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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 SB (AMENDED)
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS ISSUERS
SERACARE, INC.
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(Name of Small Business Issuer 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)
Issuer's telephone number: (310) 772-7777
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Securities to be registered under Section 12(b) of the Exchange Act: None
Securities to be registered under Section 12(g) of the Exchange Act:
Common Stock, $.001 Par Value
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(Title of Class)
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
SeraCare, Inc. (""SeraCare" or the "Company") was incorporated under the laws of
the State of Delaware in 1986 and changed its name from American Blood
Institute, Inc. to SeraCare, Inc. effective February 6, 1996. The Company
maintains its principal business and executive offices at 1925 Century Park
East, Suite 1970, Los Angeles, California 90967, telephone (310) 772-7777.
THE FILING UNDER CHAPTER 11 OF THE BANKRUPTCY CODE AND THE RESTRUCTURING PLAN.
Prior to October 1993, SeraCare, Inc. (the "Company") was named American Blood
Institute and was engaged in the business of whole blood collection and
distribution on a "for profit" basis. As such, the company was in direct
competition with the American Red Cross. After significant and accelerating
losses, an in-depth analysis of the business was done and a plan was formulated
to restructure the company as a "Plasma Collection" company through the
acquisition of AVRE, Inc. and Binary Associates, Inc. Accordingly, meetings were
held with the major secured creditor who voiced support for the plan and
provided the necessary financing and on October 4, 1993 the Company acquired
AVRE, Inc. and Binary Associates, Inc. which owned and operated six plasma
collection centers. Before implementing the balance of the restructuring plan
for the Company, management again met with the secured creditor and obtained
their verbal support and cooperation to proceed with the discontinuation of the
whole blood collection operations and the restructuring of the Company's
financial obligations. The secured lender encouraged the Company to hold a
meeting of the unsecured creditors to discuss the background of the Company's
financial troubles and to establish their support for an "Out-of-Court"
restructuring. Such a meeting was held in conjunction with the National Credit
Managers Association in early December 1993. After much discussion, the
unsecured creditors voiced unanimous support for an Out-of-Court restructuring
of the Company's financial obligations. Very shortly thereafter, the Secured
Lender called a default and attempted to foreclose on the six plasma collection
centers on the basis that the Company had held a general meeting of creditors
which was an event of default under the terms of their loan. At the time, the
Company was current in their payments to the secured lender. Consequently the
Company filed for protection under Chapter 11 of the Bankruptcy Code on January
7, 1994 in order to stay the foreclosure process of the secured lender.
During the initial stages of the Bankruptcy, the Company implemented the
restructuring plan which had been previously defined and which encompassed the
following actions:
- - increased income by renegotiating all plasma sales contracts.
- - developed marketing strategies including demographic studies and donor
pricing analyses for each of its six plasma centers.
- - reduced costs by reorganizing the management structure of the Company and
closing the regional offices including laying off of regional managers and other
administrative personnel. Also replaced three of the six center managers
because of performance related issues.
- - applied for and obtained Quality Plasma Program Certification from the
American Blood Resources Association for all six centers.
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- - establish strategies, policies and procedures in order to compete in the
rapidly changing plasma industry with increasing FDA requirements, emerging QPP
standards which required expanded testing and restrictions on donor
qualifications. Focused on a rapidly expanding demand for plasma both within
and outside the United States.
With the initial operating strategies having been implemented while under the
protective wing of the Federal Bankruptcy Code and the Company reflecting
profitability, the Company then developed a plan for emerging from Bankruptcy.
The basic structure of the plan was as follows:
A. Priority Claims (taxes and wages) would be paid in full on the
effective date of the plan.
B. The Secured Creditor would receive $600,000 in cash on the effective
date of the plan and a note for $1,100,000 with interest payable monthly at
14% and principal payable quarterly.
C. Unsecured creditors totaling approximately $2.0 million would receive
a maximum of $.10 for each claim dollar with a limit of $200,000 for such
distribution and 10,000 shares of common stock in the reorganized company.
D. Unsecured Note Holders totaling approximately $450,000 would receive
105,275 shares of the Company's common stock in full satisfaction of their
claims.
E. The pre-petition preferred and common equity interests of the Company
would be canceled. A new capital structure would be established in
conjunction with a proposed private placement which would provide the
financing for the plan.
The proposed plan was approved by the creditors and financing of $1.2 million
was obtained via a private placement. On January 24, 1996 the plan was
approved and entered by the Federal Bankruptcy Court and became effective on
February 6, 1996.
PRINCIPAL BUSINESS OPERATIONS The Company's principal business is collecting
and selling source and hyperimmune plasma to manufacturers of pharmaceutical and
diagnostic products (called Fractionators). The Company currently collects and
sells two hyperimmune plasmas, Cytomegalovirus Antibody Plasma (CMV) and Tetanus
Antibody Plasma. Of the Company's total volume of plasma, about 90% consists of
Source Plasma and approximately 10% represents hyperimmune plasma. The
Company's customers process plasma into such products as gamma globulin (used to
provide passive immunity for infectious diseases such as hepatitis B, tetanus
and rabies), the Antihemophilic factor (used to treat hemophiliac victims),
normal serum albumin (used for shock, trauma and burn victims), diagnostic test
kits for hepatitis and allergies, and blood bank typing reagents.
The process of collecting plasma is called Plasmapheresis, which consists of
drawing whole blood from a donor; centrifuge separation of the whole blood into
its components; removal of the plasma component; and returning of the red blood
cells to the donor; all in the same process. Because the red blood cells are
returned to the donor, it is possible to donate plasma more frequently than
whole blood. Pursuant to FDA rules, a donor can donate plasma up to twice per
week or 104 times per year.
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The Company currently sells all of the source plasma it collects to
fractionators under two or three year contracts which allow for annual pricing
adjustments. The fractionators process the plasma into therapeutic products
which are then sold for distribution to the end users of the products. None of
the source plasma collected by the Company is sold or administered to an end
user without being processed by a fractionator.
CURRENT OPERATIONS. The business of the Company is currently conducted through
its four wholly-owned subsidiaries: AVRE, Inc., a Nevada corporation, Binary
Associates, Inc., a Colorado corporation, BHM, Inc., an Arkansas corporation,
and SeraCare Acquisitions, Inc., a Nevada corporation. On July 2, 1996, the
Company acquired the operating assets and licenses of Silver State Plasma Center
in Las Vegas, Nevada from Nations Biologics in an asset purchase. On July 8,
1996 the Company acquired BHM Labs, Inc., which owns and operates a plasma
collection center in Ft. Smith, Arkansas. Effective September 1, 1996, the
Company completed the acquisition of two initial stage plasma collection centers
in Clearfield, Utah and Raleigh, North Carolina. Accordingly, as of November
21, 1996, the Company had nine plasma centers in operation: two (2) in Las
Vegas, Nevada; two (2) in Colorado Springs, Colorado; one in Clarkesville,
Tennessee; one in Phoenix, Arizona; one in Pueblo, Colorado; one in Ft. Smith,
Arkansas; and one plasma center in Clearfield which opened on November 19, 1996
and was operating under a Reference Number pending FDA approval of its license
application.
Subsequent to November 21, 1996, the Company began operation of: one plasma
center in Raleigh, North Carolina which opened on December 17, 1996; and one
plasma center in Macon, Georgia which opened on December 18, 1996. Both of
these locations are operating under Reference Numbers pending FDA approval of
license applications.
The Company is currently completing the construction phase for a plasma center
which is expected to open about February 15, 1997 in Pasco, Washington. The
Company is just beginning the construction phase for a plasma center which is
expected to open about April 15, 1997 in Toledo, Ohio.
The Company is currently in the final stages of lease negotiations in two other
cities.
As of November 21, 1996, the eight fully operational centers (excluding
Clearfield, Utah) were collecting plasma at an annualized rate of about 165,000
liters. The Clearfield, Utah location is in operation collecting plasma, but is
precluded from selling any of the collected plasma until final approval of its
license application. Historically, it has taken approximately eighteen months
from date of filing to obtain final FDA approval. As a startup operation, the
volume collected at the Clearfield location is not significant at this time.
PRIVATE PLACEMENT DATED JUNE 1, 1996. The Company offered through First Equity
Capital Securities, Inc. ("the Placement Agent"), $1,500,000 of Units on a
"best efforts" basis, solely to persons who met the definition of "accredited
investor" set forth in Section 2(15) of the Securities Act of 1933, as amended
(the "1933 Act"), and Rules 215 and 501(a) promulgated thereunder. The offering
price per Unit was $7,500 with a minimum purchase of $7,500 required. Only whole
Units could be purchased.
Each Unit consisted of 5,000 shares of the Company's Common Stock (the "Shares")
and 2,500 warrants (the "Series A Warrants") to purchase one share of common
stock of the Company exercisable at $2.75. The Series A Warrants are
exercisable immediately and will terminate on the earlier of (I) six years from
the date of issuance and (ii) three years from the date of the initial
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effectiveness of the "Initial Registration Statement" discussed below. The
Warrants are redeemable by the Company at $.01 per share, upon 30 days notice,
if the common stock is publicly traded and the average of the closing price per
share of the common stock for each of the 20 consecutive trading days
immediately prior to the mailing of such notification and for each day
thereafter until the redemption date shall have exceeded 133.3% of the then
existing exercise price. No call for redemption shall be made unless the
Company shall have an effective registration statement on file relating to the
common stock and the common stock underlying the Series A Warrants from the date
of mailing through and including the redemption date.
In conjunction with the June 1, 1996 Private Placement 850,000 shares of common
stock and 425,000 Series A Warrants were issued. The common shares were issued
with a 144 legend consistent with federal regulations. Such private placement
provided for multiple closings and in fact the first closing took place on
September 4, 1996 and the final closing took place on October 24, 1996. A
Registration Rights Agreement was provided by the Company as an inducement for
the investors. The material terms of the Registration Rights commitment of the
Company are: Within 270 days of October 24, 1996 ( no later than July 21, 1997)
, the Company is required to use its best efforts to file and to cause to become
effective a registration statement under the 1933 Act (the "Initial Registration
Statement"). Upon effectiveness, the Initial Registration Statement will
register the common shares issued, the common stock underlying the Series A
Warrants, the common stock issuable upon exercise of the Dealer Warrants, and
the common stock underlying the Series B Warrants. The Series A Warrants will
provide for adjustments consisting of a reduction of the exercise price of each
Series A Warrant by $.10 upon the 270th day following the closing and for each
subsequent month thereafter until the Company effectuates such registration.
Such reduction shall be subject to a "floor", solely in relation to this
provision, of $1.50 for the Series A Warrants. In addition, holders of the
Series A Warrants, Dealer Warrants and Series B Warrants received piggyback
registration rights.
The Company's common stock has been approved for quotation on The NASDAQ Stock
Market's Bulletin Board and is traded under the symbol "SERC".
The plasma centers are operating under the tradename "SeraCare" which is
registered with the United States Patent and Trademark Office.
COMPETITION
About ninety percent of the plasma collected by the Company is sold under
contracts to Alpha Therapeutic, a subsidiary of Green Cross Corporation of
Japan. Each location has a separate long-term (3 year) contract which allows
for annual pricing adjustments. Each contract is independent of the other
contracts in terms, pricing, billing practices and enforcement. Accordingly, no
single contract is deemed to be one upon which the Company is materially
dependent. As of November 21, 1996 there were nine different contracts
covering the sale of Source Plasma from the nine operating locations. In
addition, there was one contract covering the sale of CMV plasma (approximately
10% of overall production). The current contracts with Alpha Therapeutic expire
and are renewable on various dates beginning in May 1997 through October 1998.
Terms are fob plasma center with Alpha paying for all shipping. Payment terms
are generally net 10 days.
In addition, there is a very active "Spot Market" for plasma via which the
Company could sell excess plasma should any of their location contracts not be
renewed. Prices for "Spot Market"
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plasma vary, but generally run ten to fifteen percent higher than the Company's
current contract pricing.
Newly opening centers including Raleigh, NC; Toledo, Ohio; Macon, Georgia; and
Pasco, Washington have been contractually committed to North American Biologics,
Inc. contingent upon final approval of the FDA license applications for those
centers.
The Company competes for donors with pharmaceutical companies which collect
plasma for their own use, several other commercial plasma collection companies,
and non-profit organizations, such as the American Red Cross and community blood
banks, which solicit the donation of whole blood. A number of these competitors
have access to greater financial, marketing and other resources than the
Company. If the Company is unable to maintain and expand its donor base, its
business and future prospects will be adversely affected.
Most of the plasma which the Company sells to its customers is sold under long-
term contracts and relationships which once established continue to be renewed.
The plasma collected by the Company is generally used in the manufacture of
therapeutic products to treat certain diseases. Several companies are attempting
to develop and market products to treat these diseases based upon technology
which would lessen or eliminate the need for human blood plasma. Such products,
if successfully developed and marketed, could adversely affect the demand for
plasma. Products utilizing technology developed to date have not yet proven as
cost-effective or as marketable to healthcare providers as products based on
human blood plasma. However, there can be no assurances that such technology
will not ultimately become economically viable and cause a severe adverse impact
upon the Company and the plasma industry as a whole.
REGULATORY ISSUES
The plasma collection and derivative industry is one of the most heavily
regulated in the United States. Federal, state and local regulations are
designed to protect the health of the donors as well as the integrity of the
products. The Food and Drug Administration (the "FDA") administers the federal
regulations across the country. Failure to comply with FDA regulations, or
state and local regulations, may result in the forced closure of a collection
center or monetary fines or both, depending upon the issues involved. The
Company is also subject to regulation by Occupational Safety and Health
Administration ("OSHA"). The following summarizes the nature of these
regulations:
FEDERAL GOVERNMENT
FOOD AND DRUG ADMINISTRATION:
The Food and Drug Administration has extensive regulations pertaining to
the collection, storage and transport of human SOURCE PLASMA. These
regulations are found in the Code of Federal Regulations 21: Parts 207,
211, 606 and 640.
Part 207 requires the operators of blood and blood products establishments
to register and list their products with the Center for Biologics
Evaluation and Research ("CBER"), FDA. Part 211, Subparts B and C regulate
the quality control personnel and facilities as well as the overall
facilities themselves.
Part 606 relates to the qualifications of the center personnel, both
medical and technical as well as the plant or center facilities and
buildings. Part 640, Subpart G titled Source Plasma is
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a comprehensive set of regulations covering virtually every aspect of a
plasma center operation. These include but are not limited to:
informed consent,
medical supervision,
donor suitability,
collection of blood for source plasma,
plasmapheresis (the actual procedure of collecting plasma),
required laboratory tests,
processing of plasma,
general requirements,
labeling of containers,
manufacturing responsibility,
records,
reporting of donor reactions,
modification of source plasma and
shipping and storage of plasma.
