10-Q 1 cbai_10q.htm QUARTERLY REPORT cbai_10q.htm


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 March 31, 2011
 
or
 
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT
 
for the transition period from _________ to _________
 
———————
CORD BLOOD AMERICA, INC.
(Exact Name of Small Business Registrant as Specified in its Charter)
———————

FLORIDA
 
000-50746
 
65-1078768
(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 March 31, 2011 6,746,199,634 exclusive of treasury shares.  (After a May 9, 2011 reverse split of common shares, on May 10, 2011, there were 68,128,866 common shares and no preferred shares outstanding).



 
 

 
CORD BLOOD AMERICA, INC. AND SUBSIDIARIES
 
INDEX TO FORM 10-Q
 
PART I. FINANCIAL INFORMATION      
         
Item 1.  Condensed Consolidated Financial Statements (Unaudited)      1  
           
  Condensed Consolidated Balance Sheets (unaudited) March 31, 2011 and December 31, 2010 (audited)     1  
           
  Condensed Consolidated Statements of Operations (unaudited) for the three months ended March 31, 2010 and March 31, 2011      2  
           
   Condensed Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31, 2010 and March 31, 2011      3  
           
  Notes to Condensed Consolidated Financial Statements (unaudited)      5  
           
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations      18  
           
 Item 3. Quantitative and Qualitative Disclosures About Market Risk      22  
           
 Item 4T.  Controls and Procedures     22  
           
PART II. OTHER INFORMATION        
           
Item 1. Legal Proceedings      23  
           
Item 1A. Risk Factors     24  
           
Item 2.  Unregistered Sales Of Equity Securities And Use Of Proceeds      24  
           
Item 3. Defaults Upon Senior Securities      24  
           
Item 4. Reserved      24  
           
Item 5. Other Information      24  
           
Item 6. Exhibits     24  
           
Signatures      27  
 
 
 

 
 
PART I. FINANCIAL INFORMATION
 
ITEM 1.  CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 
CORD BLOOD AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2011 (UNAUDITED) AND DECEMBER 31, 2010 (Audited)

ASSETS
 
Current assets:
 
March 31,
2011
   
December 31,
2010
 
Cash
 
$
403,021
   
$
347,258
 
Accounts receivable, net of allowance for doubtful accounts of $ 9,760 and $10,000
   
588,998
     
540,279
 
Prepaid expenses
   
226,753
     
141,300
 
Other current assets
   
289,289
     
72,560
 
     Notes receivable, related party, current
   
320,416
     
300,000
 
Total current assets
   
1,828,477
     
1,401,397
 
Property and equipment, net of accumulated depreciation and amortization of  $277,893  and $248,404
   
622,961
     
571,431
 
Customer contracts and relationships, net of accumulated amortization of $ 2,110,317 and $1,949,377
   
4,877,642
     
5,038,582
 
Investments and related party receivables
   
593,861
     
125,000
 
Goodwill
   
244,053
     
244,053
 
Total assets
 
$
8,166,994
   
$
7,380,463
 
LIABILITIES AND STOCKHOLDERS’ DEFICIT
 
Current liabilities:
               
Accounts payable
 
$
        1,042,306
   
$
967,626
 
Accrued expenses
   
1,110,082
     
1,338,115
 
Deferred rent
   
86,366
     
112,231
 
Deferred revenue
   
1,839,333
     
1,835,792
 
Derivative liability
   
717,320
     
238,789
 
Promissory notes payable, current, net of unamortized discount of  $0 and $0
   
1,490,400
     
1,490,400
 
Total current liabilities
   
6,285,807
     
5,982,953
 
Promissory notes payable, net of unamortized discount of  $864,560 and 251,903
   
1,803,848
     
651,217
 
Total liabilities
   
8,089,655
     
6,634,170
 
                 
Stockholders’ deficit:
               
Preferred stock, $.0001 par value, 5,000,000 shares authorized, no shares issued and outstanding
   
––
     
––
 
Common stock, $.0001 par value, 250,000,000 shares authorized, 67,461,996  and  62,838,832  shares issued and outstanding, inclusive of treasury shares
   
674,620
     
628,389
 
Additional paid-in capital
   
44,061,189
     
42,892,449
 
Common stock held in treasury stock, 20,000 shares
   
(599,833
)
   
(599,833
)
Accumulated Other Comprehensive income (loss)
   
(9,627
   
(551
Accumulated equity (deficit)
   
(44,629,856
)
   
(42,789,936
)
Total cord blood stockholders’ equity (deficit)
   
(503,507
)
   
130,518
 
Non-controlling interest
   
580,846
     
615,775
 
      Total stockholders’ equity (deficit)
   
77,339
 
   
746,293
 
           Total liabilities and stockholders’ deficit
 
$
8,166,994
   
$
7,380,463
 
 
See the accompanying notes to condensed consolidated financial statements.
 
 
1

 
 
CORD BLOOD AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE 3 MONTHS ENDED MARCH 31, 2011 AND 2010

 
 
THREE-MONTH
PERIOD
   
THREE-MONTH
PERIOD
 
 
 
ENDED
   
ENDED
 
 
 
MARCH 31,
   
MARCH 31,
 
 
 
2011
   
2010
 
Revenue
  $ 1,457,912     $ 839,343  
Cost of services
    (471,202 )     (415,366 )
Gross profit
    986,710       423,977  
Administrative and selling expenses
    (2,130,554 )     (1,750,262 )
Start-up Costs
 
      (820,471 )
Loss from operations
    (1,438,844 )     (2,146,756 )
Interest expense and change in derivative liability
    (730,869 )     (432,071 )
Net loss before income taxes
    (1,874,713 )     (2,578,827 )
Income taxes
    ––       ––  
Non-controlling interest in income
    34,929       ––  
Net loss
    (1,839,784 )     (2,578,827 )
Basic and diluted loss per share
  $ (0.00 )   $ (0.00 )
Weighted average common shares outstanding
    65,841,079       50,551,886  
 
See the accompanying notes to condensed consolidated financial statements.
 
 
2

 

CORD BLOOD AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2011 AND 2010
 
   
THREE-MONTH
   
THREE-MONTH
 
   
PERIOD ENDED
   
PERIOD ENDED
 
   
MARCH 31,
   
MARCH 31,
 
   
2011
   
2010
 
Cash flows from operating activities:
           
Consolidated Net loss
  $ (1,874,713 )   $ (2,578,827 )
     Adjustments to reconcile net loss to net cash used in operating activities:
               
Shares issued (cancelled) relating to services, net
    (23,050 )     427,300  
Shares issued to employees, directors and consultants
    30,000       30,000  
Amortization of loan discount
    220,558       32,700  
Depreciation and amortization
    192,181       144,411  
Stock Option Expense
    96,089       551,603  
Change in value of derivative liability
    34,460       (5,373 )
Bad Debt (Recovery)
    (480 )     ––  
Start-up costs for Stellacure
    ––       820,471  
Foreign Currency Translation
    (9,076 )     ––  
DWAC Settlement liabilities
    671,386       ––  
Net change in operating assets and liabilities
    (546,659 )     (544,456 )
Net cash used in operating activities
    (1,209,304 )     (1,122,171 )
 
               
Cash flows from investing activities:
               
Payments for purchase of property and equipment
    (82,763 )     (86,800 )
Loan Receivable issued to China Stem Cells
    (250,000 )     ––  
Loan Receivable issued to VidaPlus
    (218,861 )     ––  
Net cash used in investing activities
    (551,624 )     (86,800 )
 
               
Cash flows from financing activities:
               
Issuance of common shares for cash
    566,691       150,000  
Proceeds from issuance of notes payable
    1,250,000       1,200,000  
Proceeds from advances from shareholders
    ––       (21,419 )
Net cash provided by financing activities
    1,816,691       1,328,581  
 
               
Net increase in cash
    55,763       119,610  
Cash balance at beginning of period
    347,258       716,576  
Cash balance at end of period
  $ 403,021     $ 836,186  
 
See the accompanying notes to condensed consolidated financial statements.
 
 
3

 
 
CORD BLOOD AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLDIATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2011 AND 2010

 
 
THREE-MONTH
PERIOD
   
THREE-MONTH
PERIOD
 
 
 
ENDED
   
ENDED
 
 
 
MARCH 31,
   
MARCH 31,
 
 
 
2011
   
2010
 
Supplemental disclosures:
               
Cash paid for interest
 
$
––
   
$
 
                 
Supplemental disclosures of non-cash investing and financing activities:
   
 
     
 
 
Debt repaid through issuance of common stock
 
$
496,125
   
$
38,819
 
 
See the accompanying notes to condensed consolidated financial statements.
 
