================================================================================
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D. C. 20549
------------------
FORM 10-QSB
------------------
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities and Exchange
Act of 1934 for the quarterly period ended June 30, 2006.
[ ] Transition report pursuant to Section 13 or 15(d) of the Exchange Act for
the transition period from _____ ____________ to ____________ .
Commission File Number: 000-50746
Cord Blood America, Inc.
(Exact name of registrant as specified in charter)
Florida 65-1078768
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9000 W. Sunset Boulevard, Suite 400, West Hollywood, CA 90069
(Address of principal executive offices)
(310) 432-4090
(Registrant's Telephone Number, including Area Code)
Check whether the registrant: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. YES [X] NO [ ]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of June 30, 2006: 40,541,845 shares of common stock, par value $.0001
per share.
Transitional Small Business Disclosure Format: YES [ ] NO [X]
================================================================================
CORD BLOOD AMERICA, INC. AND SUBSIDIARIES
INDEX TO FORM 10-QSB
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements (unaudited)
Consolidated Balance Sheet (unaudited) as of June 30, 2006
Consolidated Statements of Operations (unaudited)
for the six months ended June 30, 2006 and 2005
Consolidated Statements of Operations (unaudited) for
the three months ended June 30, 2006 and 2005
Consolidated Statements of Cash Flows (unaudited) for
the six months ended June 30, 2006 and 2005
Notes to Consolidated Financial Statements (unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (including cautionary statement)
Item 3. Controls and Procedures
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Securities Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
CORD BLOOD AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (UNAUDITED)
AS OF JUNE 30, 2006
ASSETS
Current assets:
Cash $ 188,257
Accounts receivable, net of allowance for
doubtful accounts of $20,672 427,934
------------
Total current assets 616,191
Property and equipment, net of accumulated depreciation and
amortization of $16,963 27,692
Deposits 21,756
Prepaid expenses 84,453
Goodwill 12,077
Customer contracts and relationships, net of amortization
of $6,684 247,302
Domain name, net of amortization of $11 389
Other assets 670
------------
Total assets $ 1,010,531
============
LIABILITIES AND CAPITAL DEFICIT
Current liabilities:
Accounts payable $ 534,233
Accrued expenses 435,934
Deferred revenue 495,624
Due to stockholders 51,012
Capital lease obligations, current portion 4,565
Promissory notes payable, net of unamortized discount
of $293,200 4,706,800
------------
Total current liabilities 6,228,169
Capital lease obligations, net of current portion 3,706
------------
Total liabilities 6,231,875
Capital deficit:
Preferred stock, $.0001 par value, 5,000,000 shares
authorized, no shares issued and outstanding --
Common stock, $.0001 par value, 100,000,000 shares
authorized 74,541,845 shares issued and outstanding 7,454
Additional paid-in capital 20,596,946
Deferred Consideration (3,152,156)
Common stock held in treasury stock, 34,000,000 shares (11,560,000)
Accumulated deficit (11,113,588)
------------
Total capital deficit (5,221,344)
------------
Total liabilities and capital deficit $ 1,010,531
============
3
CORD BLOOD AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2006 AND 2005
SIX-MONTH PERIOD SIX-MONTH PERIOD
ENDED ENDED
JUNE 30, JUNE 30,
2006 2005
------------ ------------
Revenue $ 1,723,489 $ 1,485,396
Cost of services (1,295,738) (1,086,594)
------------ ------------
Gross profit 427,751 398,802
Administrative and selling expenses (2,426,991) (2,521,426)
------------ ------------
Loss from Operations (1,999,239) (2,122,624)
------------ ------------
Interest expense (982,455) (140,709)
------------ ------------
Net loss before income taxes (2,981,694) (2,263,333)
Income taxes -- --
------------ ------------
Net loss $ (2,981,694) $ (2,263,333)
============ ============
Basic and diluted loss per share $ (0.07) $ (0.07)
============ ============
Weighted average common shares outstanding 40,366,699 30,246,827
============ ============
5
CORD BLOOD AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) FOR
THE THREE MONTHS ENDED JUNE 30, 2006 AND 2005
THREE-MONTH THREE-MONTH
PERIOD ENDED PERIOD ENDED
JUNE 30, JUNE 30,
2006 2005
------------ ------------
Revenue $ 1,067,111 $ 665,582
Cost of services (768,540) (480,729)
------------ ------------
Gross profit 298,572 184,853
Administrative and selling expenses (1,076,935) (1,324,140)
------------ ------------
Loss from Operations (778,363) (1,139,287)
------------ ------------
Interest expense (489,208) (94,103)
------------ ------------
Net loss before income taxes (1,267,571) (1,233,390)
Income taxes -- --
------------ ------------
Net loss $ (1,267,571) $ (1,233,390)
============ ============
Basic and diluted loss per share $ (0.03) $ (0.04)
============ ============
Weighted average common shares outstanding 40,541,845 34,124,663
============ ============
6
CORD BLOOD AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) FOR
THE SIX MONTHS ENDED JUNE 30, 2006 AND 2005
SIX-MONTH SIX-MONTH
PERIOD ENDED PERIOD ENDED
----------- -----------
JUNE 30, JUNE 30,
2006 2005
----------- -----------
Cash flows from operating activities:
Net loss $(2,981,694) (2,263,333)
Adjustments to reconcile net loss to net cash
used in operating activities:
Issuance of stock for services -- 1,099,868
Loan Costs Paid in Cash -- --
Shares issued as compensation 44,759 --
Amortization of Deferred Consideration 630,431 --
Provision for uncollectible accounts 14,734 6,437
Depreciation 7,093 4,807
Amortization of discount on warrants 97,735 69,221
Fixed Asset write off 4,539 --
Share based compensation 181,231 --
Customer Contracts and Relationships 6,694 --
Changes in operating assets and liabilities:
Accounts receivable (288,294) (10,308)
Deposits (362) (1,392)
Other assets -- --
Prepaid Expenses (75,526) (24,799)
Accounts payable 220,930 345,930
Accrued expenses 212,776 (38,256)
Deferred revenue 261,782 25,285
Due to Related Party -- --
----------- -----------
Net cash used in operating activities (1,663,172) (786,540)
Cash flows from investing activities:
Purchase of property and equipment (13,515) (4,483)
Redemption (Purchase) of certificates of deposit -- 75,000
Purchase of Cryobank (120,000) --
Net cash provided by investing activities (133,515) 70,517
Cash flows from financing activities:
Proceeds from the issuance of loans payable -- 545,000
Payments on loans payable -- (31,362)
Proceeds from the issuance of notes payable -- --
Payments on notes payable -- --
Payments on capital lease obligations (2,109) (1,317)
Net repayments on line of credit -- (6,484)
Proceeds from advance from officer -- 50,791
Payments on advance from officer (28,134) --
Proceeds from issuance of common stock -- 73,085
----------- -----------
Net cash provided by financing activities (30,243) 629,713
----------- -----------
Net increase (decrease) in cash (1,826,930) (86,310)
Cash and cash equivalents, at beginning of period 2,015,187 120,216
----------- -----------
Cash and cash equivalents, at end of period 188,257 33,906
=========== ===========
7
CORD BLOOD AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) FOR
THE SIX MONTHS ENDED JUNE 30, 2006 AND 2005
SIX-MONTH SIX-MONTH
PERIOD ENDED PERIOD ENDED
----------- -----------
JUNE 30, JUNE 30,
2006 2005
----------- -----------
Supplemental disclosures of cash flow information:
Cash paid for interest $ 1,348 52,005
=========== ===========
Supplemental disclosures of non-cash investing and
financing activities:
Discount on issuance of debt with detachable warrants 97,735 123,147
=========== ===========
Issuance of shares for the acquisition of Family
Marketing, Inc. -- 16,184
=========== ===========
Acquisition of computer equipment under capital
lease obligations $ 2,567 2,058
=========== ===========
Debt repaid through issuance of common stock $ -- --
=========== ===========
8
CORD BLOOD AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2006
(1) BASIS OF PRESENTATION
The accompanying unaudited financial statements of Cord Blood America,
Inc. have been prepared in accordance with accounting principles generally
accepted in the United States of America for interim financial information and
with Item 310 of Regulation S-B. Accordingly, they do not include all of the
information and footnotes required by accounting principles generally accepted
in the United States of America for complete financial statements. The financial
statements reflect all normal recurring adjustments, which, in the opinion of
management, are considered necessary for a fair presentation of the results for
the periods shown. The results of operations for the periods presented are not
necessarily indicative of the results expected for the full fiscal year or for
any future period. Certain prior period amounts have been reclassified to
conform to the current period presentation. The information included in these
unaudited financial statements should be read in conjunction with Management's
Discussion and Analysis and Plan of Operations contained in this report and the
audited financial statements and accompanying notes included in the Company's
Annual Report on Form 10-KSB for the fiscal year ended December 31, 2005.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) BASIS OF CONSOLIDATION
The consolidated financial statements include the accounts of the Cord Blood
America, Inc. ("Cord Blood") and its wholly owned subsidiaries, Cord Partners,
Inc. ("Cord"), CBA Professional Services, Inc. D/B/A BodyCells, Inc.
("BodyCells"), CBA Properties, Inc. ("Properties"), Career Channel Inc, D/B/A
Rainmakers International ("Rain") and Family Marketing, Inc. ("Family").
Significant inter-company balances and transactions have been eliminated upon
consolidation.
(b) ORGANIZATION AND DESCRIPTION OF BUSINESS
Cord Blood, formerly D&A Lending, Inc., was incorporated in the State of Florida
on October 12, 1999. Cord Blood's headquarters are located in Los Angeles,
California.
Cord specializes in providing private cord blood stem cell preservation services
to families.
BodyCells is a developmental stage company and intends to be in the business of
collecting, processing and preserving peripheral blood and adipose tissue stem
cells allowing individuals to privately preserve their stem cells for potential
future use in stem cell therapy.
Properties was formed to hold the corporate trademarks and any other
intellectual property of Cord Blood.
Rain specializes in creating direct response television and radio advertising
campaigns, including media placement and commercial production.
Family specializes in delivering leads through internet based lead generation to
corporate customers in the business of family based products and services.
The accompanying financial statements have been prepared on a going-concern
basis, which contemplates the realization of assets and the settlement of
liabilities and commitments in the normal course of business. The accompanying
financial statements do not include any adjustments relating to the
recoverability and classification of assets and liabilities that may be
necessary in the event Cord Blood cannot continue as a going concern. See Note 2
to the financial statements for a discussion of management's plans and
intentions.
9
(c) DEFERRED REVENUE
Deferred revenue for Cord consists of payments for enrollment in the program and
processing of umbilical cord blood by customers whose samples have not been
collected, as well as the pro-rata share of annual storage fees for customers
whose samples were stored during the year. For Cord customers who have enrolled
in the Annual Payment Option, revenue is neither deferred nor recognized at the
time the sample is collected. Instead, revenue is recognized in the amount of
each payment as payment is received. Deferred revenue for Rain and Family
consists of payments for per inquiry leads that have not yet been delivered or
media buys that have not yet been placed.
(d) REVENUE RECOGNITION
We recognize revenue under the provisions of Staff Accounting Bulletin ("SAB")
104 "Revenue Recognition". Cord provides a combination of products and services
to customers. This combination arrangement is evaluated under Emerging Issues
Task Force (Issue No. 00-21, "Revenue Arrangements with Multiple Deliverables,"
("EITF 00-21"). EITF 00-21 addresses certain aspects of accounting for
arrangements under multiple revenue generating activities. CBA elected early
adoption of EITF 00-21.
Cord recognizes revenue from both enrollment fees and processing fees upon the
completion of processing while storage fees are recognized ratably over the
contractual storage period unless the customer enrolls in the Annual Payment
Option. For Cord customers who have enrolled in the Annual Payment Option,
revenue is recognized in the amount of each payment as payment is received.
Rain generates revenue from packaged advertising services, including media
buying, marketing and advertising production services. Rain's advertising
service revenue is recognized when the media ad space is sold and the
advertising occurs. Rain's advertising production service revenue is derived
through the production of an advertising campaign including, but not limited to
audio and video production, establishment of a target market and the development
of an advertising campaign. Rain recognizes revenue generated from packaged
advertising services provided to our clients using the "Gross" basis of Emerging
Issues Task Force No. 99-19, "Reporting Revenue Gross as a Principal versus Net
as an Agent" (EITF 99-19).