In addition to the Code of Federal Regulations, the FDA regularly releases
various guidelines to which all registered blood establishments are
expected to comply.
To ensure compliance, the FDA, through their various regional offices,
conduct unannounced inspections of all plasma and blood centers. These
inspections are usually annual and the results are kept on record at CBER,
FDA. The inspectors generally examine records, equipment, facilities,
review the training documents for personnel, review the physical
examination procedures and observe the various procedures being
accomplished. These inspections typically last from two to five days and
may involve more than one inspector. The observations of an inspector are
recorded on a Form 483, a copy of which is given to the local manager.
These observations must be responded to within a two week period, detailing
what, if any, actions have been taken to correct the observation. The
regional office generally makes a determination together with CBER as to
whether these responses properly address the issues. If the observations
were considered serious enough; or, if the answers were not considered
adequate, CBER will issue a REGULATORY LETTER. This is considered a "red
flag" in the industry and if not responded to in a timely and appropriate
manner, can result in CBER taking further action, including actually
closing the center. The following is the record of the number of Form 483
observations for each of SeraCare's centers for 1995 and 1996. It should be
noted that, to date, SeraCare has never received a REGULATORY LETTER or the
equivalent of such.
Center 1995 1996
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Colorado Springs "A" 4 0
Colorado Springs "B" 2 0
Clarksville 13 12
Pueblo 0 0
Las Vegas 0 1
Las Vegas "B" NA 7
Fort Smith 4 0
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The FDA, through the Federal Register, frequently prints any actions taken
against a blood bank or plasma center as a result of compliance problems.
These are easily obtained either by contacting the FDA directly or on the
FDA world wide web page "www. fda.com".
SeraCare has an appointed individual who serves in the capacity of
"RESPONSIBLE HEAD". This position is one mandated by the FDA and serves as
the communication link between the company and the FDA. Our Responsible
Head has over eighteen years in the plasma industry and is well known and
respected by the FDA. She makes periodic unannounced compliance inspections
at the centers, simulating the FDA inspections. In addition to the
Responsible Head, the fractionators (manufacturers to whom we sell the
plasma) conduct compliance inspections in our centers on an annual basis.
Because some of our products find their way into Europe, we are also
periodically inspected by members of the European county's equivalent to
the FDA. All of this regulatory activity serves to ensure that each and
every one of our centers are in compliance with all FDA regulations that
protect the integrity of the products and the safety of the donors.
CLINICAL LABORATORY IMPROVEMENT ACT OF 1988:
In 1988, the U.S. Department of Public Health introduced an updated set of
laboratory regulations. One of the many areas which this law, regulates
is the definition of the education level of personnel required to perform
clinical laboratory tests as well as regulating the equipment and the
required controls and calibrations. Among the various tests that must be
passed by plasma center personnel, there are several that fall under the
guidelines of this act. Although in most states the Federal Government has
specifically delegated the enforcement of this act to the States, the act
is universally applied. Plasma centers are periodically inspected under the
CLIA 88 regulations.
Part of the required compliance is that centers participate in a quality
control program which is CLIA approved. Consistent with such quality
control program, center personnel perform the test, the results of which
are transmitted to the program administrators. The results must fall within
an acceptable range in order for the center to maintain its CLIA approval.
To date, no SeraCare center has failed to obtain CLIA approval.
OCCUPATIONAL SAFETY AND HEALTH ADMINISTRATION:
As with most operating companies, all of our centers must comply with both
Federal and State OSHA regulations. SeraCare trains its employees in
current OSHA standards, provides hepatitis vaccine to employees when
desired, and maintains all required records. OSHA does inspects operating
locations as they deem appropriate, and generally do so without advance
notice. SeraCare has no outstanding issues relating to an OSHA inspection
which required corrective action.
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STATE GOVERNMENTS
NEVADA:
Nevada law parallels the federal requirements as stated above with one
addition. The state requires that all employees of plasma centers be
certified with the state. This requires 6 months of experience, a completed
application and a fee.
ALL OTHER STATES
All other states in which SeraCare operates have regulations that parallel
the federal regulations. Most states do conduct periodic unannounced
inspections and require licensing under each states procedures. The
Company currently has no unresolved issues relating to any state
regulations.
INDUSTRY STANDARDS
AMERICAN BLOOD RESOURCES ASSOCIATION:
The American Blood Resources Association, an industry organization
headquartered in Maryland, represents the majority, by far, of both plasma
collection companies and manufacturers. ABRA has established a voluntary
program in which member centers agree to adhere to a set of standards that
exceed those of FDA or state and local agencies. This program, entitled
the Quality Plasma Program ("QPP"), has been supported by the FDA, the
National Hemophilia Association as well as many European regulatory
agencies. The QPP program requires a biannual inspection which focuses on:
employee training; facilities, including cleanliness; and donor selection.
The QPP criteria includes but is not limited to:
Donors must have permanent addresses with 150 miles of the center.
The rates of viral marker tests must be within set national limits.
A record of all employee training must be available along with the
training procedure.
A program of donor drug testing must be implemented.
All new donors must be checked with the National Donor Deferral
Registry.
The facility must meet all published standards, including location and
neighborhood.
All of SeraCare's operating centers are QPP approved. In addition, the
Company's startup centers and initial stage centers have been designed and
planned to QPP specifications.
During the past five years, the QPP program has created a higher level of
performance criteria and has upgraded the image of the U.S. plasma
collection industry. Examples of the requirements which are enforced by the
FDA, state authorities and ABRA include facilities upgrade, high operating
standards, strict donor screening for drugs and disease, verified addresses
for all donors, use of a national registry of deferred donors and
controlled viral reactive rates to insure they remain within prescribed
limits. The Quality Plasma Program ("QPP") is designed to eliminate the
collection of plasma from donors who are homeless, transient or drug
addicted. In addition, it requires all certified centers to maintain
documented
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and approved employee-training programs. All testing required by the center
must be performed in a QPP-approved laboratory.
The Company's management closely monitors compliance with applicable
governmental regulations, ABRA standards imposed through QPP and the
Company's own quality assurance standards. In addition, contracts with
fractionators require that individual locations be reviewed and approved
by such customer in order to allow them to sell their end products in
various countries throughout the world.
THE INDUSTRY AND THE MARKET
THE PRODUCT
Currently, the Company's primary product is "SOURCE PLASMA." SOURCE PLASMA is
plasma collected from humans. Plasma is the liquid part of blood and is
collected through a procedure similar to giving blood. The clear plasma is
mechanically separated from the cellular elements of the blood (such as red and
white blood cells and platelets) through centrifugation or membrane filtration
at the time the donation is made. These cellular elements are then returned to
the donor as part of the same procedure. The process of collecting plasma is
known as PLASMAPHERESIS. Because blood cells are returned, it is possible for
individuals to donate plasma more frequently than whole blood. Donations of
plasma can be made up to twice per week or 104 times per year pursuant to FDA
rules.
PLASMA PRODUCTS FLOWCHART
[FLOWCHART]
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PLASMA DERIVED PRODUCTS
Source plasma is sold to fractionators who process the plasma into two primary
groups of plasma products: INJECTABLE AND NON-INJECTABLE. These products are
used throughout the world to prevent illness and treat injuries.
Pursuant to FDA Regulations, plasma collected by the Company is placed in
storage on site while a sample thereof is sent to a lab for testing. No plasma
can be shipped unless test results are received which indicate the plasma is
free of any bacterial or viral occurrences. If results of the testing indicate
any bacterial or viral presence, the plasma cannot be sold as source plasma and
is generally destroyed. In addition, each of our customers (fractionators) has
its own STANDARD OPERATING PROCEDURES which SeraCare, Inc. is obligated to
follow. These procedures which are prepared and provided by the fractionator,
carefully spell out all safety related instructions. In accordance with such
procedures, all initial donors are given a physical examination before being
accepted as a plasma donor. Additionally, every time the donor donates, he is
tested for the presence of blood borne pathogens such as hepatitis B, hepatitis
C, HIV (antigen and antibody)and liver enzymes (indication of liver disease,
such as other types of hepatitis). The donor is also checked for serum protein
content and hematocrit (percent of red blood cells in serum). These tests serve
as a safety mechanism for both the donor and the plasma. New donors are also
checked for syphilis and drug use. Repeat donors are re-tested for syphilis
three times each year and for drug use once each year.
All plasma collected from a donor is held until the results of his viral
tests are completed. If a donor has a reactive result, all of that donor's
plasma is usually culled from the inventory and destroyed. In most cases, the
fractionator operates the laboratory which performs these tests.
Once the plasma arrives at the fractionation facility, all plasma containers
are checked by the fractionator's quality control staff. The unique donor
number is matched to the test results to ensure no plasma is used that has
been found reactive to viral tests. Once cleared, the fractionator processes
the plasma into its final products. That processing consists of various
procedures that, in and of themselves, reduce the presence of any
microorganisms that might have been in the plasma pool. Temperature and pH
are brought to specific levels, then the in-process products are subjected to
a solvent detergent that further reduces viral activity. There are a number
of additional steps, depending on the product, including dry heat, acetone
drying, lyophilizing and membrane filtration that all reduce the presence of
any microorganisms. Some fractionators actually perform further testing both
on in-process products and final products, so sensitive, that the presence of
any single microorganism will be detected.
The Company's primary customer Alpha Therapeutic is a manufacturer of
pharmaceutical and diagnostic products (fractionator). In addition to the
preventive measures indicated above, Alpha also processes the plasma which it
purchases from SeraCare, Inc. and their other contract centers through two
sterilization processes; A. a pasteurization process and B. a detergent
scrubbing process. The objective of both processes is to render the finished
product free of any contamination from bacterial or viral occurrences.
None of the source plasma or hyperimmune plasma collected by SeraCare, Inc.
is given to end users without first being processed by a fractionator.
Donor safety is very important to the Company. Accordingly, operating
procedures require that donors have the process thoroughly explained,
including the hazards and side effects and that an
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informed consent form be signed by each donor The Company does extensive
training of employees in order to insure the safety of it's donors.
INJECTABLE PLASMA PRODUCTS
SOURCE PLASMA is the base raw material used to manufacture many injectable
therapeutic products, the most important of which are:
NORMAL SERUM ALBUMIN AND PLASMA PROTEIN FRACTION, which are primarily used
to keep vessel walls from collapsing following major injury, as blood
volume expanders and as a protein replacement. They are used:
- to treat shock due to trauma or hemorrhage;
- to treat fluid loss due to severe burns;
- in cardiovascular surgery;
- to treat liver and kidney diseases; and
- as a carrier for many other injectable solutions.
IMMUNE GLOBULINS, which are used to strengthen the immune system in order
to fight off common diseases such as:
- Suppressed immune systems in cases of organ
transplants, HIV and other immune deficiencies;
- Hepatitis B;
- Tetanus;
- Rabies, whooping cough, measles and polio; and
- Other immune related diseases.
ANTIHEMOPHILIC FACTORS, which are specific proteins found in plasma that
are an integral part of the blood clotting mechanism. Persons born with an
absence or a deficient amount of the protein suffer from hemophilia, types
A, B, or Von Willebrand's Disease.
RH IMMUNE GLOBULIN, which is a substance administered to prevent
incompatibilities between the blood of a fetus and mother. Rh
incompatibility occurs when an Rh-negative woman is pregnant with an
Rh-positive fetus. This occurs in 9-10% of pregnancies. If no
preventive measures are taken, 0.7-1.8% of Rh-negative women with an
Rh-positive fetus will become isoimmunized antenatally, developing Rh
(D) antibody through exposure to fetal blood; 8-15% will become
isoimmunized at birth, 3-5% after abortion (spontaneous or
therapeutic), and 2.1-3.4% after amniocentesis. Rh(D) isoimmunization
currently occurs at a rate of about 1.5 per 1000 births. Its effects
on the fetus or newborn include hemolytic anemia, hyperbilrubinemia,
kernicterus, or intrauterine deaths due to hydrous fetalis. About 45%
of cases require intrauterine or exchange transfusions to survive, and
there are about four deaths from this disease per 100,000 total
births. The prevalence of Rh(D) isoimmunization has declined
significantly following the introduction of Rh(D) immune globulin in
the 1960's. Between 1970 and 1979, the crude incidence fell from 40.5
cases to 14.3 cases per 10,000 total births.
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The administration of Rh(D) immune globulin to these women prevents
maternal sensitization and subsequent hemolytic disease in Rh-positive
infants. RhIG must be administered after abortion, amniocentesis,
ectopic pregnancy, and antepartum hemorrhage, as well as after
delivery. Time series studies have shown a dramatic decline in the
incidence of Rh isoimmunization, from 13-17% in the mid-1960's to 0.3-
1.9% in the mid-1970's. In Canada, where compliance with prophylaxis
was maximized, Rh isoimmunization fell from 10.3 per 1000 births and
55 deaths in 1964 to 3.4 per 1000 births and 1 death in 1975.
NON-INJECTABLE PLASMA PRODUCTS
A secondary use of plasma is to manufacture certain diagnostic products which
are for the most part non-injectable. Some of the primary diagnostic products
are:
- BLOOD GROUPING AND TYPING REAGENTS which are used
by blood banks to match donor blood with the
recipient.
- LABORATORY CONTROL REAGENTS which are used by
laboratories to assure the quality control of
their tests.
- SPECIAL TEST KIT REAGENTS which are derived from
the plasma of donors known to have a specific
disease and are used in the laboratory as a
positive control test.
SPECIALTY PLASMAS
Specialty Plasmas generally contain high concentrations of specific antibodies
and are used primarily to manufacture immune globulin therapeutic products which
bolster the immunity of patients to fight a particular infection or to treat
certain immune system disorders. Following advances in intravenous therapy in
the mid-1980s, use of specialty plasmas for therapeutic purposes significantly
increased. Among the current uses for specialty plasmas are the production of
products to prevent hepatitis, Rh incompatibility in newborns, tetanus and
rabies. Specialty plasmas are also widely used for diagnostic and tissue culture
purposes. Depending on the rarity of the antibody or medical history of the
donor, the pricing for specialty plasmas currently ranges from $80 to $3,500 per
liter. The average spot price (free market price) of source plasma is currently
approximately $76. Most specialty plasma is derived serendipitously (not the
result of stimulation) which poses no abnormal risk to the plasma collector.
