UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2014
or
| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT |
for the transition period from _________ to _________
CORD BLOOD AMERICA, INC.
(Exact Name of Small Business Registrant as Specified in its Charter)
| FLORIDA | 000-50746 | 90-0613888 | ||
| (State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) |
1857 HELM DRIVE LAS VEGAS, NV 89119 | 89119 | |
| (Address of principal executive offices) | (Zip Code) |
(702) 914-7250
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all documents and reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filings for the past 90 days. Yes þ 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 | o | Accelerated filer | o | Non-accelerated filer | o | Smaller reporting company filer | þ |
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act.): Yes ¨ No þ
Number of shares of Cord Blood America, Inc. common stock, $0.0001 par value, outstanding as of June 30, 2014, 890,000,000 exclusive of treasury shares.
CORD BLOOD AMERICA, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
| PART I. FINANCIAL INFORMATION | |||||
| Item 1. | Condensed Consolidated Financial Statements (Unaudited) | 3 | |||
| Condensed Consolidated Balance Sheets (unaudited) June 30, 2014 and December 31, 2013 (audited) | 3 | ||||
| Condensed Consolidated Statements of Comprehensive Loss (unaudited) for the three and six months ended June 30, 2014 and June 30, 2013 | 4 | ||||
| Condensed Consolidated Statements of Cash Flows (unaudited) for the six months ended June 30, 2014 and June 30, 2013 | 6 | ||||
| Notes to Condensed Consolidated Financial Statements (unaudited) | 7 | ||||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 21 | |||
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 24 | |||
| Item 4T. | Controls and Procedures | 24 | |||
| PART II. OTHER INFORMATION | |||||
| Item 1. | Legal Proceedings | 25 | |||
| Item 1A. | Risk Factors | 25 | |||
| Item 2. | Unregistered Sales Of Equity Securities And Use Of Proceeds | 26 | |||
| Item 3. | Defaults Upon Senior Securities | 26 | |||
| Item 4. | Reserved | 26 | |||
| Item 5. | Other Information | 26 | |||
| Item 6. | Exhibits | 27 | |||
| Signatures | 30 | ||||
2
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
June 30, 2014 | December 31, 2013 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | 701,880 | $ | 708,760 | ||||
| Accounts receivable, net of allowance for doubtful accounts of $93,123 and $88,551 | 268,942 | 155,661 | ||||||
| Prepaid expenses | 323,973 | 410,276 | ||||||
| Other current assets | 271,142 | 378,805 | ||||||
| Total current assets | 1,565,936 | 1,653,502 | ||||||
| Property and equipment, net of accumulated depreciation and amortization of $729,771 and $655,962 | 612,541 | 653,772 | ||||||
| Customer contracts and relationships, net of accumulated amortization of $4,140,867 and $3,850,401 | 3,199,767 | 3,492,899 | ||||||
| Other assets | 25,082 | 33,957 | ||||||
| Goodwill | 244,053 | 244,053 | ||||||
| Total assets | $ | 5,647,380 | $ | 6,078,184 | ||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 591,019 | $ | 592,844 | ||||
| Accrued expenses | 1,197,611 | 1,114,781 | ||||||
| Deferred revenue | 2,156,850 | 2,245,132 | ||||||
| Derivative liability | 953,747 | 359,407 | ||||||
| Interest on promissory notes | 506,083 | 332,155 | ||||||
| Promissory notes payable, net of unamortized discount of $15,651 and $126,041 | 1,495,879 | 1,441,335 | ||||||
| Total current liabilities | 6,901,189 | 6,085,654 | ||||||
| Deferred revenue (long term portion) | 345,360 | 362,822 | ||||||
| Total liabilities | 7,246,549 | 6,448,476 | ||||||
| Stockholders' deficit: | ||||||||
| Preferred stock, $.0001 par value, 5,000,000 shares authorized, no shares issued and outstanding | -- | -- | ||||||
Common stock, $.0001 par value, 890,000,000 shares authorized, 890,000,000 shares issued and outstanding, inclusive of treasury shares | 89,000 | 89,000 | ||||||
| Additional paid-in capital | 53,264,971 | 53,264,971 | ||||||
| Common stock held in treasury stock, 20,000 shares | (599,833 | ) | (599,833 | ) | ||||
| Accumulated other comprehensive income | 654,104 | 410,827 | ||||||
| Accumulated deficit | (54,967,872 | ) | (53,685,436 | ) | ||||
| Total cord blood stockholders’ deficit | (1,559,360 | ) | (520,470 | ) | ||||
| Non-controlling interest | (39,539) | 150,178 | ||||||
| Total deficit | (1,599,169) | (370,293) | ||||||
| Total liabilities and deficit | 5,647,380 | 6,078,184 | ||||||
3
CORD BLOOD AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2014 AND 2013
SIX-MONTH PERIOD | SIX-MONTH PERIOD | |||||||
| ENDED | ENDED | |||||||
| JUNE 30, | JUNE 30, | |||||||
| 2014 | 2013 | |||||||
| Revenue | $ | 2,951,401 | $ | 2,940,221 | ||||
| Cost of services | (912,561 | ) | (914,085 | ) | ||||
| Gross profit | 2,038,840 | 2,026,136 | ||||||
| Administrative and selling expenses | (2,630,170 | ) | (2,277,792 | ) | ||||
| Loss from operations | (591,329 | ) | (251,656) | |||||
| Interest expense and change in derivative liability | (880,825 | ) | (799,352 | ) | ||||
| Other expenses | -- | (44,227 | ) | |||||
| Net loss from continuing operations before provision for income taxes | (1,472,155 | ) | (1,095,235 | ) | ||||
| Income Taxes | -- | -- | ||||||
| Net loss from continuing operations after provision for income taxes | (1,472,155 | ) | (1,095,235 | ) | ||||
| Net loss | (1,472,155) | (1,095,235) | ||||||
| Net loss attributable to non-controlling interest | 189,717 | 141,203 | ||||||
| Net loss attributable to Cord Blood America | (1,282,437 | ) | (945,032 | ) | ||||
| Basic loss per share | ||||||||
| Continuing operations | (0.00) | (0.00) | ||||||
| Net basic loss per share | (0.00) | (0.00) | ||||||
| Weighted average common shares outstanding | ||||||||
| Basic weighted average common shares outstanding | 890,000,00 | 616,688,648 | ||||||
| Net loss before income taxes | (1,472,155 | ) | (1,095,235 | ) | ||||
| Other comprehensive income: | ||||||||
| Foreign currency translation adjustments | 243,277 | 75,088 | ||||||
| Comprehensive loss | (1,288,878 | ) | (1,020,147 | ) | ||||
| Non-controlling interest | 189,717 | 141,203 | ||||||
| Comprehensive loss attributable to Cord Blood America | $ | (1,099,161 | ) | $ | (878,944 | ) | ||
4
CORD BLOOD AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED)
FOR THE THREE MONTHS ENDED JUNE 30, 2014 AND 2013
THREE-MONTH PERIOD | THREE-MONTH PERIOD | |||||||
| ENDED | ENDED | |||||||
| JUNE 30, | JUNE 30, | |||||||
| 2014 | 2013 | |||||||
| Revenue | $ | 1,535,875 | $ | 1,488,083 | ||||
| Cost of services | (473,314 | ) | (474,100 | ) | ||||
| Gross profit | 1,062,561 | 1,013,983 | ||||||
| Administrative and selling expenses | (1,307,692 | ) | (1,170,715 | ) | ||||
| Loss from operations | (245,131 | ) | (156,732 | ) | ||||
| Interest expense and change in derivative liability | (681,543 | ) | (306,356 | ) | ||||
| Other expenses | -- | (44,227 | ) | |||||
| Net loss from continuing operations before provision for income taxes | (926,674 | ) | (507,315) | |||||
| Income taxes | -- | -- | ||||||
| Net loss from continuing operation after provision for income taxes operations: | $ | (927,674 | ) | $ | (507,315 | ) | ||
| Net loss attributable to non-controlling interest | 80,915 | 104,329 | ||||||
| Net loss attributable to Cord Blood America | $ | (845,759 | ) | $ | (402,986 | ) | ||
| Basic loss per share | ||||||||
| Continuing operations | $ | (0.00 | ) | $ | (0.00 | ) | ||
| Net basic loss per share | $ | (0.00 | ) | $ | (0.00 | ) | ||
| Weighted average common shares outstanding | ||||||||
| Basic weighted average common shares outstanding | 890,000,000 | 728,174,009 | ||||||
| Net loss before income taxes | $ | (926,674 | ) | $ | (507,315 | ) | ||
| Other comprehensive income before tax: | ||||||||
| Foreign currency translation adjustments | 9,743 | 40,221 | ||||||
| Comprehensive loss | (916,932 | ) | (467,094 | ) | ||||
| Non-controlling interest | 80,915 | 104,329 | ||||||
| Comprehensive loss attributable to Cord Blood America | $ | (836,016 | ) | $ | (362,765 | ) | ||
5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2014 AND 2013
| SIX-MONTH | SIX-MONTH | |||||||
| PERIOD ENDED | PERIOD ENDED | |||||||
| JUNE 30, | JUNE 30, | |||||||
| 2014 | 2013 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Consolidated Net loss | $ | (1,472,155 | ) | $ | (1,095,235 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Amortization of loan discount | 72,370 | 280,813 | ||||||
| Depreciation and amortization | 364,275 | 385,804 | ||||||
| Change in value of derivative liability | 594,340 | -- | ||||||
| Change in value of contingent consideration | -- | 309,684 | ||||||
| Shares issued as payment of interest on convertible notes | -- | 57,030 | ||||||
| Bad debt | 943 | 12,518 | ||||||
| Net change in operating assets and liabilities | -- | 320,033 | ||||||
| Changes in accounts receivable | (254,830 | ) | 75,088 | |||||
| Changes in other current assets | 104,638 | -- | ||||||
| Changes in inventory | (52,211 | ) | -- | |||||
| Changes in deferred tax asset | 11,993 | -- | ||||||
| Changes in prepaid | 20,983 | -- | ||||||
| Changes in accounts payable | 45,854 | -- | ||||||
| Changes in accrued expense | 274,564 | -- | ||||||
| Changes in accrued interest | 156,102 | -- | ||||||
| Changes in deferred revenue | 260,677 | -- | ||||||
