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, 2020
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 _________
CBA FLORIDA, 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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3753 HOWARD HUGHES PARKWAY
SUITE 200
LAS VEGAS, NV
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89169
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(Address
of principal executive offices)
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(Zip
Code)
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(702) 914-7293
(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
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, a
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.
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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Emerging
growth company ☐
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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 CBA Florida, Inc. common stock, $0.0001 par value,
outstanding as of May 14, 2020, 1,272,066,146 exclusive of
treasury shares.
CBA FLORIDA, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
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Condensed
Consolidated Financial Statements (unaudited)
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3
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Condensed
Consolidated Balance Sheets March 31, 2020 (unaudited) and December
31, 2019
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3
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Condensed
Consolidated Statements of Income (Loss) (unaudited) for the
three months ended March 31, 2020 and March 31,
2019
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4
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Condensed Consolidated Statements of Stockholders’
Equity (unaudited) for the three months ended March 31, 2020 and
March 31, 2019
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5
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Condensed
Consolidated Statements of Cash Flows (unaudited) for the three
months ended March 31, 2020 and March 31, 2019
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6
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Notes
to Condensed Consolidated Financial Statements
(unaudited)
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7
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Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
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13
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Quantitative
and Qualitative Disclosures About Market Risk
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14
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Controls
and Procedures
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14
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Legal
Proceedings
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15
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Risk
Factors
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15
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Unregistered
Sales of Equity Securities and Use of Proceeds
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15
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Defaults
Upon Senior Securities
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15
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Mine
Safety Disclosures
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15
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Other
Information
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15
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Exhibits
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15
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Signatures
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17
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PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
CBA FLORIDA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
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March
31,
2020
(unaudited)
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December
31,
2019
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Current
assets:
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Cash
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$11,464,834
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$11,532,312
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Accounts
receivable, net of allowance for doubtful accounts of $0.00 and
$0.00, respectively
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26,346
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33,843
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Prepaid
expenses
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77,158
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96,119
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Total current
assets
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11,568,338
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11,662,274
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Cash held in
escrow
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3,008,335
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3,007,254
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Other
Assets
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1,404
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1,404
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Income tax
receivable
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117,306
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105,355
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Total
assets
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$14,695,383
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$14,776,287
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Liabilities and
Stockholders’ equity:
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Accounts
payable
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$79,063
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$37,268
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Sales
tax payable & other
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116,000
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116,000
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Deferred tax
liability
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486,667
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486,667
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Accrued
expenses
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15,657
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15,675
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Total current
liabilities
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697,387
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655,610
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Total
liabilities
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697,387
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655,610
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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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(39,483,888)
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(39,361,207)
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Total
stockholders’ equity
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13,997,996
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14,120,677
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Total liabilities
and stockholders' equity
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$14,695,383
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$14,776,287
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See accompanying
notes to these unaudited condensed consolidated financial
statements.
3
CBA FLORIDA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF INCOME (LOSS) (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND MARCH 31,
2019
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Three-Month
Period
Ended
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Three-Month
Period
Ended
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March 31,
2020
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March 31,
2019
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Operating
expenses
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(184,864)
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(103,431)
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Loss from
operations
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(184,864)
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(103,431)
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Other
income
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29,572
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48,092
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Loss from
continuing operations before income taxes
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(155,292)
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(55,339)
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Income tax
benefit
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32,611
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12,888
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Net loss from
continuing operations
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(122,681)
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(42,451)
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Net income
(loss)
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(122,681)
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(42,451)
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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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$(0.00)
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Weighted
average common shares outstanding
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Basic weighted average common shares outstanding
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1,272,066,146
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1,272,066,146
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Diluted weighted average common shares outstanding
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1,272,066,146
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1,272,066,146
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See
accompanying notes to these unaudited condensed consolidated
financial statements.
