Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☑
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
|
For the
quarterly period ended March
31, 2017
or
☐
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE
ACT
|
for the
transition period from _________ to _________
CORD BLOOD AMERICA, INC.
(Exact
Name of Small Business Registrant as Specified in its
Charter)
FLORIDA
|
|
000-50746
|
|
90-0613888
|
(State
or other jurisdiction of incorporation)
|
|
(Commission
File Number)
|
|
(I.R.S.
Employer Identification No.)
|
1857 HELM DRIVE
LAS VEGAS, NV 89119
|
|
89119
|
(Address
of principal executive offices)
|
|
(Zip
Code)
|
(702) 914-7250
(Registrant's
telephone number, including area code)
Indicate
by check mark whether the Registrant (1) has filed all documents
and reports required to be filed by Sections 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filings for the
past 90 days. Yes ☑ No☐
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 Regulation S-T during the preceding 12 months
(or for such shorter period that the registrant was required to
submit and post such files).
Yes ☐ No ☐
Indicate
by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, smaller reporting
company, or an emerging growth company. See the definitions of
“large accelerated filer,” “accelerated
filer”, “smaller reporting company” and "emerging
growth company" in Rule 12b-2 of the Exchange Act. (Check
one):
Large accelerated filer
|
☐
|
Accelerated filer
|
☐
|
Non-accelerated
filer
|
☐
(Do not check if a smaller reporting company)
|
Smaller reporting company
|
☒
|
|
|
Emerging
growth company
|
☐
|
If an
emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange Act.
☐
Indicate
by check mark whether the registrant is a shell company (as defined
by Rule 12b-2 of the Exchange Act.):
Yes ☐ No ☑
Number
of shares of Cord Blood America, Inc. common stock, $0.0001 par
value, outstanding as of May 15, 2017, 1,272,066,146 exclusive
of treasury shares.
CORD BLOOD AMERICA, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
PART I. FINANCIAL INFORMATION
|
||||
|
|
|
|
|
Item
1.
|
Condensed
Consolidated Financial Statements (unaudited)
|
|
3
|
|
|
|
|
|
|
|
Condensed
Consolidated Balance Sheets March 31, 2017 (unaudited) and December
31, 2016
|
|
3
|
|
|
|
|
|
|
|
Condensed
Consolidated Statements of Income (unaudited) for the three
months ended March 31, 2017 and March 31, 2016
|
|
4
|
|
|
|
|
|
|
|
Condensed
Consolidated Statements of Cash Flows (unaudited) for the three
months ended March 31, 2016 and March 31, 2016
|
|
5
|
|
|
|
|
|
|
|
Notes
to Condensed Consolidated Financial Statements
(unaudited)
|
|
6
|
|
|
|
|
|
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
|
15
|
|
|
|
|
|
|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
|
17
|
|
|
|
|
|
|
Item
4T.
|
Controls
and Procedures
|
|
17
|
|
|
|
|
|
|
PART II. OTHER INFORMATION
|
||||
|
|
|
|
|
Item
1.
|
Legal
Proceedings
|
|
18
|
|
|
|
|
|
|
Item
1A.
|
Risk
Factors
|
|
18
|
|
|
|
|
|
|
Item
2.
|
Unregistered
Sales Of Equity Securities And Use Of Proceeds
|
|
18
|
|
|
|
|
|
|
Item
3.
|
Defaults
Upon Senior Securities
|
|
18
|
|
|
|
|
|
|
Item
4.
|
Mine
Safety Disclosures
|
|
18
|
|
|
|
|
|
|
Item
5.
|
Other
Information
|
|
18
|
|
|
|
|
|
|
Item
6.
|
Exhibits
|
|
18
|
|
|
|
|
|
|
Signatures
|
|
22
|
|
PART I. FINANCIAL INFORMATION
CORD BLOOD AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
|
March
31,
2017
(unaudited)
|
December 31,
2016
|
|
|
|
Current
assets:
|
|
|
Cash
|
$821,429
|
$926,209
|
Accounts
receivable, net of allowance for doubtful accounts of $78,123
and $78,123,
respectively
|
48,699
|
113,316
|
Other current
assets
|
62,395
|
58,376
|
Receivable –
Biocells net of discount of $27,291 and $27,541, respectively
current Portion
|
34,532
|
27,459
|
Prepaid
expenses
|
124,065
|
175,065
|
Total current
assets
|
1,091,120
|
1,300,425
|
Property and
equipment, net of accumulated depreciation and amortization of
$745,718 and $743,200, respectively
|
60,392
|
66,628
|
Customer contracts
and relationships, net of accumulated amortization of $4,309,543
and $4,232,982, respectively
|
1,245,495
|
1,322,056
|
Other
Assets
|
19,292
|
19,292
|
Receivable -
BioCells net of discount of $133,218 and $140,041, respectively -
long term portion
|
419,959
|
419,959
|
Total
assets
|
$2,836,258
|
$3,128,360
|
|
|
|
Liabilities and
Stockholders’ equity
|
|
|
Accounts
payable
|
$116,266
|
$151,305
|
Accrued
expenses
|
110,464
|
112,020
|
Severance
Payable
|
147,211
|
187,360
|
Deferred revenue
– current portion
|
1,165,952
|
1,158,578
|
Derivative
liability – current portion
|
24,050
|
109,731
|
Interest
on promissory notes
|
212,687
|
204,494
|
Promissory
notes payable, net of unamortized discount of $7,046 and
$43,432, respectively
|
92,954
|
356,568
|
Total current
liabilities
|
1,869,584
|
2,280,056
|
Deferred revenue -
long term portion
|
268,310
|
271,628
|
|
|
|
Total
liabilities
|
2,137,894
|
2,551,684
|
|
|
|
Stockholders'
equity:
|
|
|
Preferred stock,
$.0001 par value, 5,000,000 shares authorized, no shares
outstanding
|
--
|
--
|
Common stock,
$.0001 par value, 2,890,000,000 shares authorized,
1,272,066,146 shares issued and outstanding, inclusive of treasury
shares, respectively
|
127,207
|
127,207
|
Additional
paid-in capital
|
53,954,510
|
53,954,510
|
Common
stock held in treasury stock, 20,000 shares
|
(599,833)
|
(599,833)
|
Accumulated
deficit
|
(52,783,520)
|
(52,905,208)
|
Total
stockholders’ equity
|
698,364
|
576,676
|
Total liabilities
and stockholders' equity
|
$2,836,258
|
$3,128,360
|
See accompanying
notes to these unaudited condensed consolidated financial
statements
3
CORD BLOOD AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2017 AND MARCH 31,
2016
|
THREE-MONTH
PERIOD
|
THREE-MONTH
PERIOD
|
|
ENDED
|
ENDED
|
|
MARCH
31,
|
MARCH
31,
|
|
2017
|
2016
|
|
|
|
Revenue
|
$745,948
|
$986,346
|
Cost of
services
|
(170,934)
|
(340,330)
|
Gross
profit
|
575,014
|
646,016
|
Administrative and
selling expenses
|
(501,501)
|
(665,350)
|
Income (loss) from
operations
|
73,513
|
(19,334)
|
Interest expense
and change in derivative liability
|
41,102
|
(1,455)
|
Other
income
|
7,073
|
13,198
|
Income
from continuing operations before provision for income
taxes
|
121,688
|
(7,591)
|
|
|
|
Income
taxes
|
--
|
--
|
Net
income (loss)
|
$121,688
|
$(7,591)
|
|
|
|
