Attached files

file filename
EXCEL - IDEA: XBRL DOCUMENT - Cord Blood America, Inc.Financial_Report.xls
XML - IDEA: XBRL DOCUMENT - Cord Blood America, Inc.R9.htm
XML - IDEA: XBRL DOCUMENT - Cord Blood America, Inc.R3.htm
XML - IDEA: XBRL DOCUMENT - Cord Blood America, Inc.R2.htm
XML - IDEA: XBRL DOCUMENT - Cord Blood America, Inc.R4.htm
XML - IDEA: XBRL DOCUMENT - Cord Blood America, Inc.R8.htm
XML - IDEA: XBRL DOCUMENT - Cord Blood America, Inc.R7.htm
XML - IDEA: XBRL DOCUMENT - Cord Blood America, Inc.R5.htm
XML - IDEA: XBRL DOCUMENT - Cord Blood America, Inc.R1.htm
XML - IDEA: XBRL DOCUMENT - Cord Blood America, Inc.R6.htm
XML - IDEA: XBRL DOCUMENT - Cord Blood America, Inc.R10.htm
XML - IDEA: XBRL DOCUMENT - Cord Blood America, Inc.R20.htm
XML - IDEA: XBRL DOCUMENT - Cord Blood America, Inc.R19.htm
XML - IDEA: XBRL DOCUMENT - Cord Blood America, Inc.R14.htm
XML - IDEA: XBRL DOCUMENT - Cord Blood America, Inc.R16.htm
XML - IDEA: XBRL DOCUMENT - Cord Blood America, Inc.R11.htm
XML - IDEA: XBRL DOCUMENT - Cord Blood America, Inc.R18.htm
XML - IDEA: XBRL DOCUMENT - Cord Blood America, Inc.R21.htm
XML - IDEA: XBRL DOCUMENT - Cord Blood America, Inc.R12.htm
XML - IDEA: XBRL DOCUMENT - Cord Blood America, Inc.R17.htm
XML - IDEA: XBRL DOCUMENT - Cord Blood America, Inc.R13.htm
EX-31.2 - CERTIFICATION - Cord Blood America, Inc.cbai_ex312.htm
EX-31.1 - CERTIFICATION - Cord Blood America, Inc.cbai_ex311.htm
EX-32.1 - CERTIFICATION - Cord Blood America, Inc.cbai_ex321.htm
XML - IDEA: XBRL DOCUMENT - Cord Blood America, Inc.R15.htm


UNITED STATES
 SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC  20549
___________________________
 
FORM 10-K
 
(MARK ONE)
 
þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the fiscal year ended December 31, 2011
 
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from _______ to _______
 
Commission File No. 000-50746
 
cord blood America, inc.
(Exact Name of registrant as specified in its charter)
 
Florida  
 
90-061388
(State or Other Jurisdiction of
Incorporation or Organization)
 
(I.R.S.  Employer
Identification No.)
     
1857 Helm Drive, Las Vegas, NV
 
89119
(Address of Principal Executive Offices)
 
(Zip Code)
 
(702)-914-7250
(Issuer’s Telephone Number, Including Area Code)
 
Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of Each Class to be so Registered:
 
Name of each exchange on which registered
None
 
None

Securities registered under Section 12(g) of the Act:

Common Stock, Par Value $.0001
(Title of Class)
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.  Yes o No þ
 
Indicate by check mark whether the registrant:  (1) has filed all reports required to be filed by Section 13 or 15(d) of the 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 þ No o
 
Indicate by check mark  whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulations S-T during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files)  Yes o No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in the definitive proxy or information statement incorporated by reference in Part III of this Form 10-K or amendment to Form 10-K.  þ
 
Indicate by check mark whether the registrant is a large accelerated filer, and accelerated filer, a non-accelerated filer, or a small reporting company.  See definitions of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check One):
 
Large Accelerated Filer  
o
Accelerated Filer
o
Non-accelerated Filer  
o
Smaller reporting company
þ
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

Check whether the issuer has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes o No o

The aggregate market value of the common equity held by non-affiliates of the registrant as of June 30, 2011, based on the closing price of the common stock as reported by the Over the Counter Bulletin Board on such date, was approximately $8.9  million.  The registrant has no outstanding non-voting common equity.
 
The Registrant had  249,999,364 shares of its common stock outstanding as of March 15, 2012, and no shares of its preferred stock outstanding.
 
List hereunder the following documents if incorporated by reference and the Part of the Form 10-K into which the document is incorporated:
 


 
 

 
CORD BLOOD AMERICA, INC.
2011 ANNUAL REPORT ON FORM 10-K
Table of Contents
 
     
Page
 
         
“SAFE HARBOR” STATEMENT      
         
PART I      
         
Item 1.
BUSINESS
   
4
 
Item 1A.
RISK FACTORS
   
16
 
Item 2.
PROPERTIES
   
20
 
Item 3.
LEGAL PROCEEDINGS
   
20
 
           
PART II        
           
Item 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
   
22
 
Item 6.
SELECTED FINANCIAL DATA
   
27
 
Item 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
   
28
 
Item 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
   
33
 
Item 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
   
33
 
Item 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTAINS ON ACCOUNTING AND FINANCIAL DISCLOSURE
   
33
 
Item 9A.
CONTROLS AND PROCEDURES
    33  
Item 9B.
OTHER INFORMATION
   
34
 
           
PART III        
           
Item 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
   
35
 
Item 11.
EXECUTIVE COMPENSATION
   
36
 
Item 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
   
41
 
Item 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
   
42
 
Item 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
   
43
 
           
PART IV        
           
Item 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
   
35
 
 
SIGNATURES
   
44
 

 
2

 
 
“SAFE HARBOR” STATEMENT
 
Some of the information contained in this Annual Report may include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. We base these forward-looking statements on our current views with respect to our research and development activities, business strategy, business plan, financial performance and other matters, both with respect to us, specifically, and the biotechnology sector, in general. Statements that include the words “expect,” “intend,” “plan,” “believe,” “project,” “estimate,” “may,” “should,” “anticipate,” “will” and similar statements of a future or forward-looking nature identify forward-looking statements for purposes of the federal securities laws or otherwise, but the absence of these words does not necessarily mean that a statement is not forward-looking.
 
All forward-looking statements involve inherent risks and uncertainties, and there are or will be important factors that could cause actual results to differ materially from those indicated in these statements. We believe that these factors include, but are not limited to, those factors set forth in the sections entitled “Business,” “Risk Factors,” “Legal Proceedings,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Quantitative and Qualitative Disclosures About Market Risk” and “Controls and Procedures” in this Annual Report, all of which you should review carefully. Please consider our forward-looking statements in light of those risks as you read this Annual Report. We undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.
 
If one or more of these or other risks or uncertainties materializes, or if our underlying assumptions prove to be incorrect, actual results may vary materially from what we anticipate. All subsequent written and oral forward-looking statements attributable to us or individuals acting on our behalf are expressly qualified in their entirety by the cautionary language above. You should consider carefully all of the factors set forth or referred to in this Annual Report, as well as others, that could cause actual results to differ.
 
 
3

 
 
PART I
 
ITEM 1.     BUSINESS
 
Overview
 
Cord Blood America, Inc. ("CBAI"), formerly D&A Lending, Inc., was incorporated in the State of Florida on October 12, 1999. In October, 2009, CBAI re-located its headquarters from Los Angeles, California to Las Vegas, Nevada. CBAI is primarily a holding company whose wholly-owned subsidiaries include Cord Partners, Inc., CorCell Companies. Inc., CorCell Ltd., (“Cord”), CBA Professional Services, Inc. D/B/A BodyCells, Inc. ("BodyCells"), CBA Properties, Inc. ("Properties"), and Career Channel Inc D/B/A Rainmakers International ("Rain"). In March 2010, CBAI purchased a majority interest in Stellacure GmbH (“Stellacure”). In September 2010, CBAI purchased a majority interest in Biocordcell Argentina S.A. (“Bio”). CBAI and its subsidiaries engage in the following business activities:

     
Cord specializes in providing private cord blood stem cell preservation services to families.

     
Stellacure GmbH specializes in providing cord blood stem cell preservation services to families in Germany, Spain and Italy.
 
     
Biocordcell Argentina S.A. specializes in providing cord blood stem cell preservation to families in Argentina, Uruguay and Paraguay.
 
     
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 other intellectual property.
 
     
Rain has specialized in creating direct response television and radio advertising campaigns, including media placement and commercial production.  Management has reduced the activities of Rain, terminated its former employees, and by the end of 2010, was no longer seeking additional business.  This is consistent with management’s decision to focus its attention exclusively on the stem cell storage business and related activities.
 
Events in 2011
 
VidaPlus
 
On January 24, 2011, the Company entered into a Stock Purchase Agreement to acquire up to 51% of the capital stock in VidaPlus, an umbilical cord processing and storage company headquartered in Madrid, Spain.  The Agreement is organized into three tranches; the first executed at closing with an initial investment of approximately $204,000 (150,000 Euro) for an amount equivalent to 7% as follows; 1% of share capital in initial equity or approximately $30,000 and 6% or an estimated $174,000 as a loan convertible into equity within 12 months of closing.  The initial investment is secured by a Pledge Agreement on 270 VidaPlus samples that are incurring annual storage fees.  The second tranche provides the opportunity for an additional 28% in share capital through monthly investments based on the number of samples processed in that month (up to a maximum of 550,000 EUR).  The Company loaned $153,092 (US) to VidaPlus during the twelve months ended December 31, 2011 in connection with the second tranche of this agreement. Converting the investment from a loan into equity for tranche two will take place every 12 months, and the obligation will have been met in full after 1,000 samples have been processed and stored.  The third tranche follows a similar loan to equity agreement as tranche two but for an additional 16% equity at the option of the Company (up to a maximum of 550,000 EUR).  VidaPlus contracts through Stellacure and their relationship with the German Red Cross for their processing and storage.  The second and third tranches contain conditional components for funding to continue from CBAI, including payments to Stellacure by Vida to be current with previously agreed to terms between the parties.

In connection with the VidaPlus Stock Purchase Agreement entered into on January 24, 2011, the Company is obligated to make monthly loans to VidaPlus based on the number of new samples processed and up to a maximum of 550,000 Euro for each of tranche 2 and 3 of the Agreement.  Tranche 2 is cancellable by the Company if less than 360 samples are processed and stored by VidaPlus in a twelve month period.  On January 12, 2012, the Company notified VidaPlus that it was exercising its right to not make any further payments under the terms of the Agreement.

In total, the Company has loaned VidaPlus $327,092 in connection with this Agreement during the 12 months ended December 31, 2011.

 
4

 
 
China Stem Cell Ltd. Investment

In March of 2010 the Company acquired pursuant to a License Agreement, a 10% non dilutable interest in what became, in December 2010, China Stem Cells, Ltd., a Cayman Islands Company (hereinafter "Cayman"), which indirectly holds a 100% capital interest in AXM Shenyang, a company organized to conduct a Stem Cell Storage Business in China. In exchange for issuance of an equity interest in Cayman, under the terms of the Transfer of Technology Agreement the Company agreed to provide technology transfer, knowhow and training in the setup, marketing and operation of the China Stem Cell Storage business. In connection with the License Agreement, the Company will receive royalties equal to 8.5% of "Net Revenues" realized from the China Stem Cell Storage business, over the 15 year term of the agreement, with certain minimum annual royalties’ payable beginning in 2011.  The Company invoiced $62,866 for its minimum royalty payment for 2011.

In December of 2010 the Company also acquired the option to provide up to $750,000 of additional capital funding to Cayman through the purchase of Cayman Secured Convertible Promissory Notes and attached Cayman Warrants to acquire its Common Stock. Other Cayman shareholders were granted similar options, with the intent of raising the aggregate up to $1.5 million in additional capital for Cayman and its subsidiaries.

As of December 31, 2011, Cord Blood has exercised this option in part, provided a total of $400,000 in additional capital to Cayman, and  is to receive Cayman Secured Convertible Promissory Notes for this sum along with 50 Cayman (TBD) Warrants. The Secured Convertible Promissory Notes are convertible into Cayman stock at a conversion price of $1,500 per share, subject to certain adjustments. The Warrants have a five year term and are exercisable at an option exercise price of $0.05 per share per share, subject to certain adjustments.

ViviCells International Acquisition
 
On May 5, 2010, the Company executed and funded a Debtor-In-Possession loan agreement with ViviCells International, Inc. a Florida corporation (“Vivi” or the “Debtor”), NeoCells, Inc., an Illinois corporation, and AdultCells, Inc., an Illinois corporation, (jointly and severally referred to as the “Subsidiaries”), for $200,000 secured by a super priority lien on the Debtor’s and Subsidiaries’ assets. As additional consideration for this loan, the Company received 21% of the Debtor’s outstanding Common Stock. The $200,000 loan carries interest at 10% per annum, with principal and all accrued interest all due and payable on March 15, 2011. In September 2010, the Company acquired an approximately $800,000 secured obligation of the Debtor held by a junior lien holder in ViviCell’s bankruptcy proceeding, in exchange for the private issuance of 111,111 restricted shares of its Common stock to the holder of this secured obligation.

On October 20, 2010, the Company as a co-proponent proposed a Plan of Reorganization for Vivi under the United States Bankruptcy Code, pursuant to which the Company proposed to acquire an additional 74% of the outstanding shares of Vivi, which would give it in excess of 94% ownership in ViVi, in exchange for the issuance of up to 644,888 shares of the Company’s common stock, and the Company’s agreement to make an additional senior secured loan in the amount of $300,000 to Vivi as working capital upon consummation of the Plan. Between June 16, 2010 and December 14, 2010, the Company accelerated the date of its loan commitment, and loaned $100,000 out of the proposed $300,000 loan amount to Vivi in advance of the Plan confirmation, secured under the super priority lien. On February 16, 2011, a hearing on Confirmation of this proposed plan of reorganization was heard and approved. The plan was scheduled to be Effective as of April 1, 2011. However, Vivi subsequently advised the Company that it would be unable to supply the full 94% plus ownership of Vivi’s outstanding capital stock to the Company as required under the Plan. On April 13, 2011, the Company filed a Non Consummation of Confirmed Plan with the United States Bankruptcy Court. The Company pursued its rights to foreclose as the holder of a super priority lien against all assets of NeoCells, ViviCells’ subsidiary. Then, on April 22, 2011, ViviCells filed an adversary proceeding against the Company, in the same United States Bankruptcy Court, Central District of California (Santa Ana), where ViviCells bankruptcy proceedings had been taking place (the “Adversary Proceeding”). ViviCells followed this by, in the Adversary Proceeding, filing a Motion for a temporary restraining order on April 25, 2011, seeking to halt the foreclosure by the Company on the assets of NeoCells. The complaint and the motion were amended on May 2, 2011, primarily by adding NeoCells, in addition to ViviCells, as a party to the adversary proceeding and the motion. The motion was heard on May 2, 2011. The motion was denied, and accordingly, the Company proceeded on May 2, 2011 at 1:00 pm (CST) to foreclose against all assets of NeoCells. At the public disposition of all property owned by NeoCells, the Company as a secured creditor bid $320,000 in offset debt, and acquired all right, title and interest in said property free and clear of any liens, security interests and encumbrances which are junior and subordinate to the Company’s security interest as a secured creditor.
 
On June 2, 2011, the Court entered an order dismissing the Adversary Proceeding, and on July 11, 2011, the Court entered an Order Closing Adversary Proceeding.
 
 
5

 

Reproductive Genetics Institute
 
On February 24, 2011, the Company acquired the following assets; 593 umbilical cord blood samples and all related file documents, four (4) cryogenic storage tanks, and two computers from Reproductive Genetics Institute, Inc. (RGI) for $76,000 in cash. The Company paid an additional $48,885 to RGI to cover claims related to ViviCells International for a total $124,885. In March 2011, the assets acquired were relocated to the Company’s Las Vegas laboratory.

Additional Possible Acquisitions
 
In 2010 and continuing in 2011, the Company has also entered into three separate letters of intent, two nonbinding and one binding, contemplating the acquisition of three separate operating companies in the stem cell industry.  Acquisition was contingent on completion of ongoing due diligence review to the Company’s satisfaction, and the Company’s successfully obtaining new capital on commercially reasonable terms to fund one or more, or all of these acquisitions.  One of these acquisitions is Cryo-Cell de Mexico, S.A. de C.V. (“Cryo Mexico”) - see discussion under litigation below). Another is a US Stem Cell Company, and a third is a South American Stem Cell Company.  (See separate Form 8K reports filed with the Securities and Exchange Commission with regard to certain of these potential acquisitions, which Reports are incorporated herein by reference.)   The Company has concluded its diligence and capital raise opportunities, and is no longer pursuing these three acquisitions.
 
Other
 
As a publicly traded small cap company, Cord Blood is reliant on a private entity, the Depository Trust Company (“DTC”), to permit its publicly traded shares to be eligible for electronic stock transactions. The DTC is the only entity of its kind and is essentially unregulated.

