Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☑
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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For the
quarterly period ended March
31, 2018
or
☐
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE
ACT
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for the
transition period from _________ to _________
CORD BLOOD AMERICA, INC.
(Exact
Name of Small Business Registrant as Specified in its
Charter)
FLORIDA
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000-50746
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90-0613888
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(State
or other jurisdiction of incorporation)
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(Commission
File Number)
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(I.R.S.
Employer Identification No.)
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1857 HELM DRIVE
LAS VEGAS, NV 89119
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89119
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(Address
of principal executive offices)
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(Zip
Code)
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(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, or a non-accelerated filer. See definition of
“accelerated filer and large accelerated filer” in
Rule 12b-2 of the Exchange Act:
Large
accelerated filer ☐
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Accelerated
filer ☐
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Non-accelerated
filer ☐
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Smaller
reporting company ☑
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(do not
check if smaller reporting company)
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Emerging growth
company ☐
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Indicate
by check mark whether the registrant is a shell company (as defined
by Rule 12b-2 of the Exchange Act.):
Yes ☐ No ☑
Indicate
by check mark whether the registrant is an emerging growth company
as defined in as defined in Rule 405 of the Securities Act of 1933
(§230.405 of this chapter) or Rule 12b-2 of the Securities
Exchange Act of 1934 (§240.12b-2 of this
chapter).
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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. ☐
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Number
of shares of Cord Blood America, Inc. common stock, $0.0001 par
value, outstanding as of May 14, 2018, 1,272,066,146 exclusive
of treasury shares.
CORD BLOOD AMERICA, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
PART I. FINANCIAL INFORMATION
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Item
1.
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Condensed
Consolidated Financial Statements (unaudited)
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3
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Condensed
Consolidated Balance Sheets March 31, 2018 (unaudited) and December
31, 2017
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3
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Condensed
Consolidated Statements of Income (unaudited) for the three
months ended March 31, 2018 and March 31, 2017
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4
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Condensed
Consolidated Statements of Cash Flows (unaudited) for the three
months ended March 31, 2018 and March 31, 2017
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5
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Notes
to Condensed Consolidated Financial Statements
(unaudited)
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6
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Item
2.
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Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
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17
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Item
3.
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Quantitative
and Qualitative Disclosures About Market Risk
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19
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Item
4T.
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Controls
and Procedures
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19
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PART II. OTHER INFORMATION
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Item
1.
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Legal
Proceedings
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20
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Item
1A.
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Risk
Factors
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20
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Item
2.
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Unregistered
Sales of Equity Securities and Use of Proceeds
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20
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Item
3.
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Defaults
Upon Senior Securities
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20
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Item
4.
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Mine
Safety Disclosures
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20
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Item
5.
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Other
Information
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20
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Item
6.
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Exhibits
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21
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Signatures
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22
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2
PART I. FINANCIAL INFORMATION
CORD BLOOD AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
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March
31,
2018
(unaudited)
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December
31,
2017 |
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Current
assets:
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Cash
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$1,195,710
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$1,069,917
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Accounts
receivable, net of allowance for doubtful accounts of $36,237 and
$26,429
respectively
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66,831
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61,698
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Receivable –
Biocells net of discount of $25,628 and $26,044, respectively
current portion
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29,372
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28,956
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Prepaid
expenses
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107,983
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146,478
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Assets held for
sale
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1,059,171
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1,130,032
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Total current
assets
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2,459,067
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2,437,081
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Property and
equipment, net of accumulated depreciation and amortization of
$277,711 and $276,369, respectively
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7,749
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9,092
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Other
Assets
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19,292
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19,292
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Receivable -
BioCells net of discount of $107,589 and $113,996, respectively -
long term portion
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397,411
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391,004
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Total
assets
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$2,883,519
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$2,856,469
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Liabilities and
Stockholders’ equity:
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Accounts
payable
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$358,308
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$371,169
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Accrued
expenses
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92,734
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93,233
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Severance
payable
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--
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26,764
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Liabilities
held for sale
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1,411,740
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1,381,215
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Total current
liabilities
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1,862,782
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1,872,381
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Total
liabilities
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1,862,782
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1,872,381
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Stockholders'
equity:
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Preferred stock,
$.0001 par value, 5,000,000 shares authorized, no shares
outstanding
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--
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--
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Common stock,
$.0001 par value, 2,890,000,000 shares authorized,
1,272,066,146 shares issued and outstanding, inclusive of treasury
shares, respectively
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127,207
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127,207
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Additional
paid-in capital
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53,954,510
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53,954,510
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Common
stock held in treasury stock, 20,000 shares
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(599,833)
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(599,833)
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Accumulated
deficit
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(52,461,147)
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(52,497,796)
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Total
stockholders’ equity
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1,020,737
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984,088
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Total liabilities
and stockholders' equity
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$2,883,519
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$2,856,469
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See accompanying
notes to these unaudited condensed consolidated financial
statements.
