<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 - QSB
(X) QUARTERLY REPORT PURSUANT TO 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended May 31, 1997
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ______________________ to ____________________.
Commission file number 0-21781
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SERACARE, INC.
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(Exact name of Small Business Registrant as specified in its charter)
DELAWARE 95-4343492
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1925 CENTURY PARK EAST, SUITE 1970
LOS ANGELES, CALIFORNIA 90067
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (310) 772-7777
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Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 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 filing requirements for the past 90 days. ( X ) Yes ( ) No
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 13 or 15 (d) of the Securities Act of
1934 subsequent to the distribution of securities under a plan confirmed by a
court. Yes ( X ) No ( )
As of June 17, 1997, the issuer had 4,034,465 shares of its common stock,
$.001 par value issued and outstanding. Transitional Small Business
Disclosure Format Yes___ No_X__.
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PART I. FINANCIAL INFORMATION
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ITEM 1. FINANCIAL STATEMENTS
UNAUDITED FINANCIAL STATEMENTS ARE PROVIDED AS FOLLOWS:
PAGE
NUMBER
SERACARE, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Consolidated Balance Sheet as of May 31, 1997 3
Consolidated Statements of Operations -
For the three months ended May 31, 1997 and
For the three months ended May 31, 1996 5
Consolidated Statements of Cash Flows -
For the three months ended May 31, 1997 and
For the three months ended May 31, 1996 6
Notes to Consolidated Financial Statements 8
2
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SeraCare, Inc. and Subsidiaries
Consolidated Balance Sheet
May 31, 1997
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 77,360
Accounts receivable 352,222
Inventory 739,334
Prepaid expenses and other current assets 62,149
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Total current assets 1,231,065
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PROPERTY AND EQUIPMENT, net 1,038,045
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LAND AVAILABLE FOR SALE 25,000
FDA LICENSES, less accumulated amortization
of $33,750 1,546,665
DONOR BASE AND RECORDS, less accumulated
amortization of $44,999 1,023,955
REORGANIZATION VALUE IN EXCESS OF AMOUNTS ALLOCATED
TO IDENTIFIABLE ASSETS, less accumulated amortization
of $66,415 956,054
GOODWILL, less accumulated amortization of $28,227 889,695
OTHER ASSETS 159,422
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$6,869,901
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See accompanying notes to consolidated financial statements.
3
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SeraCare, Inc. and Subsidiaries
Consolidated Balance Sheet
May 31, 1997
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 570,325
Accrued payroll and related expenses 166,928
Accrued expenses 224,684
Bridge loans from related parties (Note 3) 522,500
Current portion of long-term debt 432,358
Customer advances (Note 4) 492,507
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Total current liabilities 2,409,302
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LONG-TERM DEBT 594,525
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SERIES A REDEEMABLE PREFERRED STOCK, 2,500 issued
and outstanding 350,740
STOCKHOLDERS' EQUITY
Common stock, $.001 par value, 25,000,000 shares
authorized; 4,149,387 (including 119,875 to be
issued) deemed issued and outstanding 4,149
Additional paid-in capital 4,182,956
Accumulated deficit since February 6, 1996 (671,771)
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Total stockholders' equity 3,515,334
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$6,869,901
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See accompanying notes to consolidated financial statements.
4
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SeraCare, Inc. and Subsidiaries
Consolidated Statement of Operations
For the Three Months ended
May 31,
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1997 1996
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(Unaudited) (Unaudited)
NET SALES $ 1,585,853 $ 1,513,526
COST OF SALES 1,427,486 1,404,179
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GROSS PROFIT 158,367 109,347
GENERAL AND ADMINISTRATIVE EXPENSES 274,976 148,635
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OPERATING (LOSS) (116,609) (39,288)
INTEREST EXPENSE 48,614 40,141
OTHER EXPENSE (INCOME), NET (942) (100,722)
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NET INCOME (LOSS) $ (164,281) $ 21,293
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EARNINGS (LOSS) PER COMMON SHARE (2) $ (.04) $ .01
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WEIGHTED AVERAGE NUMBER OF COMMON
AND COMMON EQUIVALENT SHARES 4,149,387 2,115,500
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See accompanying notes to consolidated financial statements.