In December, 2010, the DTC unilaterally and without consultation with the Company, “chilled” all newly issued shares of the Company which were entitled to be freely traded in the market and whose holders expected to utilize the DTC Electronic Trading System. The DTC has since removed the “chill,” as described in more detail herein. Under what the DTC calls a “chill”, the DTC precludes shares which it has unilaterally “chilled” from utilizing its Electronic Stock Transfer System, thereby putting the holders of such “chilled shares” at extreme disadvantage in the trading market when they go to sell their shares. The “chill” applied to all shares newly issued after the “chill” went into effect on December 14, 2010, as well as all shares newly freed from private placement sales restrictions after the “chill” went into effect. The chill included as to the Company, even shares for which an effective registration statement is in place, and shares for which valid legal opinions have been issued by seasoned securities law counsel opining as to share entitlement to free trading status under SEC Rule 144. The SEC File Number of the aforementioned registration statement, a Form S-1 filing, is 333-164844, which said registration statement was declared effective by the SEC on May 11, 2010. The “chill ” fortunately did not apply to existing publicly traded shares of the Company which were out in the market place. The holders of the “chilled” shares of the Company are the investors whose funds have been supporting CBAI with capital lines to fund its expanding business. Implementation of the DTC “chill” made it more difficult and costly for the Company to obtain new capital.

The Company is unsure as to the DTC’s reasons for its original issuance of the “chill.” No formal written reasons were given to the Company by the DTC regarding their reasons for the “chill,” in spite of the Company’s efforts to uncover any such purported reasons. The Company’s management believes the “chill” was unreasonable and that there was and is no valid, legal reason for the “chill.”

In March 2011, the Company, through outside counsel, had a conversation with the DTC during which a number of items were discussed, though no reasons were given for the DTC’s “chill” of the Company’s stock. Among the issues discussed were: whether an investor in the Company was a registered broker dealer under the Securities and Exchange Act of 1934, and if not, whether it needed to be; the details regarding the “free up” from restriction of shares issued to an investor; and whether an investor could be construed to be a “Control Person” under the 33 Act. The Company does not believe the DTC considered the Company to be in violation under any of the foregoing circumstances at the time of the conversation, only that the DTC wanted to discuss the issues with the Company. In response to and as a follow up to the discussion, the Company provided a letter, along with accompanying materials in April 2011 in an effort to alleviate any of the DTC’s potential concerns, though again, no reasons for the “chill” were actually cited by the DTC during the discussion.
 
 
6

 

During additional discussions with the DTC and its outside counsel regarding the “chill,” commencing in or around August, 2011, the DTC requested that some additional information be added to an opinion that was submitted by the Company to the DTC in June 2011. The additional information included: an itemization of the dates share issuances were made by the Company to holders during a timeframe from January 2009 through September 2010; a statement that no “additional consideration” was paid at the time of conversion under any warrants or convertible notes during this timeframe; a statement that the share issuances at issue were made by the Company to the holders, and not to the holders from a third party; and information indicating that none of the holders has owned more than 9.99% of the Company’s outstanding stock at any given time. The Company does not believe the DTC was under the impression the Company was in violation under any of these scenarios, but merely that the DTC wanted this information stated in the aforementioned opinion. The Company had previously given much of this information to the DTC in some format or another. The Company was forced to negotiate settlement agreements with its existing investors to settle alleged breaches of contract as a result of this DTC chill and the unavailability of DTC electronic transfer for chilled Company shares. Specifically:

a.  Liquidated Damages Agreement with JMJ Financial.
 
Under previous outstanding Company Convertible Notes issued to JMJ and funded by JMJ in the amount of approximately $1,750,000 executed on March 24, 2010, March 26, 2010, October 7, 2010 and January 12, 2011 (the “Earlier Notes”), the Company was obligated to deliver common shares which could be placed into the Automated System for Deposits and Withdrawals of Securities (known as “DWAC”). At present the DWAC system is not available to Company shareholders for newly issued shares of the Company’s common stock. As a result of this, on February 8, 2011, the Company entered into a settlement and liquidated damages agreement (the “Liquidated Damages Agreement”) with JMJ which contained the following terms, among others:

-
Pursuant to this Liquidated Damages Agreement, the Company agreed to pay $671,385 in liquidated damages to JMJ said sum to be added to the principal amount of the Earlier Note.
 
-
The investor was also granted the option to rescind any future conversion of portions of the principal amount of the Earlier Note, and or the 2011 Note into the Company’s common stock, and convert JMJ’s interest back into debt owed by the Company, and later at JMJ’s option, to convert back again into Company commonstock.
 
-
The per share conversion price on JMJ’s conversions of the Earlier Note and the 2011 Note was changed from a 15% discount, to a 25% discount from the Company share price, calculated as the lesser of $.0041, or the average of the 5 lowest traded prices for the Company’s common stock in the 20 trading days preceding the date of each conversion into common stock.
 
-
The Liquidated Damages Agreement also added a 35% prepayment penalty for prepayment of any previously funded portions of any Company Note, past or future , and a 15% cancelation fee for cancellation of any portion of any past or future Company Note which had not been funded.

Due to the foregoing, the Company paid liquidated damages to JMJ in the total amount of $671,385.00, all of which was paid prior to March 31, 2011. The Company will not incur any additional liquidated damages to JMJ as a result of the foregoing.

b.  Liquidated Damages Agreement with Tangiers Capital, LLC.
 
On January 19, 2011, the Company entered into a separate settlement and liquidated damages agreement (the “Agreement”), with Tangiers Capital, LLC (“Tangiers), one of the Company’s existing investment bankers which has been purchasing from time to time registered shares of the Company’s Common Stock for cash. Execution of the Agreement became necessary because under the existing agreement with Tangiers, entered June 27, 2008, the Company was obligated to deliver registered shares which could be “immediately” placed into the Automated System for Deposits and Withdrawals of Securities (known as “DWAC”), and at present the DWAC system is not available for newly issued registered shares of the Company.

The Agreement provides that as Liquidated Damages, the Company will remit a specified sum (the “Penalty Sum”) to Tangiers on each share the investor has previously purchased and currently holds, and on each share purchased Tangiers for cash in the future, until such time as the shares held by Tangiers can again be deposited into the DWAC system. Shares can only be purchased by Tangiers for cash in the future at the Company’s election, as the June 27, 2008 agreement works in a manner similar to a credit line.
 
 
7

 
 
The Penalty Sum is to be calculated as follows: A sum equal to:

(i) 90% of the volume weighted average price of the Company’s common stock for the five consecutive trading days immediately prior to notice of Tangier’s purchase of each specific share from the Company;

(ii) Plus a sum equal to 30% of the sum calculated in (i) above;

(iii) Less a sum equal to:

a. The actual sum received by Tangiers on the sale of such acquired shares upon their sale into the public market, from the date of the agreement until the date on which newly issued shares of the Company can again use the DWAC System; or

b. In the case of shares acquired during the specified period and “not sold” at the date on which the DWAC System is again available, a sum equal to the closing price for Cord common Stock on the date that newly issued shares of the Company’s common stock can again use the DWAC System. As of December 31, 2011, the DTC’s chill,” had cost the Company approximately $246,000 in damages stemming from the above-described agreement with Tangiers, which the Company has already paid to Tangiers. Further, additional damages may be alleged, in accordance with the formulas set forth in the settlement agreement with Tangiers, and as stated above, the amount is uncertain. As to potential future damages, shares can only be purchased by Tangiers for cash in the future at the Company’s election, as the June 27, 2008 agreement works in a manner similar to a credit line. Thus, it is possible no such damages would become due. Even though the “chill” has been removed, the Company has not yet been readmitted to the DTC’s FAST program, including DWAC, as further described herein, such that in the event the Company elects to allow Tangiers to purchase shares for cash in the future, Tangiers may argue that a Penalty Sum may still be due from the Company to Tangiers using the above-referenced formula.

The Company was informed on November 16, 2011 that the DTC had removed the "Chill." Now that the “chill” has been removed, the Company is no longer in a “Custody Only” status. The Company is considered ”DTC Eligible.” This status allows brokers to send physical share certificates to DTC for the benefit of their client shareholders at which point the certificates are deposited into the DTC system. Once the certificate clears the transfer process they are credited into the DTC system and future trades can be conducted and settled electronically.

At present all shares of the Company’s stock fall under the DTC categorizations described herein, in contrast to when the “chill” was in effect and some shares of the Company’s stock were subject to the “chill,” while others were not. The Company does not believe additional expenses will be incurred by shareholders and investors in making sales or purchases of the Company’s stock due to FAST services being unavailable. It may take several additional days for investors who receive physical shares of the Company’s stock from the Company in fulfillment of the Company’s financing arrangements or who, for other reasons, receive physical shares of stock, to deposit these physical stock certificates into the DTC system, as a result of the Company not being eligible for FAST services. There should not, however, be an increase in time necessary to purchase and sell the Company’s common stock that is already in the DTC system.

While the “chill” was in effect, the Company accessed capital from investors in a total amount of $2,684,062. Of this total $937,000 was from Tangiers, $1,000,000 was from JMJ Financial (“JMJ”), and $747,062 was from St. George Investments, LLC (“St. George”).

Of the amount obtained by the Company from Tangiers, $512,000 stemmed from the June, 28, 2008 agreement between the Company and Tangiers. As described herein, the Company entered into a settlement agreement with Tangiers which provided for $246,000 as damages as a result of the DTC “chill,” which thereby made this source of capital more costly to the Company. $250,000 of the remaining amount obtained from Tangiers during this period was accessed by the Company pursuant to two promissory notes issued by the Company to Tangiers in June, 2011, as described in more detail in the Liquidity and Capital Resources section of this filing. Under these documents, though no monetary damages are due to Tangiers as a result of the “chill” or as a result of the Company not being DWAC eligible, Tangiers’ conversion rate is 70% of the lowest volume weighted average price (VWAP) during the ten (10) days prior to conversion while the Company is not DWAC eligible, whereas this conversion rate would be 77.5% of the lowest volume weighted average price (VWAP) during the ten (10) days prior to conversion, if the Company were DWAC eligible. The remaining $100,000 accessed from Tangiers while the “chill” was in effect stems from four separate $25,000 notes, entered in July and August of 2011, the details of which are set forth in the Liquidity and Capital Resources section of this filing. The conversion rate on these notes is the lower of 70% of the lowest volume weighted average price (VWAP) during the 10 days prior to conversion or 70% of the average of the lowest 5 trading days over the 20 days prior to conversion. The Company believes that if it would have been DWAC eligible at the time the notes were issued, it may have been able to negotiate a better discount arrangement with Tangiers, thereby resulting in a lower cost of this capital.
 
 
8

 

As also described herein, the Company entered into   a settlement agreement with JMJ due to the “chill” that resulted in $671,385 as damages. Part of this damages are attributable to the $1,000,000 accessed from JMJ during the “chill,” though the damages amount pertains to all capital accessed from the notes which are governed by the settlement agreement, not just the $1,000,000 received by the Company from JMJ while the “chill” was in effect. The Company will not incur additional monetary damages to JMJ under that settlement agreement, however, under the settlement agreement, the discount rate on JMJ’s conversions of the Earlier Note and the 2011Note was changed in JMJ’s favor, and in addition, the settlement agreement added a prepayment penalty for any previously funded portions of any JMJ note and added a cancellation fee for any portion of any past or future JMJ note which has not yet been funded, all as set forth in more detail in this section of this filing.

Regarding amounts of capital obtained from St. George while the “chill” was in effect, the convertible promissory notes that govern this capital are set forth herein.” Due to the Company not being DWAC eligible, the conversion rate at which St. George may convert its convertible promissory notes into shares of the Company’s common stock has been reduced from 80% to 70%. Aside from the conversion rate reduction, St. George has made no claims for additional, monetary damages as a result of the Company not being DWAC eligible.

Since the DTC removed the “chill” on or around November 16, 2011, the Company has accessed $75,000 of capital from investors, all of which came from Tangiers. Under the Convertible Notes the Company entered with Tangiers in order to receive this capital, Tangiers’ conversion rate is the lower of 70% of the lowest volume weighted average price (VWAP) during the 10 days prior to conversion or 70% of the average of the lowest 5 trading days over the 20 days prior to conversion. The Company believes that if it were DWAC eligible, it may have been able to negotiate a better discount arrangement with Tangiers.
 
Industry Background of Cord
 
Stem cells. The human body is comprised of many types of cells with individual characteristics and specific functions. Cells with a defined or specialized function are referred to as differentiated. Examples of differentiated cells include nerve cells, red blood cells and skin cells. Differentiated cells are replaced and renewed over time from a population of rare, undifferentiated cells known as stem cells. As stem cells grow and proliferate, they are capable of producing both additional stem cells as well as cells that have differentiated to perform a specific function. Stem cell differentiation is prompted by specific cell-to-cell interactions or other molecular signals. These signals trigger a change in the cell’s genetic profile, causing specific genes to become active and others to become inactive. As a result, the cell develops specialized structures, features and functions representative of its differentiated cell type.
 
There are many types of stem cells in the human body. These stem cells are found in different concentrations and in different locations in the body during a person’s lifetime. Current thinking suggests that each organ and tissue in the body is founded, maintained and possibly rejuvenated to different degrees, on a more or less continual basis, by specific stem cell populations naturally present in the body. Types of stem cells include:
 
Hematopoietic stem cells.  Hematopoietic, or blood, stem cells reside in the bone marrow, umbilical cord and placenta. They can also be found in an infant’s umbilical cord as well as circulating in very small numbers in the blood. Hematopoietic stem cells generate all other blood and immune system cells in the body.  
 
Neural stem cells. Neural stem cells can be found in the brain and spinal cord and are capable of differentiating into nerve and brain tissue.
 
Mesenchymal stem cells.  Mesenchymal stem cells can be found in bone marrow and differentiate into bone, cartilage, fat, muscle, tendon and other connective tissues.
 
Pancreatic islet stem cells. Pancreatic islet stem cells can be found in the pancreas and differentiate into specialized cells of the pancreas including cells that secrete insulin.
 
 
9

 
 
The ability of a stem cell to differentiate into multiple types of cells of a certain tissue is referred to as pluripotency. For example, a hematopoietic stem cell has the ability to differentiate into many types of blood and immune system cells. However, stem cells of one tissue type may also generate specialized cells of another tissue type, a characteristic referred to as plasticity. For example, under specific conditions, hematopoietic stem cells have been shown to generate specialized cells of other systems, including neural, endocrine, skeletal, respiratory and cardiac systems. These characteristics make stem cells highly flexible and very useful for a number of applications, including the potential use as therapeutics.
 
Cell therapy. Cell therapy is the use of live cells as therapeutic agents to treat disease. This therapy involves the introduction of cells to replace or initiate the production of other cells that are missing or damaged due to disease. Currently, the most common forms of cell therapy include blood and platelet transfusions and bone marrow transplants.
 
Bone marrow transplantation is a medical procedure in which hematopoietic stem cells are introduced into the body in order to regenerate healthy, functioning bone marrow. In this procedure, stem cells are obtained from a donor through a surgical procedure to remove approximately one liter of bone marrow. The donated bone marrow, including any “captured” stem cells, is then transfused into the patient. Stem cells for transplantation may also be obtained from peripheral blood or umbilical cord blood donations. Sometimes the stem cells used in the procedure are obtained from the patient’s own bone marrow or blood.
 
Bone marrow transplantation has been successfully employed in the treatment of a variety of cancers and other serious diseases since the 1960s. According to the International Bone Marrow Transplant Registry, over 45,000 bone marrow and other hematopoietic (blood) stem cell transplant procedures were performed worldwide in 2002.
 
The flexibility and plasticity of stem cells has led many researchers to believe that stem cells have tremendous promise in the treatment of diseases other than those currently addressed by stem cell procedures. Researchers have reported progress in the development of new therapies utilizing stem cells for the treatment of cancer, neurological, immunological, genetic, cardiac, pancreatic, liver and degenerative diseases.
 
Umbilical Cord Blood Banking
 
The success of current and emerging cell therapies is dependent on the presence of a rich and abundant source of stem cells. Umbilical cord blood has been emerging as an ideal source for these cells. As information about the potential therapeutic value of stem cells has entered the mainstream, and following the first successful cord blood transplant performed in 1988, cord blood collection has grown. In the past decade, several public and private cord blood banks have been established to provide for the collection and preservation of these cells. Public cord blood banks collect and store umbilical cord blood donated by women at the birth of the child. This blood is preserved and made available for a significant fee to anyone who needs it in the future. We do not currently collect or store donated cord blood units. Private, or family, cord blood banks such as Cord, collect and store umbilical cord blood on a fee-for-service basis for families. This blood is preserved and made available to the family in the event the family needs stem cells for a transplant. Stem cells have been successfully recovered from cord blood after at least twenty years of storage in liquid nitrogen. However, these cells may be able to retain their usefulness at least as long as the normal life span of an individual.
 
CORD
 
Services Provided By Cord
 
Cord’s customers are typically expectant parents who choose to collect and store umbilical cord blood at the birth of their child for potential use in a stem cell transplant at a later date for that child or for another family member.  With the opening of the lab in Las Vegas, NV, Cord is able to provide services to collect, test, process and preserve umbilical cord blood.
 