 
4

 
 
CORD BLOOD AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2011
 
Note 1. Organization and Description of Business
 
Cord Blood America, Inc. ("CBAI"), 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 is primarily a holding company whose wholly-owned subsidiaries include Cord Partners, Inc., CorCell Co. Inc., CorCell Ltd., (“Cord”), CBA Professional Services, Inc. D/B/A BodyCells, Inc. ("BodyCells"), CBA Properties, Inc. ("Properties"), and Career Channel Inc, D/B/A Rainmakers International ("Rain"). In March 2010, CBAI purchased a majority interest in Stellacure GmbH (“Stellacure”). In September 2010, CBAI purchased a majority interest in Biocordcell Argentina S.A. (“Bio”). CBAI and its subsidiaries engage in the following business activities:
 
·  
Cord specializes in providing private cord blood stem cell preservation services to families.
 
·  
Stellacure GmbH specializes in providing cord blood stem cell preservation services to families in Germany, Spain and Italy.
 
·  
Biocordcell Argentina S.A. specializes in providing cord blood stem cell preservation to families in Argentina, Uruguay and Paraguay.
 
·  
BodyCells is a developmental stage company and intends to be in the business of collecting, processing and preserving peripheral blood and adipose tissue stem cells allowing individuals to privately preserve their stem cells for potential future use in stem cell therapy.
 
·  
Properties was formed to hold the corporate trademarks and other intellectual property.
 
·  
Rain has specialized in creating direct response television and radio advertising campaigns, including media placement and commercial production.  Management has reduced the activities of Rain, terminated its former employees, and by the end of 2010, was no longer seeking additional business.  This is consistent with management’s decision to focus its attention exclusively on the stem cell storage business and related activities.
 
Note 2. Summary of Significant Accounting Policies
 
Basis of Presentation and Going Concern
 
The accompanying unaudited condensed consolidated financial statements of Cord Blood America, Inc. have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. The condensed consolidated financial statements reflect all normal recurring adjustments, which, in the opinion of management, are considered necessary for a fair presentation of the results for the periods shown. The results of operations for the periods presented are not necessarily indicative of the results expected for the full fiscal year or for any future period. The information included in these unaudited condensed consolidated financial statements should be read in conjunction with Management's Discussion and Analysis and Plan of Operations contained in this report and the audited condensed consolidated financial statements and accompanying notes included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2010.
 
The accompanying condensed 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 condensed 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.
 
Management has been able, thus far, to finance the losses and the growth of the business, through private placements of its common stock, the issuance of debt and proceeds from the Equity Distribution Agreement and Securities Purchase Agreement, and expects to continue to raise funds through debt and equity instruments. CBAI is continuing to attempt to increase revenues within its core businesses and through acquiring other businesses in the stem cell industry. In addition, the Company has taken steps to reduce its overall spending through the reduction of our labor force. The ongoing execution of CBAI's business plan is expected to result in operating losses over the next twelve months. There are no assurances that CBAI will be successful in achieving its goals of increasing revenues and reaching profitability.
 
 
 
5

 
 
Basis of Consolidation
 
The condensed consolidated financial statements include the accounts of CBAI and its wholly-owned and majority-owned subsidiaries, Cord, Stellacure GmbH, Biocordcell Argentina S.A., BodyCells, Properties and Rain. 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 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 March 31, 2011, the Company adjusted its derivative liability to its fair value, and reflected the change in fair value, in its statement of operations.
 
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, Stellacure 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.

Cost of Services
 
Costs for Cord, Stellacure, and Bio are incurred as umbilical cord blood is collected. These costs include the transportation of the umbilical cord blood from the hospital to the lab, the labs’ processing fees, and royalties. The Company expenses costs in the period incurred. Costs for Rain include commercial production costs, lead generation costs and media buys.
 
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 non-controlling equity investment in ViviCells International, Inc., a privately held company in the business of providing blood stem cell and adult peripheral blood stem cell preservation services.  The Company utilizes the equity method of accounting as it owns more than 20% of the outstanding common stock and has the ability to exercise significant influence over this company.  As such, the investment is carried at cost less Cord’s proportionate share of ViviCells net loss for the period since investment.  At March 31, 2011, the carrying amount of this investment is $0.
 
Cord has a minority equity investment in China Stem Cells, Ltd., a Cayman Islands company, and a privately held company organized to conduct a stem cell storage business in China.  Cord also has a minority equity investment in VidaPlus, an umbilical cord processing and storage company.  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.
 
 
 
6

 
 
Fair Value Measurements
 
CBAI measures its financial assets and liabilities at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e. exit price), in an orderly transaction between market participants at the measurement date. The Company categorizes its assets and liabilities measured at fair value 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 March 31, 2011 for assets and liabilities measured at fair value on a recurring basis:
 
   
Level 1
   
Level 2
   
Level 3
   
Total
 
Cash and cash equivalents                          
 
$
403,021
 
 
$
   
$
— 
   
$
403,021 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivative liability
 
$
       —
 
 
$
      —
 
 
$
  (717,320)
 
 
$
  (717,320)
 

Derivative liability was valued under the Black-Scholes model, consistent with last year, with the following assumptions:
 
Risk free interest rate
 
0.20% to 1.28%
 
Expected life
 
0 to 4 years
 
Dividend Yield
  0%  
Volatility
 
0% to 165%
 
 
The following is a reconciliation of the derivative liability:
 
Value at December 31, 2010
  $ 238,789  
Issuance of instruments
  $ 677,740  
Increase in Value
  $ 34,460  
Reclassification
  $ (233,669 )
Value at March 31, 2011
  $ 717,320  
 
Comprehensive Income (Loss)
 
The following is a schedule of comprehensive income (loss) for three months ended March 31, 2011 and 2010:
 
   
2011
   
2010
 
Net income (loss)
  $ (1,839,784 )   $ (2,578,827 )
Foreign currency translation gain (loss)
    (9,076 )     ––  
Comprehensive income (loss)
  $ (1,848,860 )   $ (2,578,827 )
.
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.

 
7

 
 
Recently Issued Accounting Pronouncements
 
In January, 2010, the FASB issued ASU 2010-06, Improving Disclosures about Fair Value Measurements. The standard amends ASC Topic 820, Fair Value Measurements and Disclosures to require additional disclosures related to transfers between levels in the hierarchy of fair value measurement. The standard does not change how fair values are measured. The standard is effective for interim and annual reporting periods beginning after December 15, 2009. The adoption of ASU 2010-06 did not have a material impact on our consolidated financial statements.

In October 2009, the FASB issued authoritative guidance on multiple-deliverable revenue arrangements. This new guidance amends the existing criteria for separating consideration received in multiple-deliverable arrangements and requires that arrangement consideration be allocated at the inception of the arrangement to all deliverables based on their relative selling price. The guidance establishes a hierarchy for determining the selling price of a deliverable which is based on vendor-specific objective evidence, third-party evidence, or management estimates. Expanded disclosures related to multiple-deliverable revenue arrangements are also required. This guidance is effective for the Company beginning fiscal year 2011, with early adoption permitted. Upon adoption, the guidance may be applied either prospectively from the beginning of the fiscal year for new or materially modified arrangements, or it may be applied retrospectively.  The adoption of this guidance did not have a material impact on our consolidated financial statements.

In September 2009, the FASB amended ASC 860, (formerly SFAS No. 166, Accounting for Transfers of Financial Assets, and an amendment to SFAS No. 140). ASC 860 eliminates the concept of a “qualifying special-purpose entity,” changes the requirements for derecognizing financial assets, and requires additional disclosures in order to enhance information reported to users of financial statements by providing greater transparency about transfers of financial assets, including securitization transactions, and an entity’s continuing involvement in and exposure to the risks related to transferred financial assets. ASC 860 is effective for fiscal years beginning after November 15, 2009. The adoption of ASC 860 did not have a material impact on our consolidated financial statements.

In September 2009, the FASB amended ASC 810 (formerly Statement of Financial Accounting Standards No.167, Amendments to FASB Interpretation No. 46(R)). The amendments include: (1) the elimination of the exemption for qualifying special purpose entities, (2) a new approach for determining who should consolidate a variable-interest entity, and (3) changes to when it is necessary to reassess who should consolidate a variable-interest entity. ASC 810 is effective for the first annual reporting period beginning after November 15, 2009 and for interim periods within that first annual reporting period. The adoption of ASC 810 did not have a material impact on our consolidated financial statements.