Basic earnings per
share
|
$0.00
|
$0.00
|
Diluted earnings
per share
|
$0.00
|
$0.00
|
|
|
|
Weighted
average common shares outstanding
|
|
|
Basic weighted average common shares outstanding
|
1,272,066,146
|
1,272,066,146
|
Diluted weighted average common shares outstanding
|
1,272,066,146
|
1,272,066,146
|
See
accompanying notes to these unaudited condensed consolidated
financial statements
4
CORD BLOOD AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
THREE-MONTH
|
THREE-MONTH
|
|
PERIOD
ENDED
|
PERIOD
ENDED
|
|
MARCH
31,
|
MARCH
31,
|
|
2017
|
2016
|
CASH FLOWS FROM
OPERATING ACTIVITIES:
|
|
|
Net
income
|
$121,688
|
$(7,591)
|
Adjustments to
reconcile net income (loss) to net cash provided
by operating activities:
|
|
|
Amortization
of loan discount
|
36,386
|
53,015
|
Amortization
of Note Receivable discount
|
(7,073)
|
(6,885)
|
Depreciation
and amortization
|
82,797
|
97,363
|
Change
in value of derivative liability
|
(85,681)
|
(72,682)
|
Bad
debt
|
38,254
|
7,139
|
Other
income from loan receivable
|
--
|
(6,313)
|
Changes
in accounts receivable
|
26,363
|
128,901
|
Changes
in inventory
|
(4,019)
|
1,252
|
Changes
in prepaid
|
51,001
|
43,061
|
Changes
in accounts payable
|
(35,039)
|
(43,135)
|
Changes
in accrued expenses
|
(1,556)
|
(3,157)
|
Changes
in severance payable
|
(40,149)
|
--
|
Changes
in accrued interest
|
8,192
|
21,123
|
Changes
in deferred revenue
|
4,056
|
(26,190)
|
NET CASH PROVIDED
BY OPERATING ACTIVITIES
|
195,220
|
185,901
|
|
|
|
CASH FLOWS FROM
INVESTING ACTIVITIES:
|
|
|
Payment
for loan receivable
|
--
|
69,454
|
NET CASH PROVIDED
BY INVESTING ACTIVITIES
|
--
|
69,454
|
|
|
|
CASH FLOWS FROM
FINANCING ACTIVITIES
|
|
|
Repayment
of notes payable
|
(300,000)
|
--
|
NET CASH USED IN
FINANCING ACTIVITIES
|
(300,000)
|
--
|
|
|
|
NET (DECREASE)
INCREASE IN CASH
|
(104,780)
|
255,355
|
|
|
|
Cash balance at
beginning of period
|
$926,209
|
$789,046
|
Cash balance at end
of period
|
$821,429
|
$1,044,401
|
See
accompanying notes to these unaudited condensed consolidated
financial statements
5
CORD BLOOD AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2017
(UNAUDITED)
Note 1. Organization and Description of Business
Overview
Cord Blood America, Inc. ("CBAI" or the “Company”),
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's wholly-owned subsidiaries include Cord Partners, Inc.,
CorCell Companies, Inc., CorCell, Ltd., (Cord Partners, Inc.,
CorCell Companies, Inc. and CorCell, Ltd. are sometimes referred to
herein collectively as “Cord”), CBA Properties, Inc.
("Properties"), and Career Channel, Inc. formerly D/B/A Rainmakers
International. CBAI and its subsidiaries engage in the
following business activities:
●
|
CBAI and Cord specialize in providing private cord blood and cord
tissue stem cell services. Additionally, the Company is in the
business of procuring birth tissue for organizations utilizing the
tissue in the transplantation and/or research of therapeutic based
products.
|
●
|
Properties was formed to hold corporate trademarks and other
intellectual property.
|
The
accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with U.S. generally accepted
accounting principles for interim financial information and with
the instructions to Form 10-Q and Article 8 of Regulation
S-X. Accordingly, they do not include all of the
information and footnotes required by U.S. generally accepted
accounting principles for complete annual financial
statements. These statements reflect all adjustments,
consisting of normal recurring adjustments, which, in the opinion
of management, are necessary for fair presentation of the
information contained therein. Operating results for the
three months ended March 31, 2017 are not necessarily indicative of
the results that may be expected for the year ending December 31,
2017 or for any other future period. The condensed
consolidated balance sheet at December 31, 2016 has been derived
from the audited consolidated financial statements at that date but
does not include all of the information and footnotes required by
generally accepted accounting principles for complete financial
statements. It is suggested that these interim condensed
consolidated financial statements be read in conjunction with the
audited consolidated financial statements of the Company for the
period ended December 31, 2016 and notes thereto included in the
Company's annual report on Form 10-K. The Company
follows the same accounting policies in the preparation of interim
reports as noted in the Company's annual report on Form
10-K.
Note 2. Summary of Significant Accounting
Policies
Basis of Consolidation
The
consolidated financial statements include the accounts of CBAI and
its wholly-owned subsidiaries. All significant inter-company
balances and transactions have been eliminated upon
consolidation.
Estimates
The
preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amount of revenues and expenses during
the reporting periods. Actual results could differ materially from
those estimates.
6
Cash
Cash
and cash equivalents include cash on hand, deposits in banks with
maturities of three months or less, and all highly liquid
investments which are unrestricted as to withdrawal or use, and
which have original maturities of three months or less at the time
of purchase.
The
company maintains cash and cash equivalents at several financial
institutions.
Accounts Receivable
Accounts
receivable consist of the amounts due for facilitating the
processing and storage of umbilical cord blood and cord tissue, and
birth tissue procurement services. 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. The Company wrote off $38,254
and $7,139 as bad debt expenses during the periods ended March 31,
2017 and 2016, respectively.
Property and Equipment
Property
and equipment are stated at cost less accumulated depreciation.
Depreciation is computed on a straight-line basis over the
estimated useful lives of the assets. Routine maintenance and
repairs are charged to expense as incurred while major replacement
and improvements are capitalized as additions to the related
assets. Sales and disposals of assets are recorded by removing the
cost and accumulated depreciation from the related asset and
accumulated depreciation accounts with any gain or loss credited or
charged to income upon disposition.