4
CBA FLORIDA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS
OF STOCKHOLDERS’ EQUITY
(UNAUDITED)
Three-Month period Ended March 31, 2020
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Preferred stock
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Common stock
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Additional
paid-incapital
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Accumulated deficit
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Treasury stock
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Total
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Shares
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Amount
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Shares
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Amount
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Balances at
December 31, 2019
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--
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$--
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1,272,066,146
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127,207
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53,954,510
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(39,361,207)
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(599,833)
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14,120,677
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--
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--
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--
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--
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(122,681)
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--
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(122,681)
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Balances at
March 31, 2020
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--
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$--
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1,272,066,146
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127,207
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53,954,510
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(39,483,888)
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(599,833)
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13,997,996
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Three-Month period Ended March 31, 2019
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Preferred
stock
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Common
stock
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Additional
paid- in
capital
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Accumulated
deficit
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Treasury
stock
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Total
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Shares
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Amount
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Shares
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Amount
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Balances at
December 31, 2018
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--
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$--
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1,272,066,146
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127,207
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53,954,510
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(39,324,358)
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(599,833)
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14,157,526
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Net
Loss
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--
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--
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--
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--
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(42,451)
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--
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(42,451)
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Balances at
March 31, 2019
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--
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$--
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1,272,066,146
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127,207
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53,954,510
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(39,366,809)
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(599,833)
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14,115,075
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See accompanying
notes to these unaudited condensed consolidated financial
statements
5
CBA FLORIDA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(UNAUDITED)
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Three-Month
Period
Ended
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Three-Month
Period
Ended
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March 31,
2020
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March 31,
2019
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CASH FLOWS FROM
OPERATING ACTIVITIES
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Net loss from
continuing operations
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$(122,681)
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$(42,451)
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Net change in
operating assets and liabilities
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Changes
in accounts receivable
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7,497
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3,065
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Changes
in prepaid
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18,961
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5,615
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Change
in escrow receivable
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(1,081)
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(2,220)
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Changes
in accounts payable
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41,795
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(101,489)
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Changes
in accrued expenses
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(18)
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(16,070)
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Changes
in deferred income taxes
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(11,951)
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(365,888)
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NET CASH USED
IN OPERATING ACTIVITIES OF CONTINUING OPERATIONS
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(67,478)
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(519,438)
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NET INCREASE IN
CASH
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(67,478)
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(519,438)
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Cash balance at
beginning of period
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$11,532,312
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$12,412,583
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Cash balance at end
of period
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$11,464,834
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$11,893,145
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Cash Paid
For
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Interest
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$--
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$--
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Taxes
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$--
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$(353,000)
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See
accompanying notes to these unaudited condensed consolidated
financial statements.
6
Note 1. Organization and
Description of Business
Overview
CBA Florida, Inc. ("CBAI" or the “Company”), formerly
known as Cord Blood America, Inc., was incorporated in the State of
Florida on October 12, 1999 as D&A Lending, Inc. CBAI's
wholly-owned subsidiaries include CBA Partners, Inc. which was formerly Cord
Partners, Inc., CBA Companies Inc. which was formerly CorCell
Companies, Inc., and CBA Sub Ltd. which was formerly CorCell, Ltd.,
(CBA Partners, Inc., CBA Companies Inc. and CBA Sub Ltd. are
sometimes referred to herein collectively as “Cord”),
CBA Properties, Inc. ("Properties"), and Career Channel, Inc.
formerly D/B/A Rainmakers International. As further
described below, on May 17, 2018, CBAI completed a sale of
substantially all of the assets of the Company and its wholly-owned
subsidiaries. Prior to the sale of substantially all of the assets,
CBAI and its subsidiaries had engaged in the following business
activities:
●
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CBAI and Cord specialized in providing private cord blood and cord
tissue stem cell services. Additionally, the Company was in the
business of procuring birth tissue for organizations utilizing the
tissue in the transplantation and/or research of therapeutic
products.
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●
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Properties was formed to hold corporate trademarks and other
intellectual property.
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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”). The sale of
substantially all of the Company’s assets pursuant to the
Purchase Agreement was completed on May 17, 2018.
Pursuant to the terms of the Purchase Agreement, FamilyCord
acquired from CBAI substantially all of the assets of CBAI and its
wholly-owned subsidiaries and assumed certain liabilities of CBAI
and its wholly-owned subsidiaries. The sale did 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 Purchase Agreement contained customary representations,
warranties and covenants for a transaction of this type and nature.