 
10

 
 
Private cord blood banking has been growing in acceptance by the medical community and has become increasingly popular with families. For an initial fee of approximately $1,950 and an annual storage fee of approximately $125 for each year thereafter, Cord provides the following services to each customer:
 
Collection. We provide a 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.
 
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.
 
Transportation.  We manage all logistics for transporting the cord blood unit to our centralized facility immediately following birth. This procedure ensures chain-of-custody control during transportation for maximum security.
 
Comprehensive Testing. At the laboratory, the cord blood sample is tested for stem cell concentration levels and blood type. The cord blood sample and the maternal blood sample are also tested for infectious diseases. We report these results to both the mother and her doctor.
 
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 eighteen years when stored in this manner and theoretically could be maintained at least as long as the normal life span of an individual.
 
Explanation of Certain Material Agreements And Transactions
 
Patent License Agreement
 
PharmaStem Therapeutics holds certain patents relating to the storage, expansion and use of hematopoietic stem cells. In the past ten years, PharmaStem has commenced suit against numerous companies involved in cord blood collection and preservation alleging infringement of its patents. In October 2003, after a jury trial, judgment was entered against certain of our competitors and in favor of PharmaStem in one of those suits. In February 2004, PharmaStem commenced suit against Cord Partners and certain of its competitors alleging infringement of its patents. Management of Cord Partners determined to settle, rather than to litigate, this matter. As a result, PharmaStem and Cord Partners entered into a Patent License Agreement in March 2004. Pursuant to the Patent License Agreement, Cord Partners 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 may remain in effect. All of the patents expired in 2010. Cord Partners is obligated under the Patent License Agreement to pay royalties to PharmaStem of 15% of all revenues generated by Cord Partners from the collection and storage of cord blood on and after January 1, 2004. Other than royalties, no amount is payable by Cord Partners to PharmaStem. All litigation between the parties was dismissed and all prior claims were released. As of 2008, Cord has ceased paying all royalties to PharmaStem. The patents have been declared void under a final decision on appeal, and as such, there is no pending litigation in this matter. As of December 31, 2011, the Company included approximately $226,000 in accounts payable and $120,000 included in accrued expenses to account for this liability since 2008.

CorCell Acquisition
 
On October 13, 2006, we entered into an Asset Purchase Agreement with Vita34 for the assets of CorCell, Inc., to begin the process of acquiring the business of collection, processing and storage of blood taken from umbilical cord after a child is born. On February 28, 2007, we completed the acquisition. The acquisition related to all rights to possession and custody of all acquired samples owned by CorCell, Inc. and associated with the operations of CorCell, Inc., which is predominantly the current customer base and revenues. The deal also included the purchase of cryogenic freezers and other fixed assets used in this umbilical cord blood samples business. CorCell is not PharmaStem licensed. These cryogenic freezers were moved to our Las Vegas facilities on March 8, 2010.
 
 
11

 
 
CureSource Asset Acquisition
 
On August 20, 2007, we completed the acquisition of specific assets from CureSource, Inc., for the aggregate purchase price of $106,500 in cash and $10,000 value paid in common restricted shares of the company, for a total purchase price of $116,500. The asset purchase related to the existing customer samples owned by CureSource, Inc. and associated with the operations of CureSource, Inc., which predominantly is the current customer base and revenues.
 
Cryobank for Oncologic and Reproductive Donors (CORD) Acquisition
 
On January 24, 2006, we acquired specific assets related to our collecting, testing, processing and preserving umbilical cord blood, including 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, for the aggregate purchase price of $260,000.
 
Shelter Island Warrants And Puts
 
In connection with convertible debt financing consummated in February of 2007 with Shelter Island Opportunity Fund, LLC, the Company issued to the lender in that transaction a “Put Agreement”, whereby the Company agreed to purchase from the Lender up to 360,000 shares of its common stock from the lender at a fixed purchase price of $5.00 per share, or for a total of up to $1,800,000 if the Put is exercised in full.  The Put provides that if the Company is unable to, or chooses not to pay the Put price in cash, the Company can issue a convertible promissory note, bearing interest at 16% per annum during its initial 12 month term, and interest at 20% per annum thereafter, payable on a monthly basis over on a 24 month level amortization, secured by unspecified assets, and payable at the Company’s option by delivery of shares of its Common stock in lieu of cash.
 
At the same time, the Company issued to the Lender a warrant to acquire 360,000 shares of its common stock, at a warrant exercise price of $10.1, subject to exercise price adjustment under certain circumstances. The exercise price as subsequently been adjusted under the warrant provisions and is currently fixed at $0.86 per share.

The Lender in August of 2009 endeavored to exercise its rights under the Put without first exercising the warrant or otherwise acquiring shares of the Company’s common stock which the Lender would be able to deliver to the Company as required by the Put.  As a result of the Lender’s inability to deliver to the Company shares of the Company’s common stock as required by the Put, the Company declined to pay the cash Put price or deliver the convertible promissory note in satisfaction of the Put, and has taken the position that the Put has not been exercised.

After extensive negotiations with Shelter Island, the parties entered into a transaction on July 21, 2010, whereby the 360,000 shares Warrant Agreement was canceled, and the obligation represented by the Put Option Agreement was satisfied by the Company's delivery  to Shelter Island of a new Senior Secured Note in the principal amount of $1,590,400  (the "Replacement Note"). With this agreement, the derivative liability of $1,608,658 was reduced to $1,590,400 and then reclassified on the balance sheet as a note payable. The Replacement Note matured on September 30, 2011, bears interest at 16% per annum, interest-only is due, for the period July 31, 2010 through January 31, 2011, and is payable in six equal monthly installments of $265,067 each, commencing January 31, 2011. The Company, at its option, may pay the principal amount due on the Replacement Note by the issuance of unregistered Company Common Stock, to be valued at an agreed conversion rate that is fixed for this purpose, subject to certain adjustments, at 85% of the market value of the Company's common stock, calculated based on the five lowest daily closing prices for the stock over certain specified 20 day periods.
 
On March 17, 2011, the parties entered into an Amendment for above said Replacement Note.  The Amendment extends the commencement date of the six monthly installments each in the amount of $ 248,400 to April 30, 2011 in exchange for continued interest payments for February, March and April, along with a cash payment of $25,000 as an adjustment to the principal balance.  Other terms of the Replacement Note remain for the most part the same.

Shelter exercised its conversion rights under the Replacement note in 2011, in part. Specifically, as a result of conversions by Shelter, the Company issued a total of 5,562,038 shares, at a value of $568,134, to Shelter in 2011. Shelter returned 3,315,492 of these shares to the Company on November 11, 2011, which amounted to $297,095.  Shelter Island also was repaid $850,000 of its debt balance with the Company by selling a portion of its debt to Tangiers and St. George during 2011.
 
 
12

 

Stellacure Acquisition
 
In March 2010, the Company acquired 138,712 Series B Shares of Stellacure, GmbH, which represents an ownership percentage of 51%, a German Limited Liability Company that is in the business of collecting, processing, and storing cord blood samples. The purchase price paid by the Company was EUR 501,000. Stellacure operates primarily in Germany; however, it established sales channels in Spain and Italy in 2009.
 
BioCells Acquisition
 
 In September 2010, the Company entered into a Stock Purchase Agreement (the “Agreement”), with the Shareholders of Biocordcell Argentina S.A., a corporation organized under the laws of Argentina (“Bio”), providing for the Company’s acquisition of 50.1% of the outstanding shares of Bio (the “Shares).

Under the Agreement, the Company paid $375,000 in cash at the closing, and was obligated to pay an additional $350,000 in October, 2010, $150,000 of which is part of the fixed portion of the purchase price for the shares, for a total minimum purchase price of $525,000. The remaining $200,000 of this payment represents advances against the contingent payments due based on Bio’s 2010 and 2011 net income performances.
 
The Agreement provides that the Shareholders are to be paid contingent “earn-out” compensation in 2011 based on achieving certain levels of net income in 2010 of which the Shareholders were paid $500,000; and additional contingent “earn-out” compensation in 2012 based on achieving certain levels of net income in 2011.
 
BodyCells
 
BodyCells is a developmental stage company in the business of collecting, processing and preserving peripheral blood and adipose tissue stem cells that allows individuals to privately preserve their stem cells for potential future use in stem cell therapy.
 
Competition
 
The Company is one of an estimated thirty (30) firms in the US providing private cord blood banking services.  Internationally there are an estimated one hundred and twenty (120) additional firms offering these services. The Company has built its business in the United States (“US”) via a model of organic growth and accretive acquisitions. 

Management believes that in the US the organic differentiator for the company is its emphasis on strategic relationships with larger health insurance providers. This approach differs from our major competitors who tend to focus on a traditional pharmaceutical model by having sales reps cover a market by visiting ob/gyn practices.  By focusing on the health insurance relationships, while the sales cycle is longer, once established, management believes the sales approach builds loyalty and reoccurring sales.

The Company officially opened its own laboratory operations at its new facility in Las Vegas, Nevada on January 22, 2010.  Previously the Company has outsourced these key scientific elements to a third party.  Now, with this key expertise in house, the Company has the ability to continue making advancements on existing and new services related to stem cells as well as better manage laboratory costs related to processing and storage.

Management may add acquisitions that either increases the company's footprint, which may include international elements, and/or increase the reoccurring storage based revenues, assuming sufficient new sources of capital can be located to make such acquisitions.  To date, the Company has concluded seven acquisitions, and management believes there exist multiple opportunities to acquire smaller competitors who do not have the resources to compete on a go forward basis. 
 
 
13

 

Intellectual Property

We rely upon a combination of trade secret, copyright and trademark laws, license agreements, confidentiality procedures, nondisclosure agreements and technical measures to protect the intellectual property used in our business. We generally enter into confidentiality agreements with our employees, consultants, vendors and customers. We also seek to control access to and distribution of our technology, documentation and other proprietary information.  We use numerous trademarks, trade names and service marks for our products and services. We also rely on a variety of intellectual property rights that we license from third parties. Although we believe that alternative technologies are generally available to replace such licenses, these third party technologies may not continue to be available to us on commercially reasonable terms.
 
The steps we have taken to protect our copyrights, trademarks, service marks and other intellectual property may not be adequate, and third parties could infringe, misappropriate or misuse our intellectual property. If this were to occur, it could harm our reputation and adversely affect our competitive position or results of operations
 
Properties
CBA Properties, Inc. holds trademarks of CBA and its subsidiaries, including word marks registered with the United States Patent and Trademark Office (“USPTO”) in two international classes for the words “Cord Blood America,” as well as design marks which incorporate the words “Cord Blood America” registered with the USPTO in two international classes, along with other trademarks.”

Rain
 
Rain was acquired on February 28, 2005 and is in the business of advertising.  Sources of revenue for Rain included, procuring and placing radio and television advertising; per-inquiry advertising on radio and television; production of radio and television commercials, procuring and setting up call centers; editing, dubbing and distribution of radio and television commercials; and procuring and placing print advertising.
 
In 2010, management reduced the activities of  Rain, terminated its former employees, and is no longer seeking new business.  This is consistent with management’s decision to focus its attention on the stem cell storage business and related activities.
 
Environmental Remediation
 
The Company does not currently have any material capital expenditure commitments for environmental compliance or environmental remediation for any of its properties. The Company does not believe compliance with federal, state and local provisions that have been enacted or adopted regarding the discharge of materials into the environment, or otherwise relating to the protection of the environment, will have a material effect on its capital expenditures, potential earnings or competitive position.
 
Employees
 
As of December 31, 2011, we had sixteen full time employees, and three part time employees.  Our full time employees include our Chairman of the Board and Chief Executive Officer, our Chief Operating Officer and our Vice President of Operations, laboratory, customer service and sales personnel.  We believe our relations with all of our employees are good.
 
 
14

 

Exchange Act Reports
 
The Company makes available free of charge through its Internet website, www.cordblood-america.com, its annual report on Form 10-K quarterly reports on Form 10-Q, (both XBRL compliant), current reports on Form 8-K and all amendments to those reports as soon as reasonably practicable after such materials are electronically filed with or furnished to the Securities and Exchange Commission (SEC). The SEC maintains an Internet website, www.sec.gov, which contains reports, proxy and information statements, and other information filed electronically with the SEC. Any materials that the Company files with the SEC may also be read and copied at the SEC’s Public Reference Room, 100 F Street, N.E., Room 1580, Washington, D. C. 20549.

Information on the operations of the Public Reference Room is available by calling the SEC at 1-800-SEC-0330. The information provided on the Company’s website is not part of this report and is not incorporated herein by reference.
 
Transactions Subsequent To Year End

VidaPlus

On January 19, 2012, the Company notified VidaPlus 2007, S.L. that effective January 24, 2012 it was exercising its right under the Stock Purchase Agreement executed January 24, 2011, Tranche 1, to convert its loan into 6% of the outstanding shares such that the Company will own a total of 7% of the outstanding shares.  Additionally, the Company declined to make any further investment (loan or otherwise) to VidaPlus under Tranche 2, and elected to maintain its Pledge position with samples until further notice.

Shelter Island Opportunity Fund

On February 13, 2012, the Company paid in full its obligation, in connection with convertible debt financing consummated in February of 2007, with Shelter; and subsequent negotiations of the “Put Agreement” satisfied by the Company's delivery to Shelter Island of a new Senior Secured Note in the principal amount of $1,590,400. The remaining balance of the Note in 2012 was $369,692.56 and was acquired by Tangiers Capital.  The Tangiers obligation was subsequently retired as well in 2012.
 
HaVi Enterprises, LLC
 
On January 12, 2012, HaVi Enterprises, LLC, in which the Company’s COO Joseph Vicente owns a 50% interest, loaned $50,000 to the Company through a Secured Promissory Note with an interest rate of 12% per annum and a 6-month repayment schedule.
 
 
15

 
 
ITEM 1A.  RISK FACTORS

Risks Related To Our Business
 
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 consolidated financial statements have been prepared assuming we will continue as a going concern. We have experienced recurring net losses from operations, which losses have caused an accumulated deficit of approximately $48.7 million as of December 31, 2011.  In addition, we have a working capital deficit of approximately $4.9 million as of December 31, 2011.  We had net losses of $6.0 million and $8.1 million for the years ended December 1, 2011 and 2010, 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. If we are unable to generate substantial revenues and/or unable to obtain additional financing to meet our working capital requirements, we may have to curtail our business or cease operations.

We are Currently Dependent on External Financing

Currently, we are dependent upon external financing to fund our operations. 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, adequate funds may not be sufficient for our operations, or capital may not be available when needed or on terms acceptable to our management.   Our failure to obtain adequate additional financing would require us to delay, curtail or scale back some or all of our operations would hinder our ability to implement our business plans and could jeopardize our ability to continue our business.

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 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. Continued 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 increase market acceptance of our services, we may be unable to generate enough additional revenue to achieve and then maintain profitability or to continue our operation.

The DTC Previously Effectuated a “Chill” on the Company’s Stock, Since Removed, the Results of which Have an Adverse Impact on the Cost to the Company of Utilizing Existing Capital Sources.

In December, 2010, the DTC unilaterally and without consultation with the Company “chilled” all newly issued shares of the Company’s common stock which were entitled to be freely traded in the market and whose holders expected to utilize the DTC Electronic Trading System. Under what the DTC calls a “chill,” the DTC precludes shares which it has unilaterally “chilled” from utilizing its Electronic Stock Transfer System, thereby putting the holders of such “chilled shares” at a disadvantage in the trading market when they go to sell their shares.

As a result of the “chill,” existing sources of funding for the Company became more costly. Namely, the Company was forced to negotiate a settlement agreement with investor Tangiers Capital, LLC (“Tangiers”) to settle an alleged breach of contract as a result of this DTC “chill.” Specifically: on January 19, 2011, the Company entered into a settlement and liquidated damages agreement (the “Agreement”) with Tangiers. Execution of the Agreement became necessary because under the existing agreement with Tangiers, entered June 27, 2008, the Company was obligated to deliver registered shares which could be “immediately” placed into the Automated System for Deposits and withdrawals of Securities (known as “DWAC”).
 
 
16

 
 
The Agreement provided that as Liquidated Damages, the Company will remit a specified sum (the “Penalty Sum”) to Tangiers on each share the investor has previously purchased and currently holds, and on each share purchased by Tangiers for cash in the future, until such time as the shares held by Tangiers can again be deposited into the DWAC system. The Company currently owes no damages for shares purchased by Tangiers in the past. As to potential future damages, shares can only be purchased by Tangiers for cash in the future at the Company’s election, as the June 27, 2008 agreement works in a manner similar to a credit line. Thus, it is possible no such damages will become due. In the event the Company elects to allow Tangiers to purchase shares for cash in the future, Tangiers may argue that a Penalty Sum may be due from the Company to Tangiers, even though the DTC “chill” has been removed, because the Company is not eligible for the DTC’s FAST program, including DWAC, which would thereby make this capital source more costly to the Company. The formula for calculating any such Penalty Sum is provided Item 1. Business under Events in 2011,  “Other,” of this filing, along with extensive additional details pertaining to Liquidated Damages already paid to Tangiers, the “chill” the FAST program, the Company’s DTC status, and related details.