Impairment of Long-Lived Assets
Long-lived
assets, other than goodwill, are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying
amount of the assets might not be recoverable. Conditions that
would necessitate an impairment assessment include a significant
decline in the observable market value of an asset, a significant
change in the extent or manner in which an asset is used, or a
significant adverse change that would indicate that the carrying
amount of an asset or group of assets is not
recoverable. For
long-lived assets to be held and used, the Company recognizes an
impairment loss only if its carrying amount is not recoverable
through its undiscounted cash flows and measures the impairment
loss based on the difference between the carrying amount and fair
value. The Company reviews goodwill for impairment at least
annually or whenever events or circumstances are more likely than
not to reduce the fair value of goodwill below its carrying
amount.
Inventory
Inventory,
comprised principally of finished goods, is stated at the lower of
cost or market, and net realized value, using the first-in,
first-out (“FIFO”) method. This policy requires the
Company to make estimates regarding the market value of its
inventory, including an assessment of excess or obsolete inventory.
The Company determines excess and obsolete inventory based on an
estimate of the future demand and estimated selling prices for its
products.
Note Receivable
Notes
receivable consists of the notes due from Biocordcell Argentina
S.A. (BioCells) (Note 4). The note receivable is recorded at the
carrying-value on the financial statements.
For
note receivable from BioCells, since the Company agreed to finance
the sale of the shares in Biocordcell at no stated interest, in
accordance with ASC 500, the interest method was applied using a 6%
borrowing rate. The Company recorded an unamortized discount based
on the 6% borrowing rate and the discount is amortized throughout
the life of the note.
7
Deferred Revenue
Deferred
revenue consists of payments for enrollment in the program and
processing of umbilical cord blood and cord tissue 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.
Valuation of Derivative Instruments
ASC
815-40 requires that embedded derivative instruments be bifurcated
and assessed, along with free-standing derivative instruments such
as warrants, on their issuance date and in accordance with ASC
815-40-15 to determine whether they should be considered a
derivative liability and measured at their fair value for
accounting purposes. In determining the appropriate fair value, the
Company uses the Binomial option pricing formula and present value
pricing. At March 31, 2017 and December 31, 2016, the Company
adjusted its derivative liability to its fair value, and reflected
the change in fair value, in its condensed consolidated statements
of income.
Revenue Recognition
CBAI
recognizes revenue under the provisions of ASC 605. CBAI provides a
combination of products and services to customers. This combination
arrangement is evaluated under ASC 605. ASC 605 addresses certain
aspects of accounting for arrangements under multiple revenue
generating activities.
Cord
recognizes revenue from both enrollment fees and processing fees
upon the completion of processing while revenue from storage fees
are recognized ratably over the contractual storage
period.
Cost of Services
Costs
are incurred as umbilical cord blood, cord tissue and birth
tissue are collected. These costs include the transportation
of the umbilical cord blood, cord tissue and birthing tissue from
the hospital, direct material and labor, costs for processing and
cryogenic storage of new samples by a third party laboratory,
collection kit materials and allocated rent, utility and general
administrative expenses. The Company expenses costs in the period
incurred.
Accounting for Stock Option Plan
The
Company’s share-based employee compensation plans are
described in Note 6. On January 1, 2006, the Company adopted
the provisions of ASC 718 , “Accounting for Stock-based
Compensation (Revised 2004)” (“123(R)”), which
requires the measurement and recognition of compensation expense
for all share-based payment awards made to employees and directors,
including employee stock options at fair value.
Earnings (Loss) Per Share
Basic
earnings per share (EPS) is computed by dividing net income
available to common stockholders by the weighted average number of
common shares outstanding. Diluted EPS is similar to
basic EPS except that the weighted average number of common shares
outstanding is increased to include the number of additional common
shares that would have been outstanding if the dilutive potential
common shares had been exercised.
Concentration of Risk
Credit
risk represents the accounting loss that would be recognized at the
reporting date if counterparties failed completely to perform as
contracted. Concentrations of credit risk (whether on or off
balance sheet) that arise from financial instruments exist for
groups of customers or counterparties when they have similar
economic characteristics that would cause their ability to meet
their contractual obligations to be similarly affected by changes
in economic or other conditions described below.
Relationships
and agreements which could potentially expose the Company to
concentrations of credit risk consist of the use of one source for
the processing and storage of all umbilical cord blood and one
source for the development and maintenance of a website. The
Company believes that alternative sources are available for each of
these concentrations.
8
Financial
instruments that subject the Company to credit risk could consist
of cash balances maintained in excess of federal depository
insurance limits. The Company maintains its cash and cash
equivalent balances with high credit quality financial
institutions. At times, cash and cash equivalent balances may be in
excess of Federal Deposit Insurance Corporation limits. To date,
the Company has not experienced any such losses.
Fair Value Measurements
Assets
and liabilities recorded at fair value in the condensed
consolidated balance sheets are categorized based upon the level of
judgment associated with the inputs used to measure the fair value.
Level inputs, as defined by ASC 820, are as follows:
●
|
Level 1
– quoted prices in active markets for identical assets or
liabilities.
|
●
|
Level 2
– other significant observable inputs for the assets or
liabilities through corroboration with market data at the
measurement date.
|
●
|
Level 3
– significant unobservable inputs that reflect
management’s best estimate of what market participants would
use to price the assets or liabilities at the measurement
date.
|
The
following table summarizes fair value measurements by level at
March 31, 2017 for assets and liabilities measured at fair value on
a recurring basis:
|
Level
1
|
Level
2
|
Level
3
|
Total
|
|
|
|
|
|
Derivative
liability
|
$--
|
$--
|
$(24,050)
|
$(24,050)
|
Derivative
liability was valued under the Binomial model with the following
assumptions:
Risk free interest
rate
|
1.03%
|
Expected
life
|
0.5
years
|
Dividend
Yield
|
0%
|
Volatility
|
116%
|
The
following table summarizes fair value measurements by level at
December 31, 2016 for assets and liabilities measured at fair value
on a recurring basis:
|
Level
1
|
Level
2
|
Level
3
|
Total
|
|
|
|
|
|
Derivative
liability
|
$--
|
$--
|
$(109,731)
|
$(109,731)
|
Derivative
liability was valued under the Binomial model, with the following
assumptions:
Risk free interest
rate
|
0.12%-0.47%
|
Expected
life
|
0 to 0.75
years
|
Dividend
Yield
|
0%
|
Volatility
|
0% to
109%
|
For
certain of the Company’s financial instruments, including
cash, accounts receivable, prepaid expenses and other assets,
accounts payable and accrued expenses, and deferred revenues, the
carrying amounts approximate fair value due to their short
maturities. The carrying amounts of the Company’s notes
receivable and notes payable approximates fair value based on the
prevailing interest rates.
9
Recently Issued Accounting Pronouncements
In February 2016, the FASB issued ASU No.
2016-02, Leases
(Topic 842), under the new guidance,
lessor accounting is largely unchanged. Certain targeted
improvements were made to align, where necessary, lessor accounting
with the lessee accounting model and Topic 606, Revenue from
Contracts with Customers. The amendments of this ASU are effective for
fiscal years beginning after December 15, 2018, and interim
periods within those fiscal years. Early adoption is permitted. The
Company is currently assessing the potential impact this ASU will
have on the financial statements and related
disclosures.
In May 2016, the FASB issued ASU No.