3
CORD BLOOD AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2018 AND MARCH 31,
2017
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Three-Month
Period
Ended
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Three-Month
Period
Ended
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March
31,
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March
31,
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2018
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2017
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Revenue
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$--
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$--
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Cost of
services
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--
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--
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Gross
profit
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--
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--
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Administrative and
selling expenses
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(428,923)
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(420,046)
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Loss from
operations
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(428,923)
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(420,046)
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Interest expense
and change in derivative liability
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--
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41,102
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Other
income
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6,823
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7,073
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Loss from
continuing operations before income taxes
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(422,100)
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(371,871)
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Income
taxes
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--
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--
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Net loss from
continuing operations
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(422,100)
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(373,871)
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Net income from
discontinuing operations
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458,749
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493,559
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Net
income
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36,649
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121,688
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Basic
earnings from continuing operations per share
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$0.00
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$0.00
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Diluted
earnings from continuing operations per share
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$0.00
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$0.00
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Basic
earnings from discontinued operations per share
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$0.00
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$0.00
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Diluted
earnings from discontinued operations per share
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$0.00
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$0.00
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Basic
earnings per share
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$0.00
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$0.00
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Diluted
earnings per share
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$0.00
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$0.00
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Weighted average common shares outstanding
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Basic weighted average common shares outstanding
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1,272,066,146
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1,272,066,146
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Diluted weighted average common shares outstanding
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1,272,066,146
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1,272,066,146
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See
accompanying notes to these unaudited condensed consolidated
financial statements.
4
CORD BLOOD AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AUDITED)
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Three-Month
Period
Ended
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Three-Month
Period
Ended
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March
31,
2018
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March
31,
2017
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CASH FLOWS FROM
OPERATING ACTIVITIES
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Net loss from
continuing operations
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$(422,100)
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$(371,871)
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Adjustments to
reconcile net income to net cash used in operating
activities:
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Amortization of
loan discount
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--
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36,386
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Amortization of
loan receivable discount
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(6,823)
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(7,073)
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Depreciation and
amortization
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1,343
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1,342
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Change in value of
derivative liability
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--
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(85,681)
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Bad
debt
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9,808
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38,254
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Net change in
operating assets and liabilities
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Changes
in accounts receivable
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(14,491)
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26,363
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Changes
in prepaid
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38,495
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51,001
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Changes
in accounts payable
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(12,861)
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(35,039)
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Changes
in accrued expenses
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(499)
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(1,556)
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Changes
in severance payable
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(26,764)
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(40,149)
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Changes
in accrued interest
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--
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8,192
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NET CASH USED
IN OPERATING ACTIVITIES OF CONTINUING OPERATIONS
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(434,342)
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(379,831)
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CASH FLOWS FROM
FINANCING ACTIVITIES
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Repayment
of convertible note payable
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--
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(300,000)
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NET CASH USED IN
FINANCING ACTIVITIES OF CONTINUING OPERATIONS
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--
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(300,000)
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Change in cash
– continuing operations
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(434,342)
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(679,831)
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CASH FLOWS FROM
DISCONTINUED OPERATIONS
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Net
Cash provided by operating activities
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560,135
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575,051
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Net
Cash provided by investing activities
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--
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--
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Net
Cash provided by financing activities
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--
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--
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NET CASH PROVIDED
BY DISCONTINUED OPERATIONS
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560,135
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575,051
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NET INCREASE
(DECREASE) IN CASH
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125,793
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(104,780)
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Cash balance at
beginning of year
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$1,069,917
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$926,209
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Cash balance at end
of year
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$1,195,710
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$821,429
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Non-Cash Investing
and Financing Activities
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Cash
paid for interest
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$--
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$--
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Cash
paid for tax
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$--
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$--
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The
accompanying notes are an integral part of these consolidated
financial statements.