As also described in Events 2011, located under “Other,” the Company was forced to enter into the February 8, 2011 settlement agreement with JMJ Financial (“JMJ”) due to the “chill” for the same or similar reasons the Company was forced to enter the above described settlement agreement with Tangiers, which resulted in $671,385 as monetary damages. The Company will not incur additional monetary damages to JMJ under that settlement agreement, however, under the settlement agreement, the discount rate on JMJ’s conversions of the notes governed by the settlement agreement was changed in JMJ’s favor, and in addition, the settlement agreement added a prepayment penalty for any previously funded portions of any JMJ note and added a cancellation fee for any portion of any past or future JMJ note which has not yet been funded, all as set forth in more detail in Events 2011, located under “Other,” of this filing.

St. George was not a capital source for the Company prior to the DTC effectuating the “chill,” and as such, is described more fully in Note 8. Commitments and Contingencies. A further breakdown regarding the amount of capital obtained by the Company from each these entities while the “chill” was in effect and since the “chill” has been removed, as well as additional costs of this capital as a result of the chill, is provided in the Events 2011, located under “Other” of this filing.

We may be liable to our customers and may lose customers if we provide poor service, if our services do not comply with our agreements or if our storage facilities fail.

We must meet our customers’ service level expectations and our contractual obligations with respect to our services. Failure to do so could subject us to liability, as well as cause us to lose customers. In some cases, we rely upon third party contractors to assist us in providing our services. Our ability to meet our contractual obligations and customer expectations may be impacted by the performance of our third party contractors and their ability to comply with applicable laws and regulations.
 
Our Storage Systems are subject to the Risk of Material Disruption; Insurance Risks
 
Any material disruption in our ability to maintain continued, uninterrupted and fully operating 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. We may not carry sufficient business interruption insurance and/or liability insurance to compensate us for losses and claims that might occur in the event of such an interruption.
 
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 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 has announced that it will implement more regulatory procedures for cord blood banking in 2006. This new regulation may require medical device pre-market notification clearance or 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.
 
 
17

 
 
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 California, New Jersey , New York, and Maryland  currently require that cord blood banks be licensed. We maintain the required procurement service licenses of the states of California, New York and New Jersey and Maryland. 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 The 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. We do not have any research and development underway, while other competitors have established budgets for such R&D. 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.
 
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.
 
 
18

 
 
The Company’s sales can be impacted by the health and stability of the general economy.

Unfavorable changes in general economic conditions, such as the current recession, or economic slowdown in the geographic markets in which the Company does business, may have the temporary effect of reducing the demand for the Company’s services. For example, economic forces may cause consumers to withhold discretionary dollars that might otherwise be spent on our services. Adverse economic conditions could also increase the likelihood of customer delinquencies and bankruptcies, which would increase the risk of uncollectibility of certain accounts. Each of these factors could adversely affect the Company’s revenue, price realization, gross margins and overall financial condition and operating results.

Recent volatility in the financial market may negatively impact the Company’s ability to access the credit markets.
 
Capital and credit markets have become increasingly volatile as a result of adverse conditions that have caused the failure and near failure of a number of large financial services companies. If the capital and credit markets continue to experience volatility and availability of funds remains limited, it is possible that the Company’s ability to raise additional capital through the private placement of shares, debt and/or convertible debt may be limited by these factors while the Company currently requires such sources of additional capital in order to continue its operations, fund negative cash flow, and implement its business plans.

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 Chief Executive Officer, Matthew L. Schissler, and our Chief Operating Officer, Joseph Vicente. The loss of either’s services could materially harm our business because of the cost and time necessary to find their successor. Such a loss would also divert management’s attention away from operational issues. We do not presently maintain key-man life insurance policies on either Executive Officer. 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 sufficient number and quality of staff.
 
Trading of our stock may be restricted by the Securities Exchange Commission’s penny stock regulations, which may limit a stockholder’s ability to buy and sell our stock.
 
The Securities and Exchange Commission has adopted regulations which generally define “penny stock” to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and “accredited investors”. The term “accredited investor” refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the Securities and Exchange Commission, which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the marketability of our common stock.
 
Failure to establish and maintain effective internal controls over financial reporting could have an adverse effect on our business, operating results and stock price.
 
Maintaining effective internal control over financial reporting is necessary for us to produce reliable financial reports and is important in helping to prevent financial fraud.  If we are unable to maintain adequate internal controls, our business and operating results could be harmed.
 
 
19

 
 
ITEM 1B.  UNRESOLVED STAFF COMMENTS
 
None
 
ITEM 2.     PROPERTIES.
 
In October, 2009, we re-located our headquarters from Los Angeles, California to Las Vegas, Nevada. Our new principal office and laboratory operations are located at 1857 Helm Drive, Las Vegas, NV 89119.  This facility encompasses approximately 17,000 square feet. The property is leased from an unaffiliated third party for a period of 5 years ending September 2014. The monthly lease payments are approximately $15,303, which includes Common Area Maintenance (CAM) charges. We continue to be responsible for our previous principal office located in Santa Monica, CA until September, 2012, where we leased approximately 2, 200 square feet at a monthly lease cost of approximately $9,500. As of October 2010, we have been able to sublease the Santa Monica, CA property. The property has been sub-leased for $6,297 per month, commencing January 2011 and is to continue for the remainder of the lease which terminates on September 30, 2012.

We maintain fire and casualty insurance on our leased property in an amount deemed adequate by management.

The German and Argentina subsidiaries both lease facilities for operations in Hamburg, Germany and Buenos Aires, Argentina respectively.
 
ITEM 3.     LEGAL PROCEEDINGS.
 
ViviCells International

On May 5, 2010, the Company executed and funded a Debtor-In-Possession loan agreement with ViviCells International, Inc. a Florida corporation (“Vivi” or the “Debtor”), NeoCells, Inc., an Illinois corporation, and AdultCells, Inc., an Illinois corporation, (jointly and severally referred to as the “Subsidiaries”), for $200,000 secured by  a super priority lien on the Debtor’s  and Subsidiaries’ assets.  As additional consideration for this loan, the Company received 21% of the Debtor’s outstanding Common Stock.  The $200,000 loan carries interest at 10% per annum, with principal and all accrued interest all due and payable on March 15, 2011.   In September 2010, the Company acquired an approximately $800,000 secured obligation of the Debtor held by a junior lien holder in  ViviCell’s bankruptcy proceeding, in exchange for the private issuance of  111,111 restricted shares of its Common stock  to the holder of this secured obligation.

On October 20, 2010, the Company, as a co-proponent  proposed a Plan of Reorganization for Vivi under the United States Bankruptcy Code pursuant to which the Company proposed to acquire an additional 74% of the outstanding shares of Vivi, which would give it in excess of  94% ownership in ViVi, in exchange for the issuance of up to 644,889 shares of the Company’s common stock, and the Company’s agreement to make an additional senior secured loan in the amount of $300,000 to Vivi as working capital upon consummation of the Plan. Between June 16, 2010 and December 14, 2010, the Company accelerated the date of its loan commitment, and loaned $100,000 out of the proposed $300,000 loan amount to Vivi in advance of the Plan confirmation, secured under the super priority lien.   On February 16, 2011, a hearing on Confirmation of this proposed plan of reorganization was heard and approved.   The plan was scheduled to be Effective as of April 1, 2011.  However, Vivi subsequently advised the Company that it would be unable to supply the full 94% plus ownership of Vivi’s outstanding capital stock to the Company as required under the Plan.  On April 13, 2011, the Company filed a Non Consummation of Confirmed Plan with the United States Bankruptcy Court.   The Company pursued its rights to foreclose as the holder of a super priority lien against all assets of NeoCells, ViviCells’ subsidiary. Then, on April 22, 2011, ViviCells filed an adversary proceeding against the Company, in the same United States Bankruptcy Court, Central District of California (Santa Ana), where ViviCells bankruptcy proceedings had been taking place.  ViviCells followed this by filing a Motion for a temporary restraining order on April 25, 2011, seeking to halt the foreclosure by the Company on the assets of NeoCells. The complaint and the motion were amended on May 2, 2011, primarily by adding NeoCells, in addition to ViviCells, as a party to the adversary proceeding and the motion. The motion was heard on May 2, 2011. The motion was denied, and accordingly, the Company proceeded on May 2, 2011 at 1:00 pm (CST) to foreclose against all assets of NeoCells.  At the public disposition of all property owned by NeoCells, the Company as a secured creditor bid $320,000 in offset debt, and acquired all right, title and interest in said property free and clear of any liens, security interests and encumbrances which are junior and subordinate to the Company’s security interest as a secured creditor. On June 2, 2011, the Court entered an order dismissing the adversary proceeding, and on July 11, 2011, the Court entered an Order Closing Adversary Proceeding.
 
 
20

 

Cryo-Cell International
 
On December 16, 2010, Cryo-Cell International, Inc. (“Cryo International”) filed an action against Cord Blood America, Inc. (the “Company”) in The Sixth Judicial Circuit Court, Pinellas County, Florida alleging claims for: tortious interference with a business relationship; misappropriate of trade secrets and confidential information in violation of the Florida Uniform Trade Secrets Act, § 688.001, Et. Seq., Fla. Stat.; dilution of trademark in violation of § 495.151, Fla. Stat.; and Common Law Unfair Competition.   Cryo International, a competitor of the Company, filed the suit apparently in an effort to stop the Company’s pursuit of the acquisition of Cryo-Cell de Mexico, S.A. de C.V. (“Cryo Mexico”), for which the Company had in place a non binding Letter of Intent for acquisition.    (see Subsequent Events).  In addition, along with its Complaint, Cryo International filed an Emergency Motion for a Temporary Injunction.  In January 2011, the Company filed a Memorandum of Law in Opposition to Cryo International’s Emergency Motion for Temporary Injunction, and a Rule 1.140(b) Motion to Dismiss Cryo International’s complaint, as well as amendments to these documents.  The Emergency Motion for a Temporary Injunction, Motion to Dismiss and related filings were heard by the Court on January 14, 2011.  The Court granted the Company’s Motion to Dismiss, finding that Cryo Mexico was an indispensible party to the lawsuit and granted Cryo International leave to file an amended complaint to add Cryo Mexico as a defendant to the lawsuit and to serve Cryo Mexico with the required legal papers.  Cryo International filed an Amended Complaint on January 20, 2011.  The Amended Complaint added Cryo Mexico as a defendant to the action, asserted all of the original causes of action against the Company, and added a claim for Breach of a License Agreement against Cryo Mexico and a claim for Unfair and Deceptive Trade Practices in violation of § 501.201, Et. Seq. Fla. Stat. against Cryo Mexico and the Company.  Cryo International also filed an amended motion for temporary injunction.  In response, Defendant Cryo Mexico filed a Motion to Dismiss for Insufficiency of Service of Process and a Motion to Dismiss for Improper Forum and Lack of Personal Jurisdiction, and the Company filed a Rule 1.140(b) Motion Regarding Amended Complaint, seeking dismissal of the Amended Complaint.  The Defendants’ Motions to Dismiss and Defendant Cryo Mexico’s Motion to Quash were heard on March 14, 2011 and thereafter, the Court granted these motions in favor of the Company and Cryo Mexico.  Subsequently, Cryo International filed a Motion for Rehearing, which said motion was heard on September 7, 2011.  On September 16, 2011, the Court signed a Final Order dismissing the case. Cryo International did not appeal the decision.

Ken Williams

In July 2011 and September 2011, the Company was notified by the U.S. Equal Employment Opportunity Commission (the “EEOC”) that an individual named Ken Williams filed a claim for discrimination based on race and retaliation against the Company with the EEOC.  The Company believes Mr. Williams’ claims were without merit, and would have vigorously defended these claims. Subsequently and prior to any action being required on the part of the Company, however, the EEOC notified the Company that Mr. Williams’ claims were dismissed.  To the best of the Company’s knowledge, there is no action pending anywhere that is related to this matter.

Ironridge Global IV, Ltd.
In August of 2011, Ironridge Global IV, Ltd. (“Ironridge”), the holder of certain claims against the Company in the amount of $260,695.20 due for services provided to the Company which had not been paid, filed a complaint against the Company in the Superior Court of California, County of Los Angeles.  On August 17, 2011, the Court approved a settlement of Ironridge’s complaint in exchange for the issuance of 7,000,000 shares of the Company’s common stock pursuant to Section 3(a)(10) of the Securities Act of 1933 as amended. In accordance with the approved settlement, the number of shares to be issued to Ironridge was subject to adjustment.  In addition to the 7,000,000 shares issued to Ironridge on August 17, 2011, an additional 2,179,018 shares  were issued to Ironridge on November 4, 2011, pursuant to the adjustment required under the settlement agreement.

Lindsay Bays

On or around September 21, 2011, Lindsay Bays, et. al filed a case against the Company, along with additional defendants Corcell, Inc., Progenitor Cell Therapy, LLC, and Bergen Community Blood Center in the Circuit Court of Kanawha County, West Virginia, case number 11-C-1664, alleging claims of breach of contract, negligence, and other related claims.  After the filing, the case was removed by the defendants to the United States District Court for the Southern District of West Virginia. The Plaintiff alleges that she entered into a contract with Corcell, Inc. for the collection and storage of her child’s cord blood.  She claims that though her child was accepted as a candidate for autoreinfusion treatment of her child’s cerebral palsy in the Duke University Pediatric Blood and Marrow Transplant Program, her child was unable to participate, purportedly due to the defendants’ actions in labeling and shipping the blood.  She seeks monetary damages for injuries and losses, punitive damages, interest and attorneys’ fees.  The Company placed its insurance carrier on notice, and the insurance carrier engaged outside counsel to represent the Company in the action. On or around December 5, 2011, the Company filed a Motion to Dismiss the action.  A hearing date has not yet been set for the Motion, and the Motion has not otherwise been ruled upon. The Company plans to continue to vigorously defend against the claims.

 
21

 

PART II
 
ITEM 5.     MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
 
(a) Market Information. Our Common Stock is traded on the OTC Bulletin Board, under the symbol CBAI.OB.

The following table sets forth the high and low bid prices of the Company’s Common Stock traded on the OTC Bulletin Board for fiscal years ended December 31, 2011, and December 31, 2010. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions.

 
Common Stock
 
Fiscal Year 2011
High
 
Low
 
First Quarter
 
$
0.45
   
$
0.21
 
Second Quarter
 
$
0.40
   
$
0.13
 
Third Quarter
 
$
0.19
   
$
0.02
 
Fourth Quarter
 
$
0.08
   
$
0.02
 
                 
 
Common Stock
Fiscal Year 2010
High
 
Low
 
First Quarter
 
$
2.00
   
$
0.78
 
Second Quarter
 
$
1.00
   
$
0.53
 
Third Quarter
 
$
0.60
   
$
0.39
 
Fourth Quarter
 
$
0.72
   
$
0.37
 
 
(b) Holders. As of March 16, 2012, our Common Stock was held by approximately 673 shareholders of record. Our transfer agent is Interwest Transfer Company, Inc., with offices at 1981 East 4800 South, Suite 100, P.O. Box 17136, Salt Lake City, Utah 84117, phone number 801-272-9294. The transfer agent is responsible for all record-keeping and administrative functions in connection with the common shares of stock.

(c) Dividends. We have never declared or paid a cash dividend. There are legal restrictions which preclude our ability to pay cash dividends on our common shares so long as we have an accumulated deficit. We do not anticipate declaring or paying any cash dividends in the foreseeable future.
 
(d) Securities Authorized for Issuance Under Equity Compensation Plans.
 
 
22

 

Equity Compensation Plan Information

The following table sets forth the information indicated with respect to our compensation plans as of December 31, 2011, under which our common stock is authorized for issuance.
 
   
Number of Securities to be issued
upon exercise of outstanding
options, warrants and rights
(a)
   
Weighted average
exercise price of
outstanding options,
warrants and rights
(b)
   
Number of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities
reflected in column (a))
(c)
 
Equity compensation plans approved by security holders
   
6,951,310
   
$
1.01
       
Equity compensation plans not approved by security holders
   
N/A
               
Outstanding warrants (1)
   
1,867,629
   
$
2.33
     
-
 
                         
Total
   
8,818,939
   
$
1.29
         

(1)  
The warrants shown were issued in discreet transactions from time to time as compensation for services rendered by debt holders, consultants, advisors or other third parties, and do not include warrants sold in private placement transactions. The material terms of such warrants were determined based upon arm’s-length negotiations with the service providers. The warrant exercise prices approximated the market price of our common stock at or about the date of grant, and the warrant terms are five years from the grant date. The warrants contain customary anti-dilution adjustments in the event of a stock split, reverse stock split, reclassification or combination of our outstanding common stock and similar events and certain of the warrants contain anti-dilution adjustments triggered by other corporate events, such as dividends and sales of equity below market price.
 