| NET CASH PROVIDED BY OPERATING ACTIVITIES OF CONTINUING OPERATIONS | 127,543 | 345,735 | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Payments for purchase of property and equipment | (128,712 | ) | (126,531 | ) | ||||
| NET CASH USED IN INVESTING ACTIVITIES OF CONTINUING OPERATIONS | (128,712 | ) | (126,531 | ) | ||||
| Foreign currency translation | (5,710 | ) | 40,221 | |||||
| NET INCREASE IN CASH | (6,879 | ) | 219,204 | |||||
| Cash balance at beginning of period | $ | 708,760 | $ | 393,832 | ||||
| Cash balance at end of period | $ | 701,880 | $ | 613,036 | ||||
| Supplemental Disclosures | ||||||||
| Interest Paid | $ | -- | $ | -- | ||||
| Summary of non-cash transactions: | ||||||||
| Conversion of debt into common shares | $ | $ | 410,910 | |||||
6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014
(UNAUDITED)
Note 1. Organization and Description of Business
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 ("Rain"). In September 2010, CBAI purchased a majority interest in Biocordcell Argentina S.A. (“Bio”). CBAI and its subsidiaries engage in the following business activities:
| ● | CBAI and Cord specialize in providing private cord blood and cord tissue stem cell storage services to families throughout the United States and Puerto Rico. |
| ● | Biocordcell Argentina S.A. specializes in providing private cord blood stem cell storage to families in Argentina, Uruguay and Paraguay. |
| ● | Properties was formed to hold corporate trademarks and other intellectual property. |
The accompanying consolidated financial statements have been prepared on a going-concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of assets and liabilities that may be necessary in the event CBAI cannot continue as a going concern.
7
Note 2. Summary of Significant Accounting Policies
Basis of Presentation and Going Concern
The accompanying financial statements of CBAI and its subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. The Company has experienced recurring net losses from operations, which losses have caused an accumulated deficit of approximately $54.97 million as of June 30, 2014. In addition, CBAI has notes and loans payable of approximately $1.49 million as of June 30, 2014. The Company has no available common stock outstanding as of June 30, 2014, and as such, the Company may not be able to issue common stock to retire debt until such time as the shareholders approve an increase in the number of shares authorized. These factors, among others, raise substantial doubt about CBAI's ability to continue as a going concern.
Since inception, the Company has financed cash flow requirements through the issuance of common stock and warrants for cash, services and loans. However, over the past nine quarters, the Company has reduced operating expenses, ended investment in its unconsolidated affiliates and Stellacure, and received no additional funding from outside sources for working capital. During the quarter ended June 30, 2014 the Company had positive cash flow from operations of $0.13 million. The Company plans to continue to operate on its cash flows from operations by aligning its expenses with its revenues. If cash flows from operations are significantly less than projected, then the Company would need to either cut back on its budgeted spending, look to outside sources for additional funding or a combination of the two. The Company currently does not have any financing agreements in place for additional funding. If the Company is unable to access sufficient funds when needed, obtain additional external funding or generate sufficient revenue from the sale of our products, it could be forced to curtail or possibly cease operations.
In view of these conditions, CBAI's ability to continue as a going concern is dependent upon its ability to meet its financing requirements, and to ultimately achieve profitable operations. Management believes that its current and future plans provide an opportunity to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that may be necessary in the event CBAI cannot continue as a going concern.
Basis of Consolidation
The consolidated financial statements include the accounts of CBAI and its wholly-owned and majority-owned subsidiaries, Cord and Biocordcell Argentina S.A. All significant inter-company balances and transactions have been eliminated upon consolidation.
Deferred Revenue
Deferred revenue consists of payments for enrollment in the program and processing of umbilical cord blood and cord tissue by customers whose samples have not yet been collected, as well as the pro-rata share of annual storage fees for customers whose samples were stored during the year.
Valuation of Derivative Instruments
ASC 815-40 (formerly SFAS No. 133 "Accounting for derivative instruments and hedging activities"), 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 (formerly EITF 00-19 "Accounting for derivative financial instruments indexed to, and potentially settled in, a company's own stock") 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 Black-Scholes option pricing formula. At June 30, 2014, the Company adjusted its derivative liability to its fair value, and reflected the change in fair value, in its consolidated statements of comprehensive loss.
Revenue Recognition
CBAI recognizes revenue under the provisions of ASC 605-25 (previously Staff Accounting Bulletin 104 “Revenue Recognition”). CBAI provides a combination of products and services to customers. This combination arrangement is evaluated under ASC 605-25-25 (previously Emerging Issues Task Force Issue No. 00-21, "Revenue Arrangements with Multiple Deliverables"). ASC 605-25-25 addresses certain aspects of accounting for arrangements under multiple revenue generating activities.
Cord and Bio recognize revenue from both enrollment fees and processing fees upon the completion of processing while revenue from storage fees are recognized ratably over the contractual storage period.
8
Franchise revenues are recognized in accordance with ASC 952-605-3, according to requirements for recognizing franchise revenues after “franchise agreement” services are completed and substantially performed. Further, in accordance with ASC 952-605-25-7, the installment or cost recovery accounting method is used to account for franchise fee revenue only in those exceptional cases when revenue is collectible over an extended period and no reasonable basis exists for estimated collectability. During the quarter ended June 30, 2014, the Company did not recognize any franchise revenues.
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.
Equity Investments
Cord has a minority equity investment in China Stem Cells, Ltd., a Cayman Islands Company, a privately held company organized to conduct a stem cell storage business in China. In 2011, Cord acquired a minority equity investment in VidaPlus, an umbilical cord processing and storage company headquartered in Madrid, Spain. The Company utilizes the cost method of accounting as it owns less than 20% of the outstanding common stock and only has the ability to exercise nominal, not significant, influence over these companies. The cost of this investment was $204,062 and represents approximately 9.24% equity in Vidaplus. As of December 31, 2013, the Company recognized an impairment loss of $204,062 on the Vidaplus investments and notes receivable.
9
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 820-10, are as follows:
| ● | Level 1 – quoted prices in active markets for identical assets or liabilities. |
| ● | Level 2 – other significant observable inputs for the assets or liabilities through corroboration with market data at the measurement date. |
| ● | Level 3 – significant unobservable inputs that reflect management’s best estimate of what market participants would use to price the assets or liabilities at the measurement date. |
The following table summarizes fair value measurements by level at June 30, 2014 of assets and liabilities measured at fair value on a recurring basis:
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Cash and cash equivalents | $ | 701,880 | $ | — | $ | — | $ | 701,880 | ||||||||
| Derivative liability | $ | — | $ | — | $ | (953,747 | ) | $ | (953,747 | ) | ||||||
10
Derivative liability was valued under the Black-Scholes model, consistent with last year, with the following assumptions:
| Risk free interest rate | 0 to 0.13 % | |||
| Expected life | 0 to 1 years | |||
| Dividend Yield | 0% | |||
| Volatility | 0% to 108% | |||
The following is a reconciliation of the derivative liability:
| Value at December 31, 2013 | $ | 359,407 | ||
| Change in value of derivative | $ | 594,340 | ||
| Value at June 30, 2014 | $ | 953,747 |
For certain parts 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 May 2014, the FASB issued an accounting standard update on revenue recognition that will be applied to all contracts with customers. The update requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects what it expects in exchange for the goods or services. It also requires more detailed disclosures to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The guidance will be required to be applied on a retrospective basis, using one of two methodologies, and will be effective for fiscal years beginning after December 15, 2016, with early application not being permitted. The Company is currently assessing the impact that the guidance will have on the Company's financial condition and results of operations.