5
CORD BLOOD AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2018
(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.
Company Developments – Sale of Assets
On February 7, 2018, the Company announced that it entered into an
Asset Purchase Agreement, dated as of February 6, 2018 (the
“Purchase Agreement”), with California Cryobank Stem
Cell Services LLC (“FamilyCord”).
Pursuant to the terms of the Purchase Agreement, FamilyCord agreed
to acquire from CBAI substantially all of the assets of CBAI and
its wholly-owned subsidiaries and to assume certain liabilities of
CBAI and its wholly-owned subsidiaries. The sale does not include
CBAI’s cash and certain other excluded assets and
liabilities. FamilyCord agreed to pay a purchase price of
$15,500,000 in cash at closing with $3,000,000 of the purchase
price deposited into escrow to secure CBAI’s indemnification
obligations under the Purchase Agreement. The sale, which is
subject to the closing conditions described below, is expected to
close as soon as practicable, but likely during the second quarter
of 2018.
The Purchase Agreement contains customary representations,
warranties and covenants for a transaction of this type and nature.
Pursuant to the terms of the Purchase Agreement, CBAI shall
indemnify FamilyCord for breaches of its representations and
warranties, breaches of covenants, losses related to excluded
assets or excluded liabilities and certain other matters. The
representations and warranties set forth in the Purchase Agreement
generally survive for two years following the closing.
In connection with the sale, the parties will also enter into a
transition services agreement designed to ensure a smooth
transition of CBAI’s business from CBAI to
FamilyCord.
The consummation of the sale is dependent upon the satisfaction or
waiver of a number of closing conditions, including among other
things, approval by CBAI’s shareholders, receipt of certain
third-party consents and FamilyCord obtaining external financing.
The Purchase Agreement may be terminated at any time prior to the
date of closing by mutual agreement of the parties, or by either
party under certain circumstances set forth in the Purchase
Agreement, including by either party if the closing has not
occurred within six months of the execution of the Purchase
Agreement, by FamilyCord for CBAI’s failure to obtain its
shareholders’ approval of the asset sale, by FamilyCord if
CBAI pursues an alternative superior transaction or by FamilyCord
if it is unable to obtain necessary financing. The Purchase
Agreement also sets forth termination fees that may be payable by
one party to the other under certain circumstances of
termination.
Upon completion of the transaction, CBAI presently estimates it
will distribute a portion of the sale proceeds to its shareholders.
The initial distribution amount will be determined by CBAI’s
board of directors and will be subject to such factors as taxes
payable, operating expenses and other contingencies and estimates.
Additional monies may be distributed over time based on cash
available and the release of known and unknown liabilities. Given
cash needed for the aforementioned expenses and contingencies,
total proceeds paid out to shareholders are expected to be
significantly less than the gross purchase price.
6
A copy of the Purchase Agreement was attached as Exhibit 2.1 to the
Form 8-K filed February 8, 2018.
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 ended March 31, 2018 are not necessarily indicative of the
results that may be expected for the year ending December 31, 2018
or for any other future period. The condensed
consolidated balance sheet at December 31, 2017 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, 2017 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.