Rain's revenue recognition policy involves significant judgments and estimates
about the ability to collect. We assess the probability of collection based on a
number of factors, including past transaction history and/or the
creditworthiness of our clients' customers, which is based on current published
credit ratings, current events and circumstances regarding the business of our
client's customer and other factors that we believe are relevant. If we
determine that collection is not reasonably assured, we defer revenue
recognition until such time as collection becomes reasonably assured, which is
generally upon receipt of cash payment.
Both Rain and Family recognize revenue generated through per inquiry advertising
as the per inquiry leads are delivered to the customer.
(e) COST OF SERVICES
Costs for Cord are incurred as umbilical cord blood is collected. These costs
include the transport of the umbilical cord blood from the hospital to the lab,
the lab's processing fees and royalties. Cord expenses costs in the period
incurred and does not defer any costs of sales. Costs for Rain include
commercial productions costs, lead generation costs and media buys. Costs for
Family include lead generation.
10
(f) ACCOUNTING FOR STOCK COMPENSATION PLAN
Effective January 1, 2006, we adopted Statement of Financial Accounting
Standards ("SFAS") No. 123(R), Share-Based Payment, using the modified
prospective application transition method. Prior to January 1, 2006, we
accounted for share-based compensation with employees using the intrinsic value
based method of accounting, under which no compensation expense is recognized
for stock option awards granted at fair market value. With the adoption of SFAS
No. 123(R), there will be an increase in compensation expense. The increase has
had a material impact on our results of operations but not on our cash flows.
The following table illustrates the effect on net loss and loss per share if the
fair value based method had been applied to all outstanding awards in each
period:
Six months Six months
ended ended
June 30, June 30,
2006 2005
----------- -----------
Net loss, as reported $(2,981,694) (2,263,333)
Add: stock-based compensation expense included in reported net loss net of related
tax effects 181,231 3,053
----------- -----------
Deduct: total stock-based compensation expense determined under the fair value
method for all awards, net of related tax effects (181,231) (49,289)
----------- -----------
Pro forma net loss $(2,981,694) (2,309,569)
=========== ===========
Basic and diluted loss per common share, as reported $ (0.07) (0.08)
=========== ===========
Basic and diluted loss per common share, pro forma $ (0.07) (0.08)
=========== ===========
(g) NET LOSS PER SHARE
Net loss per common share is calculated in accordance with SFAS No. 128,
Earnings per Share. Basic net loss per share is computed by dividing the net
loss by the weighted average common shares outstanding of 40,366,699 and
30,246,827 for the six-months ended June 30, 2006 and 2005, respectively. Cord
Blood had 3,047,420 and 2,778,168 outstanding options to acquire common stock at
June 30, 2006 and 2005, respectively, and warrants to purchase 23,570,000 and
2,000,000 shares at June 30, 2006 and 2005, respectively which are not included
in the computation of net loss per common share because the effects of inclusion
are anti-dilutive.
(2) MANAGEMENT'S PLANS AND INTENTIONS
Cord Blood's consolidated financial statements have been prepared assuming it
will continue as a going concern. Cord Blood has experienced recurring net
losses from operations, which losses have caused an accumulated deficit of
approximately $11,113,588 as of June 30, 2006. In addition, Cord Blood has
consumed cash in its operating activities of approximately $1,663,172 for the
six months ending June 30, 2006 and has a working capital deficit of
approximately $5,611,978 as of June 30, 2006. These factors, among others, raise
substantial doubt about Cord Blood's ability to continue as a going concern.
11
Management has been able, thus far, to finance the losses, as well as the growth
of the business, through private placements of its common stock, the issuance of
debt and proceeds from the Equity Distribution Agreement and Securities Purchase
Agreement. Cord Blood is continuing to attempt to increase revenues within its
core businesses. Recently, management shifted some of Cord Blood's personnel to
assist in growing its subsidiary, Family. We believe growing Family using our
existing resources will help improve our cash flow and help us approach
profitability more rapidly. In addition, Cord Blood is exploring alternate ways
of generating revenues through acquiring other businesses in the stem cell
industry. The ongoing execution of Cord Blood's business plan is expected to
result in operating losses over the next twelve months. There are no assurances
that Cord Blood will be successful in achieving its goals of increasing revenues
and achieving profitability.
In view of these conditions, Cord Blood's ability to continue as a going concern
is dependent upon its ability to meet its financing requirements, and to
ultimately achieve profitable operations. Management believes that its current
and future plans provide an opportunity to continue as a going concern. The
accompanying consolidated financial statements do not include any adjustments
relating to the recoverability and classification of recorded assets, or the
amounts and classification of liabilities that may be necessary in the event
Cord Blood cannot continue as a going concern.
(3) ACCRUED EXPENSES
The components of accrued expenses at June 30, 2006 are summarized as follows:
June 30,
2006
Accrued salaries and benefits $ 120,870
Accrued interest 259,722
Deferred Rent 11,903
Other 43,439
---------
$ 435,934
=========
(4) NOTES AND LOANS PAYABLE
In March 2005, Cord Blood entered into a Standby Equity Distribution Agreement
(the "Equity Agreement") with Cornell Capital Partners L.P. ("Cornell") whereby
Cord Blood could sell up to $5,000,000 of Cord Blood's common stock to Cornell
at Cord Blood's discretion over a 24-month period. The Equity Agreement and the
respective rights and obligations were terminated on December 26, 2005. Prior to
termination, the Equity Agreement allowed the Company to sell shares of common
stock to the investor group in incremental advances not to exceed $250,000. The
shares of common stock issued at each advance were calculated based on 98% of
the lowest volume weighted average price of Cord Blood's common stock for the
five day period after the request for an advance was received. The investment
company also received a 5% fee for each advance. The Equity Agreement called for
the issuance of 1,239,029 shares of common stock as a one time commitment fee.
Prior to any advances, the Securities and Exchange Commission declared effective
a registration statement registering the resale of Cord Blood's securities in
accordance with the Equity Agreement.
In connection with the Equity Agreement, Cord Blood entered into a Placement
Agency Agreement (the "Agent Agreement") with a registered broker-dealer to act
as the placement agent for Cord Blood. The Agent Agreement called for a
placement agent fee of $10,000 paid by the issuance of 51,626 shares of Cord
Blood's common stock.
On April 27, 2005, Cord Blood issued a promissory note to Cornell in the amount
of $350,000. The promissory note accrued interest at a rate of 12% per annum and
was due and payable nine months from the date of issuance. On April 28, 2005,
$175,000 of the $350,000 loan was funded by Cornell. Pursuant to the terms of
the note Cord Blood issued Cornell a detachable warrant to purchase 1,000,000
shares of common stock at an exercise price of $0.20 per share. The estimated
relative fair value of the warrants of approximately $163,000 was recorded as
interest expense. In July 2005, Cornell exercised its right to purchase
1,000,000 shares at $0.20 per share.
12
On June 21, 2005, Cord Blood issued an Amended and Restated Promissory Note to
Cornell in the amount of $600,000 which replaced the Promissory Note dated April
27, 2005 and received $300,000 towards this amended and restated Promissory
Note. The Promissory Note accrued interest at 12% per annum. These promissory
notes were re-paid with the proceeds of a stock issuance in 2005.
On July 13, 2005 Cornell issued a promissory note in the amount of $500,000. The
principal amount of $500,000 was funded to Cord Blood on July 14, 2005. The
promissory note was non-interest bearing unless an event of default occurred.
The note was due and payable on or before August 1, 2005. Full payment was made
on July 25, 2005 from the proceeds of a stock issuance.
During the three months ended September 30, 2005, Cord Blood re-paid $1,360,553
in interest and principal on an outstanding loan with Cornell through the
proceeds of issuing 3,568,734 shares of common stock. At September 30, 2005, all
of the loans relating to the Equity Agreement had been paid.
On December 26, 2005, Cord Blood and Cornell amended and restated the $3,500,000
Debentures dated September 9, 2005 and funded the $1,500,000 Debentures pursuant
to the Second Closing on December 28, 2005. The Securities Purchase Agreement
("SP Agreement") and the Registration Rights Agreement dated September 9, 2005
were also amended. The amended agreement states that Cord Blood shall issue and
sell to Cornell, and Cornell shall purchase Five Million Dollars ($5,000,000) of
secured convertible debentures, which shall be convertible into shares of Cord
Blood's common stock, par value $0.0001, of which Three Million Five Hundred
Thousand Dollars ($3,500,000) has been funded as of September 9, 2005 and One
Million Five Hundred Thousand Dollars ($1,500,000) was funded on December 28,
2005 for a total purchase price of Five Million Dollars ($5,000,000). The
interest rate has been amended to 10% per annum and the principal together with
accrued but unpaid interest is due on or before December 23, 2008.
The SP Agreement was amended to state Cord Blood shall pay Cornell or its
designees a non refundable commitment fee of $375,000 (equal to seven and one
half percent (7.5%) of the $5,000,000 Purchase Price), all of which has been
paid. It also states Cord Blood agrees to take any and all appropriate action
necessary to increase its authorized common stock to two hundred million
(200,000,000) by March 1, 2006. This action has been approved by the Company's
board and must still be voted on by the Company's shareholders at its annual
meeting.
The Investor Registration Rights Agreement that was entered into by Cord Blood
and Cornell concurrently with the SP Agreement was amended to state the number
of shares to be registered on the Initial Registration Statement, as defined in
the Registration Right Agreement, is to be 60,000,000 shares underlying the
Debentures. The initial registration statement was filed on February 13, 2006.
The number of shares to be registered on the Second Registration Statement, as
defined in the Registration Right Agreement, to be filed no later than thirty
(30) days after Cord Blood has increased its authorized common stock to at least
two hundred million (200,000,000) shares, are as follows:
13
a. Such number of shares of Common Stock equal to five (5) times the
total principal balance of the Convertible Debentures remaining
at the time the Second Registration Statement is filed divided by
the conversion price in effect at the time the Second
Registration Statement is filed.
b. 7,000,000 Shares underlying the Warrant dated 9/9/05
c. 7,285,000 Shares underlying the Warrant dated 9/9/05
d. 8,285,000 Shares underlying the Warrant dated 9/9/05
On June 27, 2006, Cord Blood entered into an agreement with Cornell. The
agreement amends certain terms of the SP Agreement, the Registration Rights
Agreement and the Pledge and Escrow Agreement entered into on September 9, 2005.
Pursuant to the agreement, the following changes have been agreed to by both
parties. First, the time for Cord Blood to increase its authorized common stock
to 200,000 million has been increased to August 18, 2006. Second, the deadline
for Cord Blood to have the second Registration Statement declared effective by
the SEC has been increased to September 30, 2006. Third, Cord Blood will waive
the Conversion Restriction which restricts Cornell from converting any amounts
of the outstanding principal of the Debentures at the Market Conversion Price
prior to September 9, 2006. Fourth, in the event that Cord Blood does not have a
sufficient number of authorized shares of Common Stock to issue Conversion
Shares upon a conversion of the Debentures, Cord Blood is hereby authorized to
issue to Cornell such number of shares otherwise reserved as Pledge Shares to
Cornell and reduce the number of Pledged Shares by the amount of such issuance.
The number of shares included in the amended registration statement have been
reduced to 55,840,448.
(5) COMMITMENTS AND CONTINGENCIES
AGREEMENTS
Cord is operating under an agreement with a not-for-profit company, Bergen
Community Regional Blood Center, to process, test and store all umbilical cord
blood samples collected. The agreement has a 10-year term, beginning June 30,
2002, and can be terminated by either party giving a 90-day notice. If the
agreement is not terminated within 120-days of the end of the initial term, the
agreement will renew on an annual basis for successive one-year terms.
In March 2004, Cord entered into a Patent License Agreement with the holder of
patents utilized in the collection, processing, and storage of umbilical cord
blood to settle litigation against Cord for alleged patent infringements. The
Patent License Agreement calls for royalties of 15% of processing and storage
revenue, with a minimum royalty of $225 per specimen collected, on all specimens
collected after January 1, 2004 until the patents expire in 2010. During the
three months ended June 30, 2006 and 2005, Cord incurred approximately $65,561
and $43,900 respectively, in royalties to the Patent License Agreement. During
the six months ended June 30, 2006 and 2005, Cord incurred approximately
$119,613.15 and $95,500 respectively, in royalties to the Patent License
Agreement. At June 30, 2006, approximately $56,600 is included in accounts
payable relating to these fees.
OPERATING LEASE
In 2005 and 2004, Cord Blood entered into non-cancelable operating leases for
office space and computer software which expire through October 2009.