Pursuant to the terms of the Purchase Agreement, CBAI indemnified
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.
CBAI previously disclosed that it anticipates distributing proceeds
from the FamilyCord sale to shareholders. On February 11,
2020, the Company’s Board of Directors approved a plan of
dissolution (the “Plan”) that is subject to shareholder
approval. If the Company’s
shareholders approve the Plan, the Company presently intends to
make an initial distribution of at least $0.0048 per share of
common stock as promptly as reasonably possible thereafter.
Based on
the information currently available to it, the Company is unable to
estimate the aggregate amount which will ultimately be distributed
to its shareholders. The actual amounts of any distributions may
vary substantially, depending on, among other things, whether the
Company becomes subject to any additional liabilities or claims,
including potential claims for indemnification relating to sales of
the Company’s assets, whether the Company incurs unexpected
or greater than expected losses with respect to contingent
liabilities, the extent to which the Company is able to monetize
any remaining non-cash assets and any future amounts received by
the Company in connection with, among other things, all future
amounts received by the Company, including the amount of FamilyCord
sale proceeds to be released from escrow upon the termination of
the escrow in May 2020. CBAI and its Board of Directors continue to
contemplate a distribution, given the Company’s expenses and
other contingencies the total proceeds ultimately paid out to
shareholders will be significantly less than the gross purchase
price the Company received from its Purchase Agreement with
FamilyCord.
BioCells Acquisition and Subsequent Sale
In
September 2010, the Company entered into a Stock Purchase Agreement
(the “Agreement”), with the Shareholders of Biocordcell
Argentina S.A., a corporation organized under the laws of Argentina
(“BioCells”), providing for the Company’s
acquisition of 50.004% of the outstanding shares of BioCells (the
“Shares).
On
September 29, 2014, the Company closed a transaction whereby it
sold its ownership stake in BioCells, amounting to 50.004% of the
outstanding shares of BioCells to Diego Rissola (Purchaser), who is
the current President and Chairman of the Board of BioCells and a
shareholder prior to the transaction.
7
Under
the Agreement, the Purchaser was obligated to pay the total amount
of $705,000, as follows:
$5,000
on or before October 12, 2014; $10,000 on or before December 1,
2014; $15,000 on or before March 1, 2015; $15,000 on or before June
1, 2015; $45,000 on or before June 1, 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.
On
October 31, 2018, the Company entered into a settlement agreement
with the Purchaser whereby the Purchaser agreed to make a one-time
payment of $294,988 to the Company to settle all remaining payments
and obligations due under the Agreement. The Company received the
settlement payment on November 6, 2019, and wrote off the remaining
unpaid receivable of $89,597 remaining under the terms of the
Agreement.
Sale of China Stem Cell Stock and Convertible Debt
The Company entered into an Asset Purchase Agreement, dated June
19, 2019, with Golden Sun Multi-Manager Fund LP (“Golden
Sun”), whereby the Company sold all shares and convertible
debt it held in China Stem Cells Ltd. (“China Stem
Cells”) to Golden Sun. The total proceeds from the sale was
$50,000. The Company previously wrote-off the entire value of the
China Stem Cells shares and convertible debt held by the Company,
and accrued a gain for the full value of sale proceeds received on
its statement of operations for the nine months ended September 30,
2019.
Unaudited Interim Financial Information
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, 2020 are not necessarily indicative of
the results that may be expected for the year ending December
31,2020 or for any other future period. The condensed
consolidated balance sheet at December 31, 2019 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, 2019 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
Financial Statement Presentation
The
preparation of the financial statements in conformity with U.S.
generally accepted accounting principles (U.S. GAAP) requires
management to make estimates and assumptions that affect reported
amounts and related disclosures. Actual results could differ from
these estimates. Certain prior year amounts have been reclassified
to conform to current year presentation.
Pursuant
to guidance in accounting standard codification (“ASC”)
205-20, Presentation of Financial Statements, and ASC 360-10-45-9
to 14, Property, Plant and Equipment, regarding when the results of
operations of a component of an entity that is classified as held
for sale would be reported as a discontinued operation in the
financial statements of the entity. The Company determined that it
met the threshold for reporting discontinued operations due to a
strategic business shift having a major effect on an entity's
operations and financial results.