Note 3. Notes and Loans Payable
At June, 2014 and December 31, 2013 notes and loans payable consist of:
June 30, 2014 | December 31, 2013 | |||||||
| Convertible Promissory Note Payable to St. George Investment, secured by the Company’s assets, interest rate of 6.0% per annum, with payment due on or before March 10, 2015 | 259,530 | 259,530 | ||||||
| Secured Convertible Promissory Note to Tonaquint, Inc., 6% per annum; due on or before February 27, 2014 | 1,252,000 | 1,252,000 | ||||||
| (See Item 1. Legal Proceedings as described more fully) | ||||||||
| 1,511,530 | 1,511,530 | |||||||
| Less: Unamortized Discount | (15,651 | ) | (70,195 | ) | ||||
| $ | 1,495,879 | $ | 1,441,335 | |||||
11
Note 4. Commitments and Contingencies
St. George Investments
On March 10, 2011, the Company entered into a Note and Warrant Purchase Agreement (the "Purchase Agreement") with St. George Investments, LLC, (“St. George”) an Illinois limited liability company (the "Investor") whereby the Company issued and sold, and the Investor purchased: (i) Secured Convertible Promissory Notes of the Company in the principal amount of $1,105,500 (the "Company Note") and (ii) a Warrant to purchase common stock of the Company (the "Warrant"). The Investor paid $250,000 in cash as an initial payment to the Company and executed and delivered six separate “Secured Buyer Notes” (the “Buyer Notes”), as consideration in full for the issuance and sale of the Company Note and Warrants.
The principal amount of the Company Note is $1,105,500 ("Maturity Amount") and the Company Note is due 48 months from the issuance date of March 10, 2011. The Company Note has an interest rate of 6.0%, which would increase to a rate of 12.0% on the happening of certain Trigger Events, including but not limited to: a decline in the 10-day trailing average daily dollar volume of the common shares in the Company’s primary market to less than $30,000 of volume per day at any time; the failure by the Company or its transfer agent to deliver Conversion Shares (defined in the Company Note) within 5 days of Company’s receipt of a Conversion Notice (defined in the Company Note). Due to a triggering event occurring, the current interest rate is 12%. The total amount funded (in cash and notes) was $1,000,000, representing the Maturity Amount less an original issue discount of $100,500 and the payment of $5,000 to the Investor to cover its fees, with payment consisting of $250,000 advanced at closing and $750,000 in a series of six secured convertible Buyer Notes of $125,000 each, with interest rates of 5.0%. To date, St. George has paid the total amount due.
The Buyer Notes are secured by an Irrevocable Standby Letter of Credit (“Letter of Credit”). The warrant also contains a net exercise /cashless exercise provision. St. George may elect to convert all or part of the principal and any accrued unpaid interest on the Company Note on or before the aforementioned maturity date, subject to certain limitations. The conversion price under the Company Note is eighty percent (80%) of the average of the closing bid prices for the three (3) Trading Days (defined in the Purchase Agreement) with the lowest closing bids over the twenty (20) Trading Days immediately preceding the Conversion Date (defined in the Company Note), subject to adjustments as set forth in the Company Note. Due to adjustments, St. George’s current conversion ratio inserts fifty-five percent (55%) in the aforementioned formula, in place of eighty percent (80%).
The Investor has also received a five year warrant entitling it to purchase shares of common stock of the Company at an exercise price determined under the terms of the Warrant. The warrant also contains a net exercise /cashless exercise provision.
As of June 30, 2014 the balance due to St. George Investments was $259,530 in principal and $33,471 in accrued interest.
The Company Note, Warrant and related documentation, including any amounts owed by the Company to St. George based thereon, are in dispute and are the subject of litigation, as described more fully in Item 1. Legal Proceedings.
Tonaquint, Inc.
In a transaction that closed on June 29, 2012, the Company entered into a Securities Purchase Agreement (the "Purchase Agreement") with Tonaquint, Inc. (“Tonaquint”) a Utah corporation whereby the Company issued and sold, and Tonaquint purchased a Secured Convertible Promissory Note of the Company in the principal amount of $1,252,000 (the "Company Note").
The Company Note was issued June 27, 2012 and is due 20 calendar months after the issuance date. The Company Note has an interest rate of 6.0%, which would increase to a rate of 18.0% on the happening of certain Events of Default (defined in the Company Note), including but not limited to: failure to pay and the failure by the Company or its transfer agent to deliver Conversion Shares (defined in the Company Note) within 3 Trading Days of the Company’s receipt of a Conversion Notice (defined in the Company Note). Tonaquint has claimed an interest rate of 18%, which is being disputed by the Company. The total amount funded in cash at closing was $1,120,000, representing the principal amount less an original issue discount of $112,000 and the payment of $20,000 to Tonaquint to cover its fees.
Tonaquint has the right to convert, subject to restrictions described in the Company Note, all or a portion of the outstanding amount of the Company Note into shares of the Company’s common stock at a price of $0.03. So long as Tonaquint has not extinguished the Company Note in its entirety pursuant to such conversions, the Company shall make monthly payments to Tonaquint on the Company Note, through either the issuance of shares of the Company’s common stock or by payment in cash, at the election of the Company. Payments commence six months from the date of issuance of the Company Note and continue until the Company Note has been paid in full. The amount of the monthly payments is the greater of (i) $100,000, plus the sum of any accrued and unpaid interest as of the applicable Installment Date (defined in the Company Note) and accrued and unpaid Late Charges (defined in the Company Note), if any, under the Company Note as of the applicable Installment Date (defined in the Company Note), and any other amounts accruing or owing to Investor under the Company Note as of such Installment Date, or (ii) the then-outstanding balance of the Company Note divided by the number of Installment Dates remaining prior to the Maturity Date.
12
In the event the Company is unable to make payments in cash or otherwise elects not to make a payment or payments in cash, the number of common shares delivered to the Investor upon conversion will be calculated by dividing the amount of the Company Note that is being converted by the market price of the common stock, which is defined as 80% of the arithmetic average of the three (3) lowest volume weighted average prices of the shares of the Company’s common stock during the twenty three (23) consecutive trading day period immediately preceding the date as of which such price determination is required (such as the effective date of a conversion).
As of June 30, 2014, the amount owed to Tonaquint was $1,252,000 of principal and $472,607 in accrued interest in accordance with Tonaquint’s claim which is being disputed by the Company.
The Company Note, Purchase Agreement and other related documents, including any amounts owed by the Company to Tonaquint based thereon, are in dispute and are the subject of litigation, as described more fully in Item 1. Legal Proceedings.
VidaPlus
On January 24, 2011, the Company entered into a Stock Purchase Agreement to acquire up to 51% of the capital stock in VidaPlus, an umbilical cord processing and storage company headquartered in Madrid, Spain. The Agreement is organized into three tranches; the first executed at closing with an initial investment of approximately $204,000 (150,000 Euro) for an amount equivalent to 7% as follows; 1% of share capital in initial equity or approximately $30,000 and 6% or an estimated $174,000 as a loan convertible into equity within 12 months of closing. The initial investment was secured by a Pledge Agreement on 270 VidaPlus samples that are incurring annual storage fees. The second tranche provides the opportunity for an additional 28% in share capital through monthly investments based on the number of samples processed in that month (up to a maximum of 550,000 EUR). In connection with Tranche 2, the Company has loaned VidaPlus $246,525 to date. Converting the investment from a loan into equity will take place within 24 months of the date the amount of shares due to the Company pursuant to the second tranche is calculated. The third tranche follows a similar loan to equity agreement as tranche two but for an additional 16% equity at the option of the Company (up to a maximum of 550,000 EUR). VidaPlus contracts through Stellacure and their relationship with the German Red Cross for their processing and storage.
In connection with the VidaPlus Stock Purchase Agreement entered into on January 24, 2011, the Company is obligated to make monthly loans to VidaPlus based on the number of new samples processed and up to a maximum of 550,000 Euro for each of Tranche 2 and 3 of the Agreement. Tranche 2 did contain provisions that provided the Company an option to discontinue funding if certain performance targets were not met.