The Company currently collects and sells two specialty plasmas, Cytomegalovirus
Antibody Plasma (CMV) and Tetanus Antibody Plasma. The Company intends to place
increased emphasis on the collection of specialty plasmas by identifying
potential specialty plasma donors through screening and testing procedures and
by developing more FDA-licensed programs to inoculate potential donors.
13
<PAGE>
THE PLASMA INDUSTRY
The blood resource industry can be divided into two industry segments. One is
the non-profit or voluntary sector which is commonly thought of as Red Cross and
independent non-profit blood centers. This "non-profit" sector is primarily
concerned with providing whole blood and components of whole blood for
transfusion in medical applications at hospitals. The other is the commercial or
"for-profit" segment such as plasma collection centers. This "for-profit"
commercial sector consists of plasma collection operations which collect plasma
from paid donors and sell the plasma to Fractionators, who produce plasma
derivative products or fractions that are used in therapeutics.
Plasma is collected at centers owned by both foreign and U.S. fractionators and
by independent companies who sell to diagnostic companies and other
fractionators.
Plasma collection centers are found in most states throughout the United States
as presented in the following illustration:
DISTRIBUTION OF PLASMA CENTERS BY STATE - 1996
[MAP]
SOURCE: AMERICAN BLOOD RESOURCES ASSOCIATION
The United States plays a leading role in the world's source plasma, providing
approximately 65% of the world's plasma needs. The United States plasma industry
has made a concerted effort through ABRA to increase its global market share.
PLASMA MARKET
The source plasma industry has experienced a number of fluctuations in the
supply and demand cycles. The market factors driving the plasma industry have
included:
- The expanded use of immune globulins to prevent and treat
disease.
- The worldwide plasma shortage.
- Extensive public concern over the safety of blood products.
- An increase in domestic and foreign regulatory control over
the collection and testing of plasma.
14
<PAGE>
A worldwide shortage of plasma began in 1991, driven partially by the increased
need for plasma components to treat larger and older populations, and partially
by a diminished pool of donors that resulted from more restrictive testing and
screening requirements imposed by regulatory authorities. In 1991, the FDA
required mandatory screening for hepatitis C, thereby disqualifying donations
from a significant portion of the then existing donor base. Another market
factor has been increasing public concern over HIV and other viruses which has
lead to increased testing and tighter scrutiny.
The Company has generally sold its plasma under contracts ranging from one to
three years which allow for annual pricing renegotiations. Pricing for product
deliveries is generally mutually agreed upon prior to the beginning of the
contract year and fixed for that year. Consequently, the Company may be
adversely or beneficially affected if its costs of collecting and selling plasma
rise or fall during the year as a result of changes in government regulation,
donor fees or other factors.
FRACTIONATORS
Fractionation is the process of separating the raw source plasma into a variety
of derivative products (see "The Product" above). Prior to being fractionated,
source plasma is blended into batches of 7,500 to 10,000 liter units from many
different donor sources.
The five leading fractionators in the United States are:
ALPHA THERAPEUTIC a subsidiary of The Green Cross Corp. of
CORPORATION Japan
CENTEON a subsidiary of Rhone-Poulenc-Rorer, a
PHARMACEUTICALS French government owned pharmaceutical
conglomerate
MILES LABORATORIES a division of Germany's Bayer A.G.
HYLAND THERAPEUTICS a division of Baxter, Inc.,an $8.1 billion
revenue U.S. company.
NORTH AMERICAN a public U.S. company with $160 million
BIOLOGICALS, INC. revenue - traded on NASDAQ
CURRENT OPERATIONS
CURRENT PLASMA CENTERS
As of November 21, 1996, the Company had in operation nine plasma centers: two
(2) in Las Vegas, Nevada; two (2) in Colorado Springs, Colorado; one in
Clarkesville, Tennessee; one in Phoenix, Arizona; one in Pueblo, Colorado; one
in Ft. Smith, Arkansas; and one plasma center in Clearfield, Utah which opened
on November 19, 1996 and was operating under a Reference Number pending FDA
approval of its license application.
15
<PAGE>
Subsequent to November 21, 1996, the Company began operation of: one plasma
center in Raleigh, North Carolina which opened on December 17, 1996; and one
plasma center in Macon, Georgia which opened on December 18, 1996. Both of
these locations are operating under Reference Numbers pending FDA approval of
license applications.
The Company is currently completing the construction phase for a plasma center
which is expected to open about February 1, 1997 in Pasco, Washington. The
Company is just beginning the construction phase for a plasma center which is
expected to open about April 15, 1997 in Toledo, Ohio.
The Company collected approximately 105,000 liters of plasma in calendar year
1995, with the initial six centers. This represented an 11%, or
approximately 10,000 liter, increase over 1994 and a 33% increase over 1993.
The current eight operational centers (excluding Clearfield) are collecting
plasma at the rate of approximately 165,000 liters annually. About 90%
percent of this plasma is currently sold under contracts with Alpha
Therapeutic Corporation, a subsidiary of the Green Cross Corporation of
Japan. Alpha Therapeutic is one of the major companies in the plasma
collection, fractionation and product distribution business in the United
States. Approximately 10% of the Company's collected plasma is currently sold
as Hyperimmune plasma (CMV) to another domestic customer.
DONORS
FDA standards restrict the frequency in which a donor may give plasma to twice a
week or 104 times per year. Most regular donors donate between 40 and 60 times
per year.
The QPP certification program is focused on excluding drug or alcohol addicts or
homeless persons by requiring proof of permanent address as well as alcohol and
drug use testing.
MARKETING/DONOR RECRUITMENT
Effective recruitment, management and retention of donors are essential to the
Company's plasma business. The Company seeks to attract and retain its donor
base in the following ways:
- by utilizing competitive financial incentives which the
Company offers for the donation of the plasma.
- by providing outstanding customer service to its donors.
- by implementing programs designed to attract donors through
education as to the uses of plasma.
- by encouraging regular participation in its donor programs.
- by providing incentives to encourage donors to return.
Repeat donors are important because of the lower cost associated with obtaining
their plasma and less risk that their plasma will not satisfy regulatory and
customer requirements. The Company's centers advertise for donors through
targeted mailings, flyers and newspapers. Radio and television ads are also used
when advantageous.
The Company's donor records are maintained with the assistance of donor database
systems at each center which allows the Company's personnel to track the
frequency of donor visits. When a
16
<PAGE>
donor has not visited a center in over one month, the center sends a reminder
card to the donor emphasizing the importance of the donor's continued
participation.
DONOR PROCESSING
On their first visit all new donors are given a physical examination by
either a licensed physician or physician substitute. The National Donor
Deferral Registry and the deferral lists of the Fractionators and other
local plasma centers are all checked to determine if the donor has ever had
positive viral test results or has ever been previously deferred or rejected
as a donor. In addition to the deferral list checks, each time the donor
visits, the donor is given the opportunity to defer himself confidentially
and is asked a number of screening questions which he must audibly answer. In
addition, each time he visits, the donor is tested for: blood pressure;
temperature; pulse; weight; hematocrit; total proteins; HIV; hepatitis B and
C; and liver enzymes.
QUALITY AND OPERATIONAL CONTROLS
Through its QPP and internal operating procedures and policies, the Company
strives to maintain a high level of quality control. The Company's policies
require that donor charts be audited on a daily basis, and that equipment be
regularly recalibrated. Quality control records and procedures are maintained
at a detailed level.
TRAINING
The Company is focusing on two levels of training: (a) technical training of
employees; and (b) center management skills and development.
All employees are required to read and study detailed training materials and
are then given a written test covering that material. Results of the written
tests must be kept available for FDA inspection. Employees are also required
to demonstrate specific skills to an FDA-certified trainer. Each level of an
employee's training is tracked and documented and each employee is required
to be retested on all material every six months. All employees are "cross
trained" in all three of the center's functional areas, allowing for more
efficient scheduling. Ongoing or continuing education sessions are
periodically held to review new procedures, equipment and FDA requirements.
All training documentation is subject to FDA approval.
It is the Company's philosophy to continually develop competent individuals
within the Company to move into management positions. Selected individuals
are sent to outside management development seminars in addition to the
in-house program of development. Consequently, all of the open manager
positions during the past three years have been filled with existing in-house
personnel.
EMPLOYEES
As of November 21, 1996, the Company employed 69 full time employees and 72 part
time employees.
Of the full time employees four were corporate officers, two were corporate
clerical employees, eleven were location managers, eight were nurses, one was
a doctor and the balance (43) were crosstrained as
technicians/receptionists/phlebotomists.
17
<PAGE>
Of the part time employees, 6 were nurses and the balance (66) were crosstrained
as technicians/receptionists/phlebotomists.
The Company believes that the relations between the Company's management and its
employees are good, although there can be no assurances that such relations will
continue. The inability of the Company to attract or retain qualified personnel
could have a material adverse effect on the Company.
ITEM 2. PROPERTIES
The Company currently occupies fourteen locations with corporate offices at
1925 Century Park East, Suite 1970, in Los Angeles and thirteen plasma
centers in: Las Vegas, Nevada (2 centers); Clarksville, Tennessee; Phoenix,
Arizona; Colorado Springs, Colorado (2 centers); Pueblo, Colorado; Ft.
Smith, Arkansas; Clearfield, Utah; Raleigh, North Carolina; Macon, Georgia;
Pasco, Washington; and Toledo, Ohio. The Pasco and Toledo locations are
currently being remodeled in preparation for starting new centers in those
locations. All of the Company's leased property, comprising fourteen
locations and approximately 57,000 square feet, is leased from unaffiliated
parties under leases expiring through 2002. Most of these leases contain
renewal options which permit the Company to renew the leases for periods of
from two to five years at the then fair rental value. One of the Company's
centers is leased on a month-to-month basis. The Company believes that in the
normal course of its business it will be able to renew or replace its
existing leases. The Company believes that the space it occupies is adequate
for its existing centers.
The Company's plasma collection centers range in size from approximately
2,950 to 5,500 square feet and generally are located in population centers of
60,000 to 1,000,000 people.
The Company also owns two parcels totaling approximately one acre of land in
Fort Worth, Texas which was obtained in the purchase of the original six
plasma centers. These parcels are currently listed for sale and are not
being considered for plasma collection center development.
ITEM 3. DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
The Company is headquartered in Los Angeles, California and operates with a
head office staff of five people. The office of the Chief Operating Officer
is in Clearfield, Utah.
The following table sets forth certain information with respect to the current
directors and executive officers of the Company.
Name Age Position
- --------------------------------------------------------------------------------
Barry D. Plost ................ 50 Chairman of the Board,
President and CEO
Jerry L. Burdick............... 51 Executive Vice President, Chief
Financial Officer, Secretary
and a Director
Brad Rabe...................... 36 Vice President and Chief
Operating Officer
Brian Olson.................... 56 Vice President, Operations
Sam Anderson................... 58 Director
Susan Preston.................. 41 Director
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<PAGE>
- --------------------
BARRY D. PLOST began serving as Chairman, President and Chief Executive
Officer of the Company on February 6, 1996. Prior to joining the Company, he
was a Management Consultant with the management consulting firm of David
Barrett, Inc. for the period January 1995 until February 6, 1996. Mr. Plost
was President and Chief Executive Officer of Country Wide Transport Services,
Inc., a trucking company, from February 1991 through June 1994, and President
and Chief Operating Officer of Freymiller Trucking, Inc., a trucking company,
from November 1979 through August 1991.
JERRY L. BURDICK was appointed Executive Vice President, Chief Financial
Officer, Secretary and a Director effective December 1, 1995. From August
1993 through March 1995, Mr. Burdick was a consultant to SeraCare, Inc. in
the areas of financing, internal controls, cost accounting and was
specifically requested to evaluate the whole blood operations of the Company
and make recommendations for correcting the increasing losses. When the
Company filed for protection under Chapter 11 of the Federal Bankruptcy Code,
Mr. Burdick was asked to provide guidance to the Controller and financial
staff on appropriate bankruptcy filings and regulations. Mr. Burdick also
drafted the first proposed Reorganization Plan and accompanying Private
Placement Memorandum for SeraCare, Inc. during that period. During that
period, Mr. Burdick had no direct reports and acted only in an advisory
capacity reporting to the President of the Company. In March 1995, the
Company determined to terminate the Controller and Chief Financial Officer
(same person) and have Mr. Burdick fill that role on an acting basis during
the remaining tenure of the bankruptcy, through February 6, 1996. Mr.
Burdick previously operated his own consulting practice from March 1988
through August 1993. Mr. Burdick is a Certified Public Accountant in the
State of California. At the time the Company filed for protection under
Chapter 11 of the Federal Bankruptcy Code, Mr. Burdick was a consultant to
the Company. Mr. Burdick has also participated in various other Chapter 11
restructurings as a consultant, and for about one year as controller of a
company which was in bankruptcy when he joined the company.
BRAD RABE was appointed Vice President and Chief Operating Officer effective
September 1, 1996. Prior to joining the Company, Mr. Rabe spent sixteen
years with the Plasma Collection Division of Bayer Corporation, a large
pharmaceutical company, most recently as Operations Director.
BRIAN OLSON has served as Vice President, Operations of the Company since
July 1992 and was a Director of the Company from February 1996 until October
1996. Prior to joining the Company, Mr. Olson held the position of Director
of Plasma Supply with Alpha Therapeutic Corporation, a manufacturer of
pharmaceutical products, from July 1987 through June 1992. At the time the
Company filed for protection under Chapter 11 of the Federal Bankruptcy Code,
Mr. Olson was serving as Vice President, Operations.
SAM ANDERSON was elected a Director effective April 16, 1996. Since April of
1996, Mr. Anderson has also been a consultant to SeraCare, Inc. in the areas
of: finding and evaluating potential acquisitions; helping the Company in
developing a strategic plan for increasing the volume of hyperimmune plasma
collected including targeting the particular type of hyperimmune the company
should target; and advising the Chief Executive Officer of the Company on
industry trends and potential changes in regulations and the ramifications
thereof. Mr. Anderson's role is strictly advisory and he has no direct
reports within SeraCare, Inc.. Since March 1991, Mr. Anderson has served as a
consultant to various companies in the plasma business and specifically
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<PAGE>
in pharmaceutical products, fractionation and hyperimmune plasma. From March
1990 to March 1991, Mr. Anderson served as president of Trancel, Inc., a
start-up bio-tech development company in the area of insulin dependent
diabetes and prior to that served as Chairman and Chief Executive Officer of
Alpha Therapeutic Corporation, a manufacturer of pharmaceutical products and
also the largest plasma collection company and fractionator in the world,
until he retired in February 1990.
SUSAN PRESTON was elected a Director effective April 16, 1996. Ms. Preston
has been a practicing attorney for the law firm of Weiss, Jensen, Ellis &
Howard in Seattle, Washington since May 1994 and previously served as
corporate counsel for various other companies.