Commitments for minimum future rental payments, by year and in the aggregate, to
be paid under the operating leases as of June 30, 2006, are as follows:
2007 $95,836
2008 102,479
2009 106.178
2010 94,822
2011 47,410
--------
$446,726
========
14
The total lease payments are recorded as rent expense on a straight-line basis
over the lease periods, resulting in a deferred rent liability of $11,903, which
is included in accrued expenses in the accompanying balance sheet. Total lease
expense for operating leases, including those with terms of less than one year,
amounted to approximately $33,490 and $45,510 for the six months ended June 30,
2006 and 2005, respectively.
EMPLOYMENT AGREEMENTS
On January 1, 2006, Cord Blood entered into one-year employment agreements with
three executive officers, Matthew L. Schissler, Sandra D. Anderson and Noah J.
Anderson (the "executive Agreements"). Pursuant to the Executive Agreements with
Matthew L. Schissler, Mr. Schissler serves as Chairman and Chief Executive
Officer of Cord Blood at an annual salary of $150,000 through December 31, 2006.
The Executive Agreement entitles Mr. Schissler to receive a net year-end
performance bonus of $25,000 as well as certain other benefits. Mr. Schissler is
subject to non-competition and confidentiality requirements. Cord Blood may
terminate Mr. Schissler's Executive Agreement at any time without cause. In such
event, not later than the Termination Date specified in the Termination Notice
(both as defined in the Executive Agreement), Cord Blood shall pay to Mr.
Schissler an amount in cash equal to the sum of his Compensation determined as
of the date of such Termination Notice through the remaining term of the
Executive Agreement.
Pursuant to the Executive Agreement with Sandra Anderson, Ms. Anderson will
serve as Chief Financial Officer of Cord Blood at an annual salary of $108,000
through December 31, 2006. The Executive Agreement entitles Ms. Anderson to
receive a quarterly performance bonus of up to $5,500 as well as certain other
benefits. Ms. Anderson is subject to non-competition and confidentiality
requirements. Cord Blood may terminate this Executive Agreement at any time
without cause. In such event, not later than the Termination Date specified in
the Termination Notice (both as defined in the Executive Agreement, Cord Blood
shall pay to Ms. Anderson an amount in cash equal to the sum of her Compensation
for 90 days determined as of the date of such Termination Notice Agreement (as
defined in the Executive Agreement).
Pursuant to the Executive Agreement with Noah J. Anderson, Mr. Anderson will
serve as Chief Technology Officer of Cord Blood and President of Family at an
annual salary of $108,000 through December 31, 2006. The Executive Agreement
entitles Mr. Anderson to receive a quarterly performance bonus of up to 10% of
Gross Profit of Family, a year-end bonus of up to 10% of Net Income of Family as
well as certain other benefits. Mr. Anderson is subject to non-competition and
confidentiality requirements. Cord Blood may terminate this Executive Agreement
at any time without cause. In such event, not later than the Termination Date
specified in the Termination Notice (both as defined in the Executive
Agreement), Cord Blood shall pay to Mr. Anderson an amount in cash equal to the
sum of his Compensation for 90 days determined as of the date of such
Termination Notice Agreement (as defined in the Executive Agreement).
COMPENSATION OF DIRECTORS
On January 26, 2006, Cord Blood's board of directors approved a board
compensation plan through 2008. Shares issued as compensation for one year of
service in 2006 are based on $10,000 divided by the closing stock price on
January 25, 2006. Shares issued as compensation for one year of service in 2007
and 2008 will be based on $10,000 divided by the closing stock price of the last
business day of 2006 and 2007, respectively.
15
COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS
On January 24, 2006, Cord, a Florida corporation and wholly-owned subsidiary of
Cord Blood, a Florida corporation, completed the acquisition of certain assets
from Cryobank for Oncologic and Reproductive Donors, Inc., a New York
corporation ("Cryobank"), for the purchase price of $120,000 in cash and
$140,000, or 703,518, unregistered shares of Cord Blood's common stock (the
"Acquisition"). The Acquisition related to our collecting, testing, processing
and preserving umbilical cord blood and included the assets and liabilities
associated with approximately 750 umbilical cord blood samples, as well as three
cryogenic freezers used for the storage of such umbilical cord blood samples.
$253,986 of the purchase price was allocated to customer contracts and
relationships, which will be amortized over 18 years. Pursuant to the terms of
the acquisition agreement, Cord Blood registered the resale of the common stock
Cryobank received in the Acquisition on a Registration Statement on Form SB-2
filed with the Securities and Exchange Commission on February 13, 2006.
(6) RELATED PARTY TRANSACTIONS AND COMMITMENTS
In prior years, the Company received non-interest bearing advances from officers
of Cord Blood. In November 2005, $15,000 of this advance was repaid and the
balance remaining amounted to $45,541 at June 30, 2006.
In January 2003, Cord entered into a Web Development and Maintenance Agreement
(the "Web Agreement") for the development and maintenance of a website with a
company whose president is a member of the board of directors of Cord Blood. The
Web Agreement stipulates that Cord does not own the website; however, Cord
maintains a license to utilize the site as long as the Web Agreement is in
effect. The Web Agreement calls for commissions to be paid on sales and requests
for information resulting in a sale generated through the website. The Web
Agreement has an initial three-year term and renews automatically for additional
three-year periods unless either party provides written notice at least 30 days
prior to the end of the term.
In March 2004, Cord cancelled the existing Web Agreement and signed a new Web
Design and Maintenance Agreement. The new agreement replaced the commission
payments with a flat monthly fee of $5,000 per month from March 2004 through May
2004 and $10,000 per month from June 2004 until termination of the Web
Agreement. The new agreement also called for the issuance of 150,000 stock
options with an exercise price of $0.25 per share, issued in April 2004,
followed by another 150,000 stock options that were issued in 2005 at an
exercise price of $1.00 per share. The new Web Agreement expired on March 31,
2006.
On May 5, 2006, Cord entered into a new Web Development and Maintenance
Agreement (the "Web Agreement") for the development and maintenance of a website
with a company whose president is a member of the board of directors of Cord
Blood. The Web Agreement replaced the agreement that expired on March 31, 2006.
The Web Agreement calls for fees of $10,000 per month from April 2006 until
termination in April 2008. At the beginning of each annual term, Cord Blood
America will issue to Gecko Media so many shares of common stock of CBAI as will
total a value of $10,000 at the closing sales price of CBAI stock on the date of
issuance.
During the six months ended June 30, 2006 and 2005, Cord incurred approximately
$60,000 in each period, relating to the web development agreements. At June 30,
2006, Cord did not owe any money relating to these web development agreements.
In April 2005, Family entered into an exchange agreement with Family Marketing,
LLC where Family must pay quarterly royalty fees to Family Marketing, LLC. The
president of Family Marketing, LLC is a member of the board of directors of Cord
Blood. Royalty fees are calculated as 2% of gross profit. During the six months
ended June 30, 2006, Family incurred approximately $6,700 in royalty fees.
On January 1, 2006, Cord Blood entered into a one-year consulting agreement with
Stephanie Schissler, Cord Blood's former President and Chief Operating Officer.
Ms. Schissler is the spouse of the Company's Chief Executive Officer. The
agreement entitles Ms. Schissler to a $10,000 per month retainer and stock
option incentives for her services in relation to strategic corporate planning
and other business related matters. The agreement automatically renews for a
second year, unless a 60 day written notice of cancellation is provided by
either Cord Blood or Ms. Schissler.
16
(7) SHARE BASED COMPENSATION
Effective January 1, 2006, we adopted Statement of Financial Accounting
Standards ("SFAS") No. 123(R), Share-Based Payment, using the modified
prospective application transition method. Prior to January 1, 2006, we
accounted for share-based compensation with employees using the intrinsic value
based method of accounting, under which no compensation expense is recognized
for stock option awards granted at fair market value. With the adoption of SFAS
No. 123(R), there will be an increase in compensation expense. The increase has
had a material impact on our results of operations but not on or our cash flows.
Our net income for the six months ended June 30, 2006 includes $146,644 of
compensation costs related to our stock-based compensation arrangements with
employees. Our net income for the six months ended June 30, 2005 does not
include any compensation costs related to our stock-based compensation
arrangements with employees.
STOCK OPTION PLAN. The Company's Share Option Plan permits the grant of share
options to its employees, directors, consultants and independent contractors for
up to 8 millions shares of its common stock. The Company believes that such
awards encourage employees to remain employed by the Company and also to attract
persons of exceptional ability to become employees of the Company.
During 2004 and 2005, the Company estimated the fair value of each stock option
at the grant date using the Black-Scholes option-pricing model based on the
following assumptions:
Risk free interest rate 3.66% - 4.69%
Expected life 8.95 years
Dividend yield 0%
Volatility 128.34% - 194.85%
Stock Options that vest at the end of a one-year period are amortized over the
vesting period using the straight-line method. For stock options awarded using
graded vesting, the expense is recorded at the beginning of each year in which a
percentage of the options vests.
The following activity has occurred under our existing plan:
WEIGHTED AVERAGE
SHARES GRANT-DATE FAIR VALUE
STOCK OPTION AWARDS:
Nonvested Balance at January 1, 2006 3,176,400 $0.24
Granted -- --
Vested (390,500) $0.25
Forfeited (128,000) $0.25
Nonvested balance at June 30, 2006 2,657,900 $0.24
As of June 30, 2006, there was $394,484 of total unrecognized compensation costs
related to employee stock options awards. These costs are expected to be
recognized over a weighted average period of 1.60 years.
17
A summary of option activity under the employee stock option plan as of January
1, 2006, and changes during the six months ended June 30, 2006 is as follows:
WEIGHTED AVERAGE
REMAINING
WEIGHTED AVERAGE CONTRACTUAL TERM AGGREGATE
SHARES EXERCISE PRICE (YEARS) INTRINSIC VALUE
OUTSTANDING: JANUARY 1, 2006 3,550,400 $0.24 9.07 $113,153
Granted -- -- -- --
Exercised -- -- -- --
Canceled (375,000) $0.25 -- --
Forfeited (128,000) $0.25 -- --
OUTSTANDING: JUNE 30, 2006 3,047,400 $0.24 8.80 $113,153
EXERCISABLE: JUNE 30, 2006 390,500 $0.25 8.10 $ 0
We did not receive any cash from stock option exercises for the six months ended
June 30, 2006 as no options have been exercised to date.
(8) STOCK OPTION AND WARRANT AGREEMENTS
Cord Blood did not issued any options during the six months ending June 30,
2006.
Cord Blood issued warrants to purchase shares of the company, in relation to its
issuance of convertible debentures in 2005. The value of these warrants was
$4,175,809, which was recorded as deferred consideration, presented against
additional paid in capital, and amortized over the term of the convertible
debentures.
The following table summarizes the warrants outstanding and exercisable at June
30, 2006:
---------------------- -------------------------- ------------------------ ------------------------- -------------------
NUMBER OF
WARRANTS EXERCISE MATURITY
OUTSTANDING PRICE DATE
---------------------- -------------------------- ------------------------ ------------------------- -------------------
1,000,000 $0.1875 09/16/2009
---------------------- -------------------------- ------------------------ ------------------------- -------------------
14,285,000 $0.35 09/09/2010
---------------------- -------------------------- ------------------------ ------------------------- -------------------
8,285,000 $0.40 09/09/2010
---------------------- -------------------------- ------------------------ ------------------------- -------------------
23,570,000
---------------------- -------------------------- ------------------------ ------------------------- -------------------
(9) PREFERRED STOCK
At inception, Cord Blood had 5,000,000 shares of preferred stock authorized. In
March 2004, the board of directors of Cord Blood amended the company's articles
of incorporation to establish a $.0001 par value for the preferred stock. No
preferred stock has been issued to date.
(10) COMMON STOCK
During the three months ended March 31, 2006, Cord Blood issued a total of
703,518 shares to Cryobank for Oncologic and Reproductive Donors as part of an
Asset Purchase Agreement. The total cash value of the stock on the date of
issuance was $140,000.
18
During the three months ended March 31, 2006, Cord Blood issued a total of
271,270 shares to its directors as compensation. The total cash value of the
stock on the date of issuance was $44,760.
(11) SEGMENT REPORTING
SFAS 131 "Disclosures about Segments of an Enterprise and Related Information,"
requires that public business enterprises report financial and descriptive
information about its reportable operating segments. Operating segments are
components of an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating decision makers in
deciding how to allocate resources and in assessing performance.