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 $9,808
and $38,254 in bad debt expense during the three months ended March
31, 2018 and 2017, 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.
7
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 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.
Deferred Revenue (related to cord blood and cord tissue stem cell
storage business)
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, 2018 and December 31, 2017, the Company
adjusted its derivative liability to its fair value, and reflected
the change in fair value, in its condensed consolidated statements
of income (loss).
Revenue Recognition (related to cord blood and cord tissue stem
cell storage business)
CBAI
recognizes revenue under the provisions of ASC 606. See Note 10 for
the Company’s disclosures on Revenue
Recognition.
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.
8
Accounting for Stock Option Plan
Stock-based compensation is accounted for based on the requirements
of the Share-Based Payment Topic of ASC 718 which requires
recognition in the consolidated financial statements of the cost of
employee and director services received in exchange for an award of
equity instruments over the period the employee or director is
required to perform the services in exchange for the award
(presumptively, the vesting period). The ASC also requires
measurement of the cost of employee and director services received
in exchange for an award based on the grant-date fair value of the
award.
Pursuant to ASC Topic 505-50, for share-based payments to
consultants and other third-parties, compensation expense is
determined at the “measurement date.” The expense is
recognized over the vesting period of the award. Until the
measurement date is reached, the total amount of compensation
expense remains uncertain. The Company initially records
compensation expense based on the fair value of the award at the
reporting date.
Earnings 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.
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.
9
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.
Recently Adopted Accounting Pronouncements
In May 2014, the FASB issued Accounting Standards Update
(“ASU”) No. 2014-09, “Revenue from Contracts with
Customers (Topic 606),” (“ASU 2014-09”). ASU
2014-09 supersedes the revenue recognition requirements in ASC 605
- Revenue Recognition (“ASC 605”) and most
industry-specific guidance throughout ASC 605. The FASB has issued
numerous updates that provide clarification on a number of specific
issues as well as requiring additional disclosures. The core
principle of ASC 606 requires that an entity recognize revenue to
depict the transfer of promised goods or services to customers in
an amount that reflects the consideration to which the company
expects to be entitled in exchange for those goods or
services.
The Company adopted ASC 606 effective January 1, 2018 using the
full retrospective approach. The adoption of ASU 2014-09 did not
have a material impact on the Company’s consolidated
financial position, results of operations, equity or cash
flows.
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. There was no
impact as a result of adopting 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 was effective for the Company on January 1,
2018, There was no impact as a result
of adopting this ASU on the financial statements and related
disclosures..
In May
2017, the FASB issued ASU No. 2017-09, Compensation – Stock
Compensation (Topic 718): Scope of Modification Accounting. This
new standard provides guidance about which changes to the terms or
conditions of a share-based payment award require an entity to
apply modification accounting in Topic 718. This amendment was
effective for the Company on December 15, 2017. There was no impact as a result of adopting this
ASU on the financial statements and related
disclosures.
On December 22, 2017 the SEC staff issued Staff Accounting
Bulletin 118 (SAB 118), which provides guidance on
accounting for the tax effects of the Tax Cuts and Jobs Act (the
TCJA). SAB 118 provides a measurement period that should
not extend beyond one year from the enactment date for companies to
complete the accounting under ASC 740. In accordance with SAB
118, a company must reflect the income tax effects of those aspects
of the TCJA for which the accounting under ASC 740 is
complete. To the extent that a company’s accounting for
certain income tax effects of the TCJA is incomplete but for
which they are able to determine a reasonable estimate, it must
record a provisional amount in the financial
statements. Provisional treatment is proper in light of
anticipated additional guidance from various taxing authorities,
the SEC, the FASB, and even the Joint Committee on
Taxation. If a company cannot determine a provisional amount
to be included in the financial statements, it should continue to
apply ASC 740 on the basis of the provisions of the tax laws that
were in effect immediately before the enactment of the TCJA.
The Company has applied this guidance to its financial
statement
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 consolidated financial statements and related
disclosures.