M. EZZAT JALLAD was elected a Director effective October 28, 1996. Mr.
Jallad has been Chairman and President of Softpoint, Inc., which develops and
markets point of sale software and hardware for the fast food and retail
markets since June 1995. Previously, he was Executive Vice President of SCIM
Corporation, a financial consulting firm, from April 1988 to May 1995.
The Board of Directors currently consists of five directors: Barry D.
Plost , Chairman, President and Chief Executive Officer; Jerry L. Burdick,
Executive Vice President, Chief Financial Officer and Secretary; Sam
Anderson, outside Director; Susan Preston, outside Director; and, Ezzat
Jallad, outside Director.
ITEM 4. REMUNERATION OF DIRECTORS AND OFFICERS
The following table sets forth the cash compensation and other consideration
to be paid by the Company to its executive officers. The Company does not
have key man insurance on any of its employees. Sam Anderson, an outside
Director, has entered into a three year consulting agreement with the Company
at $50,000 per year plus fully vested options to purchase 30,000 shares of
the Company's common stock at $1.50 per share which expire in three years.
Mr. Anderson also was granted fully vested options to purchase 20,000 shares
of the Company's common stock at $1.00 per share, which expire in three
years, in conjunction with a $100,000 bridge loan Mr. Anderson made to the
Company on July 2, 1996. Susan Preston has been granted fully vested options
to purchase 15,000 shares of the Company's common stock at $1.50 per share
which expire in three years.
<TABLE>
<CAPTION>
Current Paid Prior
Name and Principal Position Salary Year Options Other
- --------------------------- -------- ---------- ----------- -----
<S> <C> <C> <C> <C>
(8)Barry D. Plost, President, Chairman and CEO 110,000 None 56,147 (1) (6)(5)
150,000 (2)
100,000 (3)
130,000 (4)
(9)Jerry L. Burdick, Ex VP, Secretary and CFO 125,000 None 42,110 (1) (6)(5)
Brad Rabe, Vice President and COO 100,000 (7) None (6)(5)
(10)Brian Olson, VP, Operations 90,000 85,000 28,073 (1) (6)(5)
</TABLE>
- -----------------------------
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<PAGE>
(1) Options vest at the rate of 1/3 per year for three years, commencing with
February 6, 1997 and are contingent upon the Company achieving certain
projected operating results. The exercise price is the mid point between
$.74 and the thirty day trading average of the shares immediately prior to
each vesting date. The options will vest at the rate of one-third per year
and are contingent upon the company achieving the projected pre-tax
earnings of $920,549 in year one following February 6, 1996, $2,590,160 in
year two and $4,384,187 in year three except that such projections
contemplate an initial funding of $4.5 million in convertible debtor notes
and if the indicated funding is not provided in timely fashion for the
acquisition of the number of centers indicated in such projections, then a
calculation will be made utilizing the projected results of the base six
centers (which includes corporate overhead) plus a prorated calculation of
the projected operating results of the acquisition centers based upon the
percentage of the financing actually obtained for SeraCare, Inc. For
example, the projections contemplate the acquisition of twelve centers
during year one. Accordingly, this acquisition program would require $2.4
million. If $1.2 million or 50% is actually funded, then a calculation
will be made utilizing 100% of the year one operating results projected for
the base six centers ($365,556) plus 50% of the year one projected
operating results for the acquisition centers (50% X $450,198 = $225,099)
with the sum of the two ($365,556 + $225,099 = $590,655). Accordingly,
$590,655 will be the objective criteria for vesting of one third of the
options. If SeraCare, Inc. is sold, merged, consolidated with another
company or reorganized to the extent that there is a 50% or more change in
the ownership, the options will become immediately vested and exercisable.
(2) Options at prices are 50,000 at $1.00, 50,000 at $2.00, and 50,000
$3.00 per share, which vest in increments of 50,000 over three years,
contingent upon Company achieving the same performance criteria as
indicated in (1) above and which are exercisable for five years from
each vesting date.
(3) Fully vested options at $1.00 per share which expire at the end of
five years.
(4) Mr. Plost was granted fully vested three year options to purchase
130,000 shares of the Company's common stock at $1.00 per share in
conjunction with a $400,000 bridge loan Mr. Plost made to the Company
on July 2, 1996 and a $50,000 bridge loan he made to the Company on
July 17, 1996.
(5) The Company has established a Management Bonus Pool whereby ten
percent (10%) of earnings before taxes which are in excess of $920,549
in the year ending February 29, 1997; $2,590,160 in the year ending
February 29, 1998, and $6,244,536 in the year ending February 29, 1999
will be allocated to a bonus pool to be paid pro rata to all officers
of the Company on the basis of salaries.
(6) To the extent that quarterly earnings before taxes exceed $100,000,
the excess will be paid on a pro-rata basis to all officers up to an
annual maximum of $10,000 each.
(7) Effective on September 1, 1996, the Company signed a contract with Mr.
Rabe through February 5, 1999 at $100,000 per year plus a success
bonus of $25,000 (which may be taken in the form of cash or 16,667
shares of the Company's common stock). The success bonus is
contingent upon the signing of a multi-year contract between North
American Biologicals, Inc. and the Company for the purchase of source
plasma for all of the Company's startup locations. For the period
September 1, 1996 through December 31, 1996, Mr. Rabe shall be
compensated through the issuance of 22,224 common shares of the
Company. Mr. Rabe's compensation for the period January 1, 1997
through February 5, 1999 shall be in cash. Mr. Rabe shall also
participate in the Management Bonus Pool on the same basis as other
officers of the Company during the term of his agreement.
(8) Effective on February 6, 1996, the Company signed a contract with Mr.
Plost through February 5, 1999 at a base salary of $75,000. Such
salary was increased to $170,000 on November 1, 1996 by the Board of
Directors. Mr. Plost shall also participate in the Management Bonus
Pool on the same basis as other officers of the Company during the
term of his agreement and also received certain options as indicated.
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<PAGE>
(9) Effective on February 6, 1996, the Company signed a contract with Mr.
Burdick through February 5, 1999 at a base salary of $125,000. Mr.
Burdick shall also participate in the Management Bonus Pool on the
same basis as other officers of the Company during the term of his
agreement and also received stock options as indicated above.
(10) Effective on February 6, 1996, the Company signed a contract with Mr.
Olson through February 5, 1999 at a base salary of $90,000. Mr. Olson
shall also participate in the Management Bonus Pool on the same basis
as other officers of the Company during the term of his agreement and
also received stock options as indicated above.
ITEM 5. SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN
SECURITYHOLDERS
<TABLE>
<CAPTION>
COMMON SERIES A
INDIVIDUAL / GROUP SHARES % OPTIONS WARRANTS
- --------------------------------------- --------- ------ ------- --------
<S> <C> <C> <C> <C>
(1)Barry D. Plost 169,284 5% 436,147 35,000
(2)Jerry L. Burdick - - 42,110
(3)Brad Rabe (assumes all criteria met) 338,891 10%
(4)All Officers and Directors 553,952 17% 571,330 70,000
</TABLE>
Of the issued and outstanding shares as of September 30, 1996, no one person
or interest owns or controls more than 10%. If it is assumed that Mr. Brad
Rabe will be issued the maximum number of shares pursuant to the acquisition
agreement dated September 3, 1996, he will hold 10% of the Company's then
outstanding stock if there are no other issuance's.
Assuming the exercise of all warrants, options and the inclusion of shares
already held, Mr. Barry Plost would own 15% of the outstanding common stock
of the Company. No other person or interest would own or control more than
10%.
PRICE AND EXERCISE DATE OF SERIES A WARRANTS LISTED ABOVE.
A. Barry D Plost - President 35,000 Series A Warrants
Mr. Plost acquired 14 Units of the June 1, 1996 Private Placement for
$105,000. Each Unit consisted of 5,000 shares of common stock and 2,500
Series A warrants to purchase one share of the company's common stock at
$2.75. The Series A warrants are exercisable immediately and terminate on
the earlier of (i) six years from the date of issuance and (ii) three
years from the date of the initial effectiveness of the "Initial
Registration Statement". The Series A warrants are redeemable by the
Company at $.01 per share, upon 30 days notice, if the common stock is
publicly traded and the average of the closing price per share of the
common stock for each of the 20 consecutive trading days immediately prior
to the mailing of such notification and for each day thereafter until the
redemption date shall have exceeded 133.3% of the existing exercise price.
B. Sam Anderson - a Director 35,000 Series A Warrants
Mr. Anderson acquired 14 Units of the June 1, 1996 Private Placement
for $105,000.
See explanation under A. above.
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<PAGE>
C. All Officers and Directors 70,000 Series A Warrants
Represents the total of A. and B. above.
ITEM 6. INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
BRIDGE LOANS TO THE COMPANY.
In order to close the acquisition of the Silver State Plasma Center in Las
Vegas, Nevada on July 2, 1996, the Board of Directors unanimously approved
$550,000 in bridge loans. The terms of the bridge loans included interest at
twelve percent and 150,000 three year warrants, each warrant to purchase one
share of the Company's common stock at $1.00. Of the total amount of the bridge
loans, $450,000 was advanced by Mr. Barry Plost, the Company's President and
Chief Executive Officer, and the remaining $100,000 was advanced by Mr. Samuel
Anderson, a member of the Company's Board of Directors. Both Mr. Plost and Mr.
Anderson opted to participate in the Private Placement dated June 1, 1996
instead of receiving repayment of their note.
Mr. Plost converted $105,000.00 face value of notes into 14 Units which
consists of 70,000 shares of common stock and 35,000 Series A Warrants which
were issued in the name Barry D. Plost. In addition, Mr. Plost converted
$22,500.00 face value of notes into three Units which consists of 15,000
shares of common stock and 7,500 Series A Warrant which were issued in the
name Rena Plost.
Mr. Samuel Anderson wanted to purchase 14 Units of the Private Placement.
Fourteen Units at $7,500 totaled $105,000. Mr. Anderson had only loaned the
Company $100,000. Accordingly, Mr. Anderson remitted an additional $5,000
in order to cover the total cost of $105,000.00. The 14 Units consisted of
70,000 shares of common stock and 35,000 Series A Warrants which were issued
in the name The Samuel and Mary Ann Anderson Trust, of which Mr. Anderson is
a Trustee.
In each case, the shares issued are restricted shares and the terms of
purchase were consistent with the terms provided to all participants in the
Private Placement dated June 1, 1996 and outlined therein. Such terms
include registration rights (see Page 2 above) and the exercise price and
terms of the Series A Warrants. Each Series A Warrant authorizes the holder
to purchase one share of the company's common stock at $2.75. The Series A
Warrants are exercisable immediately and terminate on the earlier of (i) six
years from the date of issuance and (ii) three years from the date of the
initial effectiveness of the "Initial Registration Statement". The Series A
Warrants are redeemable by the Company at $.01 per share, upon 30 days
notice, if the common stock is publicly traded and the average of the
closing price per share of the common stock for each of the 20 consecutive
trading days immediately prior to the mailing of such notification and for
each day thereafter until the redemption date shall have exceeded 133.3% of
the existing exercise price.
ACQUISITION OF CLEARFIELD AND RALEIGH PLASMA CENTERS.
On September 3, 1996, the Company acquired from Mr. Brad Rabe all rights and
interests in leases, leasehold improvements, fixed assets and/or any other
personal property, licenses,
23
<PAGE>
certifications or rights attributable to both the Clearfield Center and the
Raleigh Center, including the rights to any FDA or QPP licenses and/or
certifications which attach or may attach to those locations, including the
right to file for such licenses and/or certifications if they have not
already been applied for. Mr. Rabe also agreed to complete the process of
establishing both startup locations as operational plasma collection centers
by opening plasma collection centers in both locations within a reasonable
period of time not to exceed 120 days from September 3, 1996.
BASE CONSIDERATION. As consideration to Mr. Rabe, the Company agreed to
deliver 175,000 shares of Common Stock of the Company within fifteen days of
the date when both the Raleigh and Clearfield locations have processed their
first donors. The 175,000 shares of Common Stock may be increased or
decreased depending on whether the buildout costs for the two centers exceed
$135,000. The value per share was defined within the contract at $1.50 per
share. The Private Placement dated June 1, 1996 which had its first closing
on September 4, 1996 and its final closing on October 24, 1996 was
considered when the $1.50 was established.
ADDITIONAL CONSIDERATION. In addition to the Base Consideration, the Company
and Mr. Rabe agreed on certain operational performance criteria which will
serve as the basis for Additional Consideration of a maximum of 125,000
shares of common stock of the Company if all performance criteria for the
centers are met. Accordingly, if Clearfield Center and Raleigh Center in
total generate a net profit before taxes of $310,000 for the measurement
period of twelve months ending on the last day of eighteenth month following
the Closing Date, Mr. Rabe shall receive as additional consideration 62,500
shares of Common Stock of the Company. Further, if Clearfield Center and
Raleigh Center in total generate a net profit before taxes of $310,000 for
the measurement period of twelve months ending on the last day of thirtieth
month following the Closing Date, Mr. Rabe shall receive as additional
consideration another 62,500 shares of Common Stock of the Company.
ITEM 7. SECURITIES BEING OFFERED
NO SECURITIES ARE BEING OFFERED HEREWITH PURSUANT TO THE FILING OF THIS FORM
10SB.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS.
(a) MARKET INFORMATION:
The Company's Common Stock has been approved for quotation on The NASDAQ Stock
Market's Bulletin Board and is traded under the symbol "SERC". The Company
emerged from bankruptcy on February 6, 1996 and began trading on the Bulletin
Board in May 1996. The following table sets forth the range of bid prices for
the Common Stock during the periods indicated, and represents inter-dealer
prices, without retail mark-up, mark-down or commission to the broker-dealer,
and may not represent actual transactions. The information summarized in the
following table has been derived from the NASD's Monthly Statistical Report.
24
<PAGE>
The Company's Common Stock was not traded on any market prior to May 1996.
For the period May 1, 1996 through January 30, 1997: High Low
---- ---
3 1/4 3/4
(b) HOLDERS:
Approximate Number of
Record Holders (as
Title of Class of January 30, 1997)
- -------------- ---------------------
Common Stock, $.001 par value 360 (1)
- ---------------------
(1) Certain of the Company's other shareholders hold shares under "street
name" and are not identified individually. Accordingly, the Company
estimates that it has a total of approximately 460 beneficial shareholders.
(c) DIVIDENDS:
The Company has never paid cash dividends on its Common Stock. According to
the terms and conditions of the Amended and Restated Loan Agreement dated
February 5, 1996, between CVD Financial Corporation (referred to therein as
"Lender") and SeraCare, Inc., Avre Incorporated, and Binary Associates, Inc.