Cord Blood has three operating segments. Cord generates revenues related to the
processing and preservation of umbilical cord blood. Rain generates revenues
related to television and radio advertising. Family generates revenues related
to internet advertising. All of its long-lived assets are located in, and
substantially all of its revenues are generated from within, the United States
of America. The table below presents certain financial information by business
segment for the six months ended June 30, 2006:
Adipose/ Radio/
Umbilical Peripheral Television Internet Segments Consolidated
Cord Blood Blood Advertising Advertising Total Total
----------- ----------- ----------- ----------- ----------- -----------
Revenue from $ 624,789 $ 0 $ 813,928 $ 284,772 $ 1,723,489 $ 1,723,489
External Customers
Interest Expense 976,125 0 819 0 976,944 976,944
Depreciation and
Amortization 13,766 0 22 0 13,788 13,788
Segment Income
(Loss) (3,062,767) (63,056) 35,768 109,321 (2,981,694) (2,981,694)
Segment Assets $ 760,884 $ 2,983 $ 240,723 $ 5,941 $ 1,010,531 $ 1,010,531
=========== =========== =========== =========== =========== ===========
The table below presents certain financial information by business segment for
the six months ended June 30, 2005:
Radio/
Umbilical Television Internet Segments Consolidated
Cord Blood Advertising Advertising Total Total
----------- ----------- ----------- ----------- -----------
Revenue from $ 585,832 $ 888,865 $ 10,699 $ 1,485,396 $ 1,485,396
External Customers
Interest Expense 134,352 6,357 0 140,709 140,709
Depreciation and
Amortization 4,666 141 0 4,807 4,807
Segment Income
(Loss) (2,379,725) 110,506 5,886 (2,263,333) (2,263,333)
Segment Assets $ 173,895 $ 24,179 $ 22,670 $ 220,744 $ 220,744
=========== =========== =========== =========== ===========
19
The table below presents certain financial information by business segment for
the three months ended June 30, 2006:
Adipose/
Umbilical Peripheral Television Internet Segments Consolidated
Cord Blood Blood Advertising Advertising Total Total
----------- ----------- ------------ ----------- ----------- -----------
Revenue from $ 364,646 $ 0 $ 523,261 $ 179,204 $ 1,067,111 $ 1,067,111
External Customers
Interest Expense 489,208 0 0 0 489,208 489,208
Depreciation and
Amortization 11,410 0 11 0 13,788 13,788
Segment Income
(Loss) (1,177,819) (33,554) 65,706 57,600 (1,267,571) (1,267,571)
Segment Assets $ 760,884 $ 2,983 $ 240,723 $ 5,941 $ 1,010,531 $ 1,010,531
=========== =========== =========== =========== =========== ===========
The table below presents certain financial information by business segment for
the three months ended June 30, 2005:
Radio/
Umbilical Television Internet Segments Consolidated
Cord Blood Advertising Advertising Total Total
----------- ----------- ----------- ----------- -----------
Revenue from $ 251,164 $ 403,719 $ 10,699 $ 665,582 $ 665,582
External Customers
Interest Expense 90,818 3,285 0 94,103 94,103
Depreciation and
Amortization 3,171 0 0 3,171 3,171
Segment Income
(Loss) (1,319,492) 80,216 5,886 (1,233,390) (1,233,390)
Segment Assets $ 173,895 $ 24,179 $ 22,670 $ 220,744 $ 220,744
=========== =========== =========== =========== ===========
(12) SUBSEQUENT EVENTS
NOTES AND LOANS PAYABLE
On August 2, 2006, Cord Blood entered into a Subscription Agreement with
Strategic Working Capital Fund, L.P. ("Subscriber"). Pursuant to the
Subscription Agreement, Cord Blood (i) issued to Subscriber a Promissory Note
bearing interest at the rate of 8% with an aggregate principal amount of
$285,000 and (ii) delivered 500,000 unregistered shares of its Common Stock (the
"Shares") to Subscriber. The Promissory Note is due one year from the date of
issuance, unless redeemed prior thereto by Subscriber no earlier than the third
month following issuance of the note. The Promissory Note also is subject to
acceleration upon an event of default, as defined in the note. Pursuant to the
Subscription Agreement, Subscriber was granted registration rights for the
Shares in the event that Cord Blood proposes to register any other shares of its
common stock.
20
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
FORWARD LOOKING STATEMENT:
In addition to the historical information contained herein, we make statements
in this Quarterly Report on Form 10-QSB that are forward-looking statements.
Sometimes these statements will contain words such as "believes," "expects,"
"intends," "should," "will," "plans," and other similar words. Forward-looking
statements include, without limitation, our ability to increase income streams,
to grow revenue and earnings, and to obtain additional cord blood banking
revenue streams. Actual results could differ materially from those projected in
the forward-looking statements as a result of a number of risks and
uncertainties. These risks and uncertainties include: (1) whether we will
continue as a going concern; (2) whether we will continue to increase revenues
within our core business; (3) whether we will generate revenues through offering
additional stem cell services and acquiring other businesses in the stem cell
industry; (4) whether we will be successful in achieving our goals of
diversifying revenue streams and working towards profitability; (5) whether we
are able to meet our financing requirements, and to ultimately achieve
profitable operations (6) whether our current and future plans will provide an
opportunity to continue as a going concern; (7) whether we will create
tremendous value in building a database of qualified leads with specific
demographic information which can be used to market a number of products and
services; (8) whether we will be able to further monetize our website traffic
through the use of our web properties, and therefore offset these increasing
costs; (9) whether we will continue to carry a deficit until such time that we
can greatly increase our assets and reduce our significant liabilities; (10)
whether we will be able to reduce our working capital deficit over the
long-term; (11) whether our current funding will partially be used to supplement
the remaining 70% of operating cash needed through the end of 2006; (12) whether
a portion of the funding will also be used to promote additional channels of
stem cell services to further diversify our revenue streams; (13) whether other
channels that will furnish a more favorable financial model; (14) whether a
portion of the funding will be used for mergers and acquisitions of companies in
the stem cell industry; (15) whether the combination of the capital raised
through the issuance of the convertible debentures and our cash flows from
operations will be sufficient through 2006; (16) whether we move towards
profitability throughout 2006; (17) whether we further streamline our current
operations, through discovering and implementing more profitable stem cell
channels and by drastically reducing expenses related to raising additional
capital; (18) whether additional financing will be available, and, if available,
whether it will take the form of debt or equity; (19) whether Rain's loans will
be paid in full by the end of 2006; (20) whether Rain will not continue to
experience a cash flow deficiency in the future; (21) whether Rain will be able
to fund its own operations through cash flows from operations again in the very
near future; (22) whether our new programs will have a positive impact in the
future; (23) whether we find new and improved ways to produce positive financial
results that are complimentary to our business; (24) whether the launch of the
Annual Payment Option in September 2005 will have a positive impact; (25)
whether our new Annual Payment Option will open the door so that the average
American family can afford to bank their child's cord blood stem cells; (26)
whether our marketing initiatives will promote the new payment plan and create
awareness both with existing prospects and other expectant families outside the
company database; (27) whether our Annual Payment Option creates a new
demographic of customers who were not previously able to take advantage of our
cord blood preservation services; (28) whether there is an increase in potential
customers as well as an increase in new customers; (29) whether we can improve
our overall conversion rate and cost for acquiring clients; (30) whether we
continue to develop new channel sales opportunities through the addition of
strategic referral partnerships with Obstetrics and Gynecological practices and
other healthcare professionals; (31) whether continuing to develop relationships
with medical professionals who work closely with expectant families will further
enhance our long-term growth and profitability; (32) whether we are able to
accelerate the growth of our channel partnership programs by engaging a firm
with existing medical sales representatives on staff to present Cord Partners'
Physician Partnership Programs on a national scale to key healthcare providers;
(33) whether we add long form television infomercial buys, Hispanic media buys
and call center management services over the next six months; (34) whether we
21
add call center management services during the fourth quarter of 2005; (35)
whether Family is able to take advantage of the huge profit potential in the
lead generation business as more advertisers are moving to a fixed cost
advertising methodology to control their return on investment; (36) whether our
campaigns greatly increase the number of leads generated for all of our clients
through our web properties over the next 12 months; (37) whether we will
continue to add new advertisers to our sites and expand our network to
accommodate these advertisers; (38) whether we will continue to re-market to our
opt in database of leads using both online and offline mediums to produce
additional revenue; (39) whether we are able to diversify our service offerings
within the stem cell industry by offering additional sources of adult stem cells
for private banking; (40) whether sources such as adipose tissue and peripheral
blood have the potential to make a positive financial impact on our company; and
(41) whether we continue to actively evaluate opportunities to acquire
organizations within the stem cell industry that make both strategic and
financial sense. These statements are not guarantees of our future performance
and are subject to risks, uncertainties, and other important factors, certain of
which are discussed herein under the heading "Factors That May Affect Future
Operating Results" that could cause our actual performance or achievements to be
materially different from those expressed in any forward-looking statements made
by or on our behalf. Given these uncertainties, undue reliance should not be
placed on these forward-looking statements. The Company's past performance is
not necessarily indicative of its future performance. The Company does not
undertake, and the Company specifically disclaims any obligation, to update any
forward-looking statements to reflect occurrences, developments, events or
circumstances after the date of such statement.
The following information should be read in conjunction with our June 30, 2006
consolidated financial statements and related notes thereto included elsewhere
in the quarterly report and with our consolidated financial statements and notes
thereto for the year ended December 31, 2005 and the related "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
contained in our annual Report on Form 10-KSB for the year ended December 31,
2005. We also urge you to review and consider our disclosures describing various
risks that may affect our business, which are set forth under the heading "Risk
Factors Related to our Business" in this report and in our annual Report on Form
10-KSB for the year ended December 31, 2005.
INTRODUCTION:
This management's discussion and analysis of financial condition and results of
operations is intended to provide investors with an understanding of Cord Blood
America's ("CBA's") past performance, financial condition and prospects. The
following will be discussed and analyzed:
o Overview
o Financial Highlights for Second Quarter of 2006
o Financial Condition and Results of Operations
o Critical Accounting Policies and Use of Estimates
o Liquidity and Capital Resources
o Business Outlook
o Risk Factors Related to Our Business
o Off-Balance Sheet Arrangements
22
OVERVIEW:
Cord Blood is an umbilical cord blood stem cell preservation company with a
particular focus on the acquisition of customers in need of family based
products and services. We also provide television, radio and internet
advertising services to businesses that sell family based products and services.
We operate three core businesses:
o the umbilical cord blood stem cell preservation operations
that are conducted by Cord Partners, Inc. ("Cord")
o the television and radio advertising operations that are
conducted by Career Channel, Inc. D/B/A Rainmakers
International ("Rain")
o the internet advertising operations that are conducted by
Family Marketing, Inc. ("Family")
The umbilical cord blood stem cell preservation operations provide umbilical
cord blood banking services to expectant parents throughout all 50 United
States. The company's corporate headquarters are located in Los Angeles,
California. All cord blood testing, processing, and storage is conducted by our
outsourced laboratory partner, Bergen Community Regional Blood Services, located
in Paramus, New Jersey. We provide the following services to each customer:
o COLLECTION MATERIALS. We provide a medical kit that contains
all of the materials necessary for collecting the newborn's
umbilical cord blood at birth and packaging the unit for
transportation. The kit also provides for collecting a
maternal blood sample for later testing.
o FULL-TIME PHYSICIAN AND CUSTOMER SUPPORT. We provide 24-hour
consulting services to customers as well as to physicians and
labor and delivery personnel, providing any instruction
necessary for the successful collection, packaging, and
transportation of the cord blood & maternal blood samples.
o TRANSPORTATION. We coordinate the transportation of the cord
blood unit to our laboratory partner, Community Blood
Services, immediately following birth. This process utilizes a
private medical courier, Quick International, for maximum
efficiency and security.
o COMPREHENSIVE TESTING. At the laboratory, the cord blood
sample is tested for stem cell concentration levels, bacteria
and blood type. The maternal blood sample is tested for
infectious diseases. We report these results to the newborn's
mother.
o CORD BLOOD PRESERVATION. After processing and testing, the
cord blood unit is cryogenically frozen in a controlled manner
and stored in liquid nitrogen for potential future use. Data
indicates that cord blood retains viability and function for
at least fifteen years when stored in this manner and
theoretically could be maintained at least as long as the
normal life span of an individual.