10
Note 3. Assets Held for Sale -
Cord Blood and Cord Tissue Stem Cell Storage
Operations
Background
Pursuant to the terms of the Purchase Agreement dated as of
February 6, 2018, FamilyCord agreed to acquire from CBAI
substantially all of the assets of CBAI and its wholly-owned
subsidiaries and to assume certain liabilities of CBAI and its
wholly-owned subsidiaries. FamilyCord agreed to pay a purchase
price of $15,500,000 in cash at closing with $3,000,000 of the
purchase price deposited into escrow to secure CBAI’s
indemnification obligations under the Purchase Agreement. The sale,
which is subject to the closing conditions described below, is
expected to close as soon as practicable, but likely during the
second quarter of 2018. The sale does not include CBAI’s
cash, accounts receivables, and certain other excluded assets and
liabilities.
The consummation of the sale is dependent upon the satisfaction or
waiver of a number of closing conditions, including among other
things, approval by CBAI’s shareholders, receipt of certain
third-party consents and FamilyCord obtaining external financing.
The Purchase Agreement may be terminated at any time prior to the
date of closing by mutual agreement of the parties, or by either
party under certain circumstances set forth in the Purchase
Agreement, including by either party if the closing has not
occurred within six months of the execution of the Purchase
Agreement, by FamilyCord for CBAI’s failure to obtain its
shareholders’ approval of the asset sale, by FamilyCord if
CBAI pursues an alternative superior transaction or by FamilyCord
if it is unable to obtain necessary financing. The Purchase
Agreement also sets forth termination fees that may be payable by
one party to the other under certain circumstances of
termination.
The assets sold in the transaction are the sole revenue generating
assets of the Company. The results of operations associated with
the assets sold have been reclassified into discontinued operations
and the assets and liabilities are reflected as held-for-sale
(current and long-term) for all periods presented.
Assets and groups of assets and liabilities which comprise disposal
groups are classified as “held for sale” when all of
the following criteria are met: a decision has been made to sell,
the assets are available for sale immediately, the assets are being
actively marketed at a reasonable price in relation to the current
fair value, a sale has been or is expected to be concluded within
twelve months of the balance sheet date, and significant changes to
the plan to sell are not expected. Assets held for sale are not
depreciated.
11
Additionally, the operating results and cash flows related to these
assets and liabilities are included in discontinued operations in
the consolidated statements of operations and consolidated
statements of cash flows for the three months ended March 31, 2018
and March 31, 2017.
The following is summary of aggregate carrying amounts of the major
classes of assets and liabilities classified as held-for-sale as of
March 31, 2018 and December 31, 2017:
|
March
31,
2018
|
December
31,
2017
|
ASSETS
|
|
|
Inventory
|
$46,701
|
$45,762
|
Property and
equipment, net of accumulated depreciation
|
31,635
|
35,152
|
Customer contracts
and relationships, net of accumulated amortization
|
980,835
|
1,049,118
|
Total
assets
|
$1,059,171
|
$1,130,032
|
|
|
|
LIABILITIES
|
|
|
|
|
|
Deferred
revenue
|
$1,411,740
|
$1,381,215
|
Total
liabilities
|
$1,411,740
|
$1,381,215
|
Income From Discontinued Operations
The proposed sale of majority of the assets and liabilities related
to the cord blood and cord tissue stem cell operation represents a
strategic shift in the Company’s business. For this reason,
the results of operations related to the assets and liabilities
held for sale for all periods are classified as discontinued
operations.