In January 2012, the Company exercised its right to convert its Tranche 1 loan into 6% of the outstanding shares of VidaPlus, and as a result, the Company owned a total of 7% of the outstanding shares. At the time of the equity conversion, the Company no longer maintained its Pledge on the 270 VidaPlus samples associated with Tranche 1; however, the Company maintained a liquidation preference in VidaPlus over the money invested by the Company in VidaPlus. Additionally, the Company declined to make any further investment (loan or otherwise) to VidaPlus under whether Tranche 2, Tranche 3 or otherwise. CBAI holds a pledge over the umbilical cord blood maintenance and storage contracts between VidaPlus and certain of its customers, and all rights contained therein, including but not limited to the rights to administer those contracts and the rights to collect the revenues derived from those contracts, for 328 samples. CBAI holds that pledge until such time as it converts the monies paid to VidaPlus under Tranche 2 of the Stock Purchase Agreement into equity into Vidaplus, in accordance with the formulas set forth in the Stock Purchase Agreement. CBAI must make that conversion within two years of when the calculation was made as to the amount of shares to which CBAI is entitled pursuant to Tranche 2, which means that such conversion shall take place around or before February 2014. CBAI also holds a liquidation preference in VidaPlus for the money the Company invested in VidaPlus. On February 14, 2014, CBAI delivered to VidaPlus its election to convert its loan under Tranche 2 into shares of stock in VidaPlus, including Anti-Dilution shares. The Company is entitled to an additional ownership stake of approximately 2.24% in connection with the forgoing, bringing its total ownership percentage to approximately 9.24%
Patent License Agreement
PharmaStem Therapeutics claims to hold certain patents relating to the storage, expansion and use of hematopoietic stem cells. In the past several years, PharmaStem has commenced suit against numerous companies involved in cord blood collection and preservation alleging infringement of its patents. In October 2003, after a jury trial, judgment was entered against certain of our competitors and in favor of PharmaStem in one of those suits. In February 2004, PharmaStem commenced suit against Cord Partners and certain of its competitors alleging infringement of its patents. Management of Cord Partners determined to settle, rather than to litigate, this matter. As a result, PharmaStem and Cord Partners entered into a Patent License Agreement in March 2004. Pursuant to the Patent License Agreement, Cord Partners could, on a non-exclusive basis, collect, process and store cord blood utilizing PharmaStem’s claimed technology and processes allegedly covered by its patents for so long as the patents may remain in effect. Most of the patents at issue expired in 2010. PharmaStem could claim, arguendo, Cord Partners is obligated under the Patent License Agreement to pay royalties to PharmaStem of 15% of all revenues generated by Cord Partners from the collection and storage of cord blood on and after January 1, 2004. Other than, potentially royalties, which would be disputed by Cord, no amount is payable by Cord Partners to PharmaStem. All litigation between the parties was dismissed and all prior claims were released. As of 2008, Cord ceased paying all royalties to PharmaStem. The patents have been declared void under a final decision on appeal, and as such, there is no pending litigation in this matter. As of June 30, 2014, the Company included approximately $226,000 in accounts payable and $120,000 included in accrued expenses to account for this liability since 2008, though the Company disputes that it owes any royalties to Pharmastem.
Commitments and Contingencies
BioCells
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 (“Bio”), providing for the Company’s acquisition of 50.1% of the outstanding shares of Bio (the “Shares).
13
Under the Agreement, the Company paid $375,000 in cash at the closing, and was obligated to pay an additional $350,000 in October, 2010, $150,000 of which is part of the fixed portion of the purchase price for the shares, for a total minimum purchase price of $525,000. The remaining $200,000 of this payment represents advances against the contingent payments due based on Bio’s 2010 and 2011 net income performances. In 2011, the Company negotiated and paid out the amount of $500,000 in connection with the 2010 earn out.
As of June 22, 2012, the Company entered into an Agreement with the shareholders of Bio from whom the Company purchased its majority ownership interest in Bio in 2010 (the "Sellers") relating to the 2011 earn out. Under the Agreement, the Company was to pay the Sellers the following: $25,000 on or before June 30, 2012; $10,000 on or before July 31, 2012; and $25,000 on or before September 30, 2012, for a total cash payment of $60,000. In addition, the Sellers will collect the Company’s portion of BioCells shareholders’ dividends for fiscal years 2012 and 2013, up to a maximum amount of $440,000, if any. There were no shareholder dividends earned or paid for the 2012 and 2013 fiscal years. Also, since BioCells was not sold before April 2014, certain thresholds for purchase price and payment were not met or exceeded, and the Sellers did not receive compensation. As a result of this Agreement with the Sellers of BioCells, the Company has paid the total cash amount due of $60,000 as of December 31, 2012 and there have been no earned portion of Company’s dividends paid to Sellers for fiscal years 2012 and 2013.
Employment Agreements
On September 12, 2011 (the “Company”), entered into an Executive Employment Agreement with Joseph R. Vicente, then the Company’s Chief Operating Officer and Vice President and appointed Chairman and President on May 15, 2012 by the Board of Directors, which was effective as of August 1, 2011 and shall terminate as of December 31, 2014, unless earlier terminated by the Company or Mr. Vicente. Mr. Vicente’s Executive Employment Contract had an initial term from August 1, 2011 through December 31, 2011, and is renewable annually thereafter for up to three additional, successive years, and provides for a base salary equal to his previous year’s annual salary, which said salary was set under the provisions of the previous employment agreement entered between Mr. Vicente and the Company in July of 2008. Mr. Vicente voluntarily reduced his annual salary by 12.5% until otherwise determined by Mr. Vicente, along with the advice and consent of the Company’s Board of Directors. It also provides for an annual bonus, payable at the discretion of the Board of Directors, equal to 25% of Mr. Vicente’s prior year base salary. The Agreement provides for a change of control termination bonus, which provide that if Mr. Vicente is terminated, his compensation reduced, or Mr. Vicente terminates his employment within one year after a change of control, then Mr. Vicente is entitled to a termination benefit in an amount equal to the average annual cash compensation over the three (3) year period preceding the Triggering Event (defined in the agreements) multiplied (2.00). The Agreement also provides for termination payments in the absence of a change of control in the event the Company terminates Mr. Vicente without cause in an amount equal to all compensation paid by the Company to Mr. Vicente for the 24 months preceding the termination, along with health plan and 401k incentives (if any were to be offered – the Company terminated its 401k earlier in 2012), as stated in the agreement.
The Company entered into an Executive Employment Agreement with Stephen Morgan (the “Employee”) on August 10, 2012, with July 1, 2012 as the effective date of the Agreement. The Agreement provides for a change of control termination bonus, whereby if the Employee is terminated, his compensation reduced, or the Company terminates the Employee’s employment within one year after a change in control, then the Employee is entitled to a termination benefit in an amount equal to the employee’s cash compensation over the one (1) year preceding the Triggering Event (defined in the Agreement). The Agreement also provides for termination payments in the absence of a change of control in the event the Company terminates the Employee without cause in an amount equal to all compensation paid by the Company to the Employee for the 12 months preceding the termination, along with health plan and 401k incentives (if any were to be offered – the Company terminated its 401k earlier in 2012), as stated in the Agreement. The Agreement provides for an annual salary of $125,000, along with a bonus, payable at the discretion of the Board of Directors of up to an annual amount of 20% of the Employee’s salary. Mr. Morgan’s compensation, as set forth in the Agreement has not increased as a result of his election to the officer positions of Vice President and Secretary on May 15, 2012 in addition to his retention of his previous position, General Counsel. The Company believes the assumption of additional roles by existing management and other individuals in leadership positions, including filling recently vacated roles, will reduce overall management costs while also leading to greater efficiency within the organization.
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, 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 shall revert 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 has the option to lease a portion of the premises currently occupied by the Company to a third party, and if this portion is leased to a third party, the Company’s monthly rent amount shall 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. CBAI’s subsidiary leases office space in Argentina, (Bio). The lease for Bio is for three years beginning in May 2014, and Bio shall receive rent abatement for May and June of 2014.
Commitments for future minimum rental payments, by year, and in the aggregate, to be paid under such operating lease as of June 30, 2014, are as follows:
| Rent | ||||
| to be paid | ||||
| 2014 | $ | 118,482 | ||
| 2015 | 238,981 | |||
| 2016 | 251,485 | |||
| 2017 | 209,954 | |||
| 2018 | 189,842 | |||
| Thereafter | 144,962 | |||
| Total | $ | 1,154,065 | ||
14
Note 5. Related Party Transactions and Commitments
China Stem Cells, Ltd.
In March of 2010 the Company acquired pursuant to a License Agreement, a 10% non dilutable interest in what became, in December 2010, China Stem Cells, Ltd., a Cayman Islands Company (hereinafter "Cayman"), which indirectly holds a 100% capital interest in AXM Shenyang, a company organized to conduct a Stem Cell Storage Business in China. In exchange for issuance of an equity interest in Cayman, under the terms of the Transfer of Technology Agreement the Company agreed to provide technology transfer, knowhow and training in the setup, marketing and operation of the China Stem Cell Storage business. In connection with the License Agreement, the Company is to receive royalties equal to 8.5% of "Net Revenues" realized from the China Stem Cell Storage business, over the 15 year term of the agreement, with certain minimum annual royalties’ payable beginning in 2011. The Company has not been paid any royalty balance due to date, and it remains doubtful that any such royalties will be collected.
In December of 2010 the Company also acquired the option to provide up to $750,000 of additional capital funding to Cayman through the purchase of Cayman Secured Convertible Promissory Notes and attached Cayman Warrants to acquire its Common Stock. Other Cayman shareholders were granted similar options, with the intent of raising the aggregate up to $1.5 million in additional capital for Cayman and its subsidiaries. CBAI has exercised this option in part, provided a total of $400,000 in additional capital to Cayman, and is to receive Cayman Secured Convertible Promissory Notes for this sum along with 80 Cayman (TBD) Warrants. The Secured Convertible Promissory Notes are convertible into Cayman stock at a conversion price of $1,500 per share, subject to certain adjustments. The Warrants have a five year term and are exercisable at an option exercise price of $0.05 per share per share, subject to certain adjustments. The Company has recorded a reserve for the entire carrying amount of the receivable, including interest. The Company’s current President, Joseph Vicente was appointed as a Director of China Stem Cells Ltd. in July 2012.