2016-12, Revenue from Contracts with
Customers (Topic 606): Narrow-Scope Improvements and Practical
Expedient, which is to (1)
clarify the objective of the collectability criterion for applying
paragraph 606-10-25-7; (2) permit an entity to exclude amounts
collected from customers for all sales (and other similar) taxes
from the transaction price; (3) specify that the measurement date
for noncash consideration is contract inception; (4) provide a
practical expedient that permits an entity to reflect the aggregate
effect of all modifications that occur before the beginning of the
earliest period presented when identifying the satisfied and
unsatisfied performance obligations, determining the transaction
price, and allocating the transaction price to the satisfied and
unsatisfied performance obligations; (5) clarify that a completed
contract for purposes of transition is a contract for which all (or
substantially all) of the revenue was recognized under legacy GAAP
before the date of initial application, and (6) clarify that an
entity that retrospectively applies the guidance in Topic 606 to
each prior reporting period is not required to disclose the effect
of the accounting change for the period of adoption. The amendments
of this ASU are effective for fiscal years beginning after
December 15, 2017, and interim periods within those fiscal
years. The Company is currently assessing the potential impact this
ASU will have on the financial statements and related
disclosures
In August 2016, the FASB issued ASU
No. 2016-15, Statement of Cash Flows (Topic
230): Classification of Certain Cash
Receipts and Cash Payments, in
an effort to reduce the diversity of how certain cash receipts and
cash payments are presented and classified in the statement of cash
flows. The amendments of this ASU are effective for fiscal years
beginning after December 15, 2017, and interim periods within
those fiscal years. Early adoption is permitted. The Company is
currently assessing the potential impact this ASU will have on the
financial statements and related disclosures.
In
January 2017, the FASB issued ASU No. 2017-01, Business
Combinations (Topic 805): Clarifying the Definition of a Business.
This new standard clarifies the definition of a business and
provides a screen to determine when an integrated set of assets and
activities is not a business. The screen requires that when
substantially all of the fair value of the gross assets acquired
(or disposed of) is concentrated in a single identifiable asset or
a group of similar identifiable assets, the set is not a business.
This new standard will be effective for the Company on
January 1, 2018, however, early adoption is permitted with
prospective application to any business development
transaction.
Note 3. Notes and Loans Payable
At
March 31, 2017 and December 31, 2016 notes and loans payable
consist of:
|
March
31,
2017
|
December
31,
2016
|
Secured Convertible
Promissory Note to Tonaquint, Inc., 7.5% per annum; due on or
before September 17, 2017
|
$100,000
|
$400,000
|
|
|
|
|
100,000
|
400,000
|
Less: Unamortized
Discount
|
(7,046)
|
(43,432)
|
|
$92,954
|
$356,568
|
Tonaquint, Inc.
On
August 30, 2013, Cord Blood America, Inc. (the
“Company”) filed a Complaint in the United States
District Court for the District of Utah, Central Division against
Tonaquint, Inc. (“Tonaquint”) and St. George
Investments, LLC (“St. George”) (collectively
“Defendants”), case number 2:13-cv-00806-PMW (the
“Action”), and on May 7, 2014, the Company filed an
amended complaint. On September 25, 2013, Defendants
each filed their Answer and Counterclaim in the Action, which they
amended on March 22, 2014.
10
On
December 17, 2014, in settlement of the Action, the parties entered
into a Settlement and Exchange Agreement (the "Settlement
Agreement"). Pursuant to the Settlement Agreement, the Secured
Convertible Promissory Note and the Warrant to Purchase Shares of
Common Stock issued by the Company to St. George on or around March
10, 2011, as well as the SGI Purchase Agreement, and all other
documents that made up the March 2011 transaction between the
Company and St. George, all of which have been set forth in detail
in prior filings by the Company, were terminated, cancelled or
otherwise extinguished. Further pursuant to the
Settlement Agreement, the Tonaquint Note was exchanged for a
Secured Convertible Promissory Note of the Company in the principal
amount of $2,500,000 (the "Company Note"), and certain of the other
documents that were part of the June 27, 2012 transaction between
the Company and Tonaquint (the “June 2012 Tonaquint
Transaction”) were terminated, cancelled or otherwise
extinguished, and certain of them were amended, as set forth
below.
Under
the Company Note, the Company shall make monthly payments to
Tonaquint, with the first payment due on or before April
17, 2015, and with payments continuing thereafter until the
Company's Note is paid in full, with a maturity date that is 33
calendar months after the effective date of December 17, 2014. The
amount of the monthly payments is $100,000 (the “Installment
Amount”); provided,
however, that if the remaining amount owing under the
Company Note as of the applicable Installment Date (defined in the
Company Note) is less than $100,000, then the Installment Amount
for such Installment Date shall be equal to the outstanding amount.
The Company may prepay any or all of the outstanding amount of the
Company Note at any time, without penalty. In the event the Company
prepays an amount that is less than the outstanding amount, then
the prepayment amount shall be applied to the next Installment
Amount(s) due under the Company Note.
For
each monthly payment, the Company may elect to designate all or any
portion of the Installment Amount then due as a conversion
eligible amount (hereafter “Conversion Eligible
Amount”); provided that the total outstanding Conversion
Eligible Amount that has not been converted by Tonaquint, as set
forth below, at any given time may not exceed one hundred thousand
dollars ($100,000) without Tonaquint’s prior written consent
and subject to additional restrictions set forth in the Company
Note. In the event the Company designates any portion of any
monthly payment amount as a Conversion Eligible Amount, the
applicable monthly payment shall be reduced by an amount equal to
the portion thereof designated as a Conversion Eligible Amount. The
Conversion Eligible Amount shall continue to be included in and be
deemed to be a part of the Outstanding Balance (defined in the
Company Note) of the Company Note unless and until such amount is
either paid in cash by the Company or converted into Common Stock
by Tonaquint. The Company may pay the Conversion Eligible Amount in
cash, provided that no prepayments of cash shall reduce the
Conversion Eligible Amount until the Outstanding Balance is equal
to or less than the Conversion Eligible Amount.
Once
the Company has designated amounts as Conversion Eligible Amount,
Tonaquint may convert all or any portion of that amount into
shares of the Company's Common Stock. In the event of a conversion
by Tonaquint of a Conversion Eligible Amount, the number of Common
Stock shares delivered to Tonaquint upon conversion will be
calculated by dividing the amount of the Company Note that is being
converted by 70% of the average of the three (3) lowest Closing Bid
Prices of the Common Stock (as defined in the Company Note) in the
twenty (20) Trading Days immediately preceding the applicable
Conversion.
The
Company records debt discounts in connection with the issuance of
convertible debt and the initial valuation of the derivative
liability. The discounts are amortized to non-cash interest expense
over the life of the debt.