(referred to therein as "Borrowers"), Borrowers may not declare or pay
dividends on account of any stock of the Borrowers, except that SeraCare,
Inc. may issue warrants, options, stock, rights or any other form of equity
security as a dividend. The declaration and payment of dividends in the form
of equity securities by the Company's board of directors will depend, among
other factors, on earnings as well as the operating and financial condition
of the Company. At the present time, the Company does not expect to declare
or issue any dividends within the foreseeable future.
(d) INFORMATION REQUIRED BY ITEM 201(a) (2) OF REGULATION S-B.
As of October 31, 1996, the amount(s) of common equity of SeraCare, Inc.
which is subject to outstanding options or warrants to purchase, or
securities convertible into common equity of the registrant was as follows:
Description Shares
--------------------------------------------- -----------
Common Shares Issued and Outstanding 2,965,500
Shares reserved for Options of Officers and Directors 571,330
Shares reserved for Series A Warrants 425,000
Shares reserved for Dealer Warrants 103,500
Shares reserved for Clearfield/Raleigh acquisition 300,000
Shares reserved for Brad Rabe success bonus 16,667
Shares reserved for Brad Rabe salary for the
period 9/3/96 through 12/31/96 22,222
---------
Total Common Shares Issued and Reserved 4,404,219
---------
25
<PAGE>
The Company has agreed to register the shares reserved for the Series A
Warrants and the Dealer Warrants in accordance with the registration rights
agreements attached to the Form 10SB as Exhibits 6.15 and 6.18.
ITEM 2. LEGAL PROCEEDINGS
(a) PENDING LEGAL MATTERS.
PREFERENCE LITIGATION:
In conjunction with the winding down of the Chapter 11 bankruptcy
proceedings associated with BK Case No. LA 94-11730-AA which was filed on
January 7, 1996, the Company has three preference actions pending against:
NOW Medical Services for $64,000.00; Arthur Anderson & Co. for $10,000.00;
and Weingberg Spelton & Sax for $18,000.00. In addition, the Company has
entered into settlement agreements with various other defendants which are
pending approval by the United States Bankruptcy Court Central District of
California. According to the terms of the Plan of Reorganization, total
recoveries of preference claims net of legal costs are to be split one-half
to the Unsecured Creditors on a pro-rata distribution basis and one-half to
the Company. Preference proceedings are administered under the direction
of and are subject to approval by the Federal Bankruptcy Court. Preference
litigation is aimed at avoidable preference transfers (payments) which took
place within 90 days of the date on which the Debtor files for bankruptcy.
Elements of an avoidable preference transfer include:
1. "any transfer of an interest of the debtor in property,"
2. "to or for the benefit of a creditor,"
3. "for or on account of an antecedent debt owed by the debtor"
before the "transfer was made,"
4. "made while the debtor is insolvent,"
5. "made (A) . . . within 90 days before" bankruptcy;" or (B)
between ninety days and one year before" bankruptcy, if the
transferee "was an insider" at the time of the transfer; and
6. that enables the creditor "to receive more than" it would
receive if
(A) "the case were a case under chapter 7" of the Code;
(B) "the transfer had not been made;" and
(C) the "creditor received payment" of its debt "to the extent
provided by" the Code.
The purpose of preference actions is to facilitate equality of
distributions among creditors of a debtor such that any creditor which
received a greater payment (benefit) than others in his class is required
to disgorge so that such funds can be shared equally by all creditors. In
the case of SeraCare, Inc., 50% of all net preference recoveries after
legal costs will be redistributed to the unsecured creditors and 50% will
be retained by the Company. There can be no assurances that the Company
will prevail in the three pending actions.
26
<PAGE>
OTHER LITIGATION ISSUES:
On January 24, 1996, the Company confirmed its Plan of Reorganization and
emerged from Chapter 11 Bankruptcy effective on February 6, 1996. The
Company is accordingly "Out of Bankruptcy", has implemented the Plan of
Reorganization and has made initial distributions to creditors in accordance
with that Plan. However, until the final preference action has been resolved,
the Chapter 11 proceeding remains open and will be closed at such time as
the final action has been resolved.
The Company has no other pending litigation as of September 30, 1996 which is
material or involves environmental laws.
(b) PENDING GOVERNMENTAL AGENCY PROCEEDINGS.
The Company has no pending governmental agency proceeding as of September 30,
1996 which is material or involves environmental laws.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
(1) None
(2) On April 1, 1996, the Company retained the services of BDO Seidman,
LLP to perform an independent audit of the Company's financial
statements as of February 28, 1996 and 1995 and for the years then
ended. The financial statements of the Company were not audited in
1994 due to the pending status of the Chapter 11 bankruptcy. The last
audit of the Company was performed by Arthur Anderson & Co. for the
period ended October 31, 1993.
The Company did not consult with BDO Seidman, LLP regarding the application
of accounting principles to a specified transaction, either completed or
proposed, or the type of audit opinion that might be rendered on the
Company's financial statements, or any matter that was either the subject
of a disagreement or a reportable event, at any time prior to the
appointment of such firm.
There were no disagreements with BDO Seidman, LLP during the course of the
current audits and there were no disagreements with Arthur Anderson & Co.
during the October 31, 1993 audit.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
(a) Securities sold within the past three years without registration
of the securities under the Securities Act were as indicated below.
The Company offered all such securities solely to persons who meet the
definition of "accredited investors" set forth in Section 2(15) of the
Securities Act of 1933, as amended and Rules 215 and 501(a)
thereunder. The offerings were made in reliance upon the non-public
offering exemption from registration provided in Section 4(2) of the
1933 Act and Regulation D promulgated thereunder.
27
<PAGE>
TITLE OF SECURITIES - COMMON STOCK, $.001 PAR VALUE
(i) Effective February 6, 1996, 2,115,500 shares of the
Company's Common Stock were issued in conjunction with the
funding of the Company's Plan of Reorganization. Of those
shares, an aggregate of 1,610,708 shares were issued in
exchange for $1.2 million face value of Debtor Notes and an
aggregate of 504,792 shares were issued in satisfaction of
other creditor claims. Such shares were issued pursuant to
Section 1145 of the United States Bankruptcy Code and may be
resold pursuant to Section 4(1) of the Securities Act of
1933, as amended ("1933 Act"). No Series A Warrants were
issued.
(ii) Effective September 4, 1996, an aggregate of 565,000 shares
of the Company's Common Stock and 282,500 Series A Warrants
were issued in exchange for $847,500 in cash, pursuant to a
Private Placement Memorandum dated June 1, 1996, which
offered Units consisting of five thousand shares of the
Company's Common Stock and two thousand, five hundred
Series A Warrants for each minimum investment of $7,500.00.
Such Units were offered to "accredited investors" as that
term is defined in the 1933 Act and Rules 215 and 501(a)
promulgated thereunder. These shares are "restricted
shares" as that term is defined in Rule 144 under the 1933
Act.
(iii) Effective October 23, 1996, an aggregate of 285,000 shares
of the Company's Common Stock and 142,500 Series A Warrants
were issued in exchange for $427,500 in cash, pursuant to a
Private Placement Memorandum dated June 1, 1996, which
offered Units consisting of five thousand shares of the
Company's Common Stock and two thousand, five hundred
Series A Warrants for each minimum investment of $7,500.00.
Such Units were offered to accredited investors as that
term is defined in the 1933 Act and Rules 215 and 501(a)
promulgated thereunder. These shares are "restricted
shares" as that term is defined in Rule 144 under the 1933
Act.
TITLE OF SECURITIES - SERIES A WARRANTS (Represents right to purchase one share
of the Company's Common Stock at an exercise price of $2.75,
exercisable immediately and terminating on the earlier of (1) six
years from issuance or (2) three years from the date of the initial
effectiveness of a Registration Statement covering the shares.
(i) Effective September 4, 1996, an aggregate of 282,500 Series
A Warrants were issued pursuant to a Private Placement
Memorandum dated June 1, 1996, which offered Units
consisting of five thousand shares of the Company's Common
Stock and two thousand, five hundred Series A Warrants for
each minimum investment of $7,500.00. Such Units were
offered to "accredited investors" as that term is defined
in the 1933 Act and Rules 215 and 501(a) promulgated
thereunder.
(ii) Effective October 23, 1996, an aggregate of 142,500 Series
A Warrants were issued pursuant to a Private Placement
Memorandum dated June 1, 1996, which offered Units
consisting of five thousand shares of the Company's Common
Stock and two thousand, five hundred Series A Warrants for
each minimum investment of $7,500.00. Such Units were
offered to "accredited investors" as that term is defined
in the 1933 Act and Rules 215 and 501(a) promulgated
thereunder.
28
<PAGE>
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Messrs. Plost, Burdick, Rabe, and Olson are parties to employment contracts
with the Company which, among other terms and conditions, require that the
Company indemnify, defend and hold them harmless, to the maximum extent
permitted by law, from any and all claims, litigation or suits arising out of
the activities taken in performance of the duties hereunder, including all
reasonable expenses and professional fees that may relate thereto. In
addition, the Company agreed to seek appropriate directors and officers
liability insurance for errors and omissions of such type and in such amount
as is customary for similarly situated companies, if available at a
reasonable cost. The Company does not have directors and officers liability
insurance for errors and omissions at this time.
INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING UNDER THE SECURITIES ACT
OF 1933 (THE "ACT") MAY BE PERMITTED TO DIRECTORS, OFFICERS, AND CONTROLLING
PERSONS OF THE SMALL BUSINESS ISSUER PURSUANT TO THE FOREGOING PROVISIONS, OR
OTHERWISE, THE SMALL BUSINESS ISSUER HAS BEEN ADVISED THAT IN THE OPINION OF
THE SECURITIES AND EXCHANGE COMMISSION SUCH INDEMNIFICATION IS AGAINST PUBLIC
POLICY AS EXPRESSED IN THE ACT AND IS, THEREFORE, UNENFORCEABLE.
PART F/S
REVISED FINANCIAL STATEMENTS ARE PRESENTED AS FOLLOWS:
(a) Audited Annual Financial Statements as of February 28, 1996 and 1995
and for the two years then ended.
(b) Unaudited Interim Financial Statements as of August 31, 1996 and for
the six months then ended.
29
<PAGE>
F/S (A)
PAGE
NUMBER
SERACARE, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 29, 1996 AND FEBRUARY 28, 1995
(AUDITED)
Report of Independent Auditors -
BDO Seidman, LLP 33
Consolidated Balance Sheets - 34
as of February 29, 1996 and February 28, 1995
Consolidated Statements of Operations - 36
February 6, 1996 through February 29, 1996
March 1, 1995 through February 5, 1996
Year Ended February 28, 1995
Consolidated Statements of Shareholders' Equity (Deficiency) - 37
March 1, 1994 through February 29, 1996
Consolidated Statements of Cash Flows - 38
February 6, 1996 through February 29, 1996
March 1, 1995 through February 5, 1996
Year Ended February 28, 1995
Summary of Accounting Policies 40
Notes to Consolidated Financial Statements - 43
30
<PAGE>
SERACARE, INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 29, 1996 AND FEBRUARY 28, 1995
31
<PAGE>
SERACARE, INC. AND SUBSIDIARIES
CONTENTS
INDEPENDENT AUDITORS' REPORT 33
CONSOLIDATED FINANCIAL STATEMENTS
Balance sheets 34
Statements of operations 36
Statements of shareholders' equity (deficit) 37
Statements of cash flows 38
SUMMARY OF ACCOUNTING POLICIES 40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 43
32
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
SeraCare, Inc.
We have audited the accompanying consolidated balance sheet of SeraCare, Inc.
(Restructured Company) and subsidiaries as of February 29, 1996 and the
related consolidated statements of operations, stockholders' equity
(deficit), and cash flows for the period February 6, 1996 to February 29,
1996. We have also audited the consolidated balance sheet of American Blood
Institute, Inc. (Predecessor Company) (Debtor-In-Possession) and subsidiaries
as of February 28, 1995 and the related consolidated statements of
operations, stockholders' equity (deficit) and cash flows for the period
March 1, 1995 to February 5, 1996 and the year ended February 28, 1995.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of SeraCare,
Inc. (Restructured Company) and subsidiaries and American Blood Institute,
Inc. (Predecessor Company) and subsidiaries at February 29, 1996 and February
28, 1995 and the results of their operations and their cash flows for the
periods ended February 29, 1996 and February 5, 1996 and the year ended
February 28, 1995, in conformity with generally accepted accounting
principles.
As discussed in Note 1 to the financial statements, the Bankruptcy Court
confirmed the Company's Plan of Reorganization on January 24, 1996, and the
Company emerged from bankruptcy effective February 6, 1996. On February 6,
1996 the Company accounted for the reorganization and adopted "fresh start
accounting." As a result, the Company's February 29, 1996 balance sheet is
not comparable to the February 28, 1995 balance sheet, since it presents the
financial position of the reorganized entity.
/S/
----------------------------------
Los Angeles, California BDO SEIDMAN, LLP
May 23, 1996
33
<PAGE>
SERACARE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
REORGANIZED PREDECESSOR
COMPANY COMPANY
FEBRUARY 29, FEBRUARY 28,
1996 1995
- --------------------------------------------------------------------------------
ASSETS (Notes 1 and 5)
CURRENT ASSETS
Cash and cash equivalents $ 580,476 $ 104,517
Accounts receivable, net of allowance for
doubtful accounts of $100,732 in 1995 199,862 178,891
Inventories (Note 3) 279,758 434,598
Prepaid expenses and other current assets 33,572 51,164
- --------------------------------------------------------------------------------
Total current assets 1,093,668 769,170
- --------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT, net (Note 4) 71,840 61,607
- --------------------------------------------------------------------------------
FDA LICENSES (Note 1) 900,000 -
DONOR BASE AND RECORDS (Note 1) 600,000 -
EXCESS OF COST OVER NET ASSETS ACQUIRED, less
accumulated amortization of $66,492 - 854,895
REORGANIZATION VALUE IN EXCESS OF AMOUNTS
ALLOCATED TO IDENTIFIABLE ASSETS, less
accumulated amortization of $2,374 (Note 1) 1,032,753 -
LAND AVAILABLE FOR SALE 25,000 51,285
OTHER ASSETS 17,640 26,459
- --------------------------------------------------------------------------------
$ 3,740,901 $ 1,763,416
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
34
<PAGE>
SERACARE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
REORGANIZED PREDECESSOR
COMPANY COMPANY
FEBRUARY 29, FEBRUARY 28,
1996 1995
- -------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
<S> <C> <C>
CURRENT LIABILITIES NOT SUBJECT TO COMPROMISE
Accounts payable $ 723,951 $ 599,185
Accrued expenses 583,546 118,756
Current portion of long-term debt (Notes 1 and 5) 328,571 -
- -------------------------------------------------------------------------------------------------
Total current liabilities not subject to compromise 1,636,068 717,941
- -------------------------------------------------------------------------------------------------
CURRENT LIABILITIES SUBJECT TO COMPROMISE (Note 1)
Current portion of long-term debt - 1,386,236
Unsecured notes payable - 587,189
Accounts payable and accrued expenses - pre-petition - 1,907,646
- -------------------------------------------------------------------------------------------------
Total current liabilities subject to compromise - 3,881,071
- -------------------------------------------------------------------------------------------------
OTHER LIABILITIES
Long-term debt (Notes 1 and 5) 821,429 -
- -------------------------------------------------------------------------------------------------
COMMITMENTS (Note 10)
STOCKHOLDERS' EQUITY (DEFICIT) (Notes 1, 6 and 7)
Series A preferred stock - 334,394
Common stock 2,115 5,731
Additional paid-in capital 1,277,671 2,583,349
Retained earnings (deficit) 3,618 (5,759,070)
- -------------------------------------------------------------------------------------------------
Total stockholders' equity (deficit) 1,283,404 (2,835,596)
- -------------------------------------------------------------------------------------------------
$ 3,740,901 $ 1,763,416
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements.