VidaPlus
The Company holds approximately 9.24% of the outstanding shares of VidaPlus, and has a balance of convertible loans receivable amounting to $246,525. During the year ended December 31, 2012, the Company reviewed the recoverability of the equity investment and loans receivable and the carrying amount exceeds the fair value of the investment as a result of recurring and continued operating losses at VidaPlus. Fair value of the loans receivable is determined based on the discounted future net cash flows expected to be generated by assets pledged against the loans. The Company recorded an impairment of 100% of the book value of the equity investment and convertible loan receivable.
Frozen Food Gift Group, Inc.
CBAI engaged Frozen Food Gift Group, Inc. (“FFGG”) as a vendor, prepaying for $45,000 in products during the year ended December 31, 2011. The remaining balance on that account was $30,655 as of March 31, 2013, not including additional interest and fees to which the Company may be entitled. The Company’s former CEO and Chairman of the Board, Mathew Schissler who resigned effective May 14, 2012, owned 36.2% of the outstanding shares of FFGG based on an S-1 filing made by that company with the SEC on July 31, 2012, and on information and belief is FFGG’s Chairman of the Board. CBAI’s former COO, and now President Joseph Vicente served on the Board of Directors of FFGG, but resigned effective as of January 26, 2012.
The Company entered into a Release with FFGG effective as of March 5, 2014, with the mutual releases and negative covenants contained therein not taking effect until such time as the Company received payment under the Claim Purchase Agreement, entered as of March 12, 2014 with a third party to the Company in exchange for the Company’s claims against FFGG. Payment was made by a third party to the Company on or around April 1, 2014.
Note 6. Share Based Compensation
Stock Option Plan
The Company's Stock Option Plan permits the granting of stock options to its employees, directors, consultants and independent contractors for up to 8.0 million shares of its common stock. The Company believes that such awards encourage employees to remain employed by the Company and also to attract persons of exceptional ability to become employees of the Company. On July 13, 2009, the Company registered its 2009 Flexible Stock Plan, which increases the total shares available to 4 million common shares. The agreement 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.
15
Stock options that vest at the end of a one-year period are amortized over the vesting period using the straight-line method. For stock options awarded using graded vesting, the expense is recorded at the beginning of each year in which a percentage of the options vests. The Company did not issue any stock options for the period ended March 31, 2014.
The Company’s stock option activity was as follows:
Stock Options | Weighted Average Exercise Price | Weighted Avg. Contractual Remaining Life | ||||||||||
| Outstanding, January 1, 2013 | 6,323,570 | 1.01 | 5.76 | |||||||||
| Exercised | - | - | - | |||||||||
| Forfeited/Expired | 627,740 | - | - | |||||||||
| Outstanding, December 31, 2013 | 5,570,830 | 1.01 | 4.51 | |||||||||
| Exercisable at December 31, 2013 | 5,570,830 | 1.01 | 4.51 | |||||||||
| Forfeited/Expired | - | - | - | |||||||||
| Outstanding, March 31, 2014 | 5,570,830 | 1.01 | ||||||||||
| Exercisable at March 31, 2014 | 5,570,830 | 1.01 | 4.26 | |||||||||
| Forfeited/Expired | 12,000 | |||||||||||
| Outstanding, June 30, 2014 | 5,558,830 | 1.01 | 4.01 | |||||||||
| Exercisable, June 30, 2014 | 5,558,830 | 1.01 | ||||||||||
The following table summarizes significant ranges of outstanding stock options under the stock option plan at June 30, 2014:
Range of Exercise Prices | Number of Options | Weighted Average Remaining Contractual Life (years) | Weighted Average Exercise Price | Number of Options Exercisable | Weighted Average Exercise Price | |||||||||||||||||
| $ | 0.33 — 20.00 | 5,522,806 | 3.78 | $ | 0.83 | 5,522,806 | $ | 0.75 | ||||||||||||||
| $ | 21.00 — 30.00 | 18,126 | 0.37 | 25.00 | 18,126 | 25.00 | ||||||||||||||||
| $ | 31.00— 51.00 | 17,898 | 3.77 | 31.21 | 17,898 | 31.21 | ||||||||||||||||
| 5,558,830 | 4.26 | $ | 1.01 | 5,558,830 | $ | 1.01 | ||||||||||||||||
A summary of the activity for unvested employee stock options as of June 30, 2014 and changes during the period presented below:
Weighted Average Grant Date Fair Value per Share
Stock Options | Weighted Avg. Grant Date Fair Value per Share | |||||||
| Nonvested at January 1, 2014 | -- | 0.39 | ||||||
| Granted | -- | -- | ||||||
| Vested | -- | -- | ||||||
| Exercised | -- | -- | ||||||
| Cancelled | -- | -- | ||||||
| Pre-vested forfeitures | -- | -- | ||||||
| Nonvested at June 30, 2014 | -- | 0.39 | ||||||
The total compensation cost related to non-vested options amounts to $0. All outstanding unexercised options provide for adjustment upon stock split, as well as under certain other circumstances.
16
Note 7. Warrant Agreements
On March 10, 2011 the Company issued a Promissory Note for $1,105,000 to St. George Investments along with 1,392,354 five year warrants at $0.01 per share.
The Company has not issued any warrants since January 1, 2012.
The following table summarizes the warrants outstanding and exercisable at June 30, 2014:
| WARRANTS OUTSTANDING | EXERCISE PRICE | MATURITY DATE | |||||||
| 1,392,354 | $ | 0.01 | 03/10/2016 | ||||||
| Total | 1,392,354 | ||||||||
17
Note 8. Stockholder’s Equity
Preferred Stock
CBAI has 5,000,000 shares of $.0001 par value preferred stock authorized.
Common Stock
On September 25, 2012, the Company’s Articles of Incorporation were amended to increase the authorized common stock to 890,000,000 shares, par value $0.0001, up from 250,000,000. This amendment was adopted by the Company’s Board of Directors on July 11, 2012, and its Shareholders at a Special Meeting of Shareholders called for this purpose on September 25, 2012.
During the year ended December 31, 2013, the Company issued 513,765,592 shares of common stock to retire $776,502 of principal and interest in convertible debt which had a fair market value of $1,823,206.
As of June 30, 2014 CBAI had 890,000,000 shares of Common Stock outstanding. 20,000 shares remain in the Company's treasury.
Note 9. Segment Reporting
Guidance issued by the FASB requires that public business enterprises report financial and descriptive information about its reportable operating segments. Cord primarily generates revenues related to the processing and preservation of umbilical cord blood and cord tissue. Cord’s long-lived assets are located in, and substantially all of its revenues are generated from, the United States of America and Argentina.
The table below presents certain financial information by business segment for the six months ended June 30, 2014:
| Cord | Biocordcell | Segment Total | Consolidation Eliminations | Condensed Consolidated Total | ||||||||||||||||
| Revenue from External Customers | $ | 1,938,779 | 1,012,622 | 2,951,401 | 2,951,401 | |||||||||||||||
| Interest & Derivative Expense | 821,667 | 59,158 | 880,825 | 880,825 | ||||||||||||||||
| Depreciation and Amortization | 268,559 | 95,716 | 364,275 | 364,275 | ||||||||||||||||
| Segment Income (Loss) | (1,092,720) | (379,435) | (1,472,155) | (1,472,155) | ||||||||||||||||
| Segment Assets | $ | 4,270,207 | 1,674,332 | 5,944,539 | (297,159) | 5,647,380 | ||||||||||||||
18
The table below presents certain financial information by business segment for the three months ended June 30, 2014:
| Cord | Biocordcell | Segment Total | Consolidation Eliminations | Condensed Consolidated Total | ||||||||||||||||
| Revenue from External Customers | $ | 1,019,271 | 516,604 | 1,535,875 | 1,535,875 | |||||||||||||||
| Interest & Derivative Expense | 650,276 | 31,267 | 681,543 | 681,543 | ||||||||||||||||
| Depreciation and Amortization | 134,360 | 48,774 | 183,134 | 183,134 | ||||||||||||||||
| Segment Income (Loss) | (764,843 | ) | (161,831 | ) | (926,674 | ) | (926,674 | ) | ||||||||||||
| Segment Assets | $ | 4,270,207 | 1,674,332 | 5,944,539 | (297,159 | ) | 5,647,380 | |||||||||||||
The table below presents certain financial information by business segment for the six months ended June 30, 2013:
| Cord | Biocordcell | Segment Total | Consolidation Eliminations | Condensed Consolidated Total | ||||||||||||||||
| Revenue from External Customers | $ | 1,883,464 | 1,056,757 | 2,940,221 | 2,940,221 | |||||||||||||||
| Interest & Derivative Expense | 755,688 | 43,664 | 799,352 | 799,352 | ||||||||||||||||
| Depreciation and Amortization | 360,606 | 25,198 | 385,804 | 385,804 | ||||||||||||||||
| Segment Income (Loss) | (812,829 | ) | (282,406 | ) | (1,095,235 | ) | (1,095,235 | ) | ||||||||||||
| Segment Assets | $ | 4,694,666 | 1,801,549 | 6,496,215 | (98,520 | ) | 6,397,695 | |||||||||||||
19
The table below presents certain financial information by business segment for the three months ended June 30, 2013:
| Cord | Biocordcell | Segment Total | Consolidation Eliminations | Condensed Consolidated Total | ||||||||||||||||
| Revenue from External Customers | $ | 948,517 | 539,566 | 1,488,083 | 1,488.083 | |||||||||||||||
| Interest & Derivative Expense | 267,020 | 39,336 | 306,356 | 306,356 | ||||||||||||||||
| Depreciation and Amortization | 180,045 | 12,362 | 192,407 | 192,407 | ||||||||||||||||
| Segment Income (Loss) | (298,656) | (208,659) | (507,315) | (507,315) | ||||||||||||||||
| Segment Assets | $ | 4,694,666 | 1,801,549 | 6,496,215 | (98,520) | 6,397,695 | ||||||||||||||
Note 10. Subsequent Events
Secured Promissory Note
Cord Blood Caribbean, Inc. dba Banco Vida, headquartered in San Juan, Puerto Rico (“Banco Vida”) provides private cord blood, cord tissue and other tissue related services for customers primarily located in Puerto Rico, and engages the Company as its exclusive provider of laboratory processing and storage services.
