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Cord Blood America, Inc. Announces Agreement to Restructure Debt



7/9/2012 11:36:33 AM

LAS VEGAS, July 9, 2012 /PRNewswire/ -- Cord Blood America, Inc. (OTC BB: CBAI) ("CBAI" or the "Company") today announced it has signed a new Securities Purchase Agreement and related documents with Tonaquint, Inc. ("Tonaquint"), including a Secured Convertible Promissory Note in the amount of $1,252,000. Separately the Company made a final and full payment to JMJ Financial ("JMJ") in the amount of $1,117,730.50. The agreement with, and payment to JMJ, also includes full release and cancellation provisions regarding all other notes, amendments, claims and rights that may have existed between the parties.

Joseph Vicente, who became Chairman and President on May 15, 2012, explained several key components of the restructured agreements:

  • The previous JMJ agreements contained several provisions that made them onerous if left in place. One issue was our requirement to take from the existing notes, at JMJ's option, an additional amount in cash of over $1.9 million. Moreover, there were two other notes JMJ could have elected to execute that could have further advanced the cash sum to be paid to the Company, adding further debt to the balance sheet. The requirement to take such a large amount of cash absent a commensurate rate of return for such funding was simply an example of unwarranted potential shareholder dilution and something CBAI's new management finds unacceptable. By cancelling these additional funding options CBAI is not forgoing accretive growth propositions, rather, it is taking this opportunity to institute a level of control of our financing not previously in place. The Tonaquint's agreements contain a right of first refusal to provide future financing to CBAI in the event the Company would need to seek such financing.
  • Tonaquint shares common management with St. George Investments, LLC, and with this restructuring these two entities hold approximately 88% of the Company's total debt balance. Tangiers Investors, LP is the other remaining creditor for the Company's long-term debt. With JMJ's previous debt balance very close to that of St. George's balance, we believed it important to try limiting the number of competing parties selling simultaneously in the marketplace and thus possibly stalling stock price increase momentum. While there is a provision that allows for Tonaquint, under certain restrictions, to accelerate the conversion on all or a portion of the outstanding amount of its note into shares of the Company's common stock at a price of $0.03, the agreements include an amortization schedule that allows for a structured monthly payback amount. The fact that the payment schedule will not begin for a period of six months from the date of issuance of the Tonaquint note, combined with a structured payment schedule, provides the Company some spacing as it prepares to meet its debt obligations.
  • CBAI retains the option, under the Tonaquint note, to pay any portion of the monthly amortization payment with cash without any premium. Additionally, the Tonaquint agreements contain prepayment provisions that carry no penalty or premium language if any amount of the debt is prepaid with cash, even if the payment occurs outside the amortization schedule. These highly positive changes provide us with an unprecedented level of flexibility as we address our longer term payment options for this debt obligation.

"As I commented in May regarding our Q1 2012 results, the legacy $2.3 million in principal debt against an authorized share count that has reached its ceiling, was an issue for which we needed to explore alternatives. Today, the announcement of this debt restructuring, along with our settlement agreement effective June 22, 2012 with BioCells, has now put us in a position where can move forward with a plan to extinguish the remaining Company debt," Mr. Vicente said.

"We believe we have removed a high degree of uncertainty in both instances, and replaced them with agreements that have very definable components considering the time and financial obligations of CBAI. With these two long term liabilities reduced and settled we have begun the process, and expect within the next few weeks, to file with the SEC a proxy to increase the authorized share limit. This will not be accompanied by a reverse split, but solely an increase in the authorized. Our primary goal with this increase in the authorized is to eliminate the existing debt, and not fund the ongoing working capital requirements of the Company."

"We are asking our shareholders to support management in this measure," Cord Blood America's new President stated. "However, we also know that it would be naive to believe that there will not be responses that elicit the fears of dilution; certainly a historical issue for the Company. While we cannot erase the past, we believe it equally important to demonstrate how the actions of the new management team over the last eight weeks have positioned the business in a more positive strategic direction, and how our efforts have addressed the seriousness which we view the issue of dilution. We will continue to strive to strengthen the balance sheet and create shareholder value in the long term and will only evaluate an acquisition where we are confident the return on investment exceeds the costs."

Several points that reinforce that trend:

  • The BioCells settlement agreement took an obligation of, potentially, in excess of $705,000 due in cash in 2012, and in fact already due, and with the exception of $60,000 to be paid in cash in 2012 ($25,000 of which has already been paid), successfully negotiated instead a contingency payout. The payout amount is based on and to be paid from the pro rata dividends, if any, due to the Company based solely on BioCells' performance. The net effect of this is there will be no large cash payment by the Company in 2012, which would have required the additional issuance of further dilutive convertible debt financing or some other form of financing requiring the issuance of CBAI shares. Considering the BioCells agreement, along with the JMJ notes that were cancelled and not including amounts contained in additional notes JMJ may have executed, in the past month, the Company has negotiated out of over $2.5 million that would have potentially required convertible debt or other financing. The result is a reduction in the potential dilution to the Company's shareholders by more than half.
  • There have been no capital contributions from the existing promissory notes since March 2012, except for the final installment of the St. George note, and since our Q1 filing, no additional promissory or debt related instruments have been executed, other than the notes summarized herein and in the 8K filed on July 6, 2012.
  • With the termination of the JMJ notes, there are no further obligations required under any existing agreements that require CBAI to take any additional funding.

We pointed out in the press release regarding the BioCells transaction that the Company is at a period in its life cycle where all of our subsidiaries and/or investments need to be self sufficient. This is also true of the parent Company, Cord Blood America, Inc. The net result is that as of today, our plans do not include financing options for funding daily operations. This goal remains our number one priority.

"In closing, we appreciate the continued strong interest from our shareholders. We hear you. While today will not satisfy all the questions that remain, we believe this most recent set of announcements provide a level of clarity to the most pressing question facing the Company; the solution to the remaining debt balance. We continue to believe that a company absent of debt, with the ability to operate on its own cash flows provides an abundance of strategic growth opportunities, and sustainable shareholder value. We also understand that there are challenges that lie ahead, however, we are confident that today is a major step forward and we look forward to communicating our progress in the quarters ahead," Mr. Vicente concluded.

About Cord Blood America

Cord Blood America, Inc. is the parent company of CorCell Companies, Inc., which facilitates umbilical cord blood stem cell preservation for expectant parents and their children. Its mission is to be the most respected stem cell preservation company in the industry. Collected through a safe and non-invasive process, cord blood stem cells offer a powerful and potentially life-saving resource for treating a growing number of ailments, including cancer, leukemia, blood, and immune disorders. To find out more about Cord Blood America, Inc. and CorCell Companies, Inc., visit our websites: http://www.corcell.com/ for customer information and http://www.cordblood-america.com/ for investor information.

Forward-Looking Statements

Some statements made in this press release are forward-looking statements, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. We use words such as "anticipate," "believe," "expect,'' "future," "intend," "plan," and similar expressions to identify forward-looking statements. These statements including those related to the growth of the industry, new stem cell treatments, and the Cord Blood America's performance, are only predictions and are subject to certain risks, uncertainties and assumptions. Additional risks are identified and described in the Company's public filings with the Securities and Exchange Commission. Statements made herein are as of the date of this press release and should not be relied upon as of any subsequent date. The Company's past performance is not necessarily indicative of its future performance. The Company does not undertake, and the Company specifically disclaims any obligation to update any forward-looking statements to reflect occurrences, developments, events, or circumstances after the date of such statement.

CONTACT:

Paul Knopick
E & E Communications
940.262.3584
pknopick@eandecommunications.com

SOURCE Cord Blood America, Inc.


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