The
Company Note has an interest rate of 7.5%, compounding daily, which
would increase to a rate of 15.0% on the happening of certain
Events of Default (defined in the Company Note) that are not
considered a Payment Default (defined in the Company Note),
provided that the Company may cure the default in accordance with
and subject to the terms set forth in the Company Note. Where a
Payment Default occurs, including where (i) Borrower shall fail to
pay any principal, interest, fees, charges, or any other amount
when due and payable under that Company Note; or (ii) Borrower
shall fail to deliver any Conversion Shares in accordance with the
terms of the Company Note, late fees shall accrue as set forth in
the Company Note, and in addition, the Company shall have ninety
(90) days from delivery of notice of default from Tonaquint to cure
the default, as set forth in more detail in the Company Note. If
the Company fails to cure the Payment Default, Tonaquint may
accelerate the Company Note by written notice to the Company, with
the Outstanding Balance becoming immediately due and payable in
cash at the Mandatory Default Amount (defined in the Company Note)
equal to (i) the Outstanding Balance as of the date of acceleration
(which Outstanding Balance, for the avoidance of doubt, will
include all Late Fees that accrue until any applicable Payment
Default is cured) multiplied by (ii) two hundred fifty percent
(250%), along with other remedies, as set forth in the Company
Note.
11
As of December 31, 2016, the principal balance on the Tonaquint
note was $400,000, and there was $204,494 of accrued
interest. As of
March 31, 2017, the principal balance on the Tonaquint note was
$100,000, and there was $212,687 of accrued
interest.
Note 4: Investment and Notes Receivable, Related
Parties
At
March 31, 2017 and December 31, 2016, notes receivable consist
of:
|
March
31,
2017
|
December 31,
2016
|
|
|
|
On September 29,
2014, the Company closed a transaction selling its stake in
BioCells to Diego Rissola; current President. Payments
are to be annually, after June of 2015, and the last payment due on
or before June 1, 2025.
|
615,000
|
615,000
|
|
|
|
Unamortized
discount on BioCells note receivable
|
(160,509)
|
(167,582)
|
|
$454,491
|
$447,418
|
Under
the Agreement with the Purchaser of BioCells, BioCells is to make
payments as follows: $5,000 on or before October 12, 2014 (amount
paid in 2014); $10,000 on or before December 1, 2014 (amount paid
in 2015); $15,000 on or before March 1, 2015 (amount paid in 2015);
$15,000 on or before June 1, 2015 (amount paid in 2015); $45,000 on
or before June 1, 2016 (amount paid in 2016); $55,000 on or before
June 1, 2017; $55,000 on or before June 1, 2018; $55,000 on or
before June 1, 2019; $65,000 on or before June 1, 2020; $75,000 on
or before June 1, 2021; $75,000 on or before June 1, 2022; $75,000
on or before June 1, 2023; $80,000 on or before June 1, 2024;
$80,000 on or before June 1, 2025. As of March 31, 2017, the
Purchaser has paid all amounts due and is current with payments due
under the Agreement. This loan receivable is secured, non-interest
bearing, and subject to a 6% discount rate. As of March 31, 2017
and December 31, 2016, the receivable has a balance of $454,491 and
$447,418, respectively..
Note 5. Commitments and Contingencies
Employment Agreement
On March 31, 2015, the Company entered into an Executive Employment
Agreement with Stephen Morgan, the Company’s Vice President,
General Counsel and Corporate Secretary, which is effective as of
April 1, 2015 and shall terminate as of March 31, 2017, unless
earlier terminated by the Company or Mr. Morgan in accordance with
the agreement (the “Morgan Employment
Agreement”).
The Morgan Employment Agreement provides for a base
salary equal to $130,000, as well as an annual bonus
opportunity, payable at the discretion of the Board of Directors,
equal to 25% of Mr. Morgan’s base salary for that
calendar year, provided that Mr. Morgan had the option to receive
any portion of his salary and bonus in stock of the Company, in
lieu of cash, at a value determined by the Board of Directors in
their reasonable discretion and otherwise in accordance with the
Employment Agreement.
Amendments to Employment Agreement
Effective April 9, 2015, the Company entered into an Amendment to
Executive Employment Agreement with Stephen Morgan amending his
employment agreement, such that Mr. Morgan no longer has the
option, in his sole discretion, to receive his salary and bonus
amounts in the form of Company stock, rather than
cash.
Effective February 12, 2016, the Company entered into a Second
Amendment to Executive Employment Agreement with Mr. Morgan (the
“Second Amendment”), amending his original, April 1,
2015 employment agreement. Concurrent with the Second Amendment,
Mr. Morgan commenced serving as Interim President of the
Company. Mr. Morgan no longer serves as Vice President
of the Company, but remains in his positions as Corporate Secretary
and General Counsel. The Second Amendment reflects a
five thousand dollar ($5,000) increase in Mr. Morgan’s annual
salary during the period Mr. Morgan serves as Interim President,
which period commenced on February 12, 2016 and shall end at any
time on three (3) days’ notice by the Company (the
“Interim Term”). The Amendment further provides that
the increase in Mr. Morgan’s salary shall not be included in
any severance calculations, including the severance calculations
set forth in Sections 5(e) and 5(f) of his original agreement, and
that upon termination of the Interim Term for any reason, Mr.
Morgan’s employment, duties and salary shall revert back to
what they were prior to the Second Amendment.
12
Effective March 31, 2017, the Company entered
into a Third Amendment to Executive Employment Agreement (the
“Third Amendment”) with Stephen Morgan (the
“Employee”), amending his original, April 1, 2015
employment agreement. The Third Amendment provides
that the last day of the
term of Employee’s employment is extended from March 31,
2017, to March 31, 2018, subject to the other terms and conditions
of Section 2 of the original agreement; provided, however, that (i)
the Company may change Employee’s status from full-time to
part-time employee at any time, (ii) concurrently with any such
change in status, the Company may modify Employee’s base
compensation amount and structure, and Employee’s prospective
bonus, if any, and (iii) notwithstanding any such change in status,
Employee shall remain eligible to receive the amount and other
benefits set forth in Section 5(f) in accordance with the terms and
conditions thereof.
Vicente Agreements
On December 18, 2014, the Company entered into an Executive
Employment Agreement with Joseph R. Vicente, the Company’s
former President and Chairman of the Board, which was effective as
of January 1, 2015 and was to terminate as of December 31, 2017,
unless earlier terminated by the Company or Mr. Vicente in
accordance with the agreement (the “Vicente Employment
Agreement”).
The Vicente Employment Agreement provided for a base
salary equal to $135,000, as well as an annual bonus
opportunity, payable at the discretion of the Board of Directors,
equal to 30% of Mr. Vicente’s base salary for that
calendar year. Mr. Vicente had the option to receive any portion of
his salary and bonus in stock of the Company, which was amended
effective April 9, 2015 pursuant to an Amendment to
Executive Employment Agreement whereby Mr. Vicente no longer had
the option in his sole discretion to receive his salary and bonus
amounts in stock. The Vicente
Employment Agreement includes two-year restrictions on competition
and solicitation of customers following termination of the
agreement.