Recent Issuances of Unregistered Securities
 
The issuances listed under this sub-heading were made by the Company in the past three years in exchange for services rendered to the Company. For all of the following issuances, the Company relied upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, as amended, for transactions not involving a public offering and/or where noted as issued under one of the Company’s Flexible Stock Plans, under the exemption provided by Rule 701 in that the transactions were under compensatory benefit plans and contracts relating to compensation as provided in Rule 701. Where Rule 701 is applicable, the recipients of such securities were the Company’s employees, directors or bona fide consultants and received securities under one of our Flexible Stock Plans, as noted in each particular entry. Where applicable, appropriate legends were affixed to the securities issued in the transactions detailed under this subheading.
 
 
23

 

In January 2011, 2,381 shares of common stock of the Company, at a total cash value on the date of issuance of $1,000, were issued to Physician and Legal Consultant Services for medical consulting services.

In February 2011, a total of 73,170 shares of common stock of the Company, at a total cash value on the date of issuance of $30,000, were issued to the Board of Directors; Matthew Schissler, Joseph Vicente and Timothy McGrath, who each received 24,390 shares, for annual Board compensation.

In February 2011, 3,333 shares of common stock of the Company, at a total cash value on the date of issuance of $1,000, were issued to Physician and Legal Consultant Services for medical consulting services.

In March 2011, 4,545 shares of common stock of the Company, at a total cash value on the date of issuance of $1,000, were issued to Physician and Legal Consultant Services medical consulting services.

In April 2011, 11,905 shares of common stock of the Company, at a total cash value on the date of issuance of $2,500, were issued to Cohen Family Enterprises for medical consultant services.

In May 2011, 4,000 shares of common stock of the Company, at a total cash value on the date of issuance of $1,000, were issued to Physician and Legal Consultant Services for medical consulting services.

In May 2011, 10,000 shares of common stock of the Company, for a total cash value on the date of issuance of $2,800, were issued to Lee Ann Stiller as employee incentive compensation under the Company’s 2010 Flexible Stock Plan.

In June 2011, 5,556 shares of common stock of the Company, at a total cash value on the date of issuance of $1,000, were issued to Physician and Legal Consultant Services for medical consulting services.

In June 2011, 275,000 shares of common stock of the Company were issued to Don Davis under the Company’s 2011 Flexible Stock Plan for legal services for a total cash value on the date of issuance of $38,020.

In June 2011, 200,000 shares of common stock of the Company were issued to Don Davis under the Company’s 2011 Flexible Stock Plan for legal services for a total cash value on the date of issuance of $21,907.

In July 2011, 100,000 shares of common stock of the Company were issued to Don Davis under the Company’s 2011 Flexible Stock Plan for legal services for a total cash value on the date of issuance of $11,893.

In July 2011, 19,936 shares of common stock of the Company were issued to Cohen Family Enterprises for medical consultant services for a total cash value on the date of issuance of $2,500.

In July 2011, 5,882 shares of common stock of the Company, at a total cash value on the date of issuance of $1,000, were issued to Physician and Legal Consultant Services for medical consulting services.

In August 2011, 9,090 shares of common stock of the Company, at a total cash value on the date of issuance of $1,000, were issued to Physician and Legal Consultant Services for medical consulting services.

In August 2011, 100,000 shares of common stock of the Company, at a total cash value on the date of issuance of $8,000, were issued to an employee Stephen Morgan as employee incentive compensation under the Company’s 2011 Flexible Stock Plan.

In September 2011, 23,255 shares of common stock of the Company, at a total cash value on the date of issuance of $1,000, were issued to Physician and Legal Consultant Services for medical consulting services.

In September 2011, 325,000 shares of common stock of the Company were issued to Don Davis under the Company’s 2011 Flexible Stock Plan for legal services for a total cash value on the date of issuance of $7,244.

 
24

 
 
In October 2011, 128,205 shares of common stock of the Company, at a total cash value on the date of issuance of $2,500, were issued to Cohen Family Enterprises for medical consultant services.

In October 2011, 52,083 shares of common stock of the Company, at a total cash value on the date of issuance of $1,000, were issued to Physician and Legal Consultant Services for medical consulting services.

In October 2011, 100,000 shares of common stock of the Company, at a total cash value on the date of issuance of $2,800, were issued to an employee Bart Chamberlain as employee incentive compensation under the Company’s 2011 Flexible Stock Plan.

In November 2011, 100,000 shares of common stock of the Company, at a total cash value on the date of issuance of $4,000, were issued to an employee Alex Rudolph has employee incentive compensation under the Company’s 2011 Flexible Stock Plan.

In November 2011, 100,000 shares of common stock of the Company, at a total cash value on the date of issuance of $4,000, were issued to an employee Erin Tecca as employee incentive compensation under the Company’s 2011 Flexible Stock Plan.

In November 2011, 22,222 shares of common stock of the Company, at a total cash value on the date of issuance of $1,000, were issued to Physician and Legal Consultant Services for medical consulting services.

In November 2011, 62,500 shares of common stock of the Company, at a total cash value on the date of issuance of $2,625, were issued to Angelo Rivolta for business consulting services.

In December 2011, 62,500 shares of common stock of the Company, at a total cash value on the date of issuance of $1,500 were issued to Physician and Legal Consultant Services for medical consulting services.

In the instances described under this sub-heading, the Company relied upon Section 4(2) of the Securities Act in issuing securities. The Company’s reliance was based upon the following factors: (a) the issuance of the securities was an isolated private transaction by the Company which did not involve a public offering; (b) there were only a limited number of offerees; (c) there were no subsequent or contemporaneous public offerings of the securities by the Company; (d) the securities were not broken down into smaller denominations; and (e) the negotiations for the sale of the securities took place directly between the offeree and the Company.

Shelter Island Opportunity Fund
 
In connection with convertible debt financing consummated in February of 2007 with Shelter, as described in above in this section – Sales of Unregistered Securities - the Company issued to the lender in that transaction a “Put Agreement”, whereby the Company agreed to purchase from the Lender up to 360,000 shares of its common stock from the lender at a fixed purchase price of $5.00 per share, or for a total of up to $1,800,000 if the Put is exercised in full. The Put provides that if the Company is unable to, or chooses not to pay the Put price in cash, the Company can issue a convertible promissory note, bearing interest at 16% per annum during its initial 12 month term, and interest at 20% per annum thereafter, payable on a monthly basis over on a 24 month level amortization, secured by unspecified assets, and payable at the Company’s option by delivery of shares of its Common stock in lieu of cash.

At the same time, the Company issued to the Lender a warrant to acquire 360,000 shares of its common stock, at a warrant exercise price of $10.1, subject to exercise price adjustment under certain circumstances. The exercise price as subsequently been adjusted under the warrant provisions and is currently fixed at $0.86 per share.

The Lender in August of 2009 endeavored to exercise its rights under the Put without first exercising the warrant or otherwise acquiring shares of the Company’s common stock which the Lender would be able to deliver to the Company as required by the Put. As a result of the Lender’s inability to deliver to the Company shares of the Company’s common stock as required by the Put, the Company declined to pay the cash Put price or deliver the convertible promissory note in satisfaction of the Put, and has taken the position that the Put has not been exercised.
 
 
25

 
 
After extensive negotiations with Shelter, the parties entered into a transaction on July 21, 2010, whereby the 360,000 shares Warrant Agreement was canceled, and the obligation represented by the Put Option Agreement was satisfied by the Company's delivery to Shelter Island of a new Senior Secured Note in the principal amount of $1,590,400 (the "Replacement Note"). With this agreement, the derivative liability of $1,608,658 was reduced to $1,590,400 and then reclassified on the balance sheet as a note payable. The Replacement Note matures on September 30, 2011, bears interest at 16% per annum, interest-only is due, for the period July 31, 2010 through January 31, 2011, and is payable in six equal monthly installments of $265,067 each, commencing January 31, 2011. The Company, at its option, may pay the principal amount due on the Replacement Note by the issuance of unregistered Company Common Stock, to be valued at an agreed conversion rate that is fixed for this purpose, subject to certain adjustments, at 85% of the market value of the Company's common stock, calculated based on the five lowest daily closing prices for the stock over certain specified 20 day periods.

On March 17, 2011, the parties entered into an Amendment for above said Replacement Note. The Amendment extended the commencement date of the six monthly installments each in the amount of $248,400 to April 30, 2011 in exchange for continued interest payments for February, March and April, along with a cash payment of $25,000 as an adjustment to the principal balance. Other terms of the Replacement Note remain for the most part the same.

Shelter exercised its conversion rights under the Replacement note in 2011, in part. Specifically, as a result of conversions by Shelter, the Company issued a total of 5,562,038 shares to, at a value of $568,134, to Shelter in 2011. Shelter returned 3,315,492 of these shares to the Company on November 11, 2011, which amounted to $297,095.

Tangiers Investors, LP
 
From July 2011 through December 2011, Tangiers Investors, LP (“Tangiers”) acquired portions of Shelter’s Replacement Note, described above, in a total amount of $600,000, through several separate assignments. Tangiers has exercised its conversion rights under the Replacement Note and these assignments thereof, in part. In total, the Company issued 25,421,181 shares for a total value of $523,000, pursuant to these conversions.

Tangiers also provided ten separate convertible notes, two for $125,000 each and eight for $25,000. The two $125,000 convertible promissory bears an interest charge of 7% per annum and mature one year from the date of issuance; June 1, 2012 and June 15, 2012 respectively.  Tangiers may elect to convert all or part of the principal of this Convertible Note and any unpaid or accrued interest at any time before the maturity date.  The conversion rate is 77.5% of the lowest Volume Weighted Average Price during the ten day prior to the conversion, subject to adjustments. The eight $25,000 notes bear an interest charge of 10% per annum and mature one year from the commencement date.  Tangiers may elect to convert all or part of the principal of this Convertible Note and any unpaid or accrued interest at any time before the maturity date.  The conversion rate is 70.0% of the lowest Volume Weighted Average Price during the ten day prior to the conversion, subject to adjustments.

JMJ Notes March 24, 2010
 
On March 24, 2010, JMJ issued and delivered to the Company a $1,500,000 “Secured & Collateralized Promissory Note,” (the “JMJ Note”). The JMJ Note bears interest in the form of a one-time interest charge of 10.33%, and interest is payable with the JMJ Note’s principal balance on its maturity date of March 24, 2013. The JMJ Note is secured by JMJ assets having a value of at least $1,500,000. Concurrently, the Company issued a $1,550,000 “Convertible Promissory Note” (the “2010 Note”) to JMJ. The 2010 Note bears interest in the form of a onetime interest charge of 10%, payable with the Note’s principal amount on the maturity date, March 24, 2013. The net difference between the JMJ Note and the 2010 Note, $50,000, represents a discount.

No mandatory principal or interest payments are due on the JMJ Note until its maturity date. However, voluntary prepayments at the option of JMJ are customary and provide the Company with access to liquidity and working capital as amounts are advanced under the JMJ Note. At the option of JMJ, at any time, the 2010 Note principal and interest is convertible only into shares of the Company’s common stock, originally fixed at a per share conversion price equal to 85% of the average of the 5 lowest traded prices for the Company’s common stock in the 20 trading days previous to the effective date of each such conversion. If no such conversions are made, the principal and interest amount is due and payable in cash on the maturity date.
 
In 2011, JMJ exercised its conversion rights under the 2010 Note, and the Company issued JMJ a total of 22,700,000 shares, for a total value of $1,134,637.  JMJ returned 590,000 of these shares to the Company on November 11, 2011, which amounted to $184,552.
 
 
26

 

St. George Investments, LLC
 
On March 10, 2011, the Company entered into a Note and Warrant Purchase Agreement (the "Purchase Agreement") with St. George Investments, LLC, (“St. George”) an Illinois limited liability company (the "Investor") whereby the Company issued and sold, and the Investor purchased: (i) Secured Convertible Promissory Notes of the Company in the principal amount of $1,105,500 (the "Company Note") and (ii) a Warrant to purchase common stock of the Company (the "Warrant"). The Investor paid $250,000 in cash as an initial payment to the Company and executed and delivered six separate “Secured Buyer Notes” (the “Buyer Notes”), as consideration in full for the issuance and sale of the Company Note and Warrants.

The principal amount of the Company Note is $1,105,500 ("Maturity Amount") and the Company Note is due 48 months from the issuance date of March 10, 2011. The Company Note has an interest rate of 6.0%, which would increase to a rate of 12.0% on the happening of certain Trigger Events, including but not limited to: a decline in the 10-day trailing average daily dollar volume of the common shares in the Company’s primary market to less than $30,000.00 of volume per day at any time; the failure by the Company or its transfer agent to deliver Conversion Shares (defined in the Company Note) within 5 days of Company’s receipt of a Conversion Notice (defined in the Company Note). The total amount funded (in cash and notes) at closing will be $1,000,000, representing the Maturity Amount less an original issue discount of $100,500.00 and the payment of $5,000 to the Investor to cover its fees, with payment consisting of $250,000 advanced at closing and $750,000 in a series of six secured convertible Buyer Notes of $125,000.00 each, with interest rates of 5.0%. To date, St. George has paid $750,000 of the $1,000,000 total amount.

The Buyer Notes are secured by an Irrevocable Standby Letter of Credit (“Letter of Credit”). The Investor has also received a five year warrant entitling it to purchase 1,392,354 shares of common stock of the Company at an exercise price of $.179. The warrant also contains a net exercise /cashless exercise provision. Pursuant to conversions made by St. George under the above-described notes in 2011, the Company issued 8,300,000 total shares to St. George for a total value of $117,461.

In July 2011 St. George acquired portions of Shelter’s Replacement Note, described above, in a total amount of $250,000, through several separate assignments. St. George has exercised its conversion rights under the Replacement Note and these assignments thereof. In total, the Company issued 4,097,364 shares for a total value of $251,178, pursuant to these conversions.

The following issuances were made by the Company under an exemption pursuant to Section 3(a)(10) of the Securities Act of 1933, as amended, pursuant to the facts as detailed herein:

In August of 2011, Ironridge Global IV, Ltd. (“Ironridge”), the holder of certain claims against the Company in the amount of $260,695.20 due for services provided to us which had not been paid, filed a complaint against us in Superior Court of California, County of Los Angeles. On August 17, 2011, the Court approved our settlement of the complaint in exchange for issuing 7,000,000 shares of our common stock pursuant to Section 3(a)(10) of the Securities Act of 1933 as amended. In accordance with the approved settlement, the number of shares to be issued to Ironridge was subject to adjustment. In addition to the 7,000,000 shares issued to Ironridge on August 17, 2011, an additional 2,179,018 shares were issued to Ironridge on November 4, 2011, pursuant to the adjustment required under the settlement agreement.
 
Repurchase of Shares
 
We did not repurchase any of our shares during the year ended December 31, 2011.
 
ITEM 6.     SELECTED FINANCIAL DATA

Not Applicable.
 
 
27

 

ITEM 7.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
 
Summary and Outlook of the Business  

CBAI is primarily 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.
 
Cord

The umbilical cord blood stem cell preservation operations provide umbilical cord blood banking services to expectant parents throughout all 50 United States. Our corporate headquarters re-located to Las Vegas, NV from Los Angeles, CA in October 2009. Cord earns revenue through a one-time enrollment and processing fee, and through an annually recurring storage and maintenance fee. In March 2010, we began to process and store cord blood in our own facility. We provide the following services to each customer.

 
·
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.

 
·
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.

 
·
Transportation. We coordinate the transportation of the cord blood unit to our laboratory in Las Vegas, immediately following birth. This process utilizes a private medical courier, Airnet, for maximum efficiency and security.

 
·
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.

 
·
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.

Going forward, management will continue to assess business opportunities, and plans to pursue customer acquisition, both through organic growth and acquisition.
 
Stellacure GmbH
 
Based in Hamburg Germany, Stellacure GmbH  collects, processes and stores cord blood samples as a private bank for use in current or future medical therapies in Germany, Spain, and other European and Middle Eastern Countries.
 
Biocordcell Argentina S.A.
 
Based in Buenos Aires, Biocordcell Argentina S.A., processes and stores cord blood samples as a private bank for use in current or future medical therapies in Argentina, Uruguay and Paraguay.
 
Rain
 
Rain had specialized in creating direct response television and radio advertising campaigns, including media placement and commercial production.  In 2010, management has reduced the activities of Rain, terminated its former employees, and is no longer seeking business.  This is consistent with management’s decision to focus its attention on the stem cell storage business and related activities.
 
 
28

 
 
BodyCells

We are continuing to pursue other growth opportunities by acquisition or internal growth. The development of BodyCells, which is anticipated to 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 currently suspended pending the identification of an alternative lab to partner with.
 
Critical Accounting Policies

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:

 
determination of the level of allowance for bad debt;

 
deferred revenue; and

 
revenue recognition
 
 
valuation of derivative instruments
 
Accounts Receivable

Accounts receivable consist of the amounts due for the processing and storage of umbilical cord blood, placenta collection and whole cord blood collection, advertising, commercial production and internet lead generation. Accounts receivable relating to deferred revenues are netted against deferred revenue for presentation purposes. The allowance for doubtful accounts is estimated based upon historical experience. The allowance is reviewed quarterly and adjusted for accounts deemed uncollectible by management. Amounts are written off when all collection efforts have failed.