Cord earns revenue two ways: through a one-time enrollment and processing fee
and through an annually recurring storage and maintenance fee.
23
The television and radio advertising operations provide advertising and direct
marketing customers a range of services including:
o the placement of advertising in television and radio outlets
o the production of advertising content, including television
commercials and radio copy, which is outsourced to third party
production companies
o advertising and marketing consulting services which can
include assistance in not only developing an advertising
program, but helping the client to develop the particular
product or service, determine the appropriate market and
design and implement an overall marketing program and strategy
A majority of Rain's revenues are realized via direct response media buys and
per inquiry campaigns. For direct response, we currently buy television and
radio schedules for our clients on a national and local level. Our national
television outlets include Directv, DISH Network, Comcast Digital, national
cable networks and various local cable interconnects. We buy time with numerous
national radio networks including Premiere Radio, Clear Channel, Westwood One
and Jones Radio Network, along with a variety of local radio stations. For per
inquiry advertising, we focus on national campaigns. The placements are made
using our internal media buyers and other agencies with whom we have formed
strategic marketing alliances. We also generate revenues through the commercial
production aspect of our business using production partners in Florida and
California. Rain's operations are located in Carlsbad, CA. However, a number of
Rain's clients and vendors are located in the greater Los Angeles, CA area.
Thus, on September 1, 2006, Rain will relocate its' operations to our corporate
office in West Hollywood, CA.
Family, the internet advertising operation, owns and operates several lead
generation web properties that produce internet leads for Cord Blood along with
other family based companies. The primary purpose of Family is to be the
internet marketing arm for Cord Blood. Website visitors are directed to our web
properties through several methods including natural search, paid search, email
and banners. We also utilize affiliate marketers to help drive traffic to our
web properties while only incurring a fee if a qualified lead is generated. Our
websites require a registration process which is beneficial in the following
ways:
o By registering the user with the website, the user consents to
receive follow up marketing from us on behalf of our
advertisers
o By pre-qualifying registered users for certain offers based
upon their demographic information
o By creating value in building a database of qualified leads
with specific demographic information which can be used to
market a number of products and services, enabling us to
further monetize our website traffic
Family earns revenue on a cost per lead basis for any leads generated through
our web properties. The cost of acquiring leads for Cord through traditional
internet advertising methods has become increasingly expensive. Through the use
of our web properties, we are able to monetize the cost of acquiring these leads
and therefore offset these increasing costs. Family operates out of our
corporate office in Los Angeles, CA.
24
FINANCIAL HIGHLIGHTS FOR SECOND QUARTER OF 2006:
o Consolidated revenues increased 60% to $1,067,111 for the
three months ended June 30, 2006 compared to $665,582 for the
three months ended June 30, 2005.
o Consolidated Gross Profit increased 62% to $298,572 for the
three months ended June 30, 2006 compared to $184,853 for the
three months ended June 30, 2005.
o Consolidated Loss from Operations decreased 32% to ($778,363)
for the three months ended June 30, 2006 compared to
($1,139,287) for the three months ended June 30, 2005.
FINANCIAL CONDITION AND RESULTS OF OPERATIONS:
As of June 30, 2006, total assets increased 358% to approximately $1,011,000
million compared to approximately $220,700 as of June 30, 2005. Items of
significant increase include a 455% increase in cash and cash equivalents, a
299% increase in accounts receivable and the addition of approximately $247,691
in intangibles. The increase in cash was due to the receipt of funding from the
Securities Purchase Agreement with Cornell Capital Partners which was received
in September 2005.
As of June 30, 2006, total liabilities increased 125% to approximately $6.2
million as compared to approximately $2.8 million as of June, 2005. Items of
significant increase include a 247% increase in notes payable due to the
addition of the convertible debentures in September 2005.
At June 30, 2006, we had a working capital deficit of $5,611,978. We will
continue to carry a deficit until such time, if ever, that we can increase our
assets and reduce our significant liabilities which are currently composed of
notes payable and deferred revenue. While reducing the working capital deficit
is our long-term goal we do not foresee this occurring in the near future.
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2006 COMPARED TO THE SIX
MONTHS ENDED JUNE 30, 2005
For the six months ended June 30, 2006, revenue increased 16% to approximately
$1,723,000 compared to approximately $1,485,000 for the six months ending June
30, 2005. Cord, Rain and Family all experienced increases in revenue. We believe
Cord experienced this increase due to:
o An increase in the number of customers having births, which
allows us to recognize enrollment revenue, during the first
six months of 2006 compared to the first six months of 2005
o An increase in the number of payments made by customers
choosing Annual Payment Option program
Before the implementation of the Annual Payment Option program, all revenue for
Cord was recognized upon the birth of our customer's child. This is the point at
which the sample is tested, processed and stored and therefore, our services are
fully delivered. Revenue in relation to the Annual Payment Option must be
recognized as we collect for the annual payment of $269. The payment plan allows
for our customers to defer their first payment until six months after their
child's date of birth. As the program matures, and we are able to process a
growing number of annual payment invoices, we will be able to recognize an
increasing amount of revenue.
We believe Rain experienced this increase due to:
o An increase in the number of new customers
o The continued development of new mediums such as remnant radio
and satellite radio
o For the six months ended June 30, 2006, cost of services
increased 19% to approximately $1,295,738 as compared to
approximately $1,086,594 for the six months ending June 30,
2005. The percentage of costs to revenue was nearly identical
for both periods therefore, the increase in cost of services
was due to the overall increase in sales.
25
For the six months ended June 30, 2006, gross profit increased 7% to
approximately $427,800 as compared to approximately $398,800 for the six months
ending June 30, 2006. Gross profit percent was nearly identical for both periods
therefore, the increase in gross profit was due to the overall increase in
sales.
For the six months ended June 30, 2006, administrative and selling expenses
decreased 4% to approximately $2,433,000 as compared to approximately $2,521,000
for the six months ending June 30, 2005. Administrative and selling expenses
decreased as a result of several factors. First, we experienced an increase in
director stock expense of approximately $61,300 due to the issuance of 271,270
shares during the first quarter of 2006 to our board of directors as well as the
expense related to options previously issued. We increased advertising expense
by approximately $185,700 in the first six months of 2006 as compared to the
first six months of 2005 by increasing the number of promotional materials we
mailed to prospects as well as increasing print, internet and radio advertising
during that time. There was an increase in independent contractor expense of
$81,500 due to a consulting agreement entered into with Cord's former President
as well as increased commissions to Cord's independent sales representatives.
Our insurance expense increased by approximately $19,400 during the six months
ending June 30, 2005. This was due to increased coverage upon the acquisition of
Family and the addition of BodyCells to our policies. Travel expense increased
approximately $10,000. We experienced a decrease of $274,648 in account charges
and past due fees. There was a decrease in web hosting and design expense of
approximately $4,800 due to a reduction in web hosting fees. Finally, there was
also a decrease of approximately $167,300 in investor relations, filings,
listings and stock transfer and issuance expenses.
For the six months ended June 30, 2006, interest expense increased approximately
598% to approximately $982,455 compared to approximately $140,709 for the six
months ended June 30, 2006. The increase was in relation to the interest on a
convertible debenture agreement.
For the six months ended June 30, 2006 and 2005, we experienced a loss of
approximately $2,982,000 and $2,263,000, respectively. The biggest impact on the
increase in Net Loss is due to the increase in interest expense on a convertible
debenture agreement.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2006 COMPARED TO THE
THREE MONTHS ENDED JUNE 30, 2005
For the three months ended June 30, 2006, revenue increased 60% to approximately
$1,067,000 compared to approximately $665,600 for the three months ending June
30, 2005. Cord, Rain and Family all experienced increases in revenue. We believe
Cord experienced this increase due to:
o An increase in the number of customers having births, which
allows us to recognize enrollment revenue, during the second
quarter of 2006 compared to the second quarter of 2005
o An increase in the number of payments made by customers
choosing Annual Payment Option program
Before the implementation of the Annual Payment Option program, all revenue for
Cord was recognized upon the birth of our customer's child. This is the point at
which the sample is tested, processed and stored and therefore, our services are
fully delivered. Revenue in relation to the Annual Payment Option must be
recognized as we collect for the annual payment of $269. The payment plan allows
for our customers to defer their first payment until six months after their
child's date of birth. As the program matures, and we are able to process a
growing number of annual payment invoices, we will be able to recognize an
increasing amount of revenue.
26
We believe Rain experienced this increase due to:
o An increase in the number of new customers
o The continued development of new mediums such as remnant radio
and satellite radio
For the three months ended June 30, 2006, cost of services increased 60% to
approximately $768,500 as compared to approximately $480,700 for the three
months ending June 30, 2005. The percentage of costs to revenue was nearly
identical for both periods therefore, the increase in cost of services was due
to the overall increase in sales.
For the three months ended June 30, 2006, gross profit increased 7% to
approximately $298,600 as compared to approximately $184,900 for the three
months ending June 30, 2006. Gross profit percent was nearly identical for both
periods therefore, the increase in gross profit was due to the overall increase
in sales.
For the three months ended June 30, 2006, administrative and selling expenses
decreased 19% to approximately $1,077,000 as compared to approximately
$1,324,000 for the three months ending June 30, 2005. Administrative and selling
expenses decreased as a result of several factors. First, we experienced an
increase in director stock expense of approximately $8,300 due to the issuance
of 271,270 shares during the first quarter of 2006 to our board of directors as
well as the expense related to options previously issued. We increased
advertising expense by approximately $163,000 in the second quarter of 2006 as
compared to the second quarter of 2005 by increasing the number of promotional
materials we mailed to prospects as well as increasing print, internet and radio
advertising during that time. There was an increase in independent contractor
expense of $43,900 due to a consulting agreement entered into with Cord's former
President as well as increased commissions to Cord's independent sales
representatives. Our insurance expense increased by approximately $12,800 during
the six months ending June 30, 2005. This was due to increased coverage upon the
acquisition of Family and the addition of BodyCells to our policies. Travel
expense increased approximately $15,700. There was a decrease of approximately
$51,700 in professional fees due to a reduction in accounting and business
process consulting fees. There was a decrease in web hosting and design expense
of approximately $12,500 due to a reduction in web hosting fees. We experienced
a decrease of $194,200 in account charges and past due fees. There was also a
decrease of approximately $27,600 in fees associated with raising capital.
Finally, there was also a decrease of approximately $204,711 in investor
relations, filings, listings and stock transfer and issuance expenses.
For the three months ended June 30, 2006, interest expense increased
approximately 420% to approximately $499,200 compared to approximately $94,100
for the three months ended June 30, 2006. The increase was in relation to the
interest on a convertible debenture agreement.
For the three months ended June 30, 2006 and 2005, we experienced a loss of
approximately $1,267,600 and $1,233,400, respectively. The biggest impact on the
increase in Net Loss is due to the increase in interest expense on a convertible
debenture agreement.
27
CRITICAL ACCOUNTING POLICIES AND USE OF ESTIMATES:
We define critical accounting policies as those that are important to the
portrayal of our financial condition and results of operations and require
estimates and assumptions based on our judgment of changing market conditions
and the performance of our assets and liabilities at any given time. In
determining which accounting policies meet this definition, we considered our
policies with respect to the valuation of our assets and liabilities and
estimates and assumptions used in determining those valuations. We believe the
most critical accounting issues that require the most complex and difficult
judgments and that are particularly susceptible to significant change to our
financial condition and results of operations include the following:
|X| determination of the level of allowance for bad debt;
|X| deferred revenue; and
|X| revenue recognition
Additional information about accounting policies can be found in Item 1
"Financial Information - Notes to Condensed Consolidated Financial Statements".
LIQUIDITY AND CAPITAL RESOURCES:
We have experienced net losses from operations of $778,400 and $1,139,300 for
the six months ended June 30, 2006 and 2005, respectively. At June 30, 2006, we
had $188,300 in cash and cash equivalents. We currently collect cash receipts
from operations through three of our subsidiaries: Cord, Rain and Family. All
corporate expenses such as legal, auditing, investor relations and interest are
currently being paid through Cord. Cord's cash flows from operations are not
currently sufficient to fund operations in combination with these corporate
expenses. Because of this shortfall, we have had to obtain additional capital
through other sources. On September 9, 2005, we received $3,500,000 in funding
from the issuance of convertible debentures to Cornell Capital Partners in a
private placement. On December 28, 2005, we received an additional $1,500,000.