On February 7, 2018, the Company announced that it entered into the
Purchase Agreement with FamilyCord. The sale of substantially all
of the Company’s assets occurred on May 17, 2018. For
this reason, the results of operations for the cord blood and cord
tissue stem cell operations have been reclassified into
discontinued operations.
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.
8
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. The value of cash and cash equivalents held by the
Company at a bank in excess of federally insured limits
was $11,214,834 during the
period ended March 31, 2020.
Accounts Receivable
Accounts
receivable consists primarily of unpaid lease obligations payable
to the Company by the Sublessee (see Note 5 for additional
information). Accounts receivable also includes expenses incurred
by the Company which are to be reimbursed in connection from the
sale of substantially all its assets to FamilyCord, and amounts due
for facilitating the processing and storage of umbilical cord blood
and cord tissue, and birth tissue procurement services. The
Company wrote off $0 and $0 in
bad debt expense during the three months ended March 31, 2020 and
2019, 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.
Income Taxes
The
Company follows the asset and liability method of accounting for
income taxes. Deferred tax assets and liabilities are recognized
for the estimated future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized as income in the period that
included the enactment date. The measurement of deferred tax assets
is reduced, if necessary, by a valuation allowance based on the
portion of tax benefits that more likely than not will not be
realized.
The
Company follows guidance issued by the FASB with regard to its
accounting for uncertainty in income taxes recognized in the
financial statements. Such guidance prescribes a recognition
threshold of more likely than not and a measurement process for
financial statement recognition and measurement of a tax position
taken or expected to be taken in a tax return. In making this
assessment, a company must determine whether it is more likely than
not that a tax position will be sustained upon examination, based
solely on the technical merits of the position and must assume that
the tax position will be examined by taxing authorities. Our policy
is to include interest and penalties related to unrecognized tax
benefits in income tax expense. Interest and penalties totaled $0 and $353,000 for the
three months ended March 31, 2020 and 2019, respectively. The
Company files income tax returns with the Internal Revenue Service
(“IRS”) and various state jurisdictions.
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. The
Company’s common equivalent shares are excluded from the
computation of diluted EPS if the effect is anti-dilutive.
The
diluted weighted average common shares outstanding are
1,272,066,146 and 1,272,066,146 as of March 31, 2020
and 2019, respectively.
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.
9
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, and as of
March 31, 2020, this was the case. To date, the Company has not
experienced any such losses.
Fair Value Measurements
Assets
and liabilities recorded at fair value in the 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.
|
There
were no financial instruments measured on a recurring basis as of
March 31, 2020 and 2019 and on a non-recurring basis for any of the
periods presented.
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 Issued Accounting Pronouncements
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 has been no
impact as a result of adopting this ASU on our financial statements
and related disclosures.
In August 2018, the FASB issued ASU No. 2018-13, Fair Value
Measurement (Topic 820): Disclosure Framework—Changes to the
Disclosure Requirements for Fair Value Measurement. This new
standard removes, adds and modifies certain disclosure
requirements for fair value measurements in Topic
820. The Company will no longer be required to disclose the
amount of and reasons for transfers between Level 1 and Level 2 of
the fair value hierarchy, and the valuation processes of Level 3
fair value measurements. However, the Company will be required to
additionally disclose the changes in unrealized gains and losses
included in other comprehensive income for recurring Level 3 fair
value measurements, and the range and weighted average of
assumptions used to develop significant unobservable inputs for
Level 3 fair value measurements. The ASU is effective for
fiscal years, and interim periods within those fiscal years,
beginning after December 15, 2019. The amendments relating to
additional disclosure requirements will be applied prospectively
for only the most recent interim or annual period presented in the
initial year of adoption. All other amendments will be applied
retrospectively to all periods presented upon their effective date.
The Company is permitted to early adopt either the entire ASU
or only the provisions that eliminate or modify the
requirements. The Company evaluated the impact of this
pronouncement and concluded that the guidance does not have a
material impact on its financial position and results of
operations.