Deferred Revenue

Deferred revenue consists of payments for enrollment in the program and processing of umbilical cord blood by customers whose samples have not yet been collected, as well as the pro-rata share of annual storage fees for customers whose samples were stored during the year.
 
 
29

 
 
Revenue Recognition

We recognize revenue under the provisions of ASC 605-25 (previously Staff Accounting Bulletin 104 “Revenue Recognition”). Cord provides a combination of products and services to customers. This combination arrangement is evaluated under ASC 605-25-25 (previously Emerging Issues Task Force (Issue No. 00-21, “Revenue Arrangements with Multiple Deliverables,”). ASC 605-25-25 addresses certain aspects of accounting for arrangements under multiple revenue generating activities.

Revenue from both enrollment fees and processing fees are recognized upon the completion of processing. Revenue from storage fees are recognized ratably over the contractual storage period.

Our 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.

Franchise revenues which are part of Biocordcells current income are recognized in accordance with ASC 952-605-3, according to requirements for recognizing franchise revenues after “franchise agreement” services are completed and substantially performed.  Further, in accordance with ASC 952-605-25-7, the installment or cost recovery accounting method shall be used to account for a franchise fee revenue only in those exceptional cases when revenue is collectible over an extended period and no reasonable basis exists for estimated collectability.

Summary and Outlook of  the Business
CBAI is primarily 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.

The umbilical cord blood stem cell preservation operations provide umbilical cord blood banking services to expectant parents throughout all 50 United States, Argentina, and Germany. Our corporate headquarters are located in Las Vegas, NV. Cord earns revenue through a one-time enrollment and processing fee, and through an annually recurring storage and maintenance fee.  We provide the following services to each customer.
 
· 
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.

· 
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.

· 
Transportation. We coordinate the transportation of the cord blood unit to our laboratory partner, immediately following birth. This process utilizes a private medical courier, Airnet, for maximum efficiency and security.

· 
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.

· 
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.

Going forward, management will continue to assess the market conditions, particularly related to the cost of customer acquisition, both organic growth and M&A activity and whether they will lead to profitability.
 
 
30

 
 
BodyCells

We are continuing to pursue other growth opportunities by acquisition or internal growth. The development of BodyCells, which is anticipated to 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 currently suspended pending the identification of an alternative lab to partner with.

Results of Operations for the Year Ended December 31, 2011 Compared To the Year Ended December 31, 2010

For the year ended December 31, 2011, our total revenue increased $1.54 million, or 37% to $5.67 million as compared to $4.13 million for the year ended December 31, 2010. Cord’s revenues were $3.47 million, while Stellacure’s revenues contributed $0.59 million, and Biocordcell’s revenues contributed $1.61 million. The increase in revenue overall, is due to growth in our customer list, revenue generation from the placenta project, which contributed $0.15 million, and the 2010 acquisitions of Stellacure and Biocordcell as-well-as the addition of Neocells customer lists in 2011. Cord’s annual storage fees increased approximately $0.45 million, or 20.4% from the prior comparative year, to approximately $2.65 million. Cord remains focused on strategic organic growth and accretive acquisition strategies, which management hopes will reduce or eliminate the losses and negative operating cash flow.

Cost of services increased $0.23 million to $1.86  million, and gross profit  which is 67% increased by $1.3 million, or 52% to $3.8 million. The increase is a result of adding the acquisitions of Stellacure & Biocordcell, acquiring samples from Neocells as well as bringing lab processing in house in 2010.  The 2011 costs for operating the Placenta project has remained at $0.1 million.   The company anticipates that through the growth and expansion of our Cord business, and the processing and storage of the cord blood in our own facilities, our direct costs should decrease and our gross margins increase.
 
Administrative and selling expenses decreased by $0.7 million to a total of $7.6 million.  This decrease was due to reducing overhead and administrative expenses in the U.S.  Our interest expense and change in derivatives liability increased by approximately $0.66 million or 37 % to approximately $2.1 million in 2011. The primary reason for this increase is due to the DWAC settlement on the JMJ share issuance.

Our total net loss decreased approximately $2.1 million, or 26% from $8.1 million for the year ended December 31, 2010 to $6.0 million for the year ended December 31, 2011. Of the $6.0 million net loss in 2011, $3.9 million was related to non-cash expenses made up of $2.5 million in interest and changes in derivative liabilities, $0.8 million in depreciation and amortization, $0.9 million related to DWAC settlement charges, and $0.2 million for stock option expenses.
 
Liquidity and Capital Resources

We have experienced net losses of $6.0 million and $8.1 million for the years ended December 31, 2011 and December 31, 2010, respectively. At December 31, 2011, we had $0.2 million in cash. We currently collect cash receipts from operations through Cord and both of our subsidiaries, Biocordcells and Stellacure. Cash flows from operations are not currently sufficient to fund operations in combination with these corporate expenses. During 2011 our Notes payable decreased by $2.2 million through equity issuances.

Net cash used in operating activities decreased  approximately $2.5 million from the prior comparative year to $1.9 million. The decrease  was a result in the reduction of stock based compensation of $0.2 million as compared to $2.2 million recognized in 2010 . Net cash provided by financing activities decreased  approximately $1.8 million from the prior comparative year to $2.7million. This decrease was due to a reduction in the issuance of  notes payable amounting to $2.2 million as compared to 2010 in the amount of $4.2 million . During the year, cash and cash equivalents decreased approximately $0.15 million from the prior comparative year to $0.2 million.
 
 
31

 
 
Since inception, we have financed cash flow requirements through the issuance of common stock and warrants for cash, services and repayments on 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 could, among other things, result in dilution to our shareholders. 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.

Financial Condition and Results of Operations as of December 31, 2011

As of December 31, 2011, our total assets were $7.35 million as compared to $7.38 million as of December 31, 2010, or a decrease of approximately 0.4 %.
 
As of December 31, 2011, total liabilities increased approximately 24 % to $8.2 million as compared to approximately $6.6 million as of December 31, 2010.  The increase is due to growth in deferred revenue which increased by $0.2 million, Cord’s accounts payable have increased by approximately $0.3 million.  Our derivative liability has increased approximately $0.73 million to $0.97 million. During the year, our notes payable have increased approximately $0.59 million to $2.3 million.

At December 31, 2011, we had a working capital deficit of approximately $4.9 million. 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, derivatives liability, accounts payable, accrued expenses, and deferred revenues.

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 are material to investors.
 
Recent Accounting Pronouncements
 
In October 2009, the FASB issued authoritative guidance on multiple-deliverable revenue arrangements. This new guidance amends the existing criteria for separating consideration received in multiple-deliverable arrangements and requires that arrangement consideration be allocated at the inception of the arrangement to all deliverables based on their relative selling price. The guidance establishes a hierarchy for determining the selling price of a deliverable which is based on vendor-specific objective evidence, third-party evidence, or management estimates. Expanded disclosures related to multiple-deliverable revenue arrangements are also required. This guidance is effective for the Company beginning fiscal year 2011, with early adoption permitted. Upon adoption, the guidance may be applied either prospectively from the beginning of the fiscal year for new or materially modified arrangements, or it may be applied retrospectively.  The adoption of this guidance did not have a material impact on our consolidated financial statements.
 
In May 2011, the Financial Accounting Standards Board (“FASB”) issued ASU 2011-04, Fair Value Measurement (“ASU 2011-04”), which amended ASC 820, Fair Value Measurements (“ASC 820”), providing a consistent definition and measurement of fair value, as well as similar disclosure requirements between U.S. GAAP and International Financial Reporting Standards. ASU 2011-04 changes certain fair value measurement principles, clarifies the application of existing fair value measurement and expands the disclosure requirements. ASU 2011-04 will be effective for us beginning January 1, 2012. The adoption of ASU 2011-04 is not expected to have a material effect on our consolidated financial statements or disclosures.
 
 
32

 
In June 2011, the FASB issued ASU 2011-05, Presentation of Comprehensive Income (“ASU 2011-05”). ASU 2011-05 requires the presentation of comprehensive income in either (1) a continuous statement of comprehensive income or (2) two separate but consecutive statements. ASU 2011-05 will be effective for us beginning January 1, 2012 and is to be applied retrospectively. The adoption of ASU 2011-05 is not expected to have a material effect on our consolidated financial statements or disclosures.
 
In September 2011, the FASB issued ASU 2011-08, Testing Goodwill for Impairment (“ASU 2011-08”), which amends the guidance in ASC 350-20, Intangibles—Goodwill and Other – Goodwill. ASU 2011-08 provides entities with the option of performing a qualitative assessment before calculating the fair value of the reporting unit when testing goodwill for impairment. If the fair value of the reporting unit is determined, based on qualitative factors, to be more likely than not less than the carrying amount of the reporting unit, the entities are required to perform a two-step goodwill impairment test. ASU 2011-08 will be effective for us beginning January 1, 2012. The adoption of ASU 2011-08 is not expected to have a material effect on our consolidated financial statements or disclosures.

ITEM 7AQUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
 
None
 
ITEM 8.     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Our consolidated financial statements and supplemental schedule and notes thereto as of December 31, 2011 and 2010, and for each of the two years then ended, together with the independent registered public accounting firm’s reports thereon, are set forth on pages F-1 to F-23 of this Annual Report.

ITEM 9.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

ITEM 9A.  CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures.

It is management's responsibility to establish and maintain adequate internal control over all financial reporting pursuant to Rule 13a-15 under the Securities Exchange Act of 1934 (the "Exchange Act"). Our management, including our chief executive officer and our chief financial officer, have reviewed and evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2011.  Following this review and evaluation, management collectively determined that our disclosure controls and procedures are not effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to management, including our chief executive officer, our chief operations officer, and our chief financial officer, as appropriate to allow timely decisions regarding required disclosure.

The deficiency in our disclosure controls and procedures is related to a lack of segregation of duties due to the size of the accounting department and the lack of experienced accountants due to the limited financial resources of the Company. We continue to actively search for additional capital in order to be in position to remediate this lack of segregation of duties.

Changes in Internal Control over Financial Reporting

There were no significant changes in the Company's internal controls over financial reporting or in other factors that could significantly affect these internal controls subsequent to the date of their most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.  
 
 
33

 
 
Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over our financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act). Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets, (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors, and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
 
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

We assessed the effectiveness of our internal control over financial reporting as of December 31, 2011. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework.

Based upon management’s assessment using the criteria contained in COSO, and for the reasons discussed below, our management has concluded that, as of December 31, 2011, our internal control over financial reporting was not effective.

Based on its evaluation, the Company's Chief Executive Officer and Chief Financial Officer identified a major deficiency that existed in the design or operation of our internal control over financial reporting that it considers to be a “material weakness”. The Public Company Accounting Oversight Board has defined a material weakness as a “significant deficiency or combination of significant deficiencies that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.”  The material weakness was first identified at the beginning of 2007 and remained unchanged through December 31, 2011.

The deficiency in our internal control is related to a lack of segregation of duties due to the size of the accounting department and the lack of experienced accountants due to the limited financial resources of the Company.  We continue to actively search for additional capital in order to be in position to add the necessary staff to address this material weakness. We are also assessing how we can improve our internal control over financial reporting with the current number of employees in an effort to remediate this lack of segregation of duties.

ITEM 9B.  OTHER INFORMATION

None.

 
34

 

PART III
 
ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE.
 
The following table sets forth the names and positions of our executive officers and directors. Our directors are elected at our annual meeting of stockholders and serve for one year or until successors are elected and quality.  Our Board of Directors elects our officers, and their terms of office are at the discretion of the Board, except to the extent governed by an employment contract.

Our directors, executive officers and other significant employees, their ages and positions are as follows:
 
Name
 
Age
 
Position with the Company
Matthew L. Schissler
  40  
Chairman and Chief Executive Officer
Joseph R. Vicente
  49  
Director and Chief Operating Officer
Timothy McGrath
  47  
Director
 
Matthew L. Schissler is one of our founders and has served as Chairman of the Board and Chief Executive Officer since January 2003. From April 2001 until January 2003, Mr. Schissler was the President and Chief Executive Officer of Rain, an advertising agency which he founded. From 1994 through March 2001, Mr. Schissler held various management sales positions at TMP Worldwide, Inc., a personnel staffing company.
 
Joseph R. Vicente has been a director of the Company since April 2004.  Mr. Vicente has occupied different positions at the Company since November 2004, serving most recently as Chief Operation Officer. From July 2002 through October 2004, Mr. Vicente was an independent consultant where he provided strategic consulting services to organizations on acquisitions, operational practices and efficiencies, and sales management.  From July 1993 through April 2002, he was a Senior Vice President at TMP Worldwide, Inc. where he held various strategic, operational, and sales management positions.  
 
Timothy McGrath has been a director of the Company since March 2006. Mr. McGrath has served in an executive capacity for the past twelve years. Mr. McGrath is currently serving as Controller for LogicInfo, a technology services company.  From January 2006 to February 2008 Mr. McGrath served as the Vice President of Finance and Accounting at BioE, Inc.  From October 1999 through September 2005 Mr. McGrath served as Vice President and Chief Financial Officer of Orphan Medical, Inc.
 
 
35

 
 
Involvement In Certain Legal Proceedings
 
None of our officers, directors, promoters or control persons has been involved in the past five years in any of the following:
 
(1)
any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;
 
(2)
any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
 
(3)
Being subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, or any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or
 
(4)
Being found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.
 
Committees; Audit Committee Financial Expert.
 
Our board has an Audit Committee made up solely of Timothy McGrath.

Our Board of Directors has determined that Cord Blood has one Audit Committee financial expert, Mr. McGrath, On April 6, 2006; the board adopted its written Audit Committee charter.
 
Compliance with Section 16(a) of the Exchange Act
 
Section 16(a) of the Securities Exchange Act of 1934 requires that our officers and directors, and persons who own more that ten percent of a registered class of our equity securities, file reports of ownership and changes in ownership with the Securities and Exchange Commission and with any exchange on which the Company's securities are traded. Officers, directors and persons owning more than ten percent of such securities are required by Commission regulation to file with the Commission and furnish the Company with copies of all reports required under Section 16(a) of the Exchange Act. To our knowledge, based solely upon our review of the copies of such reports furnished to us, during the fiscal year ended December 31, 2011, all Section 16(a) filing requirements applicable to our officers and directors were complied with.
 
Code of Ethics
 
We adopted a Code of Ethics on April 13, 2005 that applies to all of our directors, officers and employees, including our principal executive officer, principal financial officer and principal accounting officer. The Code of Ethics was attached as Exhibit 14.1 to our registration statement filed on Form SB-2 on May 2, 2005.

Changes in Nominating Procedures
 
None.
 
ITEM 11.   EXECUTIVE COMPENSATION.
 
The Company accrued or paid compensation to the executive officers as a group for services rendered to the Company in all capacities during the 2011 and 2010 fiscal years as shown in the following table.
 
 
36

 
 
SUMMARY COMPENSATION TABLE
 
Overview
 
The following is a discussion of our program for compensating our named executive officers and directors. Currently, we do not have a compensation committee, and as such, our Board of Directors is responsible for determining the compensation of our named executive officers.
 
Compensation Program Objectives and Philosophy
 
The primary goals of our policy of executive compensation are to attract and retain the most talented and dedicated executives possible, to assure that our executives are compensated effectively in a manner consistent with our strategy and competitive practice and to align executives compensation with the achievement of our short- and long-term business objectives.
 
The board of directors considers a variety of factors in determining compensation of executives, including their particular background and circumstances, such as their training and prior relevant work experience, their success in attracting and retaining savvy and technically proficient managers and employees, increasing our revenues, broadening our product line offerings, managing our costs and otherwise helping to lead our Company through a period of rapid growth.
 
In the near future, we expect that our board of directors will form a compensation committee charged with the oversight of executive compensation plans, policies and programs of our Company and with the full authority to determine and approve the compensation of our chief executive officer and make recommendations with respect to the compensation of our other executive officers. We expect that our compensation committee will continue to follow the general approach to executive compensation that we have followed to date, rewarding superior individual and company performance with commensurate cash compensation.
 
Elements of Compensation
 
Our compensation program for the named executive officers consists primarily of base salary. There is no retirement plan, long-term incentive plan or other such plans, although Mr. Schissler’s and Mr. Vicente’s agreements have a bonus plan, subject to the Board’s discretion.  The base salary we provide is intended to equitably compensate the named executive officers based upon their level of responsibility, complexity and importance of role, leadership and growth potential, and experience.
 
Base Salary
 
Our named executive officers receive base salaries commensurate with their roles and responsibilities. Base salaries and subsequent adjustments, if any, are reviewed and approved by our board of directors annually, based on an informal review of relevant market data and each executive’s performance for the prior year, as well as each executive’s experience, expertise and position. The base salaries paid to our named executive officers in 2011 are reflected in the Summary Compensation Table below.
 
Stock-Based Awards under the Equity Incentive Plan  
 
We have previously provided equity awards as a component of compensation.  Our Stock Option Plan  permits the granting of stock options to its employees, directors, consultants and independent contractors for up to eighty million shares of our common stock. We believe 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.
 