The $5,000,000 raised has been partially used to supplement the operating cash
needed in 2006. Approximately $1,059,000 was used to fully repay outstanding
notes, including interest, and approximately $440,000 was used to pay past due
balances with various vendors. A portion of the funding has also been invested
in Family, as we believe there is an excellent opportunity for growth through
this subsidiary. Currently, Family has the highest margins of any of our
subsidiaries with the potential of an attractive return on investment. Finally,
we invested part of the funding into an asset purchase of approximately 750
umbilical cord blood samples, as well as three cryogenic freezers used for the
storage of the umbilical cord blood samples from Cryobank for Oncologic and
Reproductive Donors, Inc. This transaction increased Cord's revenue producing
contracts by approximately 53%.
We will need to obtain additional capital in order to continue operations of
Cord at the current level. A critical component of our operating plan that may
have a substantial impact on our continued existence is our ability to obtain
capital through additional equity and/or debt financing. We do not anticipate
adequate positive internal operating cash flow until such time as we can
generate substantially greater revenues than we are generating at present.
Since inception, we have financed cash flow requirements through the issuance of
common stock and warrants for cash, services and loans. As we expand our
operational activities, we may continue to experience net negative cash flows
from operations and we will be required to obtain additional financing to fund
operations through equity offerings and borrowings to the extent necessary to
provide working capital. Financing may not be available, and, if available, it
may not be available on acceptable terms. Should we secure such financing, it
could have a negative impact on our financial condition and our shareholders.
The sale of debt would, among other things, adversely impact our balance sheet,
increase our expenses and increase our cash flow requirements. The sale of
equity would, among other things, result in dilution to our shareholders.
28
If our cash flows from operations are significantly less than projected, then we
would either need to cut back on our budgeted spending, look to outside sources
for additional funding or a combination of the two. If we are unable to access
sufficient funds when needed, obtain additional external funding or generate
sufficient revenue from the sale of our products, we could be forced to curtail
or possibly cease operations.
Our Independent Registered Public Accountants have added an explanatory
paragraph to their audit opinions issued in connection with our consolidated
financial statements which states that our 2005 consolidated financial
statements raise substantial doubt as to our ability to continue as a going
concern. Adequate financing may not be obtained by us to meet our capital needs.
If we are unable to generate profits and unable to continue to obtain financing
to meet our working capital requirements, we may have to curtail our business
sharply or cease operations altogether. Our continuation as a going concern is
dependent upon our ability to generate sufficient cash flow to meet our
obligations on a timely basis, to obtain additional financing, and, ultimately,
to attain profitability. Should any of these events not occur, we will be
adversely affected and we may have to cease operations.
A large shortfall in projected cash flows may occur due to, but is not limited
to, any of the following reasons:
o an extreme shift in the selection of our new Annual Payment
Option plan by new customers;
o introduction of a competing stem cell product that would
decrease interest in cord blood stem cell preservation;
o loss of market share to new or existing competitors;
o a major increase in the cost of our services;
o changes in company strategies that produce unforeseen adverse
results;
o decreased visibility of the stem cell industry within the
national media
o a medical break-through deeming cord blood stem cell
preservation obsolete; or
o poor economic factors leaving families with less disposable
income.
Our subsidiary, Rain, has been able to fund its own operations during the six
months ended June 30, 2006 through cash flows from operations due to an increase
in sales. However, it is possible Rain may experience insufficient cash flows in
the future due to, but not limited to, the following reasons:
o a loss of current customers to competitors;
o the inability to add new customers to our current customer
base;
o increased pricing that leaves companies with smaller
advertising budgets unable to continue to use our services;
o changes in company strategies that produce unforeseen adverse
results;
o seasonal factors within the television and radio advertising
industry; and
o poor economic factors leaving companies with smaller
advertising budgets unable to continue to use our services.
The cash flows from operations of our third subsidiary, Family, are currently
sufficient to cover its cash flow needs. We believe this will continue to be the
case for the next twelve months.
On June 30, 2006, we held accounts receivable (net of allowance for doubtful
accounts) of $427,934. Accounts receivable are generally kept current through
punctual collection efforts.
29
Our sources of funding that are currently outstanding or available are as
follows:
On December 26, 2005, Cord Blood and Cornell amended and restated the $3,500,000
Debentures dated September 9, 2005 and funded the $1,500,000 Debentures pursuant
to the Second Closing on December 28, 2005. The Securities Purchase Agreement
("SP Agreement") and the Registration Rights Agreement dated September 9, 2005
were also amended. The amended agreement states that Cord Blood shall issue and
sell to Cornell, and Cornell shall purchase Five Million Dollars ($5,000,000) of
secured convertible debentures, which shall be convertible into shares of Cord
Blood's common stock, par value $0.0001, of which Three Million Five Hundred
Thousand Dollars ($3,500,000) has been funded as of September 9, 2005 and One
Million Five Hundred Thousand Dollars ($1,500,000) was funded on December 28,
2005 for a total purchase price of Five Million Dollars ($5,000,000). The
interest rate has been amended to 10% per annum and the principal together with
accrued but unpaid interest is due on or before December 23, 2008.
The SP Agreement was amended to state Cord Blood shall pay Cornell or its
designees a non refundable commitment fee of $375,000 (equal to seven and one
half percent (7.5%) of the $5,000,000 Purchase Price), all of which has been
paid. It also states Cord Blood agrees to take any and all appropriate action
necessary to increase its authorized common stock to two hundred million
(200,000,000) by March 1, 2006. This action has been approved by the Company's
board and must still be voted on by the Company's shareholders at its annual
meeting.
The Investor Registration Rights Agreement that was entered into by Cord Blood
and Cornell concurrently with the SP Agreement was amended to state the number
of shares to be registered on the Initial Registration Statement, as defined in
the Registration Right Agreement, is to be 60,000,000 shares underlying the
Debentures. The initial registration statement was filed on February 13, 2006.
The number of shares to be registered on the Second Registration Statement, as
defined in the Registration Right Agreement, to be filed no later than thirty
(30) days after Cord Blood has increased its authorized common stock to at least
two hundred million (200,000,000) shares, are as follows:
a. Such number of shares of Common Stock equal to five (5) times
the total principal balance of the Convertible Debentures
remaining at the time the Second Registration Statement is
filed divided by the conversion price in effect at the time
the Second Registration Statement is filed.
b. 7,000,000 Shares underlying the Warrant dated 9/9/05 c.
7,285,000 Shares underlying the Warrant dated 9/9/05 d.
8,285,000 Shares underlying the Warrant dated 9/9/05
On June 27, 2006, Cord Blood entered into an agreement with Cornell. The
agreement amends certain terms of the SP Agreement, the Registration Rights
Agreement and the Pledge and Escrow Agreement entered into on September 9, 2005.
Pursuant to the agreement, the following changes have been agreed to by both
parties. First, the time for Cord Blood to increase its authorized common stock
to 200,000 million has been increased to August 18, 2006. Second, the deadline
for Cord Blood to have the second Registration Statement declared effective by
the SEC has been increased to September 30, 2006. Third, Cord Blood will waive
the Conversion Restriction which restricts Cornell from converting any amounts
of the outstanding principal of the Debentures at the Market Conversion Price
prior to September 9, 2006. Fourth, in the event that Cord Blood does not have a
sufficient number of authorized shares of Common Stock to issue Conversion
Shares upon a conversion of the Debentures, Cord Blood is hereby authorized to
issue to Cornell such number of shares otherwise reserved as Pledge Shares to
Cornell and reduce the number of Pledged Shares by the amount of such issuance.
The number of shares included in the amended registration statement have been
reduced to 55,840,448.
If we default on any of the above agreements, we may have to curtail our
business or cease operations.
30
BUSINESS OUTLOOK:
We are currently engaged in many new programs at various stages that we believe
will have a positive impact on the future of Cord Blood. We are constantly
seeking new and improved ways to produce positive financial results that are
complimentary to our business. We are also focused on refining our current
programs. Below is a discussion of those programs and strategies.
CORD
We believe the launch of Cord's Annual Payment option in September 2005 will
positively impact Cord's ability to attract new customers. One of the greatest
challenges we encounter in acquiring new customers is the objection to the
initial fee of $1,695. For many new parents, the fee can be difficult given the
numerous expenses that come along with a new baby. To address this, we launched
a new payment alternative, which allows parents to pay $269 six months after
their child is born, and an additional 17 payments of $269 annually thereafter.
This new Annual Payment Option provides an opportunity for families to consider
banking their child's cord blood stem cells, when they previously may not have
been able to afford it. To our knowledge, no other competitor in the private
cord blood banking industry currently offers such a plan. We experienced an
increase in sales during the first quarter of 2006 as compared to previous
quarters which we believe is due, in part, to prospect awareness of the Annual
Payment Option.
Over the next twelve months, we plan to focus on improving the direct to
consumer sales strategy which includes a customer focused approach to generating
and closing potential clients via print and internet advertising, direct mail
solicitation, email solicitation, and telemarketing. In 2006, we plan to improve
our utilization of technology to create new sales process efficiencies. We
believe this will enable Cord to increase prospective customer conversion while
maintaining current staffing levels.
RAIN
During the first six months of 2006, Rain focused on the development of a new
sales channel, referred to as "remnant radio", which is unsold radio inventory
from radio networks that is available at a deeply discounted rate.
In the past, this unsold inventory was available to us on nationally syndicated
radio shows. This new channel involves unsold inventory at the local radio
station level. We have developed relationships with the top three firms in this
space and now offer discounted unsold radio inventory to our clients on a local
level. The ability to purchase this local remnant radio inventory is made
possible in large part due to the utilization of the internet as a supply chain
management tool, allowing local radio station managers to sell their unsold
inventory at the last minute.
The development of this service benefits us in two major ways:
o we are now able to offer a lower entry point for new clients
wishing to test radio which has provided us the opportunity to
pursue business that we were unable to serve in the past; and
o we are now able to target specific cities or states which has
been a common request by our prospective clients
By being able to offer our clients these new services, we have been able to
increase our customer base as well as an increase in media buys from existing
clients. We believe this will continue to be a trend over the next twelve
months.
FAMILY
Our strategy for Family is to take advantage of the large profit potential in
the lead generation business as more advertisers are moving to a fixed cost
advertising methodology to control their return on investment. We are putting
several campaigns in place to increase the number of leads generated for all of
our clients through our web properties over the next 12 months. We will continue
to add new advertisers to our sites and expand our network to accommodate these
advertisers. We will continue to re-market to our opt-in database of leads using
both online and offline mediums to produce additional revenue.
31
BODYCELLS
The development of BodyCells, which will facilitate the collecting, processing
and preserving of peripheral blood and adipose tissue stem cells allowing
individuals to privately preserve their stem cells for potential future use in
stem cell therapy, is temporarily on hold. We are looking for an alternative lab
to partner with due to extreme delays in lab construction of our current
partner.
CORD BLOOD
Finally, we continue to actively evaluate opportunities to acquire organizations
within the stem cell industry that make both strategic and financial sense.
Management remains committed to these efforts as a possible additional method of
growth.
RISK FACTORS RELATED TO OUR BUSINESS:
WE ARE SUBJECT TO VARIOUS RISKS THAT MAY MATERIALLY HARM OUR BUSINESS, FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
You should carefully consider the risks and uncertainties described below and
the other information in this filing before deciding to purchase our common
stock. If any of these risks or uncertainties actually occurs, our business,
financial condition or operating results could be materially harmed. In that
case, the trading price of our common stock could decline and you could lose all
or part of your entire investment.
WE HAVE BEEN THE SUBJECT OF A GOING CONCERN OPINION BY OUR INDEPENDENT AUDITORS
WHO HAVE RAISED SUBSTANTIAL DOUBT AS TO OUR ABILITY TO CONTINUE AS A GOING
CONCERN
Our Independent Registered Public Accountants have added an explanatory
paragraph to their audit opinions issued in connection with our 2005
consolidated financial statements which states that our financial statements
raise substantial doubt as to our ability to continue as a going concern. We
have experienced net losses of $2,981,694 and $2,263,333 for six months ended
June 30, 2006 and 2005, respectively. These factors, among others, raise
substantial doubt about our ability to continue as a going concern. Our
consolidated financial statements do not include any adjustment that might
result from the outcome of this uncertainty. We may not be able to obtain
adequate financing to meet our capital needs. If we are unable to generate
profits and unable to continue to obtain financing to meet our working capital
requirements, we may have to curtail our business sharply or cease operations
altogether. Our continuation as a going concern is dependent upon our ability to
generate sufficient cash flow to meet our obligations on a timely basis to
retain our current financing, to obtain additional financing, and, ultimately,
to attain profitability. Should any of these events not occur, we will be
adversely affected and we may have to cease operations.