In December 2019, the FASB issued ASU No. 2019-12,
Simplifying the
Accounting for Income Taxes,
which is intended to simplify the accounting standard and improve
the usefulness of information provided in the financial statements.
The Company intends to implement this new accounting guidance
effective January 1, 2021, however early adoption is permitted. The
Company is currently assessing the impact this new accounting
guidance will have on its financial statements.
Note 3. Commitments and Contingencies
Operating Leases
On
October 1, 2019, the Company moved to a new corporate headquarters
located at 3753 Howard Hughes Parkway, Suite 200, Office #258, Las
Vegas, Nevada. The new month-to-month lease for the Company’s
headquarters was entered into on August 21, 2019 and commenced on
October 1, 2019. The Company believes that it has adequate space
for its anticipated needs.
The
Company’s rent expense was
$1,884 and $296 during the three months ended March 31, 2020
and 2019, respectively.
10
Note 4. 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. On
July 13, 2009, the Company also registered its 2009 Flexible Stock
Plan (the “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.
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 such plan. The Company also 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, 2020 and the year ended December 31,
2019.
The
Company’s stock option activity was as follows:
|
Stock
Options
|
Weighted Average
Exercise Price
|
Weighted Avg.
Contractual
Remaining
Life
|
|
|
|
|
Outstanding,
December 31, 2019
|
664,060
|
0.53
|
0.40
|
Granted
|
--
|
--
|
--
|
Exercised
|
--
|
--
|
--
|
Forfeited/Expired
|
200,000
|
--
|
--
|
Outstanding March
31, 2020
|
464,060
|
0.53
|
0.25
|
Exercisable March
31, 2020
|
464,060
|
0.53
|
0.25
|
The
following table summarizes significant ranges of outstanding stock
options under the stock option plan at March 31, 2020:
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
|
464,060
|
0.25
|
$0.53
|
464,060
|
$0.53
|
$0.53
|
464,060
|
0.25
|
$0.53
|
464,060
|
$0.53
|
Note 5. Income Tax
The
Company provides for income taxes using the asset and liability
approach. Deferred tax assets and liabilities are recorded based on
the differences between the financial statement and tax bases of
assets and liabilities and the tax rates in effect when these
differences are expected to reverse. Deferred tax assets are
reduced by a valuation allowance if, based on the weight of
available evidence, it is more likely than not that some or all of
the deferred tax assets will not be realized. For the first quarter
of 2020 the Company expects to utilize net operating losses
generated in the current year to offset future deferred tax
liabilities derived from the sale of assets in 2018.
The
company expects its overall effective tax rate for 2020 to be
around 20.89%.
As of
March 31, 2020 and December 31, 2019, the Company has a partial
valuation allowance on net operating losses that may not be able to
be utilized fully.
For the
three months ended March 31, 2020 the Company recorded a
tax benefit of $32,611 as compared to
a tax benefit of $12,888 for the comparative three month period
ended March 31, 2019.
Note 6. Other
Certain U.S. Federal Income Tax Consequences of the Sale of
Assets
The sale of assets to FamilyCord was a transaction taxable to the
Company for United States federal income tax purposes. In general,
the Company will recognize taxable gain in an amount equal to the
difference, if any, between (i) the total amount realized by the
Company on the sale and (ii) the Company’s aggregate adjusted
tax basis in the assets sold. The total amount realized by the
Company on the sale will equal the cash the Company receives in
exchange for the assets sold, plus the amount of related
liabilities assumed by the Buyer or cancelled in the transaction.
The Company expects that a portion of the taxable gain recognized
on the sale will be offset by current year losses from operations
and available net operating loss carry forwards, as currently
reflected on our consolidated U.S. federal income tax returns.
However, the Company believes that a significant portion of its net
operating loss carryforwards will never be fully utilized and will
expire unused.
11
Our shareholders will not be subject to U.S. federal income tax on
the sale. However, as discussed below, our shareholders will be
subject to U.S. federal income tax upon the receipt of any
distribution of sale proceeds made by the Company to our
shareholders.