35
<PAGE>
SERACARE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
REORGANIZED COMPANY PREDECESSOR COMPANY
------------------- ----------------------------
FEBRUARY 6, MARCH 1,
1996 1995
THROUGH THROUGH YEAR ENDED
FEBRUARY 29, FEBRUARY 5, FEBRUARY 28
1996 1996 1995
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES $510,148 $6,159,376 $5,433,331
COST OF SALES 446,253 5,397,095 4,833,823
- ----------------------------------------------------------------------------------------------------
GROSS PROFIT 63,895 762,281 599,508
GENERAL AND ADMINISTRATIVE EXPENSES 47,050 793,934 676,236
- ----------------------------------------------------------------------------------------------------
OPERATING INCOME (LOSS) 16,845 (31,653) (76,728)
OTHER INCOME (EXPENSE)
Reorganization items (Note 1):
Professional fees (2,500) (491,877) (163,981)
Adjustment of net assets to fair value - 805,038 -
Interest expense (10,727) - -
Other expense - (30,408) -
- ----------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS BEFORE
DISCONTINUED OPERATIONS AND
EXTRAORDINARY ITEM 3,618 251,100 (240,709)
- ----------------------------------------------------------------------------------------------------
LOSS FROM DISCONTINUED OPERATIONS
(Note 2) - - (130,255)
- ----------------------------------------------------------------------------------------------------
NET INCOME (LOSS) BEFORE EXTRAORDINARY
ITEM 3,618 251,100 (370,964)
EXTRAORDINARY NET GAIN FROM DEBT
DISCHARGE (Note 1) - 2,584,496 -
- ----------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ 3,618 $2,835,596 $ (370,964)
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
</TABLE>
36
<PAGE>
SERACARE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY (DEFICIT)
<TABLE>
<CAPTION>
COMMON STOCK
--------------------------------------------------------
PREFERRED STOCK CLASS B
----------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, March 1, 1994 43,918 $ 334,394 - $ - 4,350,912 $ 5,731
Net loss - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------
BALANCE, February 28, 1995 43,918 334,394 - - 4,350,912 5,731
Net loss for period March 1, 1995 to
February 5, 1996 before
extinguishment of stockholders'
equity - - - - - -
Extinguishment of stockholders'
equity in connection with
bankruptcy (Note 1) (43,918) (334,394) - - (4,350,912) (5,731)
- ------------------------------------------------------------------------------------------------------------------------------
BALANCE, February 5, 1996 - - - - - -
Common stock issued for:
Conversion of debt - - 115,275 115 - -
Services - - 389,518 389 - -
Private placement - - 1,610,707 1,611 - -
Net income for period
February 6, 1996
to February 29, 1996 - - - - - -
- ------------------------------------------------------------------------------------------------------------------------------
BALANCE, February 29, 1996 - $ - 2,115,500 $2,115 - $ -
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
ADDITIONAL RETAINED
PAID-IN EARNINGS
CAPITAL (DEFICIT) TOTAL
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BALANCE, March 1, 1994 $ 2,583,349 $(5,388,106) $(2,464,632)
Net loss (370,964) (370,964)
- -----------------------------------------------------------------------------------------------------
BALANCE, February 28, 1995 2,583,349 (5,759,070) (2,835,596)
Net loss for period March 1, 1995 to
February 5, 1996 before
extinguishment of stockholders'
equity (553,938) (553,938)
Extinguishment of stockholders'
equity in connection with
bankruptcy (Note 1) (2,583,349) 6,313,008 3,389,534
- -----------------------------------------------------------------------------------------------------
BALANCE, February 5, 1996 - - -
Common stock issued for:
Conversion of debt 77,789 - 77,904
Services 238,393 - 238,782
Private placement 961,489 - 963,100
Net income for period
February 6, 1996
to February 29, 1996 - 3,618 3,618
- -----------------------------------------------------------------------------------------------------
BALANCE, February 29, 1996 $ 1,277,671 $ 3,618 $ 1,283,404
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
</TABLE>
See accompanying summary of accounting policies and notes to consolidated
financial statements.
37
<PAGE>
SERACARE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
INCREASE (DECREASE) IN CASH REORGANIZED COMPANY PREDECESSOR COMPANY
------------------- -------------------------------
FEBRUARY 6, MARCH 1,
1996 1995
THROUGH THROUGH YEAR ENDED
FEBRUARY 29, FEBRUARY 5, FEBRUARY 28,
1996 1996 1995
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 3,618 $2,835,596 $(370,964)
Adjustments to reconcile net income (loss) to
cash provided by (used in) operating activities:
Extraordinary gain from debt discharge
and step-up in assets from reorganization
(Note 1) - (3,389,534) -
Depreciation and amortization 3,236 77,058 5,554
Write-down of land - 26,285 -
(Increase) decrease in assets
Accounts receivable 98,081 (119,052) 123,673
Inventories 58,532 96,308 (255,471)
Prepaid expenses and other current
assets 3,988 13,604 71,436
Other assets - 8,819 (12,541)
Increase (decrease) in liabilities
Accounts payable (272,269) 299,856 535,343
Accrued expenses (33,430) 448,824 (32,677)
- -------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in)
operating activities (138,244) 297,764 64,353
- -------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (2,096) (19,565) (48,159)
Proceeds from sale of furniture
and equipment - - 88,735
- -------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in)
investing activities (2,096) (19,565) 40,576
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
38
<PAGE>
SERACARE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
INCREASE (DECREASE) IN CASH REORGANIZED COMPANY PREDECESSOR COMPANY
------------------- -----------------------------
FEBRUARY 6, MARCH 1,
1996 1995
THROUGH THROUGH YEAR ENDED
FEBRUARY 29, FEBRUARY 5, FEBRUARY 28,
1996 1996 1995
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in long-term debt - (625,000) (121,664)
Net proceeds from private placement - 963,100 -
- -------------------------------------------------------------------------------------------------
Net cash provided by (used in)
financing activities - 338,100 (121,664)
- -------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (140,340) 616,299 (16,735)
CASH AND CASH EQUIVALENTS,
beginning of period 720,816 104,517 121,252
- -------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS,
end of period $ 580,476 $ 720,816 $ 104,517
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for:
Interest $ - $ - $ 22,500
Income taxes $ - $ - $ -
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING SUMMARY OF ACCOUNTING POLICIES AND NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS.
39
<PAGE>
SERACARE, INC. AND SUBSIDIARIES
SUMMARY OF ACCOUNTING POLICIES
ORGANIZATION
SeraCare, Inc. (formerly American Blood Institute, Inc.) (the "Company"), a
Delaware corporation, was formed on November 8, 1991. The business of the
Company is currently carried out through its two wholly-owned subsidiaries
AVRE, Inc., a Nevada corporation, and Binary Associates, Inc., a Colorado
corporation.
BUSINESS OPERATIONS
The Company was initially engaged in the business of whole blood collection and
distribution. After significant and accelerating losses, it changed the focus
of the business from whole blood to plasma collection and distribution. On
October 4, 1993, the Company acquired 100% of the outstanding common stock
shares of AVRE, Inc. and Binary Associates, Inc., which owned and operated six
plasma collection centers. On January 7, 1994, the Company and subsidiaries
filed for protection under Chapter 11 of the Bankruptcy Code. The restructuring
plan which was implemented encompassed the following actions: renegotiating all
plasma sales contracts to Fractionators; developing marketing strategies
including demographic studies and donor pricing analyses for each of its six
plasma centers; reorganizing the management structure of the Company by moving
the headquarters to Los Angeles, discontinuing regional manager positions and
changing three of the six center managers; obtaining Quality Plasma Program
("QPP") certification from the American Blood Resources Association for all six
centers; and establishing consistent strategies, policies and procedures in
order to compete in the emerging QPP plasma industry. The restructuring of the
six plasma operations is substantially complete. The Company emerged from
Chapter 11 effective February 6, 1996. The six plasma centers currently operate
under the tradename "SeraCare". The name "SeraCare" is registered with the
United States Patent and Trademark Office.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its two wholly owned subsidiaries. All significant intercompany transactions
and balances have been eliminated in consolidation.
INVENTORIES
Inventories are stated at the lower of cost which is determined on a first-in,
first-out basis, or market. Inventories consist of blood plasma collected from
donors and medical supplies.
40
<PAGE>
SERACARE, INC. AND SUBSIDIARIES
SUMMARY OF ACCOUNTING POLICIES
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation and amortization are
computed primarily using the straight-line method over the estimated useful
lives, which range from three to seven years.
INCOME TAXES
The Company utilizes FAS 109 "Accounting for Income Taxes" in accounting for
income taxes. It requires an asset and liability approach for financial
accounting and reporting of deferred income taxes. Generally, FAS 109 allows
for recognition of deferred tax assets in the current period for the future
benefit of net operating loss carryforwards and items for which expenses have
been recognized for financial statement purposes but will be deductible in
future periods. A valuation allowance is recognized, if on the weight of
available evidence it is more likely than not that some portion or all of the
deferred tax asset will not be realized.
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers all highly
liquid debt instruments with an original maturity of three months or less to be
cash equivalents.
REORGANIZATION VALUE IN EXCESS OF AMOUNTS ALLOCABLE TO IDENTIFIABLE ASSETS
Under the principles of "fresh-start" reporting, the Company allocated total
reorganization value among identifiable tangible and intangible assets on the
basis of their estimated fair values. The remaining amount is classified as
reorganization value in excess of amounts allocable to identifiable assets and
is being amortized over twenty years.
FDA LICENSES
The reorganization value allocated to Food and Drug Administration ("FDA")
licenses represents the estimated value of a valid FDA license necessary to
operate a plasma donor center in the United States. An estimate value of
$150,000 per center has been allocated to the six centers owned by the Company.
The FDA license value is being amortized over forty years.
41
<PAGE>
SERACARE, INC. AND SUBSIDIARIES
SUMMARY OF ACCOUNTING POLICIES
DONOR BASE AND RECORDS
The reorganization value allocated to donor base and records represents the
estimated value to acquire a plasma center donor base and records. An estimated
value of $100,000 per center has been allocated to the six centers owned by the
Company. The donor base and records is being amortized over twenty years.
EXCESS OF COST OVER NET ASSETS ACQUIRED
Prior to February 6, 1996, the excess cost over net assets acquired represented
the excess of amounts paid over the fair value of net assets acquired relating
to the acquisitions of AVRE, Inc. and Binary Associates, Inc., and was being
amortized over forty years. The unamortized balance was written off in
connection with the Restructuring.
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
FAIR VALUE OF LONG-TERM DEBT
The fair value of the Company's long-term debt is estimated based on the quoted
market prices for the same or similar issues or on the current rates offered to
the Company for debt of the same remaining maturities.
42
<PAGE>
SERACARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. REORGANIZATION AND BASIS OF REPORTING
During 1994 and 1995 the Company prepared and has completed a plan of
reorganization (the "Plan") pursuant to Chapter 11 of the U.S. Bankruptcy Code.
The Company filed the Plan with the U.S. Bankruptcy Court for the Central
District of California (the "Bankruptcy Court") on January 24, 1996 ("the
Petition Date"). The Plan was confirmed by the Bankruptcy Court and the Company
emerged from bankruptcy on February 6, 1996 (the "Effective Date"). Pursuant to
the provisions of the Plan, on the Effective Date:
(i) The Company obtained $1.2 million in Debtor Notes financing which
was fully subscribed on the Effective Date;
(ii) Unsecured Class 1 unsecured creditors were entitled to full
payment equal to the amount of the allowed claim;
(iii) Secured Class 2 amount due CVD Financial was satisfied in the
amount of $1,775,000 as follows: (a) a cash repayment of $625,000 on the
Effective Date (b) the balance of $1,150,000, interest at 14% payable
monthly, with principal payable quarterly at $82,142 over three and
one-half years;
(iv) Unsecured Class 3 allowed claims due Unsecured Creditors were
settled as follows: (a) $.10 cash for each dollar claim up to a maximum of
$200,000 in total, (b) a pro rata share of 10,000 shares of common stock of
the Reorganized Company, and (c) 50% of any net affirmative preference
payment recoveries received from debtors.
(v) Unsecured Class 4 allowed claims due Unsecured Note Holders were
settled through the issuance of 105,275 shares of common stock of the
reorganized Company;
(vi) Unsecured Class 5 and 6 allowed claims of the two wholly-owned
subsidiaries received $.80 for each claim dollar;
(vii) All preferred and common equity interests of the Company on the
Effective Date were deemed canceled, annulled and terminated, and any such
holders of such interests received no distributions;
(viii) The Company retained full interest in the two wholly-owned
subsidiaries.
43
<PAGE>
SERACARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. REORGANIZATION AND BASIS OF REPORTING (Continued)
The financial statements as of and for the period ended February 29, 1996
reflect the Company's emergence from Chapter 11 and were prepared according to
the principles of fresh-start accounting contained in the provisions of American
Institute of Certified Public Accountants' Statement of Position 90-7,
"Financial Reporting by Entities in Reorganization Under the Bankruptcy Code"
("SOP 90-7"). As a result of the implementation of "fresh-start" accounting,
the Company's financial statements as of and for the period ended February 29,
1996 are not comparable to the Company's financial statements of prior periods.