Effective February 12, 2016 (the “Separation Date”),
the Company entered a Mutual Separation Agreement with Mr. Vicente
(the “Separation Agreement”). Pursuant to
the Separation Agreement, Mr. Vicente stepped down from his
positions as President and as a member of the
Board. Under the Separation Agreement, Mr. Vicente is
entitled to receive a severance, payable in equal monthly
installments over the twenty-four month period post separation, in
an amount equal to all compensation paid by the Company to Mr.
Vicente for the 24 months preceding the termination, including
salary and bonus received by Mr. Vicente. Additionally,
the Company will pay for the value of his health insurance
premiums, in monthly installments, until the earlier of twenty-four
months after the Separation Date or until Mr. Vicente or his
dependents become eligible for group health insurance coverage
through a new employer. Mr. Vicente is also entitled to
payment of his salary through the Separation Date, payment for
unused vacation days, payment for any unreimbursed expenses, and a
bonus payment for work performed in calendar year 2015, payable
within sixty (60) days of the Company completing its fiscal 2015
audit.
Mr. Vicente remains subject to the restrictive covenants contained
in the Vicente Employment Agreement, including a covenant not to
compete and a non-solicitation provision, and is subject to
additional restrictive covenants in the Separation
Agreement.
Operating Leases
On
January 21, 2014, the Company entered a First Amendment to Lease,
which extended its lease at the property located at 1857 Helm
Drive, Las Vegas (the “Property”), Nevada through
September 30, 2019. In connection with the amendment,
the Company received an abatement of the entire amount of its rent
for January 2014, except for CAM charges. In addition,
as of October 1, 2014, the Company’s monthly lease payments
reverted back to their rates as they existed in June 2009, other
than CAM charges, with annual adjustments thereafter as set
forth in the Amendment. Moreover, the Landlord had the option to
lease a portion of the premises then occupied by the Company to a
third party, and if this portion is leased to a third party, the
Company’s monthly rent amount was to be
reduced pro
rata with the portion of the space leased to a third
party. If the Landlord is unable to or elects not to
lease a portion of the premises to a third party by November 30,
2015 and by each subsequent anniversary thereof, the Company shall
receive an additional abatement of one month rent, excluding CAM
charges, in December 2015, December 2016 and December 2017,
respectively and as applicable. Effective May 15, 2016, the
Company entered a Second Amendment to Lease. The Second Amendment
to Lease sets forth that the square footage of the Property has
been reduced by 380 square feet, such that the Property now
consists of 16,523 square feet, confirms the abatements set forth
in the First Amendment to Lease, sets forth that the
Company’s Common Area Maintenance Expenses and HOA costs
shall be calculated based on the reduced square footage amount, and
confirms that the Company’s monthly rent amounts will remain
unchanged from the First Amendment to Lease.
13
Commitments
for future minimum rental payments, by year, and in the aggregate,
to be paid under such operating lease as of March 31, 2017, are as
follows:
|
Rent
|
|
to be
paid
|
2017
|
140,167
|
2018
|
191,006
|
2019
|
145,835
|
Total
|
$477,008
|
Note 6. Share Based Compensation
Stock Option Plan
The
Company's Stock Option Plan permits the granting of stock options
to its employees, directors, consultants and independent
contractors for up to 8.0 million shares of its common stock. The
Company believes that such awards encourage employees to remain
employed by the Company and also to attract persons of exceptional
ability to become employees of the Company. On July 13, 2009, the
Company registered its 2009 Flexible Stock Plan, which increased
the total shares available to 4 million common shares. The plan
allows the Company to issue either stock options or common shares
from this Plan.
On June
3, 2011, the Company registered its 2011 Flexible Stock Option
plan, and reserved 1,000,000 shares of the Company's common stock
for future issuance under the Plan. The Company canceled the
Company's 2010 Flexible Stock Plan, and returned 501,991 reserved
but unused common shares back to its treasury.
Stock
options that vest at the end of a one-year period are amortized
over the vesting period using the straight-line method. For stock
options awarded using graded vesting, the expense is recorded at
the beginning of each year in which a percentage of the options
vests. The Company did not issue any stock options for the period
ended March 31, 2016 and the year ended December 31,
2016.
The
Company’s stock option activity was as follows:
|
Stock
Options
|
Weighted Average
Exercise Price
|
Weighted Avg.
Contractual
Remaining
Life
|
|
|
|
|
Outstanding,
December 31, 2016
|
4,458,679
|
0.68
|
2.98
|
Granted
|
--
|
--
|
--
|
Exercised
|
--
|
--
|
--
|
Forfeited/Expired
|
--
|
--
|
--
|
Outstanding March
31, 2017
|
4,458,679
|
0.68
|
2.73
|
Exercisable March
31, 2017
|
4,458,679
|
0.68
|
2.73
|
The
following table summarizes significant ranges of outstanding stock
options under the stock option plan at March 31, 2017:
Range
of
Exercise
Prices
|
Number
of
Options
|
Weighted
Average
Remaining
Contractual
Life
(years)
|
Weighted
Average
Exercise
Price
|
Number
of
Options
Exercisable
|
Weighted
Average
Exercise
Price
|
$0.33 — 1.11
|
4,458,679
|
2.73
|
$0.68
|
4,458,679
|
$0.68
|
|
4,458,679
|
2.73
|
$0.68
|
4,458,679
|
$0.68
|
14
Note 7. Stockholder’s Equity
Preferred Stock
The
Company has 5,000,000 shares of $.0001 par value preferred stock
authorized. As of March 31, 2017 and December 31, 2016, the Company
had no shares of preferred stock outstanding.
Common Stock
The
Company has 2,890,000,000 shares of $.0001 par value common stock
authorized. As of March 31, 2017 and December 31, 2016, the Company
had 1,272,066,146 shares of common stock issued and outstanding.
20,000 shares remain in the Company’s treasury.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS
Forward Looking Statements
In
addition to the historical information contained herein, the
Company makes statements in this Quarterly Report on Form 10-Q that
are forward-looking statements. Sometimes these statements will
contain words such as "believes," "expects," "intends," "should,"
"will," "plans," and other similar words. Forward-looking
statements include, without limitation, assumptions about the
Company’s future ability to increase income streams, reduce
and control costs, to grow revenue and earnings, and our ability to
obtain additional debt and/or equity capital on commercially
reasonable terms, none of which is certain. These statements are
only predictions and involve known and unknown risks, uncertainties
and other factors included in the Company's periodic
reports with the SEC. Although forward-looking statements, and any
assumptions upon which they are based, are made in good faith and
reflect our current judgment, actual results could differ
materially from those anticipated in such statements. Except as
required by applicable law, including the securities laws of the
United States, the Company does not intend to update any of the
forward-looking statements to conform these statements to actual
results.
The
following information should be read in conjunction with the
Company’s March 31, 2017 unaudited condensed consolidated
financial statements and related notes thereto included elsewhere
in the quarterly report and with its consolidated financial
statements and notes thereto for the year ended December 31, 2016
and the related "Management's Discussion and Analysis of Financial
Condition and Results of Operations" contained in the
Company’s Annual Report on Form 10-K for the year ended
December 31, 2016, as well as its quarterly reports and reports
filed on Form 8-K for the relevant periods. The Company also urges
you to review and consider its disclosures describing various risks
that may affect its business, which are set forth under the heading
"Risk Factors Related to the Company Business" in its Annual Report
on Form 10-K for the year ended December 31, 2016.