Effective August 1, 2014, the Company entered into a secured promissory note with Banco Vida, whereby the Company provided a loan to Banco Vida in the amount of $75,000.
The note carries an interest rate of 8% per annum. Banco Vida is obligated to make interest-only, monthly payments for the first twelve months, commencing thirty days from the effective date, and thereafter shall repay the entirety of the principal and accrued interest pursuant to a standard 18 month amortization schedule, with the final payment being due on or before February 1, 2017. The Note is secured by Banco Vida’s customer contracts, customer relationships and the ability to collect payments directly from Banco Vida’s customers where their umbilical cord blood and tissue samples are stored at the Company’s facilities on behalf of Banco Vida.
20
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS
Forward Looking Statements
In addition to the historical information contained herein, the Company makes statements in this Quarterly Report on Form 10-Q that are forward-looking statements. Sometimes these statements will contain words such as "believes," "expects," "intends," "should," "will," "plans," and other similar words. Forward-looking statements include, without limitation, assumptions about our 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 June 30, 2014 condensed consolidated financial statements and related notes thereto included elsewhere in the quarterly report and with its condensed consolidated financial statements and notes thereto for the year ended December 31, 2013 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, 2013, 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, 2013.
Recent Developments During the Quarter
Frozen Food Gift Group
Effective as of March 12, 2014 the Company entered into a Claim Purchase Agreement with a third party calling for payment by the third party to the Company in exchange for the Company’s claims against Frozen Food Gift Group, Inc. (“FFGG”), as set forth in a Mutual General Release described below (“Release”). Payment was made by the third party to the Company on or around April 1, 2014.
The Company entered into the Release with FFGG effective as of March 5, 2014, with the mutual releases and negative covenants contained therein not taking effect until such time as the Company received payment under the Claim Purchase Agreement as described above, which payment was made as mentioned above.
Litigation versus Tonaquint, Inc. and St. George Investments, LLC
On May 6, 2014, the Court in the Action described in detail in Item 1. Legal Proceedings between the Company and Tonaquint, Inc. and St. George Investments, LLC granted the Company’s Motion for Leave to File Amended Complaint and Memorandum, which Motion was filed previously by the Company on March 21, 2014. Accordingly, the Company filed its First Amended Complaint and Jury Demand on May 7, 2014, which amended the Company’s Complaint to add an additional claim for breach of contract, as well as a claim for promissory estoppel.
New Service Offering
On June 25, 2014 the Company announced a new service offering for the isolation and expansion of mesenchymal stem cells found in the cord tissue. This service, branded IsoCell, is offered as an optional add on to the Company’s cord tissue service, and can also be provided, along with the cord tissue service, in combination with the umbilical cord blood service.
Summary and Outlook of the Business
CBAI is primarily an umbilical cord blood stem cell and cord tissue processing and storage company with a particular focus on the acquisition of customers in need of family based products and services.
21
Cord
Services Provided By Cord
Cord’s operations provide umbilical cord blood banking and cord tissue services to expectant parents throughout all 50 United States and Puerto Rico. 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 processes and stores cord blood and cord tissue in its own facility. Cord provides 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 any instruction necessary 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 centralized facility immediately following birth. This procedure ensures chain-of-custody control during transportation for maximum security. |
| ● | Comprehensive Testing. The cord blood sample is tested for stem cell concentration levels and blood type. The maternal samples are tested for infectious diseases. Cord reports these 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. Data indicates that cord blood retains viability and function for at least twenty five years when stored in this manner and theoretically could be maintained at least as long as the normal life span of an individual. |
Going forward, management will continue to assess business opportunities, and plans to pursue customer acquisition, primarily through organic growth.
Biocordcell Argentina S.A.
Based in Buenos Aires, Biocordcell Argentina S.A., processes and stores cord blood samples as a private bank for use in current or future medical therapies in Argentina, Uruguay and Paraguay and Panama. In 2012, Bio began franchising with locations in Argentina and Brazil for which it receives franchise fees and/or royalty payments based on franchise revenues. Bio continues to explore additional franchise opportunities.
Results of Operations for the Three-Months Ended June 30, 2014
For the three months ended June 30, 2014, total revenue increased to approximately $1.54 million from $1.49 million, an increase of 3% over the same period of 2013. Revenues are generated primarily from new enrollment/processing fees and recurring storage fees. The remaining revenue consisted primarily of tissue related products which represent approximately 7% of total revenues for the three month period ending June 30, 2014. Per segment, Cord had an increase of its total revenues of 7%, and Bio had a decrease in its revenues of 4% over the prior comparative period ending June 30, 2013. Cord’s increase was related to storage revenues increasing by 12% and tissue related products by 20% for the comparative year over year three month period. Bio’s decrease in revenues were largely impacted by a year over year adjustment to the currency exchange rate of approximately 35%, an increase in the discounts provided for enrollment/processing fees and a decrease in the number of units processed. The Company remains focused on strategic organic growth which management hopes will provide sustainable operating cash flows, and, positive operating and net income.
Cost of services as a percentage of revenue decreased to 31% for the period ended June 30, 2014 compared to 32% the same prior period of 2013. The cost of services include transportation of the umbilical cord blood and cord tissue from the hospital to the lab, direct material plus labor costs for processing and cryogenic storage, and allocated rent, utility and general administrative expenses. Gross profit increased by approximately $0.05 million or 5% to $1.06 million for the period ending June 30, 2014 from the prior three month period of 2013. The Company anticipates that through the growth and expansion of its Cord business, tighter cost controls and continuing efficiencies in its own facilities, direct costs should decrease and gross profits should improve.
Administrative and selling expenses for the three months ended June 30, 2014 were $1.31 million as compared to $1.17 million for the comparative period of 2013 representing a 12% increase. These expenses are primarily related to marketing/advertising, professional services, allocated facility related expenses and wages for personnel. A major contributor to the increase in administrative and selling expenses were legal costs associated with the Company’s ongoing litigation as described more fully in Item 1, Legal Proceedings. The Company continues to evaluate its expenses and their relationship to revenues for alignment. Depreciation and amortization are included as an administrative expense. For the three month period ending June 30, 2014 depreciation and amortization totaled $0.18 million compared to the three month period of June 30, 2013 of $0.19 million.
The Company's loss from operations was $0.25 million versus an operating loss of $0.16 million for the comparative period. The Company's net loss was $0.93 million for the period ended June 30, 2014, an increase of $0.42 million compared to the comparative period net loss of $0.51 million. The primary contributor to the increase in the loss of net income in the comparative period of 2014 versus 2013 was the interest and derivative liability increasing by $0.38 million.
22
Results of Operations for the Six-Months Ended June 30, 2014
For the six months ended June 30, 2014, the Company's total revenue increased to $2.95 million from $2.94 million, for a $0.01 increase over the same period of 2013. Revenues are generated primarily from new enrollment/processing fees and recurring storage fees. Other revenue consisted of primarily tissue related products which decreased 9% for the comparative six month period. Per segment, Cord's revenues increased by 3% and Bio’s revenues decreased by 4% over the prior comparative six month period. Cord’s increase was related to storage revenues increasing by over 9% for the six month year over year period. Bio’s decrease in revenues were largely impacted by a year over year adjustment to the currency exchange rate of approximately 37%, along an increase in the discounts provided for enrollment/processing fees and a decrease in the number of units processed. Cord remains focused on strategic organic growth which management hopes will provide sustainable operating cash flows and net income.
