" why Bioheart hasn't received significant funding for their trials?"
Well, one would assume that would mean "recent" trial(s): as in the past they have received substantial amounts of money- the total paid in capital since inception I believe now exceeds $100 million (would have to check 10-K, so don't take that as hard fact- but it's a lot of money, no matter what the exact number is).
Why "recently" are they struggling with "financing" and raising money? Don't really know- but one could speculate on many things? Part of the story is in their own documents, I believe, IMO. Read the section about the formation and existence of "Northstar"- it's a complex deal IMO. It was formed when a key loan (think it was the B of A loan went into default- that was as close to BK as you get, IMO).
So they create this sort of "shell" company within a public traded company who then "assumed" the loan that was in default, I assume via putting up personal collateral/guarantees (probably homes, businesses, cash, whatever- banks want hard collateral, tangible assets). For instance- read this statement from the last 10-Q:
"Our ability to obtain additional debt financing and/or alternative arrangements, with the Guarantors or otherwise, may be limited by the amount of, terms and restrictions of our then current debt. For instance, we do not anticipate repaying our Northstar loan (described below) until its scheduled maturity. Accordingly, until such time, we will generally be restricted from, among other things, incurring additional indebtedness or liens, with limited exceptions. See “We have a substantial amount of debt...” Additional debt financing, if available, may involve restrictive covenants that limit or further limit our operating and financial flexibility and prohibit us from making distributions to shareholders."
Notice- it points out that Northstar is sort of in "first position" as to who gets paid, and thus "we will generally be restricted from, among other things, incurring additional indebtedness or liens, with limited exceptions"- that IMO is a way of saying it will potentially make "getting financing" with "others" perhaps more difficult, maybe a lot more difficult?
Same 10-Q PAGE 27- again look at the wording:
"These provisions could have important consequences for us, including (i) making it more difficult for us to obtain additional debt financing from another lender, or obtain new debt financing on terms favorable to us, because such new lender will have to be willing to be subordinate to Northstar, "
Notice- "others" need to be "willing" to "be SUBORDINATE" to Northstar- THAT IMO , is a BIG ONE to a lot of "finance" people. Think of a 1st or 2nd mortgage on a house- many lenders are very specific about the need to be in "1st position" as they want to be sure to get PAID BACK FIRST if one or both loans goes into default or anything goes wrong.
Other reasons speculating: They have a lot of debt that someone getting into bed with them would have to clean up probably. Also, they have numerous, numerous "loans" and "finance deals" that go on for pages- again, very complicated and would probably need "clean up" by the standards of certain types who want to lend or "finance" people via equity stakes. Just an opinion- but finance people don't like past "messy situations" and old, long trails of "loans" and "warrants" and "convertible" shares and "whatever" they have to "inherit" or live with if they get on board as the "new guy". Know what I mean?
I'll give a simple example- the TV show Shark Tank. The people on there are the real deal, self made centi-millionaire to billionaire "investors" who essentially are doing what BHRT wants- they are putting up "private equity" to "finance" a new or start up or growing business. Not totally analogous, as BHRT is already public traded, been around a while- but from a "financing" point of view- to me very similar concepts IMO.
You watch Shark Tank- several of the episodes had some people asking for some pretty big money- say $500K to as much as $1 MILLION- a pretty good chunk of change for a venture person to put into a relatively small time operation. These businesses had to have pretty good sales (several million dollars a yr + patents and more) to be asking for that kind of money. Many of the "Sharks" were intrigued by how that person got the business that big already. Question ALWAYS comes up: 1) Do YOU the biz owner have your own money in it? 2) Do you already have "investors" and DING DING DING- when the person said "yes". Sharks immediately wanted to know- how much "equity" does the other "investor(s)" already have or debt or whatever. It was a deal killer in nearly every instance. The Shark didn't want to get mired into working with a trail of others who already had ownership rights in the biz, and especially other loans that had to be paid taking cash flow out of the future growth, etc. They just saw it as all too "messy" and said pass. That's just an example.
My opinion- you read the BHRT 10-Q or 10-K and they are "complicated" to say the least IMO. I mean- pages of old deals, loans, and financing- pages and pages. It's hard to even decipher who is still owed what and what it takes to "service" the old loan(s) and in what "position" it is to other loans, loans have been "split"- I saw a page describing a bunch of those- which I don't even know what that means. You got insiders owed money, private people appear to be owed money and then these major bank deals from days gone by owed money and then "Northstar" right there too.
Also, look at the part where they granted Northstar a "lien" on pretty darn near, as I can tell, everything BHRT owns, might own, all intellectual property, future rights, etc. THAT ONE has, IMHO, got to be a mega biggie for some "new" person to step in "behind" or else have to "buy out" or "clean up" or whatever you want to call it. Here is the wording, last 10-Q PAGE 28:
". In addition, the Company executed a security agreement granting Northstar a lien on ALL patents, patent applications, trademarks, service marks, copyrights and intellectual property rights of any nature, as well as the results of ALL clinical trials, know-how for preparing Myblasts, old and new clinical data, existing approved trials, all right and title to Myoblasts, clinical trial protocols and other property rights. In addition, the Company granted Northstar a PERPETUAL (as in FOREVER) license on products as described for resale, relicensing and commercialization outside the United States. In connection with the granted license, Northstar shall pay the Company a royalty of up to 8% on revenues generated.
In addition to the limitations imposed on our operational flexibility by the Northstar loan as described above, the Northstar loan, the Seaside National Bank loan, our obligations to the Guarantors, and any other indebtedness incurred by us could have significant additional negative consequences, including, without limitation:
•
requiring the dedication of a portion of our available cash to service our indebtedness, thereby reducing the amount of our cash available for other purposes, including funding our research and development programs and other capital expenditures;
•
increasing our vulnerability to general adverse economic and industry conditions;
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LIMITING our ability to obtain additional financing;
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limiting our ability to react to changes in technology or our business; and
•
placing us at a possible competitive disadvantage to less leveraged competitors."
See that "LIEN" wording- that is BIG IMO as stated. They, Northstar, appear to pretty much OWN IT ALL- "trial" results, IP property- the whole ball of wax. Meaning, IMO if BHRT went belly up tomorrow, Northstar walks away owning rights to all "trials" to all intellectual property and methods, everything in that list above.
I think IMO that is a major impediment to a "typical" finance person wanting to "step in" on a deal- a huge potential issue IMO.
That's my 2 cents as to some possible reasons. Pure speculation and only my opinions. Just some possibilities from reading the documents. Don't know for sure- only way to know would be, to be a "fly on the wall" and listen to some pro-level "financier" person reply after going of the BHRT books and records. That's the final answer- no one has said "yes" to this point recently, so there must be reasons why? Not sure.