The
following is a summary of the results of operations related to the
assets held for sale for the three months ended March 31, 2018 and
2017:
|
Three-Month
Period
Ended
|
Three-Month
Period
Ended
|
|
March 31,
2018
|
March 31,
2017
|
Revenue
|
$702,879
|
$745,948
|
Cost of
services
|
(172,328)
|
(170,934)
|
Gross
profit
|
530,551
|
575,014
|
Depreciation and
Amortization
|
(71,800)
|
(81,455)
|
Net income from
discontinued operations
|
$458,751
|
$493,559
|
The
following is a summary of net cash provided by operating activities
for the assets held for sale for the three months ended March 31,
2018 and March 31, 2017:
|
Three-Month
Period
Ended
|
Three-Month
Period
Ended
|
|
March 31,
2018
|
March 31,
2017
|
Cash provided by operating
activities
|
$560,135
|
$575,051
|
12
Note 4. Property and Equipment
At
March 31, 2018 and December 31, 2017, property and equipment
consist of:
|
Useful
Life
(Years)
|
March 31,
2018
|
December 31,
2017
|
Furniture and
fixtures
|
1-5
|
$17,597
|
$17,597
|
Computer
equipment
|
5
|
124,466
|
124,466
|
Laboratory
Equipment
|
1-5
|
5,837
|
5,837
|
Freezer
equipment
|
7-15
|
34,699
|
34,699
|
Leasehold
Improvements
|
5
|
102,862
|
102,862
|
|
|
285,461
|
285,461
|
Less: accumulated
depreciation and amortization
|
|
(277,712)
|
(276,369)
|
|
|
$7,749
|
$9,092
|
Assets
held for sale:
|
|
|
|
Furniture
and fixtures
|
1-5
|
$5,432
|
$5,432
|
Computer
equipment
|
5
|
93,339
|
93,339
|
Laboratory
Equipment
|
1-5
|
92,351
|
92,351
|
Freezer
equipment
|
7-15
|
329,526
|
329,526
|
|
|
520,648
|
520,648
|
Less: accumulated
depreciation and amortization
|
|
(489,013)
|
(485,496)
|
|
|
$31,635
|
$35,152
|
For the
three months ended March 31, 2018 and 2017, depreciation expense
totaled $1,342 and $1,342 respectively for continuing operations
and $3,517 and $4,893, respectively for discontinued
operations.
Note 5. Investment and Notes Receivable, Related
Parties
At
March 31, 2018 and December 31, 2017, notes receivable consist
of:
|
March
31,
2018
|
December
31,
2017
|
|
|
|
On September 29,
2014, the Company closed a transaction selling its stake in
BioCells to Diego Rissola; current President. Payments
are to be made annually, after June of 2015, and the last payment
due on or before June 1, 2025.
|
$560,000
|
$560,000
|
|
|
|
Unamortized
discount on BioCells note receivable
|
(133,217)
|
(140,040)
|
|
$426,783
|
$419,960
|
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 (amount paid in 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, 2018, the Purchaser has paid all amounts due for the June 1,
2017 payment, such that the Purchaser 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, 2018
and December 31, 2017, the receivable has a balance of $426,783 and
$419,960, respectively.
13
Note 7. Commitments and Contingencies
Joseph 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. In
the first quarter of 2018, the Company paid $13,382 in connection
with the severance, and the remaining amount payable as of March
31, 2018 is $0.
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.
14
Commitments
for future minimum rental payments, by year, and in the aggregate,
to be paid under such operating lease as of March 31, 2018, are as
follows:
|
Rent
|
|
to be
paid
|
2018
|
$143,541
|
2019
|
145,835
|
Total
|
$289,376
|
Note 8. 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 during the three
months ended March 31, 2018 and the year ended December 31,
2017.
The
Company’s stock option activity was as follows:
|
Stock
Options
|
Weighted
Average Exercise Price
|
Weighted Avg.