Cost of services as a percentage of revenue remained consistent at 31% for the period ended June 30, 2014 as compared to the same prior period of 2013. The cost of services includes transportation of the umbilical cord blood and cord tissue from the hospital to the lab, direct material plus labor costs for processing and cryogenic storage, and allocated rent, utility and general administrative expenses. Gross profit increased by approximately $0.01 million or 1 % to $2.04 million from the prior comparative six month period. The Company anticipates that through the growth and expansion of its Cord business, tighter cost controls and continuing efficiencies in its own facilities, direct costs should decrease and gross profits should improve.
Administrative and selling expenses for the six months ended June 30, 2014 were $2.63 million as compared to $2.28 million for the comparative period of 2013 representing a 15% increase. These expenses are primarily related to marketing/advertising, professional services, allocated facility, including utilities, expenses, and wages for personnel. A major contributor to the increase in administrative and selling expenses were legal costs associated with the Company’s ongoing litigation as more fully described in Item 1, Legal Proceedings. The Company continues to evaluate its expenses and their relationship to revenues for alignment. Depreciation and amortization are included as an administrative expense. For the 6 month period, depreciation and amortization totaled $0.36 million versus $0.39 million for the prior comparative period of 2013.
The Company's loss from operations was $0.59 million versus an operating loss of $0.25 million for the comparative period. The company's net loss was $1.47 million for the period ended June 30, 2013, an increase of $0.38 million compared to the comparative period net loss of $1.10 million, of which $0.35 million of the increase was related to the increase in administrative and selling expense.
Liquidity and Capital Resources
Total assets at June 30, 2014 were $5,647,380, compared to $6,078,183 at December 31, 2013. Total liabilities at June 30, 2014 were $7,246,549 consisting primarily of Promissory Notes, Accounts Payable and Deferred Revenue of $1,495,879, $591,019 and $2,502,210 respectively. At December 31, 2013, total liabilities were $6,448,476 consisting primarily of Promissory Notes, Accounts Payable and Deferred Revenue of $1,441,335, $592,844 and $2,607,954 respectively.
For the period ending June 30, 2014, the company had $0.70 million in cash, a decrease of 1% from $0.71 million at December 31, 2013. The Company currently collects cash receipts from operations through Cord and its subsidiary, Bio-cells. During the six month period ended June 30, 2014 there was no increase in notes payable for purposes of working capital or investment in affiliate companies. Net cash provided by operating activities for the six month period ending June 30, 2014 was $0.13 million, versus net cash provided by operating activities of $0.35 million from the prior comparative period of 2013, a decrease of $0.22 million. Net cash used in investing activities remained relatively flat for the year over prior year six month period at $0.13 million. Net cash provided by financing activities remained unchanged from the prior comparative period ending June 30, 2013. The Company did not have any financing activities during six month period ending June 30, 2014, and cash flow from operations continue to be sufficient to fund operations.
23
Since inception, the Company has financed cash flow requirements through the issuance of common stock and warrants for cash, services and loans. Over the past nine consecutive quarters, the Company has reduced operating expenses, ended investment in its foreign affiliates and received no additional funding from outside sources for working capital. The Company plans to continue to operate on its cash flows from operations by aligning its expenses with its revenues. If cash flows from operations are significantly less than projected, then the Company would need to either cut back on its budgeted spending, look to outside sources for additional funding or a combination of the two. The Company currently does not have any financing agreements in place for additional funding. If the Company is unable to access sufficient funds when needed, obtain additional external funding or generate sufficient revenue from the sale of our products, we could be forced to curtail or possibly cease operations.
Inflation
In the opinion of management, inflation has not and will not have a material effect on the Company operations in the immediate future. Management will continue to monitor inflation and evaluate the possible future effects of inflation on the Company's business and operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Disclosure not applicable to smaller reporting companies.
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, including its president and chief financial officer, have reviewed and evaluated the effectiveness of its disclosure controls and procedures as of June 30, 2014. 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 submit 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, vice 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.
24
PART II. - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On August 30, 2013, Cord Blood America, Inc. (the “Company”) filed a Complaint (the “Complaint”) in the United States District Court for the District of Utah, Central Division against Tonaquint, Inc. (“Tonaquint”) and St. George Investments, LLC (“St. George”) (collectively ”Defendants”), along with summonses in connection therewith, case number 2:13-cv-00806-PMW (the “Action”). The Company brought the Action against the Defendants alleging causes of action for Fraud in the Inducement, Breach of Agreement, Breach of the Implied Covenant of Good Faith and Fair Dealing and Unjust Enrichment. In particular, among other things, the Complaint alleges that Defendants have fraudulently induced the Company to enter into the June 27, 2012 Secured Convertible Promissory Note (“Tonaquint Note”), Securities Purchase Agreement (“Tonaquint Purchase Agreement”) and related documentation through misrepresentations including but by no means limited to: (i) representing that the Tonaquint Note would be consecutively amortized with the March 10, 2011 Secured Convertible Promissory Note issued to St. George by the Company (“St. George Note”), and that these would not become due and owing simultaneously, and (ii) that the St. George Note would be replaced by an amended note to be paid off according to a set amortization schedule.
The Company seeks relief in the form of rescission or reformation of the Tonaquint Note, St. George Note, the Warrant issued to St. George as part of the March 10, 2011 transaction, as well as related agreements and documents, an order enjoining Defendants from foreclosing on the Notes or selling the Company’s assets, punitive and other damages in an unspecified amount, costs, attorneys’ fees, interest and such other relief as the Court deems just and proper.
Subsequently, on September 25, 2013, Defendants each filed their Answer and Counterclaim in the Action. In their Counterclaims, Defendants allege causes of action against the Company for Breach of the March 10, 2011 Note and Warrant Purchase Agreement between St. George and the Company (“SGI Purchase Agreement”), Breach of the Tonaquint Purchase Agreement and Tonaquint Note, Breach of the Implied Covenant of Good Faith and Fair Dealing, and Unjust Enrichment. Defendants claim that the Company purportedly breached the SGI Purchase Agreement, Tonaquint Purchase Agreement, and Tonaquint Convertible Note, by, among other things, failing to maintain a share reserve, failing to increase the number of authorized shares, failing to call or hold a meeting to increase the authorized shares of Common Stock of the Company, and failing to make installment payments under the Tonaquint Convertible Note. Defendants seek relief in the form of damages in an unspecified amount and an order from the Court requiring the Company to establish and maintain a share reserve for the benefit of the Defendants, along with costs, attorneys’ fees and such other relief as the Court deems just and proper.
Also on September 25, 2013, the Company received from Tonaquint a Notice of Disposition of Collateral advising of Tonaquint’s intent to sell all assets of the Company at a public auction on November 4, 2013 at 11:00 a.m. PST at 1857 Helm Drive, Las Vegas, Nevada, 89119. On October 18, 2013, the Company received from Tonaquint a Notification of Cancellation, which provided notice that the aforementioned auction to sell the Company’s assets was cancelled.
On March 22, 2014, Defendants filed an Amended Counterclaim. The Amended Counterclaim added a claim for declaratory judgment, wherein Defendants seek that the Court declare the Security Agreement entered into by the Company and Tonaquint secured repayment for the Company’s purported obligations to both Tonaquint and St. George.
On May 7, 2014, the Company filed its First Amended Complaint and Jury Demand, amending its Complaint to add an additional claim for breach of contract, as well as a claim for promissory estoppel.
The Company intends to vigorously pursue its claims and defend itself against Defendants' counterclaims, and will continue to take legal action to protect the interests of the Company and its shareholders.
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, 2013. There were no material changes to those risk factors during the three months ended June 30, 2014.
25
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
In the instances described under this sub-heading, the Company relied upon Section 4(2) of the Securities Act in issuing securities. The Company’s reliance was based upon the following factors: (a) the issuance of the securities was an isolated private transaction by the Company which did not involve a public offering; (b) there were only a limited number of offerees; (c) there were no subsequent or contemporaneous public offerings of the securities by the Company; (d) the securities were not broken down into smaller denominations; and (e) the negotiations for the sale of the securities took place directly between the offeree and the Company.
St. George Investments, LLC
On March 10, 2011, the Company entered into a Note and Warrant Purchase Agreement (the "Purchase Agreement") with St. George Investments, LLC, (“St. George”) an Illinois limited liability company (the "Investor") whereby the Company issued and sold, and the Investor purchased: (i) Secured Convertible Promissory Notes of the Company in the principal amount of $1,105,500 (the "Company Note") and (ii) a Warrant to purchase common stock of the Company (the "Warrant"). The Investor paid $250,000 in cash as an initial payment to the Company and executed and delivered six separate “Secured Buyer Notes” (the “Buyer Notes”), as consideration in full for the issuance and sale of the Company Note and Warrants.