In August 2009, the FASB issued ASU 2009-15, which changes the fair value accounting for liabilities. These changes clarify existing guidance that in circumstances in which a quoted price in an active market for the identical liability is not available, an entity is required to measure fair value using either a valuation technique that uses a quoted price of either a similar liability or a quoted price of an identical or similar liability when traded as an asset, or another valuation technique that is consistent with the principles of fair value measurements, such as an income approach (e.g., present value technique). This guidance also states that both a quoted price in an active market for the identical liability and a quoted price for the identical liability when traded as an asset in an active market when no adjustments to the quoted price of the asset are required are Level 1 input fair value measurements. This ASU became effective for us on January 1, 2010. Adoption of this ASU did not have a material impact on our consolidated financial statements.

 
8

 
 
Note 3. Summary of Acquisitions
 
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 is 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).  The first installment of this second tranche was completed during the Quarter at an estimated loan amount of $15,000.  Converting the investment from a loan into equity for tranche two will take place every 12 months, and the obligation will have been met in full after 1,000 samples have been processed and stored.  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.  The second and third tranches contain conditional components for funding to continue from CBAI, including payments to Stellacure by Vida to be current with previously agreed to terms between the parties. The Company believes that further support of a key channel partner to Stellacure provides additional opportunities for expansion throughout Europe.
 
Reproductive Genetics Institute

On February 24, 2011, the Company acquired the following assets; 593 umbilical cord blood samples and all related file documents, four (4) cryogenic storage tanks, and two computers from Reproductive Genetics Institute, Inc. (RGI) for $76,000 in cash.  The Company paid an additional $48,885 to RGI to cover claims related to ViviCells International for a total $124,885.  In March 2011, the assets acquired were relocated to the Company’s Las Vegas laboratory.
 
Note 4. Notes and Loans Payable
 
At March 31, 2011 and December 31, 2010, notes and loans payable consist of:
 
 
 
March 31,
2011
   
December 31,
2010
 
Convertible Promissory Note Payable to JMJ Financial, secured by $1.5 million of the Company's assets, one time interest charge of 10.33%, due January 19, 2013
  $
1,317,883
    $
658,121
 
Convertible Promissory Note Payable to JMJ Financial, secured by $.750 million of the Company's assets, one time interest charge of 10.67%, due April 7, 2013
   
700,025
     
99,975
 
Senior Secured Note Payable to Shelter Island Opportunity Fund, LLP, effective interest rate of 16% per annum, payable in six monthly installments of $248,400 April 2011 through September 2011
   
1,490,400
     
1,490,400
 
Convertible Promissory Note Payable to JMJ Financial, secured by $.750 million of the Company's assets, one time interest charge of 10.67%, due October 7, 2013
   
145,025
     
145,025
 
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
   
355,500
     
––
 
Convertible Promissory Note Payable to JMJ Financial, secured by $1.0 million of the Company's assets, one time interest charge of 10.0%, due  January 12, 2014
   
149,975
     
––
 
             
––
 
 
   
4,158,808
     
2,393,521
 
Less: Unamortized Discount
   
(864,560
)
   
(251,904
 
 
$
3,294,248
   
$
2,141,617
 

 
9

 
 
Note 5. Commitments and Contingencies
 
JMJ Financial

On January 12, 2011, the Company issued a $1,050,000 “Convertible Promissory Note” to JMJ Financial (“JMJ”), a private investor (the “2011 Note”).    The 2011 Note bears interest in the form of a onetime interest charge of 10%, payable with the Note’s principle amount on the maturity date, January 12, 2014.  All or a portion of the 2011 Note principle and interest is convertible at the option of JMJ from time to time, into shares of the Company’s common stock, originally fixed at a per share conversion price equal to 85% of the average of the 5 lowest traded prices for the Company’s common stock in the 20 trading days previous to the effective date of each such conversion. At the same time, JMJ issued and delivered to the Company, a  “Secured & Collateralized Promissory Note” dated January 12, 2011, (the “JMJ Note”), which served as sole consideration to the Company for the Company’s issuance of  the 2011 Note to JMJ.   The JMJ Note is in the principle amount of   $1,000,000,  bears interest in the form of a onetime interest charge of 10.5%, and interest is payable with the JMJ Note’s principle on its maturity date, January 12, 2014..  The JMJ Note is secured by JMJ assets in the form of money market fund or similar equivalent having a value of at least $1,000,000.

Under a previous outstanding Convertible Promissory Note having similar terms as described above and issued to JMJ and funded by JMJ in the amount of approximately $1,750,000 (the “Earlier Notes”), the Company was obligated to deliver common shares which could be placed into the  Automated System for Deposits and Withdrawals of Securities (known as “DWAC”).  At present the DWAC system is not available to Company shareholders for newly issued shares of the Company’s common stock.  As a result of this breach, on February 8, 2011, the Company entered into a settlement agreement with JMJ which contained the following term, among others, in which the Company agreed to pay $671,385 to JMJ, both as liquidated damages to JMJ, and in consideration for an additional $1 million in financing, which has been added to the principal amount of the Earlier Note.
 
Shelter Island Warrants And Puts
 
After extensive negotiations with Shelter Island, the parties entered into a transaction on July 21, 2010, whereby the 36 million shares Warrant Agreement was canceled, and the obligation represented by the Put Option Agreement was satisfied by the Company's delivery  to Shelter Island of a new Senior Secured Note in the principal amount of $1,590,400  (the "Replacement Note"). With this agreement, the derivative liability of $1,608,658 was reduced to $1,590,400 and then reclassified on the balance sheet as a note payable. The Replacement Note matures on September 30, 2011, bears interest at 16% per annum, interest-only is due, for the period July 31, 2010 through January 31, 2011, and is payable in six equal monthly installments of $265,067 each, commencing January 31, 2011. The Company, at its option, may pay the principal amount due on the Replacement Note by the issuance of unregistered Company Common Stock, to be valued at an agreed conversion rate that is fixed for this purpose, subject to certain adjustments, at 85% of the market value of the Company's common stock, calculated based on the five lowest daily closing prices for the stock over certain specified 20 day periods.
 
On March 17, 2011, the parties entered into an Amendment for above said Replacement Note.  The Amendment extends the commencement date of the six monthly installments each in the amount of $ 248,400, to be paid at the option of the Company in cash or stock, to April 30, 2011 in exchange for continued interest payments for February, March and April, along with a cash payment of $25,000 as an adjustment to the principal balance.  Other terms of the Replacement Note remain for the most part the same.
 
St. George Investments
 
On March 10, 2011, Cord Blood America, Inc. (the "Company") entered into a Note and Warrant Purchase Agreement (the "Purchase Agreement") with St. George Investments, LLC, 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 will be $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%.  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 139,925,374 shares of common stock of the Company at an exercise price of $.00179, subject to adjustment in the case of reverse stock split. The warrant also contains a net exercise /cashless exercise provision.
 
 
10

 
 
 
VidaPlus
 
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. Refer to Note 3.
 
Patent License Agreement
 
PharmaStem Therapeutics holds certain patents relating to the storage, expansion and use of hematopoietic stem cells. In the past five 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 may, on a non-exclusive basis, collect, process and store cord blood utilizing PharmaStem technology and processes covered by its patents for so long as the patents may remain in effect. All of the patents expired in 2010. 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 royalties, 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 has ceased paying all royalties to PharmaStem.  The patents have been declared void.  The decision is currently under a final appeal. As of March 31, 2011, the Company has included approximately $226,000 in accounts payable to account for this liability since 2008.  This amount may be reversed in the future pending final decision on appeal.
 