Contractual
Remaining
Life
|
|
|
|
|
Outstanding,
December 31, 2017
|
4,307,994
|
0.69
|
2.06
|
Granted
|
--
|
--
|
--
|
Exercised
|
--
|
--
|
--
|
Forfeited/Expired
|
--
|
--
|
--
|
Outstanding March
31, 2018
|
4,307,994
|
0.69
|
1.82
|
Exercisable March
31, 2018
|
4,307,994
|
0.69
|
1.82
|
The
following table summarizes significant ranges of outstanding stock
options under the stock option plan at March 31, 2018:
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
|
$0.53—
1.11
|
4,307,994
|
1.82
|
$0.69
|
4,307,994
|
$0.69
|
|
4,307,994
|
1.82
|
$0.69
|
4,307,994
|
$0.69
|
15
Note 9. Stockholder’s Equity
Preferred Stock
The
Company has 5,000,000 shares of $.0001 par value preferred stock
authorized. As of March 31, 2018, and December 31, 2017, 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, 2018, and December 31, 2017, the
Company had 1,272,066,146 shares of common stock issued and
outstanding. 20,000 shares remain in the Company’s
treasury.
Note 10. Revenue Recognition (related to cord blood and cord tissue
stem cell storage business)
The
Company recognizes revenue under ASC 606, Revenue from Contracts with Customers.
The core principle of the new revenue standard is that a company
should recognize revenue to depict the transfer of promised goods
or services to customers in an amount that reflects the
consideration to which the company expects to be entitled in
exchange for those goods or services. The following five steps are
applied to achieve that core principle:
●
Step 1: Identify
the contract with the customer
●
Step 2: Identify
the performance obligations in the contract
●
Step 3: Determine
the transaction price
●
Step 4: Allocate
the transaction price to the performance obligations in the
contract
●
Step 5: Recognize
revenue when the company satisfies a performance
obligation
Because
the Company’s agreements have an expected duration of one
year or less, the Company has elected the practical expedient in
ASC 606-10-50-14(a) to not disclose information about its remaining
performance obligations.
The
Company’s performance obligation to preserve cord blood
and/or cord tissue is satisfied when the cord blood and/or cord
tissue is cryogenically frozen, which is when the customer has
obtained control and is receiving the benefits of the
Company’s performance. The Company satisfies its performance
obligation to store cord blood and/or cord tissue over time using a
time-based input measure of progress that recognizes revenue on a
straight-line basis as the customer is receiving a service that is
provided continuously over time. The Company allocates the
transaction price to each performance obligation using an adjusted
market assessment approach. Customers pay upfront for processing
and storage fees that are billed annually for each year of
storage.
16
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS
As described under Note 1. Organization and Description of
Business - Company Developments – Sale of Assets, the Company has entered into an Asset Purchase
Agreement with FamilyCord relating to the sale of substantially all
of the assets of the Company.
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, 2018 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, 2017
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, 2017, 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, 2017.
Summary of the Business and Discontinued Operations
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.
●
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.
17
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,
2018
For the
three months ended March 31, 2018, total revenue from discontinued
operations decreased to approximately $0.70 million from $0.75
million, a 5.8% decrease over the same period of 2017. Revenues are generated
primarily from two sources: new enrollment/processing fees; and
recurring storage fees (both from cord blood and cord
tissue). The decrease in revenue is due a
decrease in new enrollment/processing fees offset by an increase in
recurring storage revenue. Recurring storage
revenues increased 2.1% to $0.65 million for the three months ended
March 31, 2018, versus $0.64 million for the prior comparative
period ended March 31, 2017.
Discontinued
operations cost of services as a percentage of revenue increased to
24.5% for the three months ended March 31, 2018 compared to 22.9%
in the same period of 2017. The cost of services includes
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 $0.04 million or 7.7% to approximately
$0.53 million for the three months ended March 31, 2018 from
the comparable three month period of 2017.
Administrative and selling expenses for the three months ended
March 31, 2018 were $0.43 million as compared to $0.42 million for
the comparative period of 2017, representing a 2.1% increase. These
expenses are primarily related to marketing/advertising,
professional services, allocated facility, including utilities,
expenses, and wages for personnel.
The
Company’s net loss from continuing operations was $0.42
million for the three month period ended March 31, 2018, as
compared to a net loss of $0.37 million for the comparative three
month period of 2017.
The Company’s net income from discontinued operations was
$0.46 million for the three months ended March 31, 2018, a decrease
of $0.03 million from net income from discontinued operations of
$0.49 million for the comparative three month period in
2017.