Therefore, financial statements for the "Reorganized Company" have been
separately identified from those of the "Predecessor Company".
Reorganization value approximates fair value of the entity before considering
liabilities and approximates the amount a buyer would pay for the assets of the
Company after the reorganization.
The total reorganization value assigned to the Company's assets was based on the
$1.2 million debtor note financing which was converted to common stock which
represented 76.2% of the total common stock shares issued pursuant to the
Company's Plan of Reorganization. These convertible debtor notes have been used
as the basis for determining the net worth of the Company at the Effective Date.
The excess of the reorganization value over the value of the identifiable assets
is reported as "Reorganization Value in Excess of Amount Allocable to
Identifiable Assets" and is being amortized over twenty years. Under the
principles of "fresh-start" accounting, the Company's total assets were recorded
at this assumed reorganization value, with the reorganization value allocated to
identifiable tangible and intangible assets on the basis of their estimated fair
value. In addition, the Company's accumulated deficit was eliminated.
44
<PAGE>
SERACARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. REORGANIZATION AND BASIS OF REPORTING (Continued)
The effect of the Restructuring and the implementation of "fresh-start"
accounting on the Company's balance sheet as of February 5, 1996 was as follows:
PRE-FRESH
START BALANCE FRESH-START
SHEET REORGANIZATION BALANCE SHEET
FEBRUARY 5, OF FAIR VALUE FEBRUARY 6,
1996 ADJUSTMENTS(A) 1996
- --------------------------------------------------------------------------------
Cash $ 322,716 $ 398,100 $ 720,816
Accounts receivable, net 297,943 - 297,943
Inventories 338,290 - 338,290
Prepaid expenses and other
current assets 37,560 - 37,560
Property, equipment and
improvements, net 70,606 - 70,606
FDA license agreements - 900,000 900,000
Donor base and records - 600,000 600,000
Excess of cost over net assets
acquired , net of accumulated
amortization 788,403 (788,403) -
Reorganization value in excess
of amounts allocated to
identifiable assets - 1,035,127 1,035,127
Land available for sale 25,000 - 25,000
Other assets 17,640 - 17,640
- --------------------------------------------------------------------------------
Total assets $ 1,898,158 $ 2,144,824 $ 4,042,982
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
45
<PAGE>
SERACARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. REORGANIZATION AND BASIS OF REPORTING (Continued)
<TABLE>
<CAPTION>
PRE-FRESH
START BALANCE FRESH-START
SHEET REORGANIZATION BALANCE SHEET
FEBRUARY 5, OF FAIR VALUE FEBRUARY 6,
1996 ADJUSTMENTS(A) 1996
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Accounts payable and accrued
expenses pre-petition $ 1,761,071 $ (1,761,071) $ -
Accounts payable 996,220 - 996,220
Accrued expenses 556,976 60,000 616,976
Short-term notes payable 587,189 (587,189) -
Long-term debt 1,386,236 (236,236) 1,150,000
Series A preferred stock 334,394 (334,394) -
Common stock - Class A 5,731 (3,616) 2,115
Paid-in capital 2,583,349 (1,305,678) 1,277,671
Accumulated deficit (6,313,008) 6,313,008 -
- ----------------------------------------------------------------------------------------
Total liabilities and stockholders'
equity (deficit) $ 1,898,158 $ 2,174,824 $ 4,042,982
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
</TABLE>
(A) To record the transactions applicable to the restructuring as outlined in
the above footnote, eliminate the accumulated deficit balance and record
the adjustments to state assets and liabilities at fair value in accordance
with SOP 90-7.
46
<PAGE>
SERACARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. REORGANIZATION AND BASIS OF REPORTING (Continued)
Amounts reflected in the accompanying consolidated balance sheets under the
heading "Current Liabilities Subject to Compromise" at February 28, 1995,
represent pre-petition creditor claims which were unsecured or where in the case
of CVD Financial Corporation, included in long-term debt, was compromised in the
Plan of Reorganization which was effective on February 6, 1996. Consistent with
such Plan of Reorganization: current portion of long-term debt was compromised
by $236,236 to $1,150,000; unsecured note holders agreed to accept 105,275
shares of common stock in full satisfaction of their claims; and unsecured
creditor claimants agreed to accept up to $.10 per claim dollar and a prorata
share of 10,000 shares of common stock in satisfaction of their claims. Such
ultimate determinations have been reflected in the preceding schedule.
Operating results in the accompanying consolidated statements of operations
include a charge for professional fees attributable to implementation of the
Plan of Reorganization of $163,981; $491,877; and $2,500 for the year ended
February 28, 1995, the period March 1, 1995 through February 5, 1996 and the
period February 6, 1966 through February 29, 1996, respectively. The period
March 1, 1995 through February 5, 1996 also includes a net gain of $805,038
which resulted from the utilization of the "Fresh Start" accounting treatments
afforded in accordance with SOP 90-7, i.e. adjusted the net assets to fair
value.
2. DISCONTINUED OPERATIONS
In November, 1993 the Company's Board of Directors authorized a change in the
focus of the business from whole blood to the plasma collection and distribution
business. Subsequent to determining that the Company would discontinue the
whole blood business the Company incurred various operating and other costs
associated with the discontinuance of the whole blood business. Costs amounting
to $130,255 have been recognized for the year ended February 28, 1995 as a
result of the discontinued business line. These discontinued operation costs
represent the amount in excess of the estimated cost to discontinue that line of
business which was accrued at February 28, 1994.
47
<PAGE>
SERACARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. INVENTORIES
Inventories at February 29, 1996 and February 28, 1995 consisted of the
following:
FEBRUARY 29, FEBRUARY 28,
1996 1995
- --------------------------------------------------------------------------------
Raw donated plasma $ 279,758 $ 322,515
Softgoods supplies - 112,083
- --------------------------------------------------------------------------------
$ 279,758 $ 434,598
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Softgoods supplies represent non-perishable supplies and instruments. Effective
January 1, 1996, the Company entered into new sales agreements with a customer
whereby the customer provides the softgoods supplies and the cost of such
supplies is factored into the unit sales prices as stated in the agreement.
4. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
REORGANIZED PREDECESSOR
COMPANY COMPANY
FEBRUARY 29, FEBRUARY 28,
1996 1995
- --------------------------------------------------------------------------------
Furniture and equipment $ 44,797 $ 435,203
Leasehold improvements 27,905 24,559
- --------------------------------------------------------------------------------
72,702 459,762
Less: accumulated depreciation and amortization 862 398,155
- --------------------------------------------------------------------------------
Property and equipment, net $ 71,840 $ 61,607
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
48
<PAGE>
SERACARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. LONG-TERM DEBT
In connection with the Restructuring, the Company entered into a New Term Loan
Agreement (the "New Loan Agreement") with CVD Financial on February 5, 1996.
The Company's New Loan Agreement replaced a Comprehensive Loan Facility and
Security Agreement dated October 1, 1993. At February 29, 1996 the Company's
New Loan Agreement provides for an outstanding balance in the face amount of
$1,150,000 under a Consolidated Note. The unpaid principal balance of the
Consolidated Note will be paid in quarterly installments of $82,143 with the
first principal payment being due May 1, 1996 and the final principal payment
due at maturity on August 1, 1999. The Consolidated Note bears interest at 14%
per annum.
The New Loan Agreement, which is secured by a pledge of substantially all assets
of the Company, requires the Company to comply with various covenants. The
carrying amount of the loan approximates its fair value.
Future minimum payments to be made, as of February 29, 1996, under the
aforementioned New Loan Agreement is as follows:
FISCAL YEAR ENDED AMOUNT
- --------------------------------------------------------------------------------
February 28, 1997 $ 328,571
February 28, 1998 328,571
February 28, 1999 328,571
February 29, 2000 164,287
- --------------------------------------------------------------------------------
1,150,000
Less: Current portion (328,571)
- --------------------------------------------------------------------------------
$ 821,429
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
49
<PAGE>
SERACARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. CAPITAL STOCK
As discussed in Note 1, all preferred and common stock equity interests issued
prior to the Effective Date have been extinguished. The new authorized capital
stock of the company consists of 25,000,000 shares of Common Stock, par value
$.001 per share, and 25,000,000 shares of Preferred Stock, par value $.001 per
share.
Under the terms of a Private Placement Memorandum ("PPM") dated December 14,
1995, and as a result of the success of that offering, the Company received net
proceeds of $963,100 through the issuance of Convertible Debtor Notes. As of
February 29, 1996 the net proceeds had been received by the Company and 100% of
the Debtor Notes had been converted to shares of common stock totaling 1,610,708
outstanding shares. Additionally, the Company issued 200,023 shares of common
stock as finders fees and compensation for services provided by various parties
in connection with the PPM.
Unsecured Note Holders were issued 105,275 common stock shares as discussed in
Note 1. The Company is also obligated to issue 10,000 common stock shares to
other Unsecured Creditors as discussed in Note 1.
Current and previous management were issued 189,495 shares of common stock as of
the Effective Date of the Restructuring.
All common stock share certificates issued as a result of the aforementioned
transactions were formally issued in certificate form subsequent to February 29,
1996 (with the exception of the 10,000 common stock shares not yet issued to
Unsecured Creditors). The financial statements have been prepared on the basis
that all such shares are deemed issued on the Effective Date of the
Restructuring as a result of the extinguishment of all previously issued equity
interests. The total issued common stock shares is deemed to be 2,115,500 as of
February 29, 1996.
7. STOCK OPTIONS
The Company has entered into various employment and consulting agreements with
officers and directors of the company. As part of the agreements the officers
and directors were granted stock options as follows:
The president and chief executive officer of the Company was granted the
option to purchase 100,000 shares of common stock of the Company for the
price of $1.00 per share, which was not below fair market value at that
date. These options become fully vested upon execution of the agreement in
February, 1996 and remain in effect until January, 2001.
50
<PAGE>
SERACARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. STOCK OPTIONS (Continued)
Additionally the president and chief executive officer was granted the
following options, which, in addition to the vesting period (exercisable
for a period of five years from the vesting date), vest only if the Company
achieves certain projected operating results as defined in the agreement:
(1) Option to purchase 56,147 shares of common stock of the Company
at a mean price between $.74 and the weighted average, as defined in
the agreement. The options vest one-third each year over a three year
period beginning in January, 1997.
(2) Option to purchase 50,000 shares of common stock of the Company
for the price of $1.00 per share. These options become fully vested
in January, 1997.
(3) Option to purchase 50,000 shares of common stock of the Company
for the price of $2.00 per share. These options become fully vested
in January, 1998.
(4) Option to purchase 50,000 shares of common stock of the Company
for the price of $3.00 per share. These options become fully vested
in January, 1999.
The Vice President of Finance and Vice President of Operations were granted
options to purchase 42,110 and 28,073 shares of common stock of the
Company, respectively. The option purchase price is a mean price between
$.74 and the weighted average, as defined in the agreement. The options
vest one-third each year over a three year period beginning in January,
1997 and vest only if the Company achieves certain projected operating
results as defined in the agreement.
In March, 1996 two directors were also granted options to purchase shares
of common stock of the Company. One received options to purchase 30,000
shares and the other received options to purchase 15,000 shares for the
price of $1.50 per share. These options became fully vested at the
granting date.
8. LEASES
The Company is currently leasing its corporate office under a noncancelable
lease agreement. The corporate office lease agreement, which expires in April,
1999, replaced a previous corporate office lease which was replaced in May, 1996
as a result of the Company negotiating the terms of the current lease.
The Company is also obligated under various lease agreements for six donor
centers operated by the two wholly-owned subsidiaries. One donor center lease
is a month to month agreement. The remaining five leases expire at various
dates ranging from April, 1996 to December, 2002.
51
<PAGE>
SERACARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. LEASES (Continued)
Future minimum rental obligations under the aforementioned lease agreements are
as follows:
FEBRUARY 28, AMOUNT
- --------------------------------------------------------------------------------
1997 $197,114
1998 192,636
1999 183,576
2000 101,292
2001 61,582
Thereafter 42,210
- --------------------------------------------------------------------------------
$778,410
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Rent expense amounted to $14,735, $159,890 and $166,467 for the periods ended
February 29, 1996, February 5, 1996 and February 28, 1995.
9. INCOME TAXES
At February 29, 1996 the Company had a deferred tax asset in the amount of
$2,065,000 resulting primarily from net operating loss carryforwards. Due to
management's inability to conclude that it is more likely than not that the
deferred tax asset will be realized, a valuation allowance has been recorded for
the full amount.
At February 29, 1996, the Company estimates that approximately $5,900,000 of
Federal net operating loss carryforwards are available to potentially offset
future taxable income. These carryforwards will expire in various years
beginning in 2006 through 2011. As a result of the change in ownership
provisions of section 382 of the IRC, Federal tax rules will impose limitations
on the Company's ability to utilize its net operating loss carryforwards. Such
limitation will reduce the amount of these carryforwards that will be available
to offset future taxable income each year, starting with the year of
Restructuring. The dollar amount of these limitations is indeterminable at this
time.
If the Company's net operating loss carryforwards and other fresh start deferred
tax asset balances become realizable, the tax benefits will reduce
"Reorganization Value in Excess of Amount Allocable to Identifiable Assets".
The existing valuation allowance, if realized, would reduce this reorganization
value.
52
<PAGE>
SERACARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. COMMITMENTS
The Company has entered into various employment and consulting agreements with
current and previous officers and directors of the Company. The following
further describes terms and obligations provided by the agreements entered into
by the Company with such officers and directors:
The Company is obligated to the president and chief executive officer to
pay an annual base salary of $75,000 for a three year period beginning in
February, 1996.
The Company is obligated to the vice president of finance to pay an annual
salary of $125,000 for a three year period beginning in February, 1996.
The salary is subject to quarterly adjustments with an annual increase of
up to $10,000 in the event the Company achieves quarterly pre-tax earnings
in excess of $100,000.
The Company is obligated to the vice president of operations to pay an
annual salary of $90,000 for a three year period beginning in February,
1996. The salary is subject to quarterly adjustments with an annual
increase of up to $10,000 in the event the Company achieves quarterly
pre-tax earnings in excess of $100,000.
The employment agreements also provide for a management bonus which will
allocate on the basis of salaries, 10% of pre-tax earnings to management
personnel in the event the Company achieves certain minimum annual pre-tax
earnings, as defined in the agreements.
The Company is obligated to a director of the Company to pay an annual
consulting fee of $50,000 for a three year period beginning April, 1996.