Contingencies
 
Cryo-cell International
 
On December 16, 2010, Cryo-Cell International, Inc. (“Cryo International”) filed an action against Cord Blood America, Inc. (the “Company”) in The Sixth Judicial Circuit Court, Pinellas County, Florida alleging claims for: tortuous interference with a business relationship; misappropriate of trade secrets and confidential information in violation of the Florida Uniform Trade Secrets Act, § 688.001, Et. Seq., Fla. Stat.; dilution of trademark in violation of § 495.151, Fla. Stat.; and Common Law Unfair Competition.   Cryo International, a competitor of the Company’s, has filed the suit apparently in an effort to stop the Company’s pursuit of the acquisition of Cryo-Cell de Mexico, S.A. de C.V. (“Cryo Mexico”), for which the Company has in place a non binding Letter of Intent for acquisition.    (see Subsequent Events).  In addition, along with its Complaint, Cryo International filed an Emergency Motion for a Temporary Injunction.  In January 2011, the Company filed a Memorandum of Law in Opposition to Cryo International’s Emergency Motion for Temporary Injunction, and a Rule 1.140(b) Motion to Dismiss Cryo International’s complaint, as well as amendments to these documents.  The Emergency Motion for a Temporary Injunction, Motion to Dismiss and related filings were heard by the Court on January 14, 2011.  The Court granted the Company’s Motion to Dismiss, finding that Cryo Mexico is an indispensible party to the lawsuit and granted Cryo International leave to file an amended complaint to add Cryo Mexico as a defendant to the lawsuit and to serve Cryo Mexico with the required legal papers.  Cryo International filed an Amended Complaint on January 20, 2011.  The Amended Complaint added Cryo Mexico as a defendant to the action, asserted all of the original causes of action against the Company, and added a claim for Breach of a License Agreement against Cryo Mexico and a claim for Unfair and Deceptive Trade Practices in violation of § 501.201, Et. Seq. Fla. Stat. against Cryo Mexico and the Company.  Cryo International also filed an amended motion for temporary injunction.  In response, Defendant Cryo Mexico filed a Motion to Dismiss for Insufficiency of Service of Process and a Motion to Dismiss for Improper Forum and Lack of Personal Jurisdiction, and the Company filed a Rule 1.140(b) Motion Regarding Amended Complaint, seeking dismissal of the Amended Complaint.  The Defendants’ Motions to Dismiss and Defendant Cryo Mexico’s Motion to Quash were heard on March 14, 2011 and thereafter, the Court granted these motions in favor of the Company and Cryo Mexico.  Subsequently, Cryo International filed a Motion for Rehearing, which said motion is to be heard on September 7, 2011.
 
Company management believes that there is no merit to the claims filed by Cryo International and the Company will continue to vigorously defend against these claims.
 
 
11

 
 
JMJ Financial and Third Party
 
In connection with certain of the outstanding convertible promissory notes payable to JMJ Financial and in connection with a securities purchase agreement previously entered into with a third party for the purchase of common stock of the Company, the Company was obligated to deliver common shares which could be placed into the Automated System for Deposits and Withdrawals of Securities (known as “DWAC”).  As of December 14, 2010 and to date, the DWAC system is not available to Company shareholders for newly issued shares of the Company’s common stock.  This resulted in a breach of the convertible promissory notes payable to JMJ Financial and the securities purchase agreement.  As a result of the breach of the promissory notes and in exchange for JMJ to fund additional sums to the Company, on February 8, 2011, the Company entered into a settlement agreement calling for liquidated damages and compensation for the additional funding in the amount of $671,386 to be added on to the principal balance of the outstanding convertible promissory notes payable. In accordance with ASC 450, the Company has accrued $338,886, which was estimated to be the portion of the settlement allocated to the liquidated damages resulting from the breach of contract on December 14, 2010. As a result of the breach of the securities purchase agreement, on January 19, 2011, the Company entered into a settlement agreement with the third party calling for liquidated damages to be calculated and paid based on a % of the value of the Company’s common stock over a period of time less (a) the value received by the third company in their subsequent sale of the Company’s shares and less (b) the value of the shares the third party holds at the date the DWAC system becomes available, based on the value of the Company’s shares on such date. Payments under this agreement are due monthly and a final payment due ten days after the DWAC system becomes available. In accordance with ASC 450, the Company has accrued $150,000 as of December 31, 2010 and accrued an additional $75,000 in the quarter ending March 31, 2011.

ViviCells International Acquisition

On May 5, 2010, the Company executed and funded a Debtor-In-Possession loan agreement with ViviCells International, Inc. a Florida corporation (“Vivi” or the “Debtor”), NeoCells, Inc., an Illinois corporation, and AdultCells, Inc., an Illinois corporation, (jointly and severally referred to as the “Subsidiaries”), for $200,000 secured by  a super priority lien on the Debtor’s  and Subsidiaries’ assets.  As additional consideration for this loan, the Company received 21% of the Debtor’s outstanding Common Stock.  The $200,000 loan carries interest at 10% per annum, with principal and all accrued interest all due and payable on March 15, 2011.   In September 2010, the Company acquired an approximately $800,000 secured obligation of the Debtor held by a junior lien holder in  ViviCell’s bankruptcy proceeding, in exchange for the private issuance of 11,111,111 restricted shares of its Common stock  to the holder of this secured obligation.

On October 20, 2010, the Company  as a co-proponent  proposed a Plan of Reorganization for Vivi under the United States Bankruptcy Code, pursuant to which the Company proposed to acquire an additional 74% of the outstanding shares of Vivi, which would give it in excess of  94% ownership in ViVi, in exchange for the issuance of up to 64,488,889 shares of the Company’s common stock, and the Company’s agreement to make an additional senior secured loan in the amount of $300,000 to Vivi as working capital upon consummation of the Plan. Between June 16, 2010 and December 14, 2010, the Company accelerated the date of its loan commitment, and loaned $100,000 out of the proposed $300,000 loan amount to Vivi in advance of the Plan confirmation, secured under the super priority lien.   On February 16, 2011, a hearing on Confirmation of this proposed plan of reorganization was heard and approved.   The plan was scheduled to be Effective as of April 1, 2011.  However, Vivi has subsequently advised the Company that it would be unable to supply the full 94% plus ownership of Vivi’s outstanding capital stock to the Company as required under the Plan.  On April 13, 2011, the Company filed a Non Consummation of Confirmed Plan with the United States Bankruptcy Court.   The Company pursued its rights to foreclose as the holder of a super priority lien against all assets of NeoCells, ViviCells’ subsidiary. Then, on April 22, 2011, ViviCells filed an adversary proceeding against the Company, in the same United States Bankruptcy Court, Central District of California (Santa Ana), where ViviCells bankruptcy proceedings had been taking place.  ViviCells followed this by filing a Motion for a temporary restraining order on April 25, 2011, seeking to halt the foreclosure by the Company on the assets of NeoCells. The complaint and the motion were amended on May 2, 2011, primarily by adding NeoCells, in addition to ViviCells, as a party to the adversary proceeding and the motion. The motion was heard on May 2, 2011. The motion was denied, and accordingly, the Company proceeded on May 2, 2011 at 1:00 pm (CST) to foreclose against all assets of NeoCells.  At the public disposition of all property owned by NeoCells, the Company as a secured creditor bid $320,000 in offset debt, and acquired all right, title and interest in said property free and clear of any liens, security interests and encumbrances which are junior and subordinate to the Company’s security interest as a secured creditor.
 
 
12

 

At the present time, the adversary proceeding remains outstanding.  Company management believes, however, that there is no merit to the claims filed by ViviCells and NeoCells, and the Company will continue to vigorously defend against these claims. 
 
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).

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. At March 31, 2011, the Company has accrued $500,000 as the estimated total of contingent payments due.
 
Employment Agreements

On July 16, 2008, CBAI entered into a three-year agreement with Mr. Schissler, which is renewable annually thereafter, which provides for a base salary of $165,000 the first year, with five percent base salary increases for each successive year, subject to approval by the Board of Directors. It also provides for an annual bonus, payable at the discretion of the Board of Directors, equal to thirty percent of the Employee’s prior year base salary. It also provided him with the immediate issuance of 7,500,000, five-year options to acquire restricted shares of the Company’s common shares at an exercise price of $0.01 per share, These options vest twenty-five percent immediately, and twenty-five percent annually thereafter. It also provided Mr. Schissler with the payment of an inducement bonus of 1,000,000 restricted shares of the Company’s common shares. In July, 2009, as a bonus for current and past services rendered, the Company awarded 241,096,000 options to purchase common stock, 50% of which vested immediately and the other 120,548,000 to be vested over the next four years. Mr. Schissler is subject to non-competition and confidentiality requirements. CBAI may terminate Mr. Schissler's Executive Agreement at any time without cause. In such event, no later than the Termination Date specified in the Termination Notice (both as defined in the Executive Agreement), CBAI shall pay to Mr. Schissler an amount in cash equal to the sum of his Compensation determined as of the date of such Termination Notice through the remaining term of the Executive Agreement. In December, 2009, Mr. Schissler was awarded an additional 242,929,000 options to purchase common stock, 50% of which vested immediately and the other 121,464,500 to vested at December 31, 2010. On July 1, 2010, the Company awarded a total of 30,937,178 options to purchase common shares to Matthew Schissler, to compensate him for both past services and future services, 50% of which vested immediately.  All outstanding unexercised options provide for adjustment upon  stock split, as well as under certain other circumstances.
 