Liquidity and Capital Resources
Total
assets at March 31, 2018 were $2.88 million, compared to $2.86
million at December 31, 2017. Total liabilities at March 31,
2018 were $1.86 million consisting primarily of
liabilities held for sale of $1.41 million. At December 31, 2017,
total liabilities were $1.87 million consisting primarily of
liabilities held for sale of $1.38 million.
At
March 31, 2018, the Company had $1.20 million in cash, an increase
of $0.13 million from the December 31, 2017 cash balance of $1.07
million. For the three months ended
March 31, 2018, cash flow used in operating activities of
continuing operations totaled $0.43 million compared to $0.38
million for the three months ended March 31, 2017. For the three
months ended March 31, 2018, cash flow generated from discontinued
operations totaled $0.56 million compared to $0.58 million for the
three months ended March 31, 2017.
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. 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 relied on debt to provide
capital for working capital needs. The Company had and has net
income and positive cash flow, primarily from the discontinued
operations, for the years ended December 31, 2016 and December 31,
2017. If the transaction to sell substantially all of the
Company’s assets to FamilyCord closes, the Company will have
sufficient cash on hand to meet the Company’s obligations
over the next 12 months. In the event the transaction does not
close, we anticipate that we will be able to satisfy the cash
requirements associated with, among other things, our working
capital needs, capital expenditures and lease commitments through
at least the next 12 months primarily with cash generated by
operations and existing cash balances.
18
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, 2018. 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.
19
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, 2017. There were no material changes to
those risk factors for the three months ended March 31,
2018.
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, 2018.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
NONE
ITEM 4. MINE SAFETY DISCLOSURES.
Not
applicable.
ITEM 5. OTHER INFORMATION
NONE
20
ITEM 6. EXHIBITS
The
following documents are included as exhibits to this Form
10Q:
EXHIBIT
|
|
DESCRIPTION
|
|
Form of
Common Stock Share Certificate of Cord Blood America, Inc.
(1)
|
|
|
Amended
and Restated Articles of Incorporation of Cord Blood America, Inc.
(1)
|
|
|
Articles of Amendment to Articles of Incorporation
(2)
|
|
|
|
Articles
of Amendment to the Articles of Incorporation of Cord Blood
America, Inc. (3)
|
|
Articles
of Amendment to the Articles of Incorporation of Cord Blood
America, Inc. (4)
|
|
|
Articles
of Amendment to the Articles of Incorporation of Cord Blood
America, Inc. (4)
|
|
3.1(vi)
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|
Articles
of Amendment to the Articles of Incorporation of Cord Blood
America, Inc. (5)
|
|
Articles
of Amendment to the Articles of Incorporation of Cord Blood
America, Inc. (6)
|
|
|
Amended
and Restated Bylaws of Cord Blood America, Inc. (1)
|
|
|
|
Second
Amended and Restated Bylaws of Cord Blood America, Inc.
(7)
|
|
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)
|
|
|
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.
|
(1)
Filed as an exhibit to Registration Statement on Form 10-SB filed
on May 6, 2004
(2)
Filed as an exhibit to Current Report on Form 8-K filed on August
29, 2008
(3)
Filed as an exhibit to the Current Report on Form 8-K filed on
March 31, 2009
(4)
Filed as an exhibit to Current Report on Form 10Q filed on May 23,
2011
(5)
Filed as an exhibit to Current Report on Form S-8 filed on June 3,
2011
(6)
Filed as an exhibit to the Current Report on Form 8-K filed on
August 10, 2015
(7)
Filed as an exhibit to the Current Report on Form 8-K filed on May
29, 2015
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 14th day of May
2018.
|
CORD BLOOD AMERICA, INC.
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|
|
|
|
|
|
|
By:
|
/s/Anthony
Snow
|
|
|
|
Interim
President and Corporate Secretary
|
|
|
|
(Principal
Executive Officer,
Principal Financial
and Accounting Officer)
|
|
|
|
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22