The Company has entered into a termination agreement with the previous president
and chief executive officer. Under the terms of the agreement the Company is
obligated to pay the terminated officer $16,666 in two monthly installments of
$8,333 in February and March of 1996 and is obligated to pay $50,000 in twelve
installments of $4,167 beginning in February, 1996. This termination agreement
effectively cancels any previous employment agreements entered into between the
Company and the terminated officer.
53
<PAGE>
SERACARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. CONCENTRATION OF CREDIT RISK, SIGNIFICANT CUSTOMERS AND SALES COMMITMENTS
The Company sells its only product, plasma, on credit primarily to fractionators
in the health care industry. The plasma provides specialty antibody products
that are used as the active ingredients in pharmaceutical products.
Plasma collection, storage, labeling and distribution activities are subject to
strict regulation and licensing by the U.S. Food and Drug Administration
("FDA"). The Company's facilities are subject to periodic inspection by the
FDA. Failure to comply or correct deficiencies with applicable laws or
regulations could subject the Company to enforcement action, including product
seizures, recalls, center or facility closure, license revocations and civil and
criminal penalties, any one or more could have a material adverse effect on the
Company's business.
Laws and regulations with similar substantive and enforcement provisions are
also in effect in many of the states and municipalities where the Company does
business. Any change in existing federal, state or municipal laws or
regulations, or in the interpretation or enforcement thereof, or the
promulgation of any additional laws or regulations could have an adverse effect
on the Company's business.
The Company is required to obtain from each donor an informed consent regarding
the donation procedure. Failure of the Company to obtain an adequate consent
could have a material adverse effect on the Company.
Three customers accounted for 100% of the net sales for the periods ended
February 28, 1995, February 5, 1996 and February 29, 1996.
The Company is currently obligated to one significant customer under the terms
of six agreements relating to the current six donor centers whereby the Company
has committed to sell substantially all of the plasma collected from those
centers at various unit prices as specified in those agreements. The agreements
expire at various dates through December 31, 1997 and may be terminated if the
donor centers fail to comply with various FDA, QPP and customer initiated
procedures.
54
<PAGE>
SERACARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. SUBSEQUENT EVENTS
The Company has completed and issued a private placement memorandum dated June
1, 1996. The Company is offering $1,500,000 of security interests through the
offering of 1,000,000 shares of common stock along with warrants redeemable for
500,000 shares of common stock at a purchase price of $2.75 per share. The
offering period will begin June 30, 1996 and extend through August 31, 1996.
The outcome of this offering is not determinable at this time.
The Company has issued letters of intent to purchase three plasma collection
centers.
55
<PAGE>
F/S (B)
SERACARE, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED AUGUST 31, 1996
(UNAUDITED)
Unaudited Interim Consolidated Statements of Operations - 58
For the Six Months Ended August 31, 1996
Unaudited Interim Consolidated Balance Sheet - 59
as of August 31, 1996
Unaudited Interim Consolidated Funds Flow Statement- 60
For the Six Months Ended August 31, 1996
Notes to Interim Consolidated Financial Statements- 61
For the Six Months Ended August 31, 1996
56
<PAGE>
SERACARE, INC.
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED AUGUST 31, 1996
(Unaudited)
57
<PAGE>
SERACARE, INC.
CONSOLIDATED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED 8-31-96
(IN WHOLE DOLLARS, EXCEPT PER SHARE AMOUNT)
(UNAUDITED)
------------
REVENUE $ 2,778,295
DIRECT COSTS AND EXPENSES:
DONOR FEES 1,422,163
SALARIES AND RELATED 789,478
TESTING AND SOFTGOODS 190,455
RENT 94,310
OTHER DIRECT COSTS (41,365)
------------
TOTAL DIRECT COSTS AND EXPENSES 2,455,041
------------
GROSS PROFIT FROM OPERATIONS 323,254
INDIRECT ADMINISTRATIVE EXPENSES 292,276
INTEREST EXPENSE 91,144
AMORTIZATION OF INTANGIBLES 45,731
OTHER (INCOME) AND EXPENSES (NOTE 6) (126,722)
------------
NET PROFIT BEFORE TAXES ON INCOME 20,825
TAXES ON INCOME 0
------------
NET INCOME 20,825
------------
------------
EARNINGS PER SHARE BASED UPON 2,115,500
SHARES OUTSTANDING $0.010
------------
------------
PREPARED WITHOUT AUDIT.
IS-2
58
<PAGE>
SERACARE, INC.
CONSOLIDATED BALANCE SHEET
AS OF AUGUST 31, 1996
(IN WHOLE DOLLARS)
8-31-96 2-29-96
(UNAUDITED) (AUDITED)
------------ ------------
CASH $ 36,231 $ 580,476
ACCOUNTS RECEIVABLE 157,958 199,862
INVENTORY 639,641 279,758
PREPAID EXPENSES 48,163 33,572
------------ ------------
TOTAL CURRENT ASSETS $ 881,993 $ 1,093,668
------------ ------------
PROPERTY & EQUIPMENT - NET 358,031 71,840
FDA LICENSES 1,196,875 900,000
DONOR BASE AND RECORDS 795,834 600,000
FRESH START GOODWILL 952,910 965,753
COST IN EXCESS OF BOOK VALUE ACQUIRED 647,420 0
LAND AVAILABLE FOR SALE 25,000 25,000
OTHER ASSETS 124,016 17,640
------------ ------------
TOTAL ASSETS $ 4,982,079 $ 3,673,901
------------ ------------
------------ ------------
ACCOUNTS PAYABLE $ 766,881 $ 723,951
ACCRUED LIABILITIES 326,093 583,546
CUSTOMER PREPAYMENTS ON INVENTORY 304,118 0
CURRENT PORTION OF LONG-TERM DEBT 421,028 328,571
NOTES PAYABLE 550,000 0
------------ ------------
TOTAL CURRENT LIABILITIES $ 2,368,120 $ 1,636,068
------------ ------------
LONG-TERM DEBT $ 857,285 $ 821,429
PREFERRED STOCK 519,444 0
COMMON STOCK 2,115 2,115
PAID-IN CAPITAL 1,210,671 1,210,671
RETAINED EARNINGS 24,444 3,618
------------ ------------
TOTAL LIABILITIES & CAPITAL $ 4,982,079 $ 3,673,901
------------ ------------
------------ ------------
PREPARED WITHOUT AUDIT.
IS-3
59
<PAGE>
SERACARE, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED 8-31-96
(IN WHOLE DOLLARS) (UNAUDITED)
---------
CASH FLOW FROM OPERATING ACTIVITIES:
NET INCOME AFTER TAXES 20,825
ADD: AMORTIZATION 45,731
DEPRECIATION 16,651
---------
CASH FLOW FROM OPERATIONS 83,207
---------
DECR (INCR) IN CURRENT ASSETS:
ACCOUNTS RECEIVABLE 41,904
INVENTORY (331,085)
PREPAID EXPENSES (14,531)
OTHER ASSETS (106,376)
INCR (DECR) IN LIABILITIES:
ACCOUNTS PAYABLE 23,471
ACCRUED LIABILITIES (266,847)
PREPAYMENTS ON INVENTORY 304,118
---------
NET CASH FLOW USED BY OPERATING ACTIVITIES (266,139)
---------
CASH FLOW USED FOR INVESTING ACTIVITIES:
ASSETS ACQUIRED FROM SILVER STATE FOR CASH (NOTE 5) (500,000)
FIXED ASSETS ACQUIRED (61,168)
COST IN EXCESS OF BOOK VALUE OF ASSETS ACQUIRED (85,111)
CASH ACQUIRED IN NON-CASH ACQUISITION (NOTE 5) 19,860
---------
NET CASH FLOW PROVIDED BY FINANCING ACTIVITIES (626,419)
---------
CASH FLOW FROM FINANCING ACTIVITIES:
PAYMENTS ON REDEMPTION OF PREFERRED STOCK (30,000)
NOTE PAYABLE - OFFICERS AND DIRECTORS 550,000
PAYMENTS MADE ON LONG-TERM DEBT (171,687)
---------
NET CASH FLOW PROVIDED BY FINANCING ACTIVITIES 348,313
---------
NET DECREASE IN CASH (544,245)
BEGINNING CASH BALANCE 580,476
---------
ENDING CASH BALANCE 36,231
---------
---------
PREPARED WITHOUT AUDIT.
IS-4
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SERACARE, INC.
FOOTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED AUGUST 31, 1996
1. IN THE OPINION OF MANAGEMENT, THE CONSOLIDATED STATEMENTS OF INCOME, FUNDS
FLOW STATEMENT AND BALANCE SHEET PRESENTED HEREIN INCLUDE ALL ADJUSTMENTS
NECESSARY FOR A FAIR STATEMENT OF THE RESULTS FOR THE INTERIM PERIOD. ALL
SUCH ADJUSTMENTS ARE OF A NORMAL AND RECURRING TYPE EXCEPT FOR THE
RECORDING OF THE ACQUISITION OF BHM LABS, INC. ON JULY 7, 1996 AND THE
ACQUISITION OF THE ASSETS OF SILVER STATE PLASMA PRODUCTS ON JULY 2, 1996.
2. ACQUISITIONS:
SILVER STATE PLASMA CENTER - On July 2, 1996, the Company acquired the
operating assets and licenses of Silver State Plasma Center in Las Vegas,
Nevada from Silver State Plasma Products, Inc. for $500,000 in cash and a
$300,000 three year promissory note with interest at eight percent.
BHM LABS, INC. - On July 8, 1996 the Company acquired BHM Labs, Inc., which
owns and operates a plasma collection center in Ft. Smith, Arkansas in
exchange 3,600 shares of the Company's Series A Preferred Stock in a
non-cash transaction.
CLEARFIELD, UTAH AND RALEIGH, NORTH CAROLINA PLASMA CENTERS - On September
3, 1996, the Company acquired from Mr. Brad Rabe all rights and interests
in leases, leasehold improvements, fixed assets and/or any other personal
property, licenses, certifications or rights attributable to both the
Clearfield Center and the Raleigh Center. BASE CONSIDERATION. As
consideration to Mr. Rabe, the Company agreed to deliver 175,000 shares of
Common Stock of the Company within fifteen days of the date when both the
Raleigh and Clearfield locations have processed their first donors. The
175,000 shares of Common Stock may be increased or decreased depending on
certain performance based criteria. ADDITIONAL CONSIDERATION. In addition
to the Base Consideration, the Company and Mr. Rabe agreed on certain
operational performance criteria which will serve as the basis for
Additional Consideration of a maximum of 125,000 shares of common stock of
the Company if all performance criteria for the centers are met. In
accordance with purchase agreement, the value of the shares to be issued
was established at $1.50 per share. The value of the total consideration
so determined will be recorded as Cost in Excess of Net Assets Acquired and
will be amortized over twenty years. None of the consideration so
determined will be recorded initially as an expense.
3. PRIVATE PLACEMENT. (a) Effective September 4, 1996, an aggregate of
565,000 shares of the Company's Common Stock and an aggregate of 282,500
Series A Warrants (Represents right to purchase one share of the Company's
Common Stock at an exercise price of $2.75) were issued in exchange for
$847,500 in cash and (b) Effective October 23, 1996, an aggregate of
285,000 shares of the Company's Common Stock and an aggregate of 142,500
Series A Warrants were issued in exchange for $427,500 in cash. Such
securities were issued pursuant to a Private Placement Memorandum dated
June 1, 1996, which offered Units consisting of five thousand shares of the
Company's Common Stock and two thousand, five hundred Series A Warrants
for each minimum investment of $7,500.00. Such Units were offered to
"accredited investors" as that term is defined in the 1933 Act and Rules
215 and 501(a) promulgated thereunder. These shares are "restricted
shares" as that term is defined in Rule 144 under the 1933 Act.
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4. LOANS:
CVD FINANCIAL CORPORATION. Effective February 5, 1996 and in conjunction
with the Plan of Reorganization approved by the Bankruptcy Court,
SeraCare agreed to an Amended and Restated Loan Agreement with CVD
Financial Corporation. This loan is secured by all the assets of
SeraCare, Inc. and its two wholly-owned subsidiaries, AVRE, Inc. and
Binary Associates, Inc. The principal amount of the loan on the
effective was $1,150,000 with interest at fourteen percent (14%) per
annum payable monthly and principal payable quarterly. The first
installment of interest was due May 1, 1996 and the final installment
is due August 1, 1999. Of the amounts due under this loan, $328,572
are due within one year and $657,142 is long term.
BRIDGE LOANS. In order to close the acquisition of the Silver State Plasma
Center in Las Vegas, Nevada on July 2, 1996, the Board of Directors
unanimously approved $550,000 in bridge loans. The Bridge Loans are
secured by all assets of SeraCare's consolidated operations which are
not pledged to CVD Financial and by a second position behind CVD
Financial on those assets which secure the CVD Financial loan. The
terms of the bridge loans included interest at twelve percent and
150,000 three year warrants, each warrant to purchase one share of the
Company's common stock at $1.00. Of the total amount of the bridge
loans, $450,000 was advanced by Mr. Barry Plost, the Company's
President and Chief Executive Officer, and the remaining $100,000 was
advanced by Mr. Samuel Anderson, a member of the Company's Board of
Directors. Of the amounts advanced, $127,500 was converted to equity
by Mr. Plost and $100,000 was converted to equity by Mr. Anderson on
September 4, 1996 as part of their acquisition of units of Common
Stock and Series A warrants to purchase common stock in the private
placement dated June 1, 1996. Mr. Anderson also invested an
additional $5,000 as part of the private placement. The balance of
the amounts due Mr. Barry Plost are committed to be repaid from the
proceeds of the private placement.
SILVER STATE PLASMA PRODUCTS, INC. On July 2, 1996, the Company acquired
the operating assets and licenses of Silver State Plasma Center in Las
Vegas, Nevada from Silver State Plasma Products, Inc. for $500,000 in
cash and a $300,000 promissory note. Such note is secured by the
Silver State Plasma Center assets acquired, is a three years
promissory note, interest accrues at eight percent and fully amortized
payments are due monthly. Of this amount, $92,456 is due within
twelve months and $200,143 is long term.
5. SUPPLEMENTAL DISCLOSURES ON NON-CASH INVESTING AND FINANCING ACTIVITIES.
BHM LABS, INC. - On July 8, 1996 the Company acquired BHM Labs, Inc., which
owns and operates a plasma collection center in Ft. Smith, Arkansas in
exchange 3,600 shares of the Company's Series A Preferred Stock in a
non-cash transaction valued at $550,000. In conjunction with such
acquisition, the net book value of assets acquired totaled $34,884. In
addition, the Company acquired an FDA license valued at $150,000, a donor