On July 16, 2008, CBAI entered into a three-year agreement with Mr. Joe Vicente, who serves as the Company’s Chief Operating Officer, which is renewable annually thereafter, which provides for a base salary of $115,000 the first year, with five percent base salary increases for each successive year, subject to approval by the Board of Directors. It also provides for an annual bonus, payable at the discretion of the Board of Directors, equal to twenty-five percent of the Employee’s prior year base salary. It also provided him with the immediate issuance of 7,500,000, five-year options to acquire restricted shares of the Company’s common shares at an exercise price of $0.01 per share, These options vest twenty-five percent immediately, and twenty-five percent annually thereafter. It also provided Mr. Vicente with the payment of an inducement bonus of 1,000,000 restricted shares of the Company’s common shares. In July, 2009, as a bonus for current and past services rendered, the Company awarded 120,548,000 options to purchase common stock, 50% of which vested immediately and the other 60,274,000 to be vested over the next four years. In December, 2009, Mr. Vicente was awarded an additional 121,464,500 options to purchase common stock, 50% of which vested immediately and the other 60,732,250  vested at December 31, 2010. On July 1, 2010, the Company awarded a total of 15,468,690 options to purchase common shares to Joseph Vicente, to compensate him for both past services and future services, 50% of which vested immediately.  All outstanding unexercised options provide for adjustment upon  stock split, as well as under certain other circumstances.
 
 
13

 
 
Operating Leases
 
CBAI leases office space in Las Vegas, NV and Santa Monica, CA under non-cancelable operating leases expiring in 2014 and 2012, respectively. The lease for the facility in Las Vegas has two options to renew for an additional five years each, extending the term to 2024. In October 2010, CBAI entered into a non-cancelable sub-lease agreement to sub-lease the vacated facility in Santa Monica, CA, through the end of the lease term, in 2012. Commitments for future minimum rental payments, by year, and in the aggregate, to be paid (and received) under such operating leases as of March 31, 2011, are as follows:
 
   
Rent to be
paid
   
Rent to be Received
   
Net Rent to
be Paid
 
2011
  $ 200,282     $ 56,675     $ 143,607  
2012
    251,139       56,675       194,464  
2013
    154,082       --       154,082  
2014
    118,142       --       118,142  
Total
  $ 723,645     $ 113,350     $ 610,295  
 
Note 6. Related Party Transactions and Commitments
 
China Stem Cell Ltd. Investment

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 will 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 royalty's payable beginning in 2011.
 
In December 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.

As of March 31, 2011, Cord Blood has exercised this option in part, provided a total of $375,000 in additional capital to Cayman, and received Cayman Secured Convertible Promissory Notes for this sum along with 100 Cayman 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.  As of March 31, 2011, other shareholders of Cayman have exercised options with similar terms, provided $500,000 in additional capital to Cayman, and are entitled to similar Cayman Secured Convertible Notes and to be issued an aggregate of 100 Cayman Warrants.
 
VidaPlus
 
As of March 31, 2011, the Company has approximately $188,000 loan receivable outstanding, which is convertible into equity.
 
Consulting Agreement
 
On July 1, 2008, CBAI entered into a one-year consulting agreement with Pyrenees Consulting, LLC., a business owned by Stephanie Schissler, CBAI's former President and Chief Operating Officer. Ms. Schissler is the spouse of the Company's Chief Executive Officer. The agreement entitles Ms. Schissler to a monthly retainer and stock option incentives for her services in relation to strategic corporate planning and other business related matters. On January 1, 2010 the agreement was renewed for another 12 months with a retainer of $12,500 per month. The agreement automatically renews for a further term of six months, unless a 60-day written notice of cancellation is provided by Pyrenees Consulting, or a 180-day written notice is provided by CBAI.
 
 
14

 
 
Note 7. 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 400 million common shares. The agreement allows the Company to issue either stock options or common shares from this Plan.
 
On March 2, 2010, the Company awarded a total of 20,000,000 options to purchase common shares to Stephanie Schissler, to compensate her for both past services and future services.
 
On June 1, 2010 and June 25, 2010, Matthew Schissler exercised 50,782,350 and 29,984,810 options respectively.
 
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.   There were no stock options granted during the first quarter ended March 31, 2011.
 
The Company’s stock option activity was as follows:
 
   
Stock Options
   
Weighted Average Exercise Price
   
Weighted Avg. Contractual Remaining Life
 
Outstanding,  January 1, 2011
    7,492,723       0.07       5.5  
Granted
    664,058       0.01       -  
Exercised
    807,672       -       -  
Forfeited/Expired
    397,808       -       -  
Outstanding,  December 31, 2011
    6,951,310       0.01       7.3  
Granted
    -       -       -  
Exercised
    -       -       -  
Forfeited/Expired
    -       -       -  
Outstanding,  March 31, 2011
    6,951,310       0.01       7.30  
Exercisable at March 31, 2011
    5,438,858       0.01       7.30  
 
The following table summarizes significant ranges of outstanding stock options under the stock option plan at  March 31, 2011:
 
 
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
 
$0.0033 — 0.20  
6,903,286
   
7.33
   
$
0.08
 
5,390,834
 
$
0.010
 
$0.21 — 0.30  
30,126
   
3.87
     
0.250
 
30,126
   
0.250
 
$0.31 — 0.51  
17,898
   
4.69
     
0.312
 
17,898
   
0.312
 
   
6,951,310
   
7.30
   
$
0.010
 
5,438,858
 
$
0.010
 
 
 
15

 
 
A summary of the activity for unvested employee stock options as of December 31, 2010 and changes during the year is presented below:
 
Weighted Average Grant Date Fair Value per Share
 
   
2011
   
2011
 
     Nonvested at January 1, 2011
    1,712,452       0.01  
G  Granted
    --       --  
     Vested
    200,000       0.01  
      Exercised
    --       --  
      Cancelled
    --       --  
P   Pre-vested forfeitures
    --       --  
     Nonvested at March 31, 2011
    1,512,452       0.01  

The total compensation cost related to non-vested options amounts to $164,135.  All outstanding unexercised options provide for adjustment upon stock split, as well as under certain other circumstances.

Note 8. Warrant Agreements

A summary of warrant activity since January 1, 2009 is as follows:
 
On July 2, 2009, the Company executed a Preferred Stock Purchase Agreement with Optimus Capital Partners, LLC, which also entitled them to a five-year conditional warrant to purchase 1,446,428,571 of the Company’s Common Stock at $0.007 per share.
 
On September 23, 2009, the Company issued a Promissory Note for $200,000 to Joseph Schottland along with 54,200,542 three-year warrants at $0.0037 per share.
 
On January 30, 2009, Enable Capital, a warrant holder, exercised their right to purchase 31,449,102 shares of the Company’s Common Stock at $0.0086 per share.
 
On October 10, 2009, Cornell, a warrant holder, exercised their right to purchase 1,263,920 shares of the Company's Common Stock at $0.35 per share, on a cashless basis.
 
On January 14, 2010, Schottland, a warrant holder, exercised their right to purchase 42,771,971 shares of the company's Common Stock at $0.0037 per share, on a cashless basis.
 
On March 10, 2011 the company issued a Promissory Note for $1.105M to St. George Investments along with 139,925,374 five year warrants at $.00179 per share subject to reverse stock split.
   
The following table summarizes the warrants outstanding and exercisable at March 31, 2011:
 
WARRANTS OUTSTANDING
 
EXERCISE PRICE
 
MATURITY DATE
157,297   $0.101  
02/14/2012
  40,000   $0.101  
02/14/2012
  29,167   $0.37  
11/26/2012
  37,970   $0.37  
11/26/2012
  96,555   $0.1875  
05/30/2013
114,286   $0.37  
06/23/2012
Total 475,275
     
 

All outstanding unexercised warrants provide for adjustment upon  stock split, as well as under certain other circumstances.
 
 
16

 
 
Note 9. Stockholder’s Equity
 
Preferred Stock
 
CBAI has 5,000,000 shares of $.0001 par value of preferred stock authorized.
 
Common Stock
 
On March 25, 2009, the Company’s Articles of Incorporation were amended to increase the authorized common stock to 6,945,000,000 shares, par value $0.0001, up from 950,000,000. This amendment was adopted by the Company’s Board of Directors on February 12, 2009, and its Shareholders at a Special Meeting of Shareholders called for this purpose on March 23, 2009.
 