WE MAY NOT BE ABLE TO INCREASE SALES OR OTHERWISE SUCCESSFULLY OPERATE OUR
BUSINESS, WHICH COULD HAVE A SIGNIFICANT NEGATIVE IMPACT ON OUR FINANCIAL
CONDITION
We believe that the key to our success is to increase sales of our cord blood
preservation services as well as our advertising services and thereby increase
our revenues and available cash. Our success with regard to cord blood
preservation services will depend, in large part, on widespread market
acceptance of cryo-preservation of cord blood and our efforts to successfully
educate potential customers and sell our services. Broad use and acceptance of
our service requires marketing expenditures and education and awareness of
consumers and medical practitioners. We may not have the resources required to
promote our services and their potential benefits. Successful commercialization
of our services will also require that we satisfactorily address the needs of
various medical practitioners that constitute a target market to reach consumers
of our services and to address potential resistance to recommendations for our
services. If we are unable to gain market acceptance of our services, we will
not be able to generate enough revenue to achieve and maintain profitability or
to continue our operations.
32
Our efforts to increase our sales and revenues of advertising and direct
response marketing services could be adversely impacted by the need for direct
to consumer advertising services and the strength of the United States economy,
especially for the small to mid-sized businesses that comprise the majority of
our client base. Since downturns in the economy have generally had a more severe
effect upon smaller companies, especially single-product companies, any changes
or anticipated changes in the economy which cause these companies to reduce
their advertising, marketing and promotion budget could negatively impact our
advertising and direct response marketing business.
Because of our dependence on a limited number of customers, our failure to
attract new clients for our advertising business could impair our ability to
continue successful operations. The absence of a significant client base may
impair our ability to attract new clients. Our failure to develop and sustain
long-term relationships with our clients would impair our ability to continue
our direct response marketing business, as a significant number of our
agreements for advertising are for short-term or single project engagements. If
our clients do not continue to use our services, and if we are unable to replace
departing clients or generate new business in a timely or effective manner our
business could be significantly and adversely affected.
We may not be able to increase our sales or effectively operate our business. To
the extent we are unable to achieve sales growth, we may continue to incur
losses. We may not be successful or make progress in the growth and operation of
our business. Our current and future expense levels are based on operating plans
and estimates of future sales and revenues and are subject to increase as
strategies are implemented. Even if our sales grow, we may be unable to adjust
spending in a timely manner to compensate for any unexpected revenue shortfall.
Accordingly, any significant shortfall in revenues would likely have an
immediate material adverse effect on our business, operating results and
financial condition. Further, if we substantially increase our operating
expenses to increase sales and marketing, and such expenses are not subsequently
followed by increased revenues, our operating performance and results would be
adversely affected and, if sustained, could have a material adverse effect on
our business. To the extent we implement cost reduction efforts to align our
costs with revenue, our sales could be adversely affected.
WE ARE DEPENDENT UPON EXTERNAL FINANCING TO FUND OUR ONGOING OPERATIONS AND
IMPLEMENT OUR BUSINESS PLAN
To date, we have been dependent upon external financing to fund our operations.
Our financing needs have been and are expected to continue to be provided, in
large part, by funding from third parties. It is imperative that we receive this
external financing to implement our business plan and to finance ongoing
operations. New capital may not be available and adequate funds may not be
sufficient for our operations, and may not be available when needed or on terms
acceptable to our management. Our failure to obtain adequate additional
financing may require us to delay, curtail or scale back some or all of our
operations and may hinder our ability to expand or continue our business. Any
additional financing may involve dilution to our shareholders, which could
result in a decrease in the price of our shares.
WE ARE DEPENDENT UPON A THIRD PARTY FACILITY FOR THE STORAGE OF UMBILICAL CORD
BLOOD; IF OUR STORAGE ARRANGEMENTS TERMINATE OR THE FACILITY FAILS FOR ANY
REASON, WE MAY NOT BE ABLE TO PROVIDE CORD BLOOD BANKING SERVICES FOR SOME
PERIOD OF TIME
We do not own or operate a storage facility for umbilical cord blood. All cord
blood collected from our customers is stored at Bergen Community Regional Blood
Center in Paramus, New Jersey. If our storage arrangements with the facility
terminate for any reason, we may not be able to continue to provide our cord
blood banking services for some period of time. Even if we are able to negotiate
an extension of our existing agreement or enter into one or more new agreements,
we may not be able to obtain favorable terms.
33
To the extent our cryo-preservation storage service is disrupted, discontinued
or the performance is impaired, our business and operations would be adversely
affected. Any failure, including network, software, hardware or equipment
failure, that causes a material interruption or discontinuance in our
cryo-preservation storage of stem cell specimens could result in stored
specimens being damaged and/or rendered unusable. Specimen damage, including
loss in transit to the Bergen Community Regional Blood Center facility, could
result in litigation against us and reduced future revenue, which in turn could
be harmful to our reputation. While our agreement with Bergen Community Regional
Blood Center requires both parties to maintain commercial general liability
insurance in amounts of not less than $1,000,000 per incident and $3,000,000
annual aggregate amount, such insurance coverage may not adequately compensate
us for any losses that may occur due to any system failures or interruptions in
the ability to maintain proper, continued, cryo-preservation storage services.
Any material disruption in the ability to maintain continued, uninterrupted
storage systems could have a material adverse effect on our business, operating
results and financial condition. Our systems and operations are vulnerable to
damage or interruption from fire, flood, break-ins, tornadoes and similar events
for which we may not carry sufficient business interruption insurance to
compensate us for losses that may occur.
WE ARE DEPENDENT UPON A PATENT LICENSE AGREEMENT FOR CERTAIN TECHNOLOGY AND
PROCESSES UTILIZED TO COLLECT, PROCESS AND STORE UMBILICAL CORD BLOOD; IF OUR
LICENSING ARRANGEMENT TERMINATES FOR ANY REASON, WE MAY NOT BE ABLE TO COLLECT,
PROCESS OR STORE UMBILICAL CORD BLOOD FOR SOME PERIOD OF TIME
Pursuant to the Patent License Agreement, Cord may, on a non-exclusive basis,
collect, process and store cord blood utilizing PharmaStem technology and
processes covered by its patents for so long as the patents remain in effect. If
our licensing arrangement with PharmaStem terminates for any reason, then we may
not be able to provide our cord blood banking services for some period of time,
if at all. Even if we are able to negotiate a new agreement with PharmaStem, we
may not be able to obtain favorable terms.
WE MAY BE UNABLE TO MANAGE GROWTH, WHICH MAY IMPACT OUR POTENTIAL PROFITABILITY
Successful implementation of our business strategy requires us to manage our
growth. Growth could place an increasing strain on our management and financial
resources. To manage growth effectively, we will need to:
o Establish definitive business strategies, goals and objectives
o Maintain a system of management controls
o Attract and retain qualified personnel, as well as, develop,
train and manage management-level and other employees
If we fail to manage our growth effectively, our business, financial condition
or operating results could be materially harmed, and our stock price may
decline.
IF WE DO NOT OBTAIN AND MAINTAIN NECESSARY DOMESTIC REGULATORY REGISTRATIONS,
APPROVALS AND COMPLY WITH ONGOING REGULATIONS, WE MAY NOT BE ABLE TO MARKET OUR
CORD BLOOD BANKING SERVICES
The cord blood banking services that we provide are currently subject to United
States Food & Drug Administration ("FDA") regulations requiring infectious
disease testing. The cord blood facility we use has registered with the FDA as a
cord blood banking service, listed its products with the FDA, and will be
subject to FDA inspection. In addition, the FDA has proposed new good tissue
practice regulations that would establish a comprehensive regulatory program for
human cellular and tissue-based products as well as proposed rules for donor
suitability. Consistent with industry practice, our cord blood collection kits
have not been cleared as a medical device. The FDA announced that it would
implement more regulatory procedures for cord blood banking in the future. This
new regulation may require medical device pre-market notification clearance or
34
approval for the collection kits. Securing any necessary medical device
clearance or approval for the cord blood collection kits may involve the
submission of a substantial volume of data and may require a lengthy substantive
review. This would increase costs and could reduce profitability. The FDA could
also require that we cease using the collection kit and require medical device
pre-market notification clearance or approval prior to further use of the kits.
This could cause us to cease operations for some period of time.
We may not be able to comply with any future regulatory requirements, including
product standards that may be developed after the date hereof. Moreover, the
cost of compliance with government regulations may adversely affect revenue and
profitability. Failure to comply with applicable regulatory requirements can
result in, among other things, injunctions, operating restrictions, and civil
fines and criminal prosecution. Delays or failure to obtain registrations could
have a material adverse effect on the marketing and sales of services and impair
the ability to operate profitably in the future.
Of the states in which we provide cord blood banking services, only New Jersey
and New York currently require that cord blood banks be licensed. We maintain
the required procurement service licenses of both the states of New York and New
Jersey. If other states adopt requirements for the licensing of cord blood
banking services, either the cord blood storage facility, or we, may have to
obtain licenses to continue providing services in those states.
BECAUSE OUR INDUSTRY IS SUBJECT TO RAPID TECHNOLOGICAL AND THERAPEUTIC CHANGES
AND NEW DEVELOPMENTS, OUR FUTURE SUCCESS WILL DEPEND ON THE CONTINUED VIABILITY
OF THE USE OF STEM CELLS AND OUR ABILITY TO RESPOND TO ANY CHANGES
The use of stem cells in the treatment of disease is a relatively new technology
and is subject to potentially revolutionary technological, medical and
therapeutic changes. Future technological and medical developments could render
the use of stem cells obsolete. In addition, there may be significant advances
in other treatment methods, such as genetics, or in disease prevention
techniques, which could significantly reduce the need for the services we
provide. Therefore, changes in technology could affect the market for our
services and necessitate changes to those services. We believe that our future
success will depend largely on our ability to anticipate or adapt to such
changes, to offer on a timely basis, services that meet these evolving standards
and demand of our customers. Expectant parents may not use our services and our
services may not provide competitive advantages with current or future
technologies. Failure to achieve increased market acceptance could have a
material adverse effect on our business, financial condition and results of
operations.
OUR MARKETS ARE INCREASINGLY COMPETITIVE AND, IN THE EVENT WE ARE UNABLE TO
COMPETE AGAINST LARGER COMPETITORS, OUR BUSINESS COULD BE ADVERSELY AFFECTED
Cord blood banking and stem cell preservation is becoming an increasingly
competitive business. Our business faces competition from other operators of
cord blood and stem cell preservation businesses and providers of cord blood and
stem cell storage services. Competitors with greater access to financial
resources may enter our markets and compete with us. Many of our competitors
have longer operating histories, larger customer bases, longer relationships
with clients, and significantly greater financial, technical, marketing, and
public relations resources than we do. Established competitors who have
substantially greater financial resources and longer operating histories than
us, are able to engage in more substantial advertising and promotion and attract
a greater number of customers and business than we currently attract. While this
competition is already intense, if it increases, it could have an even greater
adverse impact on our revenues and profitability. In the event that we are not
able to compete successfully, our business will be adversely affected and
competition may make it more difficult for us to grow our revenue and maintain
our existing business.
35
The advertising and direct marketing service industry is highly competitive. We
compete with major national and international advertising and marketing
companies and with major providers of creative or media services. The client's
perception of the quality of our creative product, our reputation and our
ability to serve clients are, to a large extent, factors in determining our
ability to generate and maintain advertising business. Our size and our lack of
significant revenue may affect the way that potential clients view us.
OUR INFORMATION SYSTEMS ARE CRITICAL TO OUR BUSINESS AND A FAILURE OF THOSE
SYSTEMS COULD MATERIALLY HARM US
We depend on our ability to store, retrieve, process and manage a significant
amount of information. If our information systems fail to perform as expected,
or if we suffer an interruption, malfunction or loss of information processing
capabilities, it could have a material adverse effect on our business.
