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Note 5 - Line of Credit and Notes Payable
9 Months Ended
Sep. 30, 2011
Debt Disclosure [Text Block]
Note 5—Line of Credit and Notes Payable

On December 9, 2009, the Company, together with the Company’s subsidiary, Coral Blood Services, Inc., entered into a Credit Agreement (the “Wells Agreement”), and related security agreements, with Wells Fargo Bank, N.A.   The Wells Agreement provided that the Company could borrow the lesser of 80% of eligible accounts receivable or $5 million, had a maturity date of December 1, 2011, and provided for the monthly payment of interest at a rate of 0.25% above the bank’s prime rate.  The Wells Agreement also granted the bank a first priority security interest in all of the assets of the Company and Coral Blood Services, Inc.

The Company had no outstanding borrowings under the Wells Agreement as of September 30, 2011 and December 31, 2010, except for a letter of credit issued by Wells Fargo as security for lease obligations associated with the Company’s Van Nuys facility. The Company is required to maintain a letter of credit under the lease, initially in the amount of $815,000 and reducing by 10% each year on August 14, 2009, 2010, 2011 and 2012, and 20% each year on August 14, 2013 and 2014.  At September 30, 2011 and December 31, 2010, the letter of credit was for $660,000.  No amounts have been drawn against the letter of credit.

The Wells Agreement also required that the Company maintain certain financial covenants which the Company had not maintained and the Company had been in default at December 31, 2010.

Effective as of January 15, 2011, in consideration of Wells Fargo waiving the Company’s existing defaults under the Wells Agreement, the Company agreed to amend the Wells Agreement to provide that outstanding borrowings, including outstanding advances and letters of credit, shall not at any time exceed the amount of cash collateral in a segregated, blocked deposit account maintained by the Company with Wells Fargo and with respect to which Wells Fargo has been granted a first priority security interest to secure all present and future indebtedness of the Company to Wells Fargo.  Pursuant to this arrangement, the Company has pledged $660,000 in cash to Wells Fargo, and the Company has an outstanding letter  of credit for an aggregate of $660,000 under the Wells Agreement.

On July 5, 2011, the Company entered into a second amendment to the Wells Agreement, pursuant to which the parties amended the Wells Agreement to (i) reduce outstanding borrowings, including outstanding advances and letters of credit, to $660,000, which is the amount of cash collateral the Company maintains in a segregated, blocked deposit account with Wells Fargo, (ii) provide for Wells Fargo’s release of its security interests on all assets of the Company and Coral Blood Services other than a security interest on the cash collateral the Company maintains in a segregated, blocked deposit account with the bank, and terminated certain ancillary agreements pursuant to which the bank perfected its security interest in certain assets of the Company and Coral Blood Services, and (iii) to modify and delete certain affirmative and negative covenants of the Company and Coral Blood Services.