Summary and Outlook of the Business
CBAI
primarily facilitates umbilical cord blood and cord tissue stem
cell services, with a particular focus on the acquisition of
customers in need of family based products and
services.
Cord
Services Provided By Cord
Cord’s operations facilitate umbilical cord blood banking and
cord tissue services to expectant parents. The Company’s
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. Cord facilitates processing and
storage of cord blood and cord tissue for new customers through an
engagement with a third party laboratory. Cord provides or
facilitates the following services to each customer.
15
●
|
Collection Materials. A
medical kit that contains all of the materials and instructions
necessary for collecting the newborn’s umbilical cord blood
and cord tissue at birth and packaging the unit for transportation.
The kit also provides for collecting a maternal blood sample for
infectious disease testing.
|
●
|
Physician And Customer Support. 24-hour consulting services to customers as well
as to physicians and labor and delivery personnel, providing
instruction for the successful collection, packaging, and
transportation of the cord blood and cord tissue and maternal blood
samples.
|
●
|
Transportation. Manage all
logistics for transporting the cord blood and cord tissue unit to
the Company’s third party facility immediately following
birth. This procedure ensures chain-of-custody control during
transportation for maximum security.
|
●
|
Comprehensive Testing. The
cord blood sample is tested by third parties engaged by Cord for
stem cell concentration levels and blood type. The maternal samples
are tested for infectious diseases. Cord reports results to the
newborn’s mother.
|
●
|
Cord Blood Storage. After
processing and testing, the cord blood and cord tissue unit is
cryogenically frozen in a controlled manner and stored in liquid
nitrogen for potential future use. For new customers, this process
is conducted at a third party laboratory.
|
Additionally, the Company provides services related to procuring
birth tissue for organizations utilizing the tissue in the
transplantation and/or research of therapeutic based
products. The Company receives a one-time recovery fee
per tissue. Associated services provided by the Company with
this offering may include arranging for transportation, providing
collection materials, facilitating information used to determine
donor eligibility and arranging for infectious disease testing of
the maternal blood.
Results of Operations for the Three-Months Ended March 31, 2017 and
2016
For the
three months ended March 31, 2017, total revenue decreased to
approximately $0.75 million from $0.99 million, a 24.4% decrease
over the same period of 2016. Revenues are generated
primarily from three sources: new enrollment/processing fees;
recurring storage fees (both from cord blood and cord tissue); and
services related to the procurement of birth tissue for
organizations utilized in the transplantation and/or research of
therapeutic products. The decrease in revenue is due
primarily to a reduction in orders for services related to
procurement of birth tissue. Recurring storage
revenues decreased approximately 2.0% to $0.66 million for the
three-month period ended March 31, 2017, versus $0.67 million for
the prior comparative year ended March 31, 2016. Revenues
from the procurement of birth tissue decreased to $0.0 million for
the three-month period ended March 31, 2017 from $0.17 million for
the three month period ended March 31, 2016.
Cost of
services as a percentage of revenue decreased to 22.9% for the
three-month period ending March 31, 2017 compared to 34.5% the same
prior period of 2016.
The cost of services include transportation of the umbilical cord
blood and tissue from the hospital to the lab, direct material and
labor, costs for processing and cryogenic storage of new samples by
a third party laboratory, and allocated rent, utility and general
administrative expenses. Gross profit decreased by
approximately $0.07 million or 11.0% to approximately $0.58 million
for the three month period ending March 31, 2017 from
the comparable three month period of 2016. The decline in
gross profit is largely due to reduction in revenue as a result of
receiving no orders for birth tissue procurement services for the
three months ended March 31, 2017.
The
Company’s net income was $0.12 million for the three month
period of 2017, as compared to a net loss of $0.008 million for the
three month comparative period of 2017 from 2016.
Liquidity and Capital Resources
Total
assets at March 31, 2017 were $2.84 million, compared to $3.13
million at December 31, 2016. Total liabilities at March 31,
2017 were $2.13 million consisting primarily of deferred
revenue of $1.43 million. At December 31, 2016, total liabilities
were $2.55 million consisting primarily of deferred revenue of
$1.43 million.
At
March 31, 2017, the Company had $0.82 million in cash, a decrease
of $0.10 million from the December 31, 2016 cash balance of $0.93
million. Cash flows from operations are currently sufficient to
fund operations as net cash provided by operating activities for
the three months ended March 31, 2017, was $0.20 million, compared
to net cash provided by operating activities of $0.19 million for
the prior comparative period of 2016. During the three month period of
2017 there was no increase in notes payable for purposes of working
capital.
16
The accompanying consolidated financial statements have been
prepared on a going concern basis, which contemplates the
realization of assets and the settlement of liabilities in the
normal course of business. The Company has incurred losses since
its inception through December 31, 2014, as development and
infrastructure costs were incurred in advance of obtaining
customers. However, the Company has net income and cash flow from
operations for the years ended December 31, 2015 and 2016. Starting
in 2014, the Company's management commenced a plan to reduce
operating expenses to be commensurate with operating cash flows.
Prior to 2015, the Company has relied on debt to provide capital
for working capital needs.
Management has taken several actions to ensure that the Company
will continue as a going concern, including the divesture of its
investment in its unconsolidated affiliates, including the sale of
its 51% ownership in Stellacure GmbH and 50.004% interest in
Biocordcell Argentina S.A., headcount reductions, and reductions in
discretionary expenditures. These changes effected by the Company's
management resulted in the Company generating cash flow from
operations in 2015 and 2016, and the Company did not require
additional debt or equity capital from external sources. Further,
the Company has reduced its debt via the repayment of the principal
balance. Management plans to continue to implement its business
plan and to fund operations through operating revenue and a
corresponding increase in the amount of net income from its
operations. The Company expects that cash flow from operations over
the next 12 months will be sufficient to meet its working capital
needs. Management's objective is to continue to monitor and manage
expenses relative to its revenue such that it will continue to
generate operating cash flows to meet its operating cash
requirements. Management believes that these actions will enable
the Company to continue as a going concern through March 31,
2018.
Inflation
In the opinion of management, inflation has not and will not have a
material effect on the Company operations in the immediate future.
Management will continue to monitor inflation and evaluate the
possible future effects of inflation on the Company's business and
operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Not
applicable.
ITEM 4T. 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"). The Company’s management has reviewed and evaluated
the effectiveness of its disclosure controls and procedures as of
March 31, 2017. Following this review and evaluation, management
collectively determined that its disclosure controls and procedures
are not effective to ensure that information required to be
disclosed by the Company in reports that it files or submits 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
its president and chief financial officer, as appropriate to allow
timely decisions regarding required disclosure.
The
deficiency in the Company’s 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.