Employment Agreements
 
On September 12, 2011 (the “Company”), entered into an Executive Employment Agreement with Matthew L. Schissler, the Company’s Chief Executive Officer, which was effective as of August 1, 2011 and shall terminate as of December 31, 2014, unless earlier terminated by the Company or Mr. Schissler. Mr. Schissler’s  Executive Employment Agreement has an initial term from August 1, 2011 through December 31, 2011, and is renewable annually thereafter for up to three additional, successive years, and provides for a base salary equal to his previous year’s annual salary, which said salary was set under the provisions of the previous employment agreement entered between Mr. Schissler and the Company in July of  2008.  The agreement  also provides for an annual bonus, payable at the discretion of the Board of Directors, equal to 30% Mr. Schissler’s prior year base salary.  The Agreement provides for a change of control (defined in the employment agreement) termination bonus, which provide that if the employee is terminated, his compensation reduced, or the employee terminates his employment within one year after a change of control, then Mr. Schissler is entitled to a termination benefit in an amount equal to the average annual cash compensation over the three (3) year period preceding the Triggering Event (defined in the agreements) multiplied by two and one-fourth (2.25).  The agreement also provides for termination payments in the absence of a change of control in the event the Company terminates Mr. Schissler without cause in an amount equal to all compensation paid by the Company to the Employee for the 24 months preceding the termination, along with health plan and 401k incentives, as stated in the Agreement.
 
 
37

 
 
On July 1, 2010, the Company awarded a total of 309,372 options to purchase common shares to Matthew Schissler, to compensate him for both past services and future services, 50% of which vested immediately.  All outstanding unexercised options provide for adjustment upon stock split, as well as under certain other circumstances.
 
On September 12, 2011 (the “Company”), entered into an Executive Employment Agreement with Joseph R. Vicente, the Company’s Chief Operating Officer and Vice President which was effective as of August 1, 2011 and shall terminate as of December 31, 2014, unless earlier terminated by the Company or Mr. Vicente.  Mr. Vicente’s Executive Employment Contract has an initial term from August 1, 2011 through December 31, 2011, and is renewable annually thereafter for up to three additional, successive years, and provides for a base salary equal to his previous year’s annual salary, which said salary was set under the provisions of the previous employment agreement entered between Mr. Vicente and the Company in July of 2008.  It also provides for an annual bonus, payable at the discretion of the Board of Directors, equal to 25% of Mr. Vicente’s  prior year base salary.  The Agreement provides for a change of control termination bonus, which provide that if Mr. Vicente is terminated, his compensation reduced, or Mr. Vicente terminates his employment within one year after a change of control, then Mr. Vicente is entitled to a termination benefit in an amount equal to the average annual cash compensation over the three (3) year period preceding the Triggering Event (defined in the agreements) multiplied (2.00).  The Agreement also provides for termination payments in the absence of a change of control in the event the Company terminates Mr. Vicente without cause in an amount equal to all compensation paid by the Company to Mr. Vicente for the 24 months preceding the termination, along with health plan and 401k incentives, as stated in the agreement.

On July 1, 2010, the Company awarded a total of 154,687 options to purchase common shares to Joseph Vicente, to compensate him for both past services and future services, 50% of which vested immediately.  All outstanding unexercised options provide for adjustment upon stock split, as well as under certain other circumstances.

Retirement Benefits
 
We have adopted a tax-qualified employee savings and retirement plan, the 401(k) Plan, for eligible U.S. employees, including our named executive officers. Eligible employees may elect to defer a percentage of their eligible compensation in the 401(k) Plan, subject to the statutorily prescribed annual limit. After 1000 hours of service with the Company, we match dollar for dollar up to 3% of compensation ,  and then $0.50  per dollar up to 5% of compensation , for a maximum  cumulative match of 4%.  All contributions made by tax qualified employee’s are fully vested. We intend the 401(k) Plan, and the accompanying trust, to qualify under Sections 401(k) and 501 of the Internal Revenue Code so that contributions by employees to the 401(k) Plan, and income earned (if any) on plan contributions, are not taxable to employees until withdrawn from the 401(k) Plan, and so that we will be able to deduct our contributions, if any, when made. The trustee under the 401(k) Plan, at the direction of each participant, may invest the assets of the 401(k) Plan in any of a number of investment options. The company announced it was terminating the 401(k) Plan effective May 6, 2012, and has conformed with the notices required of such termination.
 
Perquisites
 
Historically, we have not provided our named executive officers with any perquisites and other personal benefits. We do not view perquisites as a significant element of our compensation structure, but do believe that perquisites can be useful in attracting, motivating and retaining the executive talent for which we compete. It is expected that our historical practices regarding perquisites will continue and will be subject to periodic review by our by our board of directors.

The following table sets forth the compensation paid to our chief executive officer and our one other highly compensated executive officer for each of our last two completed fiscal years. No other officer received compensation greater than $100,000 for either fiscal year.
 
 
38

 

Summary Compensation Table

Name and  Position       
Year
 
Salary
($)
   
Bonus
($) (1)
   
Option Awards
($) (2)
   
All Other
Compensation ($)
   
Total
 ($)
 
Matthew L. Schissler
                               
Chairman and Chief Executive Officer
2011
   
181,913
     
54,574
     
0
     
0
     
236,486
 
 
2010
   
177,581
     
51,975
     
   125,579
     
0
     
355,135
 
Joseph Vicente
2011
   
126,787
     
     31,624
             
0
     
158,411
 
Chief Operating Officer
2010
   
123,769
     
44,563
     
62,790
     
0
     
231,122
 

(1)
Bonuses to the named executive officers reported above relating to 2011 were paid in between June through December  2011. Bonuses to the named executive officers reported above relating to 2010 were paid in July 2010. Mr. Schissler’s bonuses were paid to Pyrenees Consulting, LLC.

(2)
The values shown in this column represent the aggregate grant date fair value of equity-based awards granted during the fiscal year, in accordance with ASC 718, “Share Based-Payment”. The fair value of the stock options at the date of grant was estimated using the Black-Scholes option-pricing model, based on the assumptions described in Note 10 of the Notes to Financial Statements included in this Annual Report.

Outstanding equity awards at fiscal year end.

The following table sets forth information with respect to the outstanding equity awards of our principal executive officers and principal financial officers during 2011, and each person who served as an executive officer of Cord Blood as of December 31, 2011 (No grants were made during 2011):
 
2011 Grants of Plan-Based Awards

Name
 
Grant Date
 
All Other
Option Awards
(# of Cord
Shares)
 
Exercise Price of
Option Awards
($/Share)
   
Grant Date
Fair Value of
Option Awards
($)
 
Matthew L. Schissler
         
$
-
   
$
-
 
Chairman  and Chief Executive Officer
                       
                         
Joseph Vicente
         
$
-
   
$
-
 
Chief Operating Officer
                       

 
 
39

 
Holdings of Previously Awarded Equity
 
2011 Outstanding Equity Awards at Fiscal Year-End

   
Option Awards
   
Number of Securities
Underlying Unexercised
Options (#)
   
Option
Exercise Price
 
 
Option
Expiration
Name
 
Exercisable
   
Unexercisable
   
($)
 
Date
Matthew L. Schissler
   
5,000
 (1)
         
25.00
 
04/29/14
Chairman and Chief Executive Officer
   
206
 (1)
         
18.00
 
07/01/15
     
2,500
 (1)
         
18.00
 
12/31/15
     
16,000
 (1)
         
31.00
 
09/12/15
     
75,000
             
1.00
 
07/06/13
     
602,740,
(1)
   
602.740
     
0.30
 
07/13/20
     
1,214,645
             
1.00
 
12/31/19
     
1,214,645
             
1.00
 
12/31/19
     
154,686
             
1.00
 
07/01/20
     
--
     
154,686
     
4.10
 
07/01/20
                           
J  Joseph Vicente
   
5,000
             
25.00
 
04/29/14
    Chief Operating Officer
   
7,000
             
25.00
 
01/10/15
     
2,500
             
25.00
 
08/01/15
     
1,500
             
25.00
 
12/31/15
     
75,000-
             
1.00
 
07/06/20
     
602,740
             
0.30
 
07/06/13
     
301,370
(1)
   
301,370
     
0.30
 
07/13/13
     
607,323
             
1.00
 
12/31/19
     
607,323
             
1.00
 
12/31/19
     
77,344
             
4.10
 
07/01/20
     
77,344-
             
4.10
 
07/01/20

(1)
These options vest equally over four years, commencing July 13, 2010 and ending July 13, 2013.
 
 
40

 
 
Option Exercises and Stock Vested
 
On June 1, 2010 and June 25, 2010, Matthew Schissler exercised 527,824 and 299,848 options respectively.

COMPENSATION OF DIRECTORS

Director Compensation for year ending December 31, 2011

The following table sets forth with respect to the named director, compensation information inclusive of equity awards and payments made in the year ended December 31, 2011.

Name
 
Fees Earned
or Paid in
Cash
($)
   
Stock
Awards
($)
   
Option
Awards
($)
   
Non-Equity
Incentive Plan
Compensation
($)
   
Nonqualified
Deferred
Compensation
Earnings
($)
   
All Other
Compensation
($)
   
Total
($)
 
(a)
 
(b)
   
(c)
   
(d)
   
(e)
   
(f)
   
(g)
   
(h)
 
Matthew Schissler
   
--
   
$
--
     
--
     
--
     
--
     
--
   
$
--
 
Timothy McGrath
   
--
   
$
--
     
--
     
--
     
--
     
--
   
$
--
 
Joseph R. Vicente
   
--
   
$
       --
     
--
     
--
     
--
     
--
   
$
   --
 

On January 26, 2006 the Company’s board of directors approved a board compensation plan through 2011.  In 2011 the Company did not issue any shares related to its Board of Directors Compensation.
 
Compensation Committee Interlocks and Insider Participation

We did not have a compensation committee during the year ended December 31, 2011. During the fiscal year ended December 31, 2011, none of our executive officers served on the Board of Directors of any entities whose directors or officers serve on our Board of Directors.
 
ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
 
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 The following table sets forth information as of March 15, 2012, except as otherwise noted, with respect to the beneficial ownership of our common stock and is based on 249,999,364 shares of common stock issued and outstanding and entitled to vote as of said date as to:
 
  
Each person known by the Company to own beneficially more than five percent of our issued and outstanding common stock;
 
  
Each director and prospective director of the Company;
 
  
The Company’s Chief Executive Officer and each person who serves as an executive officer of the Company; and All executive officers and directors of the Company as a group.
 
Except as otherwise indicated, each of the stockholders listed below has sole voting and investment power over the shares beneficially owned.
 
 
41

 
 
Title Of Class
 
Name And Address Of Beneficial Owner (1)
 
Amount And Nature
Of Beneficial
Ownership (2)
   
Approximate
Percent of
Class (%)
 
Common
 
Matthew L. Schissler
   
3,681,316
(3)
   
1.45
%
Common
 
Joseph Vicente
   
2,346,766
(4)
   
*
%
Common
 
Timothy G. McGrath
   
90,667
     
*
%
Common
 
All executive officers and directors as a group (3 persons)
   
6,118,749
     
2.45
%
 
———————
*
Less than 1% of the outstanding common stock.
 
(1)
Except as noted above, the address for the above identified officers and directors of the Company is c/o Helm Drive, Las Vegas, NV 89119. Beneficial Ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Shares of common stock subject to options, warrants, or convertible debt currently exercisable or convertible, or exercisable or convertible within 60 days of March 15, 2012 are deemed outstanding for computing the percentage of the person holding such option or warrant. Percentages are based on a total of 249,999,364 shares of common stock outstanding on March 15, 2012 and shares issuable upon the exercise of options, warrants exercisable, and debt convertible on or within 60 days of March 15, 2012 as described above. The inclusion in the aforementioned table of those shares, however, does not constitute an admission that the named shareholder is a direct or indirect beneficial owner of those shares. Unless otherwise indicated, to our knowledge based upon information produced by the persons and entities named in the table, each person or entity named in the table has sole voting power and investment power, or shares voting and/or investment power with his or her spouse, with respect to all shares of capital stock listed as owned by that person or entity.
 
(3)
Includes 3,210,422  currently exercisable options held by Mr. Schissler, and 55,690 shares and 229,627 options held by Stephanie Schissler, Mr. Schissler’s wife. Mr. Schissler disclaims beneficial ownership of the shares beneficially owned by his wife. Percentage calculation considers additional outstanding of the potential options listed herein.
 
(4)
Includes 2,236,099  currently exercisable options held by Mr. Vicente. Percentage calculation considers additional outstanding of the potential options listed herein.
 
ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
 
Certain Relationships and Related Transactions
 
China Stem Cells, Ltd. .
 
In March, of 2010 the Company acquired pursuant to a License Agreement, a 10% non dilutable interest in what became, in December 2010, China Stem Cells, Ltd., a Cayman Islands Company (hereinafter "Cayman"), which indirectly holds a 100% capital interest in AXM Shenyang, a company organized to conduct a Stem Cell Storage Business in China. In exchange for issuance of an equity interest in Cayman, under the terms of the Transfer of Technology Agreement the Company agreed to provide technology transfer, knowhow and training in the setup, marketing and operation of the China Stem Cell Storage business. In connection with the License Agreement, the Company will receive royalties equal to 8.5% of "Net Revenues" realized from the China Stem Cell Storage business, over the 15 year term of the agreement, with certain minimum annual royalties’ payable beginning in 2011. The minimum royalty fee due as of December 31, 2011 is $62,866.

In December of 2010, the Company also acquired the option to provide up to $750,000 of additional capital funding to Cayman through the purchase of Cayman Secured Convertible Promissory Notes and attached Cayman Warrants to acquire its Common Stock. Other Cayman shareholders were granted similar options, with the intent of raising the aggregate up to $1.5 million in additional capital for Cayman and its subsidiaries.
 
 
42

 

As of December 31, 2011, Cord Blood has exercised this option in part, provided a total of $400,000 in additional capital to Cayman, and received Cayman Secured Convertible Promissory Notes for this sum along with 50 Cayman Warrants. The Secured Convertible Promissory Notes are convertible into Cayman stock at a conversion price of $1,500 per share, subject to certain adjustments. The Warrants have a five year term and are exercisable at an option exercise price of $0.05 per share per share, subject to certain adjustments. The Company’s CEO, Mathew Schissler, serves as a Director and as President of Cayman. In addition, a trust held fifty percent by Mathew Schissler, and fifty percent by his spouse Stephanie Schissler, owns 2% non dilutable interest in Cayman.

VidaPlus
 
As of December 31, 2011, the Company has approximately $327,092 loan receivable outstanding, which is convertible into equity. The Company currently owns 1% of share capital in initial equity.

Consulting Agreement with Pyrenees Consulting, LLC
 
On January 1, 2010, the Company entered into a consulting agreement with Pyrenees Consulting, LLC (“Pyrenees Consulting”), mislabeled in the agreement as Pyrenees Capital, LLC. Pyrenees Consulting is owned 50% by Stephanie Schissler, who is the spouse of the Company’s CEO, Matthew Schissler, and 50% by Mathew Schissler. The consulting agreement was entered for consulting services provided by Pyrenees Consulting, to be performed by Stephanie Schissler. The agreement entitles Pyrenees to a monthly retainer of $12,500 and stock option incentives for its services in relation to strategic corporate planning and other business related matters. The agreement term was 12-months and it automatically renewed for an additional 12-month period in 2011with a 5% increase in the monthly retainer  to $13,125. The agreement expired subsequent to year end, but Pyrenees Consulting continues to provide services for the Company.
 
Frozen Food Gift Group, Inc.
 
CBAI engaged Frozen Food Gift Group, Inc. (“FFGG”) as a vendor, prepaying for $45,000 in products during the year ended December 31, 2011. The remaining balance on that account is approximately $30,000.  The Company’s CEO and Chairman of the Board, Mathew Schissler, owns 41.4% of the outstanding shares of FFGG, and is FFGG’s Chairman of the Board.  CBAI’s COO Joseph Vicente served on the Board of Directors of FFGG, but resigned, effective as of January 26, 2012.
 
Director Independence
 
Mr. McGrath is independent as that term is defined under the NASDAQ Marketplace Rules.
 
ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES.
 
Rose, Snyder, Jacobs, serves as our independent registered public accounting firm and audited our financial statements for the years ended December 31, 2011 and 2010.

   
2011
   
2010
 
Audit fees
 
$
188,663
   
$
101,620
 
                 
Tax Fees
 
$
24,803
   
$
13,080
 
                 
Total
 
$
213,466
   
$
114,700
 

The Audit Committee pre-approves all audit and non-audit services performed by the Company’s auditor and the fees to be paid in connection with such services in order to assure that the provision of such services does not impair the auditor’s independence.
 
 
43

 
 
PART IV
 
ITEM 15.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
 
The following documents are filed as a part of this report or incorporated herein by reference:
 
(1)
Our Consolidated Financial Statements are listed on page F-1 of this Annual Report.
   
(2)
Financial Statement Schedules.
 