On January 14, 2010, a warrant holder exercised a portion of their warrants, or 42,771,971 shares at an exercise price of $0.0037, exercised on a cashless basis.
 
On June 1, 2010, the CEO exercised a portion of his options, or 50,782,350 shares at an exercise price of $0.0033, exercised on a cashless basis.
 
On June 25, 2010, the CEO exercised a portion of his options, or 29,984,810 shares at an exercise price of $0.0033, exercised on a cashless basis.
 
As of March 31, 2011 CBAI had 6,746,199,634 shares of Common Stock outstanding. 198,800,366 shares remain in the Company's treasury.
 
Note 10. Segment Reporting
 
Guidance issued by the FASB requires that public business enterprises report financial and descriptive information about its reportable operating segments. CBAI has one operating segment. Cord generates revenues related to the processing and preservation of umbilical cord blood.  Cord’s long-lived assets are located in, and substantially all of its revenues are generated from, the United States of America, Argentina and Germany.
 
The table below presents certain financial information by business segment for the three months ended  March 31, 2011:
 
   
Umbilical
               
Segment
         
Condensed Consolidated
 
 
 
Cord Blood
   
Stellacure
   
Biocordcell
   
Total
   
Eliminations
   
Total
 
Revenue from External Customers
  $ 833,907     $ 129,506     $ 494,499     $ 1,457,912     $ -     $ 1,457,912  
Interest & Derivative Expense
    698,084       25,744       7,041       730,869       -       730,869  
Depreciation and Amortization
    185,505       2,509       4,166       192,180       -       192, 180  
Segment Income (Loss)
    (1,800,566 )     (214,267 )     140,120       (1,874,713 )     34,929       (1,839,713 )
Segment Assets
  $ 7,696,339     $ 420,631     $ 595,667     $ 8,712,637     $ (545,643 )   $ 8,166,994  
 
 
17

 
 
The table below presents certain financial information by business segment for the three months ended March 31, 2010:
 
 
 
Umbilical
         
Segment
     
Condensed
 
   
Cord Blood
   
StellaCure
   
Total
 
Eliminations
 
Total
 
Revenue from External Customers
  $ 839,343     $ -     $ 839,343   $ -   $ 839,343  
Interest Expense
    432,071       -       432,071       -     432,071  
Depreciation and Amortization
    144,411       -       144,411     -     144,411  
Segment Income (Loss)
    (2,578,827 )     -       (2,578,827 )   -     (25,788,272 )
Segment Assets
  $ 5,627,206     $ 1,074,672     $ 6,701,878  
 (947,176
)    $ 5,754,702  
 
Note 11. Subsequent Events
 
On May 9, 2011, the Company consummated a one (1) for one hundred (100) reverse split of its outstanding common stock, with the result that the outstanding shares of common stock of the Company were reversed from 6,812,886,600  shares pre split, to 68,128,866 outstanding common shares post split.  At the same time, the Company’s Articles of  Incorporation were amended to fix authorized capital stock at 255,000,000 shares, par value $0.0001, of which 5,000,000 shares are preferred shares and 250,000,000 shares are common shares.  These actions were approved by 72% of the outstanding shares  of the Company at a special shareholders meeting called for this purpose on  April 21, 2011.
 
ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS
 
Forward Looking Statements
 
In addition to the historical information contained herein, we make 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 our 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, we do 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 our March 31, 2011 condensed consolidated financial statements and related notes thereto included elsewhere in the quarterly report and with our condensed consolidated financial statements and notes thereto for the year ended December 31, 2010 and the related "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in our annual Report on Form 10-K for the year ended December 31, 2010, as well as our quarterly reports and reports filed on Form 8-K for the relevant periods. We also urge you to review and consider our disclosures describing various risks that may affect our business, which are set forth under the heading "Risk Factors Related to our Business" in our annual Report on Form 10-K for the year ended December 31, 2010.
 
 
18

 
 
Recent Developments During the Quarter
 
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 is 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).  The first installment of this second tranche was completed during the Quarter at an estimated loan amount of $15,000.  Converting the investment from a loan into equity for tranche two will take place every 12 months, and the obligation will have been met in full after 1,000 samples have been processed and stored.  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.  The second and third tranches contain conditional components for funding to continue from CBAI, including payments to Stellacure by Vida to be current with previously agreed to terms between the parties. The Company believes that further support of a key channel partner to Stellacure provides additional opportunities for expansion throughout Europe.

Reproductive Genetics Institute

On February 24, 2011, the Company acquired the following assets; 593 umbilical cord blood samples and all related file documents, four (4) cryogenic storage tanks, and two computers from Reproductive Genetics Institute, Inc. (RGI) for $76,000 in cash.  The Company paid an additional $48,885 to RGI to cover claims related to ViviCells International for a total $124,885.  In March 2011, the assets acquired were relocated to the Company’s Las Vegas laboratory.
 
Summary and Outlook of the Business
 
CBAI is primarily an umbilical cord blood stem cell preservation company with a particular focus on the acquisition of customers in need of family based products and services.

Cord
 
The umbilical cord blood stem cell preservation operations provide umbilical cord blood banking services to expectant parents throughout all 50 United States. Our corporate headquarters recently re-located to Las Vegas, NV from Los Angeles, CA. Cord earns revenue through a one-time enrollment and processing fee, and through an annually recurring storage and maintenance fee. Cord blood testing, processing, and some storage were conducted by our outsourced laboratory partner, Progenitor Cell Therapy, LLC, (PCT) in New Jersey. In March 2010, we began to process and store cord blood in our own facility, terminating our contract with PCT on February 28, 2010. We provide the following services to each customer.

 
·
Collection Materials. We provide a medical kit that contains all of the materials necessary for collecting the newborn’s umbilical cord blood at birth and packaging the unit for transportation. The kit also provides for collecting a maternal blood sample for later testing.

 
·
Physician And Customer Support. We provide 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 & maternal blood samples.

 
·
Transportation. We manage all logistics for transporting the cord blood unit to our centralized facility immediately following birth. This procedure ensures chain-of-custody control during transportation for maximum security.
 
 
19

 
 
 
·
Comprehensive Testing. At the laboratory, the cord blood sample is tested for stem cell concentration levels, bacteria and blood type. The maternal blood sample is tested for infectious diseases. We report these results to the newborn’s mother.

 
·
Cord Blood Preservation. After processing and testing, the cord blood 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 fifteen 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, both through organic growth and acquisition.
 
Stellacure GmbH
 
Based in Hamburg Germany, Stellacure GmbH  collects, processes and stores cord blood samples as a private bank for use in current or future medical therapies in Germany, Spain, and other European and Middle Eastern Countries.
 
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.
 
BodyCells
 
We are continuing to pursue other growth opportunities by acquisition or internal growth. The development of BodyCells, which is anticipated to facilitate the collecting, processing and preserving of peripheral blood and adipose tissue stem cells allowing individuals to privately preserve their stem cells for potential future use in stem cell therapy, is currently suspended pending the identification of an alternative lab to partner.
 
Results of Operations for the Three-Months Ended  March 31, 2011
 
For the three months ended March 31, 2011, our total revenue increased approximately $0.62 million, or 74% to $1.46 million over the prior comparative period.. Stellacure’s revenue contributed $0.13 million of the overall increase and BioCells $0.494 million of the total.  Cord remains focused on strategic organic growth and accretive acquisition strategies, which management hopes will reduce or eliminate the losses and negative operating cash flow.

Cost of services increased by approximately $0.05 to $0.47 million. Gross Profit increased by approximately $0.56 million or 132% to $0.99 million. The company anticipates that through the growth and expansion of our Cord business, and the processing and storage of the cord blood in our own facilities, our direct costs should decrease and our gross margins increase.
 
Administrative and selling expenses increased by approximately $0.38 million from the prior comparative period to $2.1 million. Our net loss decreased by $.7 million, or approximately 27% to $1.9 million compared to the comparative period net loss of $2.6 million.
 
Liquidity and Capital Resources
 
Total assets at March 31, 2011 were $8,166,994, compared to $7,380,463 at December 31, 2010.  Total liabilities at March 31, 2011 were $8,089,655 consisting primarily of Promissory Notes, Accounts Payable and Deferred Revenue $3,294,248, $1,042,306 and $1,839,333.   At December 31, 2010, total liabilities were $6,634,170 consisting primarily of Promissory Notes, Accounts Payable and Deferred Revenue  $ 2,141,617, $967,626  and $1,835,792.