Certain U.S. Federal Income Tax Consequences of the Sale of Assets
to U.S. Shareholders
For purposes of this discussion, a “U.S. shareholder”
is a beneficial owner of shares of Company stock who or that is,
for U.S. federal income tax purposes:
●
an
individual who is a citizen or resident of the United
States;
●
corporation,
or any other entity taxable as a corporation, created or organized
in or under the laws of the United States, any state thereof or the
District of Columbia;
●
an
estate, the income of which is subject to U.S. federal income
taxation regardless of its source; or
●
any
trust (i) if a court within the United States is able to exercise
primary supervision over the administration of the trust and one or
more United States persons (as defined in the United States
Internal Revenue Code of 1986) have the authority to control all
substantial decisions of the trust, or (ii) if a valid election is
in place to treat the person as a United States
person.
Pursuant to the Purchase Agreement, the Company may not dissolve or
liquidate for at least two years following closing of the
transaction. Therefore, prior to the Company’s adoption of a
plan of liquidation, each distribution made by the Company to a
U.S. shareholder is characterized as a dividend to the extent of
the Company’s current and accumulated earnings and profits
(as determined under U.S. federal income tax principles). Provided
that certain holding period requirements are satisfied, a dividend
received by a U.S. shareholder who is an individual, trust or
estate may qualify as “qualified dividend income” that
is currently subject to U.S. federal income tax at a maximum rate
of 20%. Dividends received by corporate U.S. shareholders may be
eligible for a dividend received deduction (subject to applicable
exceptions and limitations). Any portion of a distribution that
exceeds the Company’s current and accumulated earnings and
profits is treated as a non-taxable return of capital, reducing
such U.S. shareholder’s adjusted tax basis in its shares of
Company stock and, thereafter as gain from the sale or exchange of
Company stock.
On
February 11, 2020, the Company’s Board of Directors approved
a plan of dissolution (the “Plan”) that is subject to
shareholder approval. If the
Company’s shareholders approve the Plan, the Company
presently intends to make an initial distribution of at least
$0.0048 per share of common stock as promptly as reasonably
possible thereafter. Based on the information currently available
to it, the Company is unable to estimate the aggregate amount which
will ultimately be distributed to its
shareholders.
Note 7. Tax Estimates and Tax Expense
For
the three months ended March 31, 2020,
the Company realized an income tax benefit from continuing
operations of $32,611 as a consequence of the utilization of
federal and state net operating loss offsets.
Note 8. Stockholder’s Equity
Preferred Stock
The Company has 5,000,000 shares of $0.0001 par value preferred
stock authorized, which includes 1,500,000 shares of Series A
Preferred Stock. As of March 31, 2020, and December 31,
2019, 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, 2020, and December 31, 2019, the
Company had 1,272,066,146 shares of common stock issued and
outstanding. 20,000 shares remain in the Company’s
treasury.
Note: 9. Subsequent Events
Management is aware that a novel strain of coronavirus (COVID-19)
was declared a pandemic by the World Health Organization. After the
sale of substantially all assets to FamilyCord, the Company ceased
all ongoing operations related the cord blood and cord tissue stem
cell services, and procurement of birth tissue for organizations
utilizing the tissue in the transplantation and/or research of
therapeutic products. The Company holds a large majority of its
assets in cash and as such, believes there is minimal to no impact
that could result from the COVID-19 pandemic.
12
ITEM 2. MANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
As described under Note 1. Organization and Description of
Business - Company Developments – Sale of Assets, on February
7, 2018, the Company announced that it entered into the Purchase
Agreement with FamilyCord. The completion of the sale of
substantially all of the Company’s assets occurred on May 17,
2018.
Pursuant to the terms of the Purchase Agreement, FamilyCord
acquired from CBAI substantially all of the assets of CBAI and its
wholly-owned subsidiaries and assumed certain liabilities of CBAI
and its wholly-owned subsidiaries. The sale did 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.
Prior
to the sale of substantially all of the Company’s assets, the
Company and its subsidiaries engaged in the following business
activities:
●
|
CBAI and Cord specialized in providing private cord blood and cord
tissue stem cell services. Additionally, the Company was in the
business of procuring birth tissue for organizations utilizing the
tissue in the transplantation and/or research of therapeutic
products.
|
●
|
Properties was formed to hold corporate trademarks and other
intellectual property.
|
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, 2020 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, 2019
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, 2019, 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, 2019.