The principal amount of the Company Note is $1,105,500 ("Maturity Amount") and the Company Note is due 48 months from the issuance date of March 10, 2011. The Company Note has an interest rate of 6.0%, which would increase to a rate of 12.0% on the happening of certain Trigger Events, including but not limited to: a decline in the 10-day trailing average daily dollar volume of the common shares in the Company’s primary market to less than $30,000 of volume per day at any time; the failure by the Company or its transfer agent to deliver Conversion Shares (defined in the Company Note) within 5 days of Company’s receipt of a Conversion Notice (defined in the Company Note). The total amount funded (in cash and notes) at closing was $1,000,000, representing the Maturity Amount less an original issue discount of $100,500 and the payment of $5,000 to the Investor to cover its fees, with payment consisting of $250,000 advanced at closing and $750,000 in a series of six secured convertible Buyer Notes of $125,000 each, with interest rates of 5.0%. To date, St. George has paid the total amount due.
The Buyer Notes are secured by an Irrevocable Standby Letter of Credit (“Letter of Credit”). The Investor has also received a five year warrant entitling it to purchase 1,392,354 shares of common stock of the Company at an exercise price of $0.179. The warrant also contains a net exercise /cashless exercise provision. St. George may elect to convert all or part of the principal and any accrued unpaid interest on the Company Note on or before the aforementioned maturity date, subject to certain limitations. The conversion price under the Company Note is eighty percent (80%) of the average of the closing bid prices for the three (3) Trading Days (defined in the Purchase Agreement) with the lowest closing bids over the twenty (20) Trading Days immediately preceding the Conversion Date (defined in the Company Note), subject to adjustments as set forth in the Company Note. Due to adjustments, St. George’s current conversion ratio inserts fifty-five percent (55%) in the aforementioned formula, in place of eighty percent (80%). Pursuant to conversions made by St. George under the above-described notes in 2013, the Company issued 397,657,686 total shares to St. George to retire $776,502 of principal and interest in convertible debt which had a fair market value of $1,350,130. The principal balance due on the Note was $ 259,530 as of June 30, 2014.
Repurchase of Shares
The Company did not repurchase any of its shares during the quarter ended June 30, 2014.
Tonaquint, Inc. claims events of default on the Secured Convertible Promissory Note dated June 27, 2012 issued to the Company. The alleged events of default include a purported failure of the Company to increase the number of authorized shares and an alleged failure of the Company to deliver pre-installment conversion shares. The Company disputes Tonaquint's claims of default, which are the subject of litigation, as described more fully in Item 1. Legal Proceedings.
NONE
26
ITEM 6. EXHIBITS
The following documents are included as exhibits to this Annual Report:
| EXHIBIT | DESCRIPTION | |
| 2.0 | Form of Common Stock Share Certificate of Cord Blood America, Inc. (1) | |
| 3.1(i) | Amended and Restated Articles of Incorporation of Cord Blood America, Inc. (1) | |
| 3.1(ii) | Articles of Amendment to Articles of Incorporation (5) | |
| 3.1(iii) | Articles of Amendment to the Articles of Incorporation of Cord Blood America, Inc.(6) | |
| 3.1(iv) | Articles of Amendment to the Articles of Incorporation of Cord Blood America, Inc. (15) | |
| 3.1(v) | Articles of Amendment to the Articles of Incorporation of Cord Blood America, Inc. (16) | |
| 3.1(vi) | Articles of Amendment to the Articles of Incorporation of Cord Blood America, Inc. (21) | |
| 3.2(i) | Amended and Restated Bylaws of Cord Blood America, Inc. (1) | |
| 10.0 | Patent License Agreement dated as of January 1, 2004 between PharmaStem Therapeutics, Inc. and Cord Partners, Inc. (2) | |
| 10.1 | Board Compensation Plan (3) | |
| 10.2 | Employment Agreement between the Company and Joseph Vicente (17) | |
| 10.3 | Lease for Las Vegas Facility (9) | |
| 10.4 | 2011 Flexible Stock Option Plan (15) | |
| 10.5 | Compensatory Arrangement for Certain Officers Effective July 13, 2009, Stock Options (7) | |
| 10.6 | Compensatory Arrangement for Certain Officers Effective December 31, 2009, Stock Options (8) | |
| 10.7 | License and Cooperation Agreement with AXM Pharma effective March 31, 2010 (10) | |
| 10.8 | Compensatory Arrangement for Certain Officers Executed July 1, 2010, Stock Options (11) | |
| 10.9 | Executed Stock Purchase Agreement on September 20, 2010 to Acquire Majority Interest in BioCordcell Argentina, SA. (12) | |
| 10.10 | On March 20, 2011 Cord Blood America, Inc. Entered into a Note and Warrant Purchase Agreement with St. George Investments. (13) | |
| 10.11 | Departure of Directors or Appointment Certain Officers; Election and of Directors, Appointment of Certain Officers on May 15, 2012 (17) |
27
| 10.12 | Entered into Agreement on June 22, 2012 with Shareholders of BioCells (18) | |
| 10.13 | On June 29, 2012, Cord Blood America, Inc. closed a Securities Purchase Agreement with Tonaquint, Inc.(19) | |
| 10.14 | On June 29, 2012, Cord Blood America, Inc. closed a Final and Full Payment Agreement with JMJ Financial, Inc. (19) | |
| 10.15 | Employment Agreement between the Company and Stephen Morgan (20) | |
| 10.16 | On May 20, 2013 Cord Blood America, Inc. announced a new service offering. (22) | |
| 10.17 | On August 30, 2013 Cord Blood America, Inc. filed a complaint against St. George Investments, LLC and Tonaquint, Inc. (23) | |
| 10.18 | On September 25, 2013, St. George Investments, LLC. and Tonaquint, Inc. filed an Answer and Counterclaim against Cord Blood America, Inc. Additionally, Cord Blood America, Inc. received a Notice of Disposition of Collateral to sell its assets at a public auction. (24) | |
| 10.19 | On October 18, 2013, Cord Blood America, Inc. received from Tonaquint, Inc. a Notice of Cancellation to sell the Company assets. (25) | |
| 10.20 | On December 30, 2013, the Company engaged De Joya Griffith, LLC (the “New Accountant”) to serve as the Registrant’s independent registered public accountants for the fiscal year ended December 31, 2013. (26) | |
| 10.21 | Amended lease for Las Vegas facility (27) | |
| 21 | List of Subsidiaries (4) | |
| 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 |
(1) Filed as an exhibit to Registration Statement on Form 10-SB filed on May 6, 2004.
(2) Filed as an exhibit to Amendment No. 1 to Form 10-SB filed on August 23, 2004.
(3) Filed as an exhibit to Current Report on Form 8-K filed on February 8, 2006.
(4) Filed as an exhibit to Current Report on Form 8-K filed on June 13, 2008
(5) Filed as an exhibit to Current Report on Form 8-K filed on August 29, 2008
(6) Filed as an exhibit to the Current Report on Form 8-K filed on March 31, 2009
(7) Filed as an exhibit to the Current Report on Form 8-K filed on July 17, 2009
(8) Filed as an exhibit to Current Report on Form 8-K filed on January 7, 2010
(9) Filed as an exhibit to Current Report on Form 10-K filed on March 31, 2010
(10) Filed as an exhibit to Current Report on Form 10Q filed on May 5, 2010
(11) Filed as an exhibit to Current Report on Form 8-K filed on July 7, 2010
28
(12) Filed as an exhibit to Current Report on Form 8-K filed on September 24, 2010
(13) Filed as an exhibit to Current Report on Form 8-K filed on March 21, 2011
(14) Filed as an exhibit to Current Report on Form 10Q filed on May 23, 2011
(15) Filed as an exhibit to Current Report on Form S-8 filed on June 3, 2011
(16) Filed as an exhibit to Current Report on Form 8K filed on September 12, 2011
(17) Filed as an exhibit to Current Report on Form 8-K filed on May 15, 2012
(18) Filed as an exhibit to Current Report on Form 8-K filed on June 25, 2012
(19) Filed as an exhibit to Current Report on Form 8-K filed on July 6, 2012.
(20) Filed as an exhibit to Current Report on Form 10Q filed on August 14, 2012
(21) Filed as an exhibit to Current Report on Form 8K filed on September 27, 2012
(22) Filed as an exhibit to Current Report on Form 8K filed on May 20, 2013.
(23) Filed as an exhibit to Current Report on Form 8K filed on September 3, 2013
(24) Filed as an exhibit to Current Report on Form 8K filed on October 1, 2013
(25) Filed as an exhibit to Current Report on Form 8K filed on October 22, 2013
(26) Filed as an exhibit to Current Report on Form 8K filed on January 10, 2014
(27) Filed as an exhibit to Current Report on Form 10K filed on March 31, 2014
29
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| CORD BLOOD AMERICA, INC. | |||
| Date: August 14, 2014 | By: | /s/ Joseph R. Vicente | |
| Joseph R. Vicente | |||
| Chairman and President | |||
| (Principal Executive Officer and | |||
| Principal Financial and Accounting Officer) | |||
30