We have experienced net losses of $1.8 million and $ 2.6 million for the three months ended March 31, 2011 and March 31, 2010, respectively.  At March 31, 2011, we had $0.4 million in cash. We currently collect cash receipts from operations through both of our subsidiaries, BioCord and Stellacure. Cash flows from operations are not currently sufficient to fund operations in combination with these corporate expenses. During the period we increased Notes payable by $1.6 million of notes payable, through equity financing a portion of which was used for investment in our recent and future acquisitions of $.70 million.
 
 
20

 

Net cash used in operating activities increased approximately $.01 million from the prior comparative period.  Net cash used in investing activities increased by $0.47 million, this was due to additional investment in foreign affiliates and domestic asset purchases.   Net cash provided by financing activities increased approximately $0.5 million from the prior comparative period to $1.8 million. At the end of the period, cash and cash equivalents increased approximately $0.43 million from the prior comparative period to $0.40 million.

Since inception, we have financed cash flow requirements through the issuance of common stock and warrants for cash, services and loans. As we expand our operational activities, we may continue to experience net negative cash flows from operations and we will be required to obtain additional financing to fund operations through equity offerings and borrowings to the extent necessary to provide working capital. Financing may not be available, and, if available, it may not be available on acceptable terms. Should we secure such financing, it could have a negative impact on our financial condition and our shareholders. The sale of debt would, among other things, adversely impact our balance sheet, increase our expenses and increase our cash flow requirements. The sale of equity could, among other things, result in dilution to our shareholders. If our cash flows from operations are significantly less than projected, then we would either need to cut back on our budgeted spending, look to outside sources for additional funding or a combination of the two. If we are 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.

We currently have financing through JMJ financial and St. George as follows:

In January 2010, the Company signed a Promissory Note for $1.5 million  with JMJ Financial bearing one-time interest rates of 10%, and maturing in January, 2013. The Company has drawn down a total of $1.5 million since inception, with$1.05 million being converted into common shares of the Company.

In April 2010, the Company signed a Promissory Note for $0.75 million with JMJ Financial bearing a one-time interest rate of 10%, and maturing in April, 2013. The Company has drawn down a total of $.18 million on the Note with no conversion into common shares.

In October of 2010, the Company signed a Promissory Note for $0.75 million with JMJ Financial bearing a one-time interest rate of 10%, and maturing in October  2013. The Company has drawn down a total of $.735 million on the Note with no conversion into common shares.

In March 2011, the Company signed a Promissory Note for $1.00 million with JMJ Financial bearing a one-time interest rate of 10%, and maturing in March, 2014. The Company has not drawn down on the note nor converted into common shares.

In March 2011, the Company signed a Note and Warrant Purchase Agreement with St. George Investments, LLC, a 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 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. The Company has drawn down $.355 million on the note with no conversion into common shares.
 
Inflation

In the opinion of management, inflation has not and will not have a material effect on our operations in the immediate future.  Management will continue to monitor inflation and evaluate the possible future effects of inflation on our business and operations.

 
21

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
Disclosure not applicable to smaller reporting companies.
 
ITEM 4T. CONTROLS AND PROCEDURES
 
Evaluation of Disclosure Controls and Procedures
 
It is management's responsibility to establish and maintain adequate internal control over all financial reporting pursuant to Rule 13a-15 under the Securities Exchange Act of 1934 (the "Exchange Act"). Our management, including our chief executive officer and our chief financial officer, have reviewed and evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2011. Following this review and evaluation, management collectively determined that our disclosure controls and procedures are not effective to ensure that information required to be disclosed by us in reports that we file 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 our chief executive officer, our chief operations officer, and our chief financial officer, as appropriate to allow timely decisions regarding required disclosure.

Our disclosure controls and procedures are  related to a lack of segregation of duties due to the size of the accounting department and to the  limited financial resources of the Company. We hired a full time Accountant in January 2011 and a new Controller in April 2011, and we expect his familiarization with the Company will continue to enhance our disclosure controls. We are working closely with the Accountants in our foreign subsidiaries to implement stronger accounting controls.   These efforts will enable to further of segregation of duties.
 
However, any controls system cannot provide absolute assurance   that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.
 
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.
 
 
22

 
 
PART II. - OTHER INFORMATION
 
ITEM 1.  LEGAL PROCEEDINGS
 
Cryo-Cell International
 
On December 16, 2010, Cryo-Cell International, Inc. (“Cryo International”) filed an action against Cord Blood America, Inc. (the “Company”) in The Sixth Judicial Circuit Court, Pinellas County, Florida alleging claims for: tortuous interference with a business relationship; misappropriate of trade secrets and confidential information in violation of the Florida Uniform Trade Secrets Act, § 688.001, Et. Seq., Fla. Stat.; dilution of trademark in violation of § 495.151, Fla. Stat.; and Common Law Unfair Competition.   Cryo International, a competitor of the Company’s, has filed the suit apparently in an effort to stop the Company’s pursuit of the acquisition of Cryo-Cell de Mexico, S.A. de C.V. (“Cryo Mexico”), for which the Company has in place a non binding Letter of Intent for acquisition.    (see Subsequent Events).  In addition, along with its Complaint, Cryo International filed an Emergency Motion for a Temporary Injunction.  In January 2011, the Company filed a Memorandum of Law in Opposition to Cryo International’s Emergency Motion for Temporary Injunction, and a Rule 1.140(b) Motion to Dismiss Cryo International’s complaint, as well as amendments to these documents.  The Emergency Motion for a Temporary Injunction, Motion to Dismiss and related filings were heard by the Court on January 14, 2011.  The Court granted the Company’s Motion to Dismiss, finding that Cryo Mexico is an indispensible party to the lawsuit and granted Cryo International leave to file an amended complaint to add Cryo Mexico as a defendant to the lawsuit and to serve Cryo Mexico with the required legal papers.  Cryo International filed an Amended Complaint on January 20, 2011.  The Amended Complaint added Cryo Mexico as a defendant to the action, asserted all of the original causes of action against the Company, and added a claim for Breach of a License Agreement against Cryo Mexico and a claim for Unfair and Deceptive Trade Practices in violation of § 501.201, Et. Seq. Fla. Stat. against Cryo Mexico and the Company.  Cryo International also filed an amended motion for temporary injunction.  In response, Defendant Cryo Mexico filed a Motion to Dismiss for Insufficiency of Service of Process and a Motion to Dismiss for Improper Forum and Lack of Personal Jurisdiction, and the Company filed a Rule 1.140(b) Motion Regarding Amended Complaint, seeking dismissal of the Amended Complaint.  The Defendants’ Motions to Dismiss and Defendant Cryo Mexico’s Motion to Quash were heard on March 14, 2011 and thereafter, the Court granted these motions in favor of the Company and Cryo Mexico.  Subsequently, Cryo International filed a Motion for Rehearing, which said motion is to be heard on September 7, 2011.
 
Company management believes that there is no merit to the claims filed by Cryo International and the Company will continue to vigorously defend against these claims. 
 
ViviCells International

On May 5, 2010, the Company executed and funded a Debtor-In-Possession loan agreement with ViviCells International, Inc. a Florida corporation (“Vivi” or the “Debtor”), NeoCells, Inc., an Illinois corporation, and AdultCells, Inc., an Illinois corporation, (jointly and severally referred to as the “Subsidiaries”), for $200,000 secured by  a super priority lien on the Debtor’s  and Subsidiaries’ assets.  As additional consideration for this loan, the Company received 21% of the Debtor’s outstanding Common Stock.  The $200,000 loan carries interest at 10% per annum, with principal and all accrued interest all due and payable on March 15, 2011.   In September 2010, the Company acquired an approximately $800,000 secured obligation of the Debtor held by a junior lien holder in  ViviCell’s bankruptcy proceeding, in exchange for the private issuance of 11,111,111 restricted shares of its Common stock  to the holder of this secured obligation.