Results of Operations for the Three-Months Ended March 31,
2020
The Company did not generate any revenue during the three months
ended March 31, 2020 and 2019, due to the sale of substantially its
assets to FamilyCord. Administrative and selling expenses for the
three months ended March 31, 2020 were $0.18 million as compared to
$0.10 million for the comparative period of March 2019,
representing an 78.7% increase. These expenses are primarily
related to professional services, allocated facility, including
utilities, expenses, and wages for personnel.
The Company’s net loss from continuing operations was $0.16
million for the three month period ended March 31, 2020, as
compared to a net loss of $0.06 million for the comparative three
month period of March 2019.
Liquidity and Capital Resources
Total assets at March 31, 2020 were $14.70 million, compared to
$14.78 million at December 31, 2019. Total liabilities at March 31, 2020 were $0.70
million consisting primarily of sales tax payable, accounts
payable, and deferred taxes liability. At December 31, 2019, total
liabilities were $0.66 consisting primarily of sales tax payable
and deferred taxes liability.
At March 31, 2020, the Company had $11.46 million in cash, a
decrease of $0.07 million from the December 31, 2019 cash balance
of $11.53 million. For the three months ended March 31, 2020, cash
flow used in operating activities of continuing operations totaled
$0.07 million compared to $0.52 million for the three months ended
March 31, 2019. At March 31, 2020, the Company had $3.01
million deposited in escrow to secure CBAI’s indemnification
obligations under the Purchase Agreement, compared to $3.01 at
December 31, 2019.
13
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 believes it has
sufficient cash on hand from the sale of substantially all its
assets to meet the Company’s obligations over the next 12
months.
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 Exchange Act. The Company’s management has
reviewed and evaluated the effectiveness of its disclosure controls
and procedures as of March 31, 2020. 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, 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.
As the Company has effectively discontinued operations, it believes
the risk of the foregoing deficiency to be significantly reduced as
the Company’s accounting needs have become much more
limited.
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.
14
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, 2019. There were no material changes to
those risk factors for the three months ended March 31,
2020.
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, 2020.
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 (2)
|
|
|
|
3.1(iii)
|
|
Articles
of Amendment to the Articles of Incorporation of Cord Blood
America, Inc. (3)
|
|
|
|
3.1(iv)
|
|
Articles of Amendment to the Articles of Incorporation of Cord
Blood America, Inc. (4)
|
|
|
|
3.1(v)
|
|
Articles of Amendment to the Articles of Incorporation of Cord
Blood America, Inc. (4)
|
|
|
|
3.1(vi)
|
|
Articles of Amendment to the Articles of Incorporation of Cord
Blood America, Inc. (5)
|
|
|
|
3.1 (vii)
|
|
Articles
of Amendment to the Articles of Incorporation of Cord Blood
America, Inc. (6)
|
|
|
|
3.1 (viii)
|
|
Articles of
Amendment to the Articles of Incorporation of Cord Blood America,
Inc. (7)
|
|
|
|
15
3.1 (ix)
|
Articles of Amendment to the Articles of Incorporation of Cord
Blood America, Inc. (8)
|
|
3.1 (x)
|
|
Articles of Amendment to the Articles of Incorporation of CBA
Florida, Inc. (9)
|
|
|
|
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.
(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
April 26, 2018
(8)
Filed as an exhibit to the Current Report on Form 8-K filed on May
25, 2018
(9)
Filed as an exhibit to the Current Report on Form 8-K filed on May
31, 2018
(7)
Filed as an exhibit to the Current Report on Form 8-K filed on May
29, 2015
16
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
2020.
|
CBA FLORIDA, INC.
|
|
|
|
|
|
|
|
By:
|
/s/Anthony
Snow
|
|
|
|
President
and Corporate Secretary
|
|
|
|
(Principal
Executive Officer,
Principal Financial
and Accounting Officer)
|
|
|
|
|
|
17