None
 
(3)
Exhibits:
 
The following documents are included as exhibits to this Annual Report:
 
EXHIBIT   DESCRIPTION
     
2.0
 
Form of Common Stock Share Certificate of Cord Blood America, Inc. (1)
     
3.1(i)
 
Amended and Restated Articles of Incorporation of Cord Blood American, Inc. (1)
     
3.1(ii)
 
Articles of Amendment to Articles of Incorporation (7)
     
3.1(iii)
 
Articles of Amendment to the Articles of Incorporation of Cord Blood America, Inc.(12)
     
3.1(iv)
 
Articles of Amendment to the Articles of Incorporation of Cord Blood America, Inc. (23)
     
 3.1(v)
 
Articles of Amendment to the Articles of Incorporation of Cord Blood America, Inc. (23)
     
 3.2(i)
 
Amended and Restated Bylaws of Cord Blood America, Inc. (1)
     
10.0
 
Patent License Agreement dated as of January 1, 2004 between PharmaStem Therapeutics, Inc. and Cord Partners, Inc. (2)
 
 
44

 
 
10.1
 
Board Compensation Plan (3)
     
10.2
 
Second Amendment, dated November 26, 2007, to the Securities Purchase Agreement, dated as of February 14, 2007, as amended by the First Amendment, dated as of April 9, 2007, by and among CorCell, Cord Blood America, Inc., and Shelter Island (4)
     
10.3
 
CorCell Security Agreement, dated as of November 26, 2007, by and between Cord Blood America, Inc., and  Shelter Island (4)
     
10.4
 
Put Option Agreement, dated as of November 26, 2007, by and between Cord Blood America, Inc. and Shelter  Island (4)
     
10. 5
 
Subordination Agreement, dated November 26, 2007, by and between Cord Blood America, Inc., CorCell, Career Channel, Inc., the Purchasers and Shelter Island (4)
     
10.6
 
Securities Purchase Agreement between the Company and Tangiers dated June 27, 2008 (5)
     
10.7
 
Registration Rights Agreement between the Company and Tangiers dated June 27, 2008 (5)
     
10.8
 
Employment Agreement between the Company and Joseph Vicente (6)
     
10.9
 
Employment Agreement between the Company and Matthew Schissler (6)
 
10.10
 
Fourth Amendment to Securities Purchase Agreement, dated June 3, 2008, by and among CorCell, Ltd., the  Company, Career Channel, Inc., a Florida corporation d/b/a Rainmakers International, and Shelter Island Opportunity Fund, LLC (8)
     
10.11
 
Form of Common Stock Purchase Warrant to Purchase Shares of Common Stock of the Company (8)
     
10.12
 
Form of Waiver Agreement. (8)
     
10.13
 
Amendment No. 1 to Securities Purchase Agreement, dated November 25, 2008 (9)
     
10.15
 
Amendment No. 1 to Securities Purchase Agreement dated January 22, 2009 (10)
     
10.16
 
Amendment Agreement, dated as of February 20, 2009, by and among Shelter Island Opportunity Fund, LLC, Corcell Ltd. and Cord Blood America, Inc. (11)
 
 
45

 
 
10.17
 
Lease for Las Vegas Facility
     
10.18
 
Compensatory Arrangement for Certain Officers Effective July 13, 2009, Stock Options (13)
     
10.19
 
Compensatory Arrangement for Certain Officers Effective December 31, 2009, Stock Options (14)
     
10.20
 
Convertible Promissory Note Executed January 6, 2010 between Cord Blood America, Inc. and JMJ  Financial (15)
     
10.21
 
Entered on March 24, 2010 into Investment Agreement to Acquire Majority Interest in Stellacure (16)
     
10.22
 
Material Agreement between Company and Pyrenees Capital (16)
     
10.23
 
Convertible Promissory Note Executed March 24, 2010 between CBAI and JMJ Financial (16)
     
10.24
 
Convertible Promissory Note Executed March 26, 2010 between CBAI and JMJ Financial (16)
     
10.25
 
Compensatory Arrangement for Certain Officers Executed July 1, 2010. Stock Options (17)
     
10.26
 
Senior Secured Note Agreement between Cord Blood America, Inc. and Shelter Island Opportunity Fund Executed July 21, 2010. (18)
     
10.27
 
Executed Stock Purchase Agreement on September 20, 2010 to Acquire Majority Interest in BioCordcell Argentina, SA. (19)
     
10.29
 
Entered into a Letter of Intent to Acquire Assets of Cryo-Cell De Mexico on December 3, 2010 (20)
     
10.30
 
On March 20, 2011 Cord Blood America, Inc. Entered into a Note and Warrant Purchase Agreement with St. George Investments. (21)
     
10.31
 
On January 12, 2011, Cord Blood America, Inc, Entered into a Convertible Promissory Note with JMJ Financial and a Liquidated Damages Agreement (21).
     
10.32
 
On January 19, 2011, Cord Blood America, Inc. Entered into a Liquidated Damages Agreement with Tangiers Capital, LLC. (21)
     
10.33
 
2011 Flexible Stock Options Plan (24)
     
10.34
 
Compensatory Arrangement for Certain Officers Effective September 12, 2011, Employment Agreements (25)
     
21
 
List of Subsidiaries (5)
     
 
Certification of the registrant’s Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 ((Filed Herewith)
     
31.2  
Certification of the registrant’s Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 ((Filed Herewith)
     
 
Certification of the Company’s Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Filed Herewith)
 
 
46

 
 
(1)
Filed as an exhibit to Registration Statement on Form 10-SB filed on May 6, 2004.

(2)
Filed as an exhibit to Amendment No. 1 to Form 10-SB filed on August 10, 2004.
 
(3)
Filed as an exhibit to Current Report on Form 8-K filed on February 8, 2006.
 
(4)
Filed as an exhibit to Current Report on Form 8-K filed on November 30, 2007.

(5)
Filed as an exhibit to Form SB2 filed on January 25, 2008.
 
(6)
Filed as an exhibit to Current Report on Form 8-K filed on July 3, 2008.
 
(7)
Filed as an exhibit to Current Report on Form 8-K filed on July 18, 2008

(8)
Filed as an exhibit to Current Report on Form 8-K filed on August 29, 2008
 
(9)
Filed as an exhibit to Current Report on Form 8-K filed on  June 13, 2008

(10)
Filed as an exhibit to Current Report on Form 8-K filed on December 12, 2008

(11)
Filed as an exhibit to Registration Statement on Form S-1 filed on January 23, 2009

(12) 
Filed as an exhibit to the Current Report on Form 8-K filed on February 26, 2009
 
(13)
Filed as an exhibit to the Current Report on Form 8-K filed on March 31, 2009
 
(14)
Filed as an exhibit to the Current Report on Form 8-K filed on July 17, 2009
 
(15)
Filed as an exhibit to Current Report on Form 8-K filed on January 7, 2010
 
(16)
Filed as an exhibit to Current Report on Form 8-K/A filed on January 12, 2010
 
(17)
Filed as an exhibit to Current Report on Form 8-K filed on March 29, 2010
 
(18)
Filed as an exhibit to Current Report on Form 8-K filed on July 7, 2010
 
(19)
Filed as an exhibit to Current Report on Form 8-K filed on August 4, 2010
 
(20)
Filed as an exhibit to Current Report on Form 8-K filed on September 23, 2010
 
(21)
Filed as an exhibit to Current Report on Form 8-K filed on December 8, 2010
 
(22)
Filed as an exhibit to Current Report on Form 8-K filed on March 21, 2011

(23)
Filed as an exhibit to Quarterly Report, Form 10Q filed on May 23, 2011
 
(24)
Filed as an exhibit to Current Report on Form S-8 filed on June 3, 2011
 
(25)
Filed as an exhibit to Current Report on Form 8-K filed on September 12, 2011   
 
 
47

 

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on this 13th day of April, 2012.
 
 
CORD BLOOD AMERICA, INC.
 
       
 
By:
/s/ Matthew L. Schissler
 
   
Matthew L. Schissler
 
   
Chief Executive Officer
 
   
(Principal Executive Officer, Principal
Financial Officer and
Principal Accounting Officer)
 

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

/s/ Matthew L. Schissler
   
Matthew L. Schissler
 
April 16, 2012
CEO and Chairman (Principal Executive Officer, Principal Financial Officer,
Principal Accounting Officer, and Director)
   
     
/s/ Joseph Vicente
   
Joseph Vicente
 
April 16, 2012
Director
   
     
/s/ Timothy McGrath
   
Timothy McGrath
 
April 163, 2012
Director
   
 
 
48

 
 
FINANCIAL STATEMENTS

Index to Financial Statements
 
   
Page
 
Report of Independent Registered Public Accounting Firm
   
F-2
 
         
Consolidated Balance Sheets
   
F-3
 
         
Consolidated Statements of Operations
   
F-4
 
         
Consolidated Statements of Changes in Stockholders’ Equity (Deficit)
   
F-5
 
         
Consolidated Statements of Cash Flows
   
F-6
 
         
Notes to the Consolidated Financial Statements
   
F-8
 
 
 
F-1

 
 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
To the Board of Directors and Stockholders
Cord Blood America, Inc.
 
We have audited the accompanying consolidated balance sheets of Cord Blood America, Inc. and Subsidiaries as of December 31, 2011 and 2010, and the related consolidated statements of operations, changes in stockholders’ equity (deficit), and cash flows for the years ended December 31, 2011 and 2010. Cord Blood America, Inc.’s management is responsible for these consolidated financial statements. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards established by the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Cord Blood America, Inc. and Subsidiaries as of December 31, 2011 and 2010, and the results of their operations and their cash flows for the years ended December 31, 2011 and 2010, in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has sustained recurring operating losses, continues to consume cash in operating activities, and has insufficient working capital and an accumulated deficit at December 31, 2011.  These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management's plans regarding those matters also are described in Note 2.  The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Rose, Snyder & Jacobs, LLP

Encino, California

April 11, 2012
 
 
F-2

 
 
CORD BLOOD AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2011 AND DECEMBER 31, 2010
 
   
December 31,
2011
   
December 31,
2010
 
ASSETS            
Current assets:            
Cash
 
$
196,367
   
$
347,258
 
Accounts receivable, net of allowance for doubtful accounts of $109,827 and $10,000
   
213,405
     
540,279
 
Prepaid expenses
   
91,754
     
141,300
 
Other current assets
   
330,473
     
72,560
 
Notes receivable, related party, current
   
--
     
300,000
 
Total current assets
   
831,999
     
1,401,397
 
Property and equipment, net of accumulated depreciation and amortization of $393,270 and $248,404
   
734,749
     
571,431
 
Customer contracts and relationships, net of amortization of  $ 2,587,896 and $1,949,377
   
4,756,786
     
5,038,582
 
Investment and notes receivable, related party
   
782,496
     
125,000
 
Goodwill
   
244,053
     
244,053
 
Total assets
 
$
7,350,083
   
$
7,380,463
 
LIABILITIES AND STOCKHOLDERS’ DEFICIT
 
Current liabilities:
               
Accounts payable
 
$
1,232,460
   
$
967,626
 
Accrued expenses
   
1,032,745
     
1,338,115
 
Deferred rent
   
61,339
     
112,231
 
Deferred revenue
   
1,600,428
     
1,397,161
 
Derivatives Liability
   
973,679
     
238,789
 
Promissory notes payable, current, net of unamortized discount of $106,821 and $0
   
789,872
     
1,490,400
 
Total current liabilities
   
5,690,523
     
5,544,322
 
Promissory notes payable, net of unamortized discount of $994,043 and $671,904
   
1,477,522
     
231,217
 
Interest on Promissory Notes
   
462,695
     
420,000
 
Deferred Revenue (long term portion)
   
598,179
     
438,631
 
Total liabilities
 
$
8,228,919
   
$
6,634,170
 
Stockholders’ deficit:
               
Preferred stock, $.0001 par value, 5,000,000 shares authorized, no shares issued and outstanding
   
--
     
--
 
Common stock, $.0001 par value, shares authorized 250,000,000 , 138,804,403 and 62,838,832 shares issued and outstanding, inclusive of treasury shares
   
635,985
     
628,389
 
Additional paid-in capital
   
47,736,445
     
42,892,449
 
Common stock held in treasury stock, 20,000 shares
   
(599,833
)
   
(599,833
)
Accumulated Other Comprehensive income (loss)
   
33,001
     
(551)
 
Accumulated deficit
   
(48,761,688
)
   
(42,789,936
)
      Total Cord Blood America stockholders’ equity (deficit)
   
(956,090)
     
130,518
 
      Non-controlling interest
   
77,254
     
615,775
 
Total stockholders’ equity (deficit)
   
(878,836)
     
746,293
 
Total liabilities and stockholders’ deficit
 
$
7,350,083
   
$
7,380,463
 

See Report of the Independent Registered Public Accounting Firm and the accompanying notes to consolidated financial statements.
 
 
F-3

 
 
CORD BLOOD AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010

   
Year Ended December 31,
 
   
2011
   
2010
 
             
Revenue
 
$
5,668,482
   
$
4,128,439
 
Cost of services
   
(1,856,195
)
   
(1,622,046
)
Gross Profit
   
3,812,287
     
2,506,393
 
                 
Administrative and selling expenses
   
(7,609,472)
     
(8,310,587
)
Start-up costs
   
(141,205)
     
(868,844
)
                 
Loss from operations
   
(3,938,390)
     
(6,673,038
)
                 
Interest expense and change in derivatives liability
   
(2,571,883
)
   
(1,778,691
)
                 
Net loss before income taxes
   
(6,510,273
)
   
(8,451,729
)
                 
Income taxes
   
--
     
--
 
Consolidated net loss
   
(6,510,273
)
   
(8,451,729
)
                 
Non-controlling interest in income
   
538,521
     
359,224
 
                 
Net loss attributable to Cord Blood America
 
$
(5,971,752
)
 
$
(8,092,505
)
                 
Basic and diluted loss per share
 
$
(0.07
)
 
$
(0.15
)
Weighted average common shares outstanding
   
86,143,153
     
54,199,942
 

See Report of the Independent Registered Public Accounting Firm and the accompanying notes to consolidated financial statements.
 
 
F-4

 
 
CORD BLOOD AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 2011 AND 2010
 
   
Common Stock
   
Additional
Paid In
   
Treasury
   
Accumulated Other Comprehensive
   
Accumulated
   
Non-Controlling
       
   
Shares
   
Amount
   
Capital
   
Stock
   
Income
   
Deficit
   
Interest
   
Total
 
                                                 
Balance at December 31, 2009
    49,477,351     $ 494,774     $ 34,763,094     $ (599,833 )     --     $ (34,697,431 )     --     $ (39,396 )
Shares issued for services
    807,366       8,074       630,090                                       638,164  
Shares issued for services
    907,968       9,080       440,920                                       450,000  
Share based compensation
    41,316       413       2,221,844                                       2,222,257  
Common Stock for debt conversion
    10,258,328       102,583       3,600,479                                       3,703,062  
Warrants exercised
    427,720       4,277       (4,277 )                                     --  
Options exercised
    807,672       8,077       (8,077 )                                     --  
Shares issued for security position
    111,111       1,111       45,556                                       46,667  
Reclassification of derivative liability
                    1,202,820                                       1,202,820  
Acquisition of Biocordcell
                                                    974,999       974,999  
Comprehensive income (loss)
                                            (8,092,505 )     (359,224 )     (8,451,729 )
Foreign currency translation
                                    (551 )                        
Balance at December 31, 2010
    62,838,832     $ 628,389     $ 42,892,449     $ (599,833 )   $ (551 )   $ (42,789,936 )   $ 615,775     $ 746,293  
Shares issued for services
    1,288,099       129       80,037                                       80,166  
Shares issued for Compensation
    445,671       45       52,305                                       52,350  
Issuance of Common Stock for Debt Conversion
    62,175,091       6,217       2,160,556                                       2,166,773  
Shares issued for DWAC settlements
    923,661       92       245,722                                       245,814  
Shares issued for Cash
    1,953,025       195       511,805                                       512,000  
Ironridge Global
    9,179,018       918       856,244                                       857,162  
Fractional Share Adjustment
    1,006                                                       --  
Stock Option Expense
                    201,995                                       201,995  
Derivative Adjustment
                    735,332                                       735,332  
Consolidated Net Loss
                                            (5,971,752 )     (538,752 )     (6,510,273 )
Comprehensive Income
                                    33,552                       33,552  
                                                                 
Ending Balance December 31, 2011
    138,804,403      $ 635,985      $ 47,736,445      $ (599,833 )    $ 33,001      $ (48,761,688 )    $ 77.254      $ (878,836 )

See Report of the Independent Registered Public Accounting Firm and the accompanying notes to consolidated financial statements.
 
 
F-5

 

CORD BLOOD AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2011 AND 2010
 
 
  2011     2010  
Cash Flows from Operating Activities
       
Consolidated Net Loss
  $ (6,510,273 )   $ (8,451,729 )
Adjustments to reconcile net loss to net cash used in operating activities
       
Shares issued (cancelled) relating to services, net
    80,166       638,164  
Shares issued to employees, directors, and consultants