WE COULD FAIL TO ATTRACT OR RETAIN KEY PERSONNEL, WHICH COULD BE DETRIMENTAL TO
OUR OPERATIONS
Our success largely depends on the efforts and abilities of our Executive
Officers. The loss of one or all of their services could materially harm our
business because of the cost and time necessary to find their successors. Such a
loss would also divert management's attention away from operational issues. We
do not presently maintain key-man life insurance policies. We also have other
key employees who manage our operations and if we were to lose their services,
senior management would be required to expend time and energy to find and train
their replacements. To the extent that we are smaller than our competitors and
have fewer resources, we may not be able to attract the sufficient number and
quality of staff.
RISKS RELATED TO OUR STOCK
OUR COMMON STOCK IS AFFECTED BY LIMITED TRADING VOLUME AND MAY FLUCTUATE
SIGNIFICANTLY
There has been a limited public market for our common stock and there can be no
assurance that a more active trading market for our common stock will develop.
Our common stock has experienced, and is likely to experience in the future,
significant price and volume fluctuations, which could adversely affect the
market price without regard to operating performance. In addition, we believe
that factors such as quarterly fluctuations in financial results and changes in
the overall economy or the condition of the financial markets could cause the
price of our common stock to fluctuate substantially. These fluctuations may
also cause short sellers to enter the market from time to time in the belief
that we will have poor results in the future. We cannot predict the actions of
market participants and, therefore, can offer no assurances that the market for
our stock will be stable or appreciate over time. These factors may negatively
impact our shareholders' ability to sell shares of our common stock.
OUR COMMON STOCK IS DEEMED TO BE "PENNY STOCK," WHICH MAY MAKE IT MORE DIFFICULT
FOR INVESTORS TO SELL THEIR SHARES DUE TO SUITABILITY REQUIREMENTS
Our common stock is deemed to be "PENNY STOCK" as that term is defined in Rule
3a51-1 promulgated under the Securities Exchange Act of 1934. These requirements
may reduce the potential market for our common stock by reducing the number of
potential investors. This may make it more difficult for investors in our common
stock to sell shares to third parties or to otherwise dispose of them. This
could cause the stock price to decline. Penny stocks are stock:
o With a price less than $5.00 per share;
o That are not traded on a "recognized" national exchange;
o Whose prices are not quoted on the NASDAQ automated quotation
system; or
o Of issuers with net tangible assets less than $2.0 million (if
the issuer has been in continuous operation for at least three
years) or $10.0 million (if in continuous operation for less
than three years), or with average revenues of less than $6.0
million for the last three years.
36
Broker/dealers dealing in penny stocks are required to provide potential
investors with a document disclosing the risks of penny stocks. Moreover,
broker/dealers are required to determine whether an investment in a penny stock
is a suitable investment for a prospective investor.
THE OWNERSHIP OF OUR COMMON STOCK IS CONCENTRATED IN THE HANDS OF OUR EXISTING
DIRECTORS, EXECUTIVE OFFICERS AND RELATED PARTIES; AS A RESULT, YOU MAY NOT BE
ABLE TO EXERT MEANINGFUL INFLUENCE ON SIGNIFICANT CORPORATE DECISIONS
Our directors and executive officers beneficially own, in the aggregate,
approximately 42% of our outstanding shares of common stock as of June 30, 2006.
These persons, acting together, will be able to exercise significant influence
over all matters requiring stockholder approval, including the election and
removal of directors and any merger, consolidation or sale of all or
substantially all of our assets. This concentration of ownership may harm the
market price of our common stock by delaying or preventing a change in control
of the company at a premium price even if beneficial to other stockholders.
WE ARE SUBJECT TO PRICE VOLATILITY DUE TO OUR OPERATIONS MATERIALLY FLUCTUATING;
AS A RESULT, ANY QUARTER-TO-QUARTER COMPARISONS IN OUR FINANCIAL STATEMENTS MAY
NOT BE MEANINGFUL
We believe that our operating results may fluctuate materially, as a result of
which quarter-to-quarter comparisons of our results of operations may not be
meaningful. If in some future quarter, whether as a result of such a fluctuation
or otherwise, our results of operations fall below the expectations of
securities analysts and investors, the trading price of our common stock would
likely be materially and adversely affected. You should not rely on our results
of any interim period as an indication of our future performance. Additionally,
our quarterly results of operations may fluctuate significantly in the future as
a result of a variety of factors, many of which are outside our control. Factors
that may cause our quarterly results to fluctuate include, among others:
o our ability to generate revenues and or obtain financing;
o our ability to retain existing clients and customers;
o our ability to attract new clients and customers at a steady
rate without relying on one major customer;
o our ability to maintain client satisfaction;
o the extent to which our products gain market acceptance;
o the timing and size of client and customer purchases;
o introductions of products and services by competitors;
o price competition in the markets in which we compete;
o our ability to attract, train, and retain skilled management;
o the amount and timing of operating costs and capital
expenditures relating to the expansion of our business,
operations, and infrastructure;
o a reduction in sales due to seasonal factors; and
o general economic conditions as well as economic conditions
specific to media distribution.
SALES OF SUBSTANTIAL AMOUNTS OF OUR COMMON STOCK, OR THE AVAILABILITY OF THOSE
SHARES FOR FUTURE SALE, COULD ADVERSELY AFFECT OUR STOCK PRICE AND LIMIT OUR
ABILITY TO RAISE CAPITAL
We are unable to predict the effect, if any, that future sales of our common
stock or the potential for such sales may have on the market price of our common
stock. Of the 40,541,845 shares of common stock outstanding as of June 30, 2006,
approximately 21,496,775 shares are, or will be, freely tradable without
restriction, unless held by our affiliates. The remaining 19,045,070 of common
stock, which are held by existing stockholders, including our officers and
directors, are "restricted securities" and may be resold in the public market
only if registered or pursuant to an exemption from registration. Some of these
shares may be resold under Rule 144.
37
VARIOUS ANTI-TAKEOVER PROVISIONS ARE CONTAINED IN OUR AMENDED AND RESTATED
ARTICLES OF INCORPORATION AND OUR AMENDED AND RESTATED BYLAWS; AS A RESULT, ANY
TAKEOVER OF CORD BLOOD MAY BE DELAYED OR DISCOURAGED
Our Amended and Restated Articles of Incorporation provide for a staggered Board
of Directors. Mr. Schissler's term expires in 2008, Mr. Vicente's and Ms.
Chrysler's terms expires in 2009, and Mr. Weir's and Mr. McGrath's term expires
in 2010. Our Amended and Restated Articles of Incorporation, as amended, also
provide for a substantial number of shares of common stock and "blank check"
preferred stock authorized for issuance solely by action of the Board of
Directors and among other things, that nominations for election to our Board of
Directors, other than those made by the Board of Directors, must be made by
written notification delivered to the Company not less than 20 and not more than
50 days prior to any annual or special meeting of shareholders called for the
election of directors. These provisions may have the effect of delaying or
discouraging any takeover of the Company by others or otherwise delaying or
limiting our shareholders' ability to change the our direction and management.
OFF-BALANCE SHEET ARRANGEMENTS:
We do not have any off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources that is material to investors.
ITEM 3. CONTROLS AND PROCEDURES
As of June 30, 2006, an evaluation was carried out under the supervision of and
with the participation of Cord Blood's management, including Cord Blood's Chief
Executive Officer (Principal Executive Officer), and Chief Financial Officer
(Principal Financial and Accounting Officer), of the effectiveness of our
disclosure controls and procedures. Based on that evaluation, the Company's
Chief Executive Officer and Chief Financial Officer concluded that the Company's
disclosure controls and procedures are effective, as of June 30, 2006, to ensure
that information required to be disclosed by the Company in reports that it
files or submits under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported within the time periods specified in
Securities and Exchange Commission rules and forms.
There have been no changes in our internal control over financial reporting
during the six months ended June 30, 2006 that have materially affected or are
reasonably likely to materially affect our internal control over financial
reporting.
It should be noted that the design of any system of controls is based in part
upon certain assumptions about the likelihood of future events, and there can be
no assurance that any design will succeed in achieving its stated goals under
all potential future conditions, regardless of how remote.
38
PART II. - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
NONE
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
We have issued the following securities in the first six months of 2006 without
registering them under the Securities Act of 1933:
During the three months ended March 31, 2006, Cord Blood issued a total of
271,270 shares to its directors as compensation. The total cash value of the
stock on the date of issuance was $44,760.
Unless otherwise noted in this section, with respect to the sale of unregistered
securities referenced above, all transactions were exempt from registration
pursuant to Section 4(2) of the Securities Act of 1933, as amended (the "1933
Act"), and Regulation D promulgated under the 1933 Act. In each instance, the
purchaser had access to sufficient information regarding Cord Blood so as to
make an informed investment decision. More specifically, we had a reasonable
basis to believe that each purchaser was an "accredited investor" as defined in
Regulation D of the 1933 Act and otherwise had the requisite sophistication to
make an investment in Cord Blood's securities.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
NONE
ITEM 5. OTHER INFORMATION
NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following exhibits are filed as part of this Form 10-QSB.
EXHIBIT NO. DESCRIPTION LOCATION
----------- ------------ ----------
3.0 Amended and Restated Articles of Incorporation of Filed as an exhibit to Registration Statement on
Cord Blood America, Inc. Form 10-SB filed on May 6, 2004
3.1 Amended and Restated Bylaws of Cord Blood America, Filed as an exhibit to Registration Statement on
Inc. Form 10-SB filed on May 6, 2004
4.0 Form of Common Stock Share Certificate of Cord Filed as an exhibit to Registration Statement on
Blood America, Inc. Form 10-SB filed on May 6, 2004
10.55 Employment Agreement with Chief Financial Officer Filed as an exhibit to Current Report on Form 8-K
filed on January 6, 2006
10.56 Employment Agreement with Chief Financial Officer Filed as an exhibit to Current Report on Form 8-K
filed on January 6, 2006
10.57 Employment Agreement with Chief Technology Officer Filed as an exhibit to Current Report on Form 8-K
filed on January 6, 2006
39
EXHIBIT NO. DESCRIPTION LOCATION
----------- ------------ ----------
10.58 Consulting Agreement with Former President Filed as an exhibit to Current Report on Form 8-K
filed on January 6, 2006
10.59 Stock Option Agreement with Former President Filed as an exhibit to Current Report on Form 8-K
filed on January 6, 2006
10.60 Asset Purchase Agreement with Cryobank for Filed as an exhibit to Current Report on Form 8-K
Oncologic and Reproductive Donors filed on January 13, 2006
10.61 Board Compensation Plan Filed as an exhibit to Current Report on Form 8-K
filed on February 8, 2006
10.62 Web Development on Maintenance Agreement with Filed as an exhibit to Current Report on Form 8-K
Gecko Media, Inc. filed on May 5, 2006
10.63 Investment Banking Agreement with Kings Pointe Filed as an exhibit to Current Report on Form 8-K
Capital, Inc. filed on June 1, 2006
10.64 Investment Banking Agreement with FAE Holdings, Filed as an exhibit to Current Report on Form 8-K
Inc. filed on June 1, 2006
10.65 Investment Banking Agreement with First SB Filed as an exhibit to Current Report on Form 8-K
Partners, Inc. filed on June 1, 2006
10.66 Agreement with Cornell Capital Partners, LP Filed as an exhibit to Current Report on Form 8-K
filed on June 29, 2006
10.67 Subscription Agreement with Strategic Working Filed as an exhibit to Current Report on Form 8-K
Capital Fund, L.P. filed on August 2, 2006
10.68 Promissory Note for the Benefit of Strategic Filed as an exhibit to Current Report on Form 8-K
Working Capital Fund, L.P. filed on August 2, 2006
10.69 Funds Escrow Agreement with Strategic Working Filed as an exhibit to Current Report on Form 8-K
Capital Fund, L.P. filed on August 2, 2006
31.0 Certification of Cord Blood America, Inc. Chief Provided herewith
Executive Officer, Matthew L. Schissler, pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
31.1 Certification of Cord Blood America, Inc. Provided herewith
Principal Financial Officer, Sandra D. Anderson,
pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002
32.0 Certification of Cord Blood America, Inc. Chief Provided herewith
Executive Officer, Matthew L. Schissler, pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
32.1 Certification of Cord Blood America, Inc. Chief Provided herewith
Financial Officer, Sandra D. Anderson, pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
40
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, the registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CORD BLOOD AMERICA, INC.
Date: August 16, 2006 By: /s/Matthew L. Schissler
Matthew L. Schissler,
Chairman and Chief Executive Officer
(Principal Executive Officer)
By: /s/Sandra D. Anderson
Sandra D. Anderson,
Chief Financial Officer
(Principal Financial and Accounting
Officer)
41