The Company continues to actively develop the controls and
resources necessary 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.
17
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
NONE
ITEM 1A.RISK FACTORS.
A description of the Company’s risk factors can be found in
“Risk Factors” of its Annual Report on Form 10-K for
the year ended December 31, 2016. There were no material changes to
those risk factors for the three months ended March 31,
2017.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
(a-b) Not
applicable.
(c)
Repurchase of Shares. The Company did not repurchase any of its
shares during the quarter ended March 31, 2017.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
NONE
ITEM 4. MINE SAFETY DISCLOSURES.
Not
applicable.
ITEM 5. OTHER INFORMATION
NONE
ITEM 6. EXHIBITS
The
following documents are included as exhibits to this Form
10Q:
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 America, Inc. (1) |
3.1(ii)
|
|
Articles
of Amendment to Articles of Incorporation (5)
|
3.1(iii)
|
|
Articles
of Amendment to the Articles of Incorporation of Cord Blood
America, Inc. (6)
|
3.1(iv)
|
|
Articles
of Amendment to the Articles of Incorporation of Cord Blood
America, Inc. (12)
|
3.1(v)
|
|
Articles
of Amendment to the Articles of Incorporation of Cord Blood
America, Inc. (12)
|
3.1(vi)
|
|
Articles
of Amendment to the Articles of Incorporation of Cord Blood
America, Inc. (17)
|
3.1
(vii)
|
|
Articles
of Amendment to the Articles of Incorporation of Cord Blood
America, Inc. (31)
|
3.2(i)
|
|
Amended
and Restated Bylaws of Cord Blood America, Inc. (1)
|
3.2(ii) |
|
Second
Amended and Restated Bylaws of Cord Blood America, Inc.
(29)
|
10.0
|
|
Patent
License Agreement dated as of January 1, 2004 between PharmaStem
Therapeutics, Inc. and Cord Partners, Inc. (2)
|
10.1
|
|
Board
Compensation Plan (3)
|
10.2
|
|
Employment
Agreement between the Company and Joseph Vicente (22)
|
10.3
|
|
Lease
for Las Vegas Facility (9)
|
10.4
|
|
2011
Flexible Stock Option Plan (17)
|
18
10.5
|
|
Compensatory
Arrangement for Certain Officers Effective July 13, 2009, Stock
Options (8)
|
10.6
|
|
Compensatory
Arrangement for Certain Officers Effective December 31, 2009, Stock
Options (9)
|
10.8
|
|
Compensatory
Arrangement for Certain Officers Executed July 1, 2010, Stock
Options (11)
|
10.9
|
|
Reserved.
|
10.10
|
|
Employment
Agreement between the Company and Stephen Morgan (23)
|
10.11
|
|
On May
20, 2013 Cord Blood America, Inc. announced a new service offering.
(18)
|
10.12
|
|
Reserved.
|
10.14
|
|
On
September 29, 2014, the Company announced it had sold its ownership
interest in Biocordcell Argentina S.A. (BioCells) to a current
shareholder and President, Diego Rissola. (21)
|
10.15
|
|
On
December 17, 2014, the Company entered into a Settlement Agreement
with St. George Investments, LLC and Tonaquint (22)
|
10.16
|
|
Reserved.
|
10.17
|
|
On
April 9, 2015, the Company entered into an Amendment to the
Executive Employment Agreement with Joseph R. Vicente and Stephen
Morgan. (25)
|
10.18
|
|
Reserved.
|
10.19
|
|
On
April 17, 2015, the Company established compensation for
non-management Directors. (27)
|
10.20
|
|
Effective
May 22, 2015, the Board of Directors unanimously approved and
adopted the Second Amended and Restated By-Laws of the Company.
(29)
|
10.21
|
|
Reserved
|
10.22
|
|
On
August 6, 2015, the Company shareholders approved an amendment to
the Amended and Restated Articles of Incorporation
(31)
|
10.23
|
|
The
Company’s Audit Committee approved the change in the
Company’s auditors to RBSM LLP. The former
auditor, De Joya Griffith resigned. (32)
|
10.24
|
|
On
February 12, 2016, the Company and Stephen Morgan entered into a
Second Amendment to Executive Employment Agreement.
(33)
|
10.25
|
|
On
February 12, 2016, the Company and Joseph Vicente entered into a
Mutual Separation Agreement. (33)
|
10.26 |
|
Effective March 31, 2017, the Company and Stephen Morgan entered into a Third Amendment to Executive Employment Agreement (34) |
21
|
|
List of
Subsidiaries (4)
|
31.1
|
|
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)
|
32.1
|
|
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.
|
19
(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 23, 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 June 13,
2008
(5)
Filed as an exhibit to Current Report on Form 8-K filed on August
29, 2008
(6)
Filed as an exhibit to the Current Report on Form 8-K filed on
March 31, 2009
(7)
Reserved
(8)
Filed as an exhibit to Current Report on Form 8-K filed on January
7, 2010
(9)
Filed as an exhibit to Current Report on Form 10-K filed on March
31, 2010
(10)
Reserved
(11)
Filed as an exhibit to Current Report on Form 8-K filed on July 7,
2010
(12)
Filed as an exhibit to Current Report on Form 10Q filed on May 23,
2011
(13)
Reserved
(14) Reserved
(15)
Reserved
(16) Reserved
(17)
Filed as an exhibit to Current Report on Form 8K filed on September
27, 2012
(18)
Filed as an exhibit to Current Report on Form 8K filed on May 20,
2013.
(19)
Reserved
(20)
Reserved
(21)
Filed as an exhibit to Current Report on Form 8K filed on October
3, 2014
20
(22)
Filed as an exhibit to Current Report on Form 8K filed on December
23, 2014
(23)
Filed as an exhibit to Current Report on Form 10K filed on March
31, 2015
(24)
Filed as an exhibit to the Current Report on Form 8K filed on April
14, 2015
(25)
Filed as an exhibit to the Current Report on Form 8K filed on April
14, 2015
(26)
Reserved
(27)
Filed as an exhibit to the Current Report on Form 8K filed on April
22, 2015
(28)
Filed as an exhibit to the Current Report on Form 8K filed on May
13, 2015
(29)
Filed as an exhibit to the Current Report on Form 8K filed on May
29, 2015
(30)
Reserved
(31)
Filed as an exhibit to the Current Report on Form 8K filed on
August 10, 2015
(32)
Filed as an exhibit to the Current Report on Form 8K filed on
August 13, 2015
(33)
Filed as an exhibit to the Current Report on Form 8K file on
February 19, 2016
(34) Filed as an exhibit to the Current Report on Form 8K filed on
March 21, 2017
21
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 15th day of
May, 2017.
|
CORD BLOOD AMERICA, INC.
|
|
|
|
|
|
|
|
By:
|
/s/Stephen
Morgan
|
|
|
|
Interim
President, General Counsel and Corporate Secretary
|
|
|
|
(Principal
Executive Officer,
Principal Financial
and Accounting Officer)
|
|
|
|
|
|
22