5
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SeraCare, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
For the Three Months ended
May 31,
--------------------------
1997 1996
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INCREASE (DECREASE) IN CASH (Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (164,281) $ 21,293
Adjustments to reconcile net income
(loss) to cash provided by (used in)
operating activities:
Depreciation and amortization 64,826 27,511
Changes in operating assets and liabilities:
Accounts receivable (115,651) (164,118)
Inventory (396,830) 73,519
Prepaid expenses and other
current assets (120) 14,152
Other assets (8,483) (26,697)
Accounts payable (35,167) (6,634)
Accrued payroll and related expenses (11,067) (18,387)
Accrued expenses 62,215 (189,669)
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Net cash used in operating activities (604,558) (269,030)
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CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (170,034) (21,988)
Additions to FDA licenses (232,420) -
Additions to donor base and records (154,946) -
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Net cash used in investing activities (557,400) (21,988)
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6
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SeraCare, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Continued)
For the Three Months ended
May 31,
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1997 1996
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INCREASE (DECREASE) IN CASH (Unaudited) (Unaudited)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of long-term debt (83,959) (82,143)
Payments on redemption of preferred stock (38,307) -
Proceeds from bridge loans - officers 325,000 -
Customer advances 492,507 -
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Net cash provided by (used in) financing activities 695,241 (82,143)
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NET DECREASE IN CASH AND CASH EQUIVALENTS (466,717) (373,161)
CASH AND CASH EQUIVALENTS,
beginning of period 544,077 580,476
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CASH AND CASH EQUIVALENTS,
end of period $ 77,360 $ 207,315
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
(a) Cash paid for:
Interest $ 48,614 $ 40,141
State income taxes $ 16,000 $ 8,500
See accompanying notes to consolidated financial statements.
7
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SeraCare, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
1. STATEMENT OF INFORMATION FURNISHED
- -------------------------------------
In the opinion of management, the accompanying unaudited financial statements
contain all adjustments (consisting only of normal and recurring accruals)
necessary to present fairly the financial position of SeraCare, Inc. and
Subsidiaries as of May 31, 1997, and the results of their operations and cash
flows for the three months ended May 31, 1997 and 1996. These results have
been determined on the basis of generally accepted accounting principles and
practices applied consistently with those used in the preparation of the
audited financial statements included in the Company's Annual Report on Form
10-K for the fiscal year ended February 28, 1997.
The results of operations for the three month period ended May 31, 1997 are
not necessarily indicative of the results to be expected for any other period
or for the entire current fiscal year.
Certain information and footnote disclosures normally included in financial
statements presented in accordance with generally accepted accounting
principles have been condensed or omitted in accordance with the rules to
Form 10-QSB. The accompanying financial statements should be read in
conjunction with the Company's audited financial statements and notes thereto
included in the Company's Annual Report on Form 10-KSB for the fiscal year
ended February 28, 1997.
2. EARNINGS PER SHARE
- ---------------------
Earnings (loss) per common share amounts are calculated based upon the
weighted average number of shares actually outstanding during the period.
Common stock options and purchase warrants, which are considered common stock
equivalents, have not been considered in the average number of common shares
outstanding for the three month period ending May 31, 1997 as their
inclusion would be anti-dilutive.
3. BRIDGE LOANS FROM RELATED PARTIES
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During the three months ended May 31, 1997, the Company obtained bridge loans
totaling $325,000 primarily from an officer of the Company.
4. CUSTOMER ADVANCES
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During the three months ended May 31, 1997, the Company received cash
advances from a customer totaling $492,507. These advances were used
primarily for working capital related principally to the newly established
centers.
8
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
- ----------------------------------------------------
Except for historical information contained herein, the statements in this
report (including without limitation, statements indicating that the Company
"expects," "estimates," "anticipates," or "believes" and all other statements
concerning future financial results, product offerings or other events that
have not yet occurred) are forward-looking statements that are made pursuant to
the safe harbor provisions of the Private Securities Litigation Reform Act of
1995, Section 21E of the Securities Exchange Act of 1934, as amended, and
Section 27A of the Securities Act of 1933, as amended. Forward-looking
statements involve known and unknown factors, risks and uncertainties which may
cause the Company's actual results in future periods to differ materially from
forecasted results. Those factors, risks and uncertainties include, but are
not limited to: the positioning of the Company's products in the Company's
market segment; the Company's ability to effectively manage its various
businesses in a rapidly changing environment; new competition for donors and
customers; the inability of the Company to obtain FDA approval of newly
established centers; and the introduction of synthetic products which could
eliminate the need for plasma products.
THREE MONTHS ENDED MAY 31, 1997 AS COMPARED TO THREE MONTHS ENDED MAY 31, 1996
- ------------------------------------------------------------------------------
RESULTS OF OPERATIONS
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SALES
- -----
The Company collected about 39,876 liters of plasma during the three month
period ended May 31, 1997 compared to about 29,704 for the comparable prior
year period or an increase of thirty-four percent. As a result of the
increased volume, net sales increased by $72,327 to $1,585,853. The increased
volumes were the result of the acquisitions of Silver State and BHM and the
newly established centers in: Clearfield, Utah; Raleigh, North Carolina; Macon,
Georgia; Pasco, Washington; and Toledo, Ohio. The newly established centers
were operating under Reference Numbers from the FDA during the period and were
thus not allowed to sell or ship plasma, although they were collecting plasma
during the period.