On October 20, 2010, the Company  as a co-proponent  proposed a Plan of Reorganization for Vivi under the United States Bankruptcy Code, pursuant to which the Company proposed to acquire an additional 74% of the outstanding shares of Vivi, which would give it in excess of  94% ownership in ViVi, in exchange for the issuance of up to 64,488,889 shares of the Company’s common stock, and the Company’s agreement to make an additional senior secured loan in the amount of $300,000 to Vivi as working capital upon consummation of the Plan. Between June 16, 2010 and December 14, 2010, the Company accelerated the date of its loan commitment, and loaned $100,000 out of the proposed $300,000 loan amount to Vivi in advance of the Plan confirmation, secured under the super priority lien.   On February 16, 2011, a hearing on Confirmation of this proposed plan of reorganization was heard and approved.   The plan was scheduled to be Effective as of April 1, 2011.  However, Vivi has subsequently advised the Company that it would be unable to supply the full 94% plus ownership of Vivi’s outstanding capital stock to the Company as required under the Plan.  On April 13, 2011, the Company filed a Non Consummation of Confirmed Plan with the United States Bankruptcy Court.   The Company pursued its rights to foreclose as the holder of a super priority lien against all assets of NeoCells, ViviCells’ subsidiary. Then, on April 22, 2011, ViviCells filed an adversary proceeding against the Company, in the same United States Bankruptcy Court, Central District of California (Santa Ana), where ViviCells bankruptcy proceedings had been taking place.  ViviCells followed this by filing a Motion for a temporary restraining order on April 25, 2011, seeking to halt the foreclosure by the Company on the assets of NeoCells. The complaint and the motion were amended on May 2, 2011, primarily by adding NeoCells, in addition to ViviCells, as a party to the adversary proceeding and the motion. The motion was heard on May 2, 2011. The motion was denied, and accordingly, the Company proceeded on May 2, 2011 at 1:00 pm (CST) to foreclose against all assets of NeoCells.  At the public disposition of all property owned by NeoCells, the Company as a secured creditor bid $320,000 in offset debt, and acquired all right, title and interest in said property free and clear of any liens, security interests and encumbrances which are junior and subordinate to the Company’s security interest as a secured creditor.

At the present time, the adversary proceeding remains outstanding.  Company management believes, however, that there is no merit to the claims filed by ViviCells and NeoCells, and the Company will continue to vigorously defend against these claims. 
 
 
23

 
 
ITEM 1A. Risk Factors.
 
A description of our risk factors can be found in “ Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2010.  There were no material changes to those risk factors during the three months ended March 31, 2011.
 
ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS ITEM 3. DEFAULTS UPON SENIOR SECURITIES
 
NONE
 
ITEM 4.  RESERVED
 
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 American, Inc. (1)
3.1(ii)
 
Articles of Amendment to Articles of Incorporation (7)
3.1(iii)
 
Articles of Amendment to the Articles of Incorporation of Cord Blood America, Inc.(12)
3.1(iv)   Articles of Amendment to the Articles of Incorporation of Cord Blood America, Inc. (Filed herewith)
 3.1(v)   Articles of Amendment to the Articles of Incorporation of Cord Blood America, Inc. (Filed herewith)
 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)
 
24

 
 

10.1   Board Compensation Plan (3)
10.2
 
Second Amendment, dated November 26, 2007, to the Securities Purchase Agreement, dated as of February 14, 2007, as amended by the First Amendment, dated as of April 9, 2007, by and among CorCell, Cord Blood America, Inc., and Shelter Island (4)
10.3
 
CorCell Security Agreement, dated as of November 26, 2007, by and between Cord Blood America, Inc., and  Shelter Island (4)
10.4
 
Put Option Agreement, dated as of November 26, 2007, by and between Cord Blood America, Inc. and Shelter  Island (4)
10. 5
 
Subordination Agreement, dated November 26, 2007, by and between Cord Blood America, Inc., CorCell, Career Channel, Inc., the Purchasers and Shelter Island (4)
10.6
 
Securities Purchase Agreement between the Company and Tangiers dated June 27, 2008 (5)
10.7
 
Registration Rights Agreement between the Company and Tangiers dated June 27, 2008 (5)
10.8
 
Employment Agreement between the Company and Joseph Vicente (6)
10.9   Employment Agreement between the Company and Matthew Schissler (6)
10.10
 
Fourth Amendment to Securities Purchase Agreement, dated June 3, 2008, by and among CorCell, Ltd., the  Company, Career Channel, Inc., a Florida corporation d/b/a Rainmakers International, and Shelter Island Opportunity Fund, LLC (8)
10.11
 
Form of Common Stock Purchase Warrant to Purchase Shares of Common Stock of the Company (8)
10.12
 
Form of Lock-Up Agreement. (8)
10.13
 
Amendment No. 1 to Securities Purchase Agreement, dated November 25, 2008 (9)
10.15
 
Amendment No. 1 to Securities Purchase Agreement filed herewith dated January 22, 2009 (10)
10.16
 
Amendment Agreement, dated as of February 20, 2009, by and among Shelter Island Opportunity Fund, LLC, Corcell Ltd. and Cord Blood America, Inc. (11)
10.17
 
Lease for Las Vegas Facility
10.18
 
2010 Flexible Stock Option Plan
10.19
 
Compensatory Arrangement for Certain Officers Effective July 13, 2009, Stock Options (13)
10.20   Compensatory Arrangement for Certain Officers Effective December 31, 2009, Stock Options (14)
10.21
 
Convertible Promissory Note Executed January 6, 2010 between Cord Blood America, Inc. and JMJ  Financial (15)
10.22
 
Entered on March 24, 2010 into Investment Agreement to Acquire Majority Interest in Stellacure (16)
10.24   Material Agreement between Company and Pyrenees Capital (16)
10.25
 
Convertible Promissory Note Executed March 24, 2010 between CBAI and JMJ Financial (16)
10.26
 
Convertible Promissory Note Executed March 26, 2010 between CBAI and JMJ Financial (16)
10.27
 
Compensatory Arrangement for Certain Officers Executed July 1, 2010. Stock Options (17)
10.28
 
Senior Secured Note Agreement between Cord Blood America, Inc. and Shelter Island Opportunity Fund Executed July 21, 2010. (18)
10.29
 
Executed Stock Purchase Agreement on September 20, 2010 to Acquire Majority Interest in BioCordcell Argentina, SA. (19)
10.30
 
Entered into a Letter of Intent to Acquire Assets of Cryo-Cell De Mexico on December 3, 2010 (20)
10.31
 
On March 20, 2011 Cord Blood America, Inc. Entered into a Note and Warrant Purchase Agreement with St. George Investments. (21)
10.32
 
On January 12, 2011, Cord Blood America, Inc, Entered into a Convertible Promissory Note with JMJ Financial and a Liquidated Damages Agreement (21).
10.33
 
On January 19, 2011, Cord Blood America, Inc. Entered into a Liquidated Damages Agreement with Tangiers Capital, LLC. (21)
21
 
List of Subsidiaries (37)
31.1
 
Certification of the registrant’s Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 ((Filed Herewith)
32.1
 
Certification of the Company’s Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Filed Herewith)

 
25

 

———————
(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 November 30, 2007.
 
(5) Filed as an exhibit to Current Report on Form 8-K filed on July 3, 2008.
 
(6) Filed as an exhibit to Current Report on Form 8-K filed on July 18, 2008

(7) Filed as an exhibit to Current Report on Form 8-K filed on August 29, 2008
 
(8) Filed as an exhibit to Current Report on Form 8-K filed on November 17, 2008

(9) Filed as an exhibit to Current Report on Form 8-K filed on December 5, 2008

(10) Filed as an exhibit to Registration Statement on Form S-1 filed on January 23, 2009

(11) Filed as an exhibit to the Current Report on Form 8-K filed on February 26, 2009
 
(12) Filed as an exhibit to the Current Report on Form 8-K filed on March 31, 2009
 
(13) Filed as an exhibit to the Current Report on Form 8-K filed on July 17, 2009
 
(14) Filed as an exhibit to Current Report on Form 8-K filed on January 7, 2010
 
(15) Filed as an exhibit to Current Report on Form 8-K/A filed on January 12, 2010
 
(16) Filed as an exhibit to Current Report on Form 8-K filed on March 29, 2010
 
(17) Filed as an exhibit to Current Report on Form 8-K filed on July 7, 2010
 
(18) Filed as an exhibit to Current Report on Form 8-K filed on August 4, 2010
 
(19) Filed as an exhibit to Current Report on Form 8-K filed on September 23, 2010
 
(20) Filed as an exhibit to Current Report on Form 8-K filed on December 8, 2010
 
(21) Filed as an exhibit to Current Report on Form 8-K filed on March 21, 2011
 
 
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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: May 23, 2011
By:
/s/ Matthew L. Schissler
 
  Name: Matthew L. Schissler  
  Title: Chairman and Chief Executive Officer
(Principal Executive Officer and
Principal Financial and Accounting Officer)
 
 
 
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