Rivulet Media Inc (fka RIVU)

[Little_Giant]

I've been doing some DD over the past day on why we are seeing the dilution over the last week. Make no mistake, we are seeing dilution here, but it is for a very good reason.

I poured over every SEC filing from the past year, and it should be mentioned that dilution has been steadily occurring over the past 12 months. In fact, the the A/S has increased twice from 500 milllion on 5/15/2012 to 1 billion on 5/16/2012. Check the filing here.

The next increase from 1 billion to 2 billion occurred on 10/23/2012. You can check the filing here.

While this sounds bad and it does actually reduce the value of the stock in which we hold, it is a necessary evil in order to fund the company through Phase 1 clinical trials.

The deal with Southridge was not necessary to just fund daily operations as the bashers want you to believe. Koos entered a deal with Southridge to put together the IND application and fund Phase 1 Clinical Trials. If he just wanted to fund daily operations, he could have done so by just diluting more shares of stock. The Southridge agreement up until recently has been in place to fund operations for the great scientific team that has been put together over last Summer. Read about it here, here, here, and here.

I think people on this board are confused with the equity agreement with Southridge. Yes, it is for up to $20 million; however, it is a share purchase agreement and Southridge will most likely never loan out the full $20 million. In fact, they are no where close to that amount at the moment. Here is the thing, Southridge can not own more than 9.99% of the O/S during this agreement during the 24 months starting 4/26/2012. THAT is why Koos has been increasing the A/S over the past year. In order for Southridge to be able to purchase more shares, Koos HAS to dilute the O/S. As of 11/30/2012, Southridge had purchased 46.2 million shares per a 13G here. This at the time represented 9.99% of the O/S. That is why you see dilution occurring throughout the month of December 2012. They needed to buffer the owned percentage amount by Southridge. Beneficially, the pps begins to rise at this point, and the dilution provides needed funds to get the IND application ready.

On a side note, an interesting thing happens here in the filings. The SGI Group LLC is compensated 30,303,030 shares. This is a Healthcare Technology Consultation firm. You can check out their website www.sgigroupllc.com. What is VERY interesting about this 13G filing is that is signed by the one and only Wayne Coleson from Vera Group LLC. The filing is here. Now Wayne has an association with SGI Group as a consultant himself, but from what I can tell from their website, he no longer is affiliated at the moment (they have a different venture capital guru). I'm not entirely sure what to think about this, but my gut is telling me that he oversaw what was happening, and decided he wanted a piece of the action himself. I could be way off base here, but why else would someone purchase 100 million shares on the open market of an at the time OTC:Pink company?

Ok, so this brings up back to our current situation. Why is dilution happening again? The O/S has increased from 1.2 billion to around 1.36 billion in the last two weeks as far as we can tell. This makes sense, because Koos needs Southridge to purchase more shares to fund Phase 1 Clinical Trials. Southridge's agreement states that the maximum amount of shares they can purchase at any given time is in the amount of $250K. Contrary to what most people on here think, these are not purchased on the open market. They are purchased directly from BMSN in the form of restricted shares. It is against everyone's best interest for these shares to be purchased at the lowest price possible, except for Southridge. Southridge wants the price as low as possible, but they cannot do anything about it because they are not allowed to short the stock (very smart on Koos' part when entering the agreement). However, due to the necessary dilution on Koos' part to free up wiggle room for Southridge to purchase more shares, panic sellers, and flippers, it has lowered the pps.

There is a lot of math involved here, but let's just say Southridge is going to purchase another $250K worth of shares at .005 pps. That amounts to another 50 million shares that Southridge is going to own very soon (if not already). They already own 46 million shares that we know. Therefore, Koos is probably going to max the amount they can own again to being 9.99% of the current O/S. That means Southridge is probably going to own about 96-135 million shares in the next few days. This number depends on how much Koos had them buy over January to February. I would be suprised, but not shocked if we did not get a 13G filing stating so. Now, by diluting the stock, it has also raised funds for BMSN. If they diluted it to the tune of 100 million (not the 600 million the bashers here want you to believe), that would probably amount to $550K at an average price of .0055. When you add the $250K from Southridge, that is about $800K of fresh funds.

Fresh funds for what? Well, according to Pharmalot here, that could be used to fund Phase 1 Clinical Trials. According to their estimates in 2011, it cost about $22K per patient to fund a Phase 1 Clinical Trial. Let's just say in 2013 that the amount is now $40K per patient. With a trial of 10 patients (as outlined in the BMSN IND), that would amount to $400K in cost for a Phase 1 Trial. Phase 2 and Phase 3 are on a much larger scale, and cost is 10-100 times what a Phase 1 costs. Therefore, that is when someone like PFE would step in if they liked what they saw from the Phase 1. If Phase 1 happens, and it is bad, BMSN will fall off the face of the Earth. However, we are not there, yet. The important thing is that BMSN now has the funds to initiate Phase 1 without big pharma.

Another important point is that there has not been a proxy vote for the increase in A/S over the last year. It is outlined by the SEC filing here. Koos has a majority of the voting power, and therefore, whatever he says goes.

At the moment, I think the dilution is slowing, and will soon come to an end. Anyone worried about the Southridge deal should not be, and I hope this post clarifies that. At most, I think Southridge has purchased around $1-$1.5 million worth of shares over the last year. As outlined in the agreement here there is virtually no way they can max out the $20 million agreement with a 9.99% ownership limit in place unless Koos decides to dilute the A/S to 1.6 trillion. Mark this post, THAT WILL NOT HAPPEN in the next 12 months. Per rule 144 of the SEC, Southridge can not sell thier shares for at least a year after their purchase since BMSN wasn't a fully reporting company at the time. So they will not be "dumping" their shares until at least this Summer when the pps should be much higher.

Understand that no one has been hurt more by this dilution that Koos and their employees. Koos has personally seen his share value drop from a 3% stake in the company to 0.88% stake over a 9 month period. That sucks big time for him, but he wouldn't be doing it if he didn't believe this company was headed for big things.

Also of note, anyone on here claiming that the company and affiliates are diluting and selling their shares because they know the IND is declined is most likely wrong. That would be insider trading, and becoming a fully reporting entity to the SEC is the last thing you want to do if you are doing such illegal activity. It would mean professional suicide for everyone involved, not to mention jail, and hefty fines. If they are doing that, it would be the dumbest thing they could possibly do at the moment. BMSN has been gaining a ton of exposure lately in the investment community and pharma community. This isn't a low level P&D right now. Southridge would absolutely report them, and everyone involved would see serious consequences.

If you gain anything from this post, understand that the dilution we are undergoing is a necessary evil for us to see a higher pps in the near future. Sit back and relax until future notice. If I am wrong in any part of this post, please provide solid evidence, and I will gladly admit I am wrong. Some of this post is speculative in regards to the amount of money being raised, but I feel it is pretty close to reality.

IMO