GROSS PROFIT
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Gross profit increased by $49,020 or 45 percent in the 1997 period to $158,367
primarily due to increased volumes of hyperimmune plasma, mostly offset by
higher donor fees, higher salaries and other operating costs resulting from
higher volumes (mainly from the acquisitions of Silver State and BHM) and
increased competition in certain locations.
GENERAL AND ADMINISTRATIVE EXPENSES
- -----------------------------------
General and administrative expenses in 1997 were higher by $126,341 or 85
percent primarily due to higher legal and professional fees, increased travel
expenses and higher administrative salaries.
9
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INTEREST EXPENSE
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Interest expense was $48,614 in the 1997 period compared to $40,141 for the
comparable 1996 period primarily due to the bridge loans in the 1997 period.
INCOME TAXES
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As of May 31, 1997, the tax effects of temporary differences for depreciation,
amortization, and valuation allowances from current and prior periods and net
operating loss carryforwards could give rise to the recording of deferred tax
assets. The Company is unable to reasonably determine the amounts of net
operating loss carryforwards available to offset against future taxable income.
Furthermore, the Company was unable to determine whether it was more likely
than not that the deferred tax asset would be realized, therefore a 100%
valuation allowance was established.
NET INCOME
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As a result of the above, there was a net loss for the three months ended May
31, 1997 of $164,281 compared to a net income of $21,293 in the 1996 period.
LIQUIDITY AND CAPITAL RESOURCES
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As of May 31, 1997, the Company's current liabilities exceeded current assets
by $1,178,237. This was primarily due to cash used in operations and investing
activities offset by the bridge loans from related parties and the customer
advances and is related to the strong growth objectives which are the focus of
the Company's strategic plan. The Company has established itself in this rapid
growth posture in order to be able to meet the strong increased demand for
plasma which the Company believes will accelerate through fiscal years ending
in 1998 and 1999. With this strategic focus on growth in the volume of plasma
collected, the short-term impact on the Company's earnings and cash flow has
been to postpone significant profitability and positive cash flows until the
later part of fiscal 1998 when the Company believes that the volumes in several
of the newly established centers will reach maturity, new products will begin
shipping, new sales contracts will bring higher plasma pricing and new
softgoods and supplies pricing will provide for improved gross margins.
Meanwhile, the Company's projected capital requirements for fiscal 1998 include
the establishment of several additional plasma centers. The Company is
currently evaluating alternatives for funding these additional centers and the
required working capital.
Net cash used in operations increased from $269,030 in 1996 to cash used in
operations of $604,558 for the comparable period in 1997. The increase was
primarily related to the establishment of the new centers. Cash flows used in
investing activities for the three months ended May 31, 1997 was $557,400
compared to $21,988 for the comparable prior year period. This increase in
cash used resulted primarily from the capital requirements of the newly
established plasma collection centers in Clearfield, Raleigh, Macon, Pasco,
and Toledo. Cash flows provided by financing activities was $695,241 for the
current year period compared to cash used of $82,143 for the comparable prior
period. This increase was primarily due to the bridge loans (primarily from
officers) and the customer advances which were used to finance the Companies
expansion program and for working capital.
10
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Management believes that the capital expenditures necessary for this and future
expansion and the related increase in working capital requirements will be
funded by a combination of internally generated cash flows, short-term bridge
financing, private placements and a planned public offering. Accordingly, the
Company is continually evaluating alternatives for funding.
11
<PAGE>
SIGNATURES
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In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
SERACARE, INC.
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(Registrant)
Dated: July 14, 1997 By: /s/ Barry D. Plost
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Barry D. Plost, President & CEO
By: /s/ Jerry L. Burdick
---------------------------------
Jerry L. Burdick
Principal Accounting and
Finance Officer
12
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<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-1998
<PERIOD-START> MAR-01-1997
<PERIOD-END> MAY-31-1997
<CASH> 77,360
<SECURITIES> 0
<RECEIVABLES> 352,222
<ALLOWANCES> 0
<INVENTORY> 739,334
<CURRENT-ASSETS> 1,231,065
<PP&E> 1,038,045
<DEPRECIATION> 0
<TOTAL-ASSETS> 6,869,901
<CURRENT-LIABILITIES> 2,409,302
<BONDS> 0
350,740
0
<COMMON> 4,149
<OTHER-SE> 3,515,334
<TOTAL-LIABILITY-AND-EQUITY> 6,869,901
<SALES> 1,585,853
<TOTAL-REVENUES> 1,585,853
<CGS> 1,427,486
<TOTAL-COSTS> 1,427,486
<OTHER-EXPENSES> 274,034
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 48,614
<INCOME-PRETAX> (164,281)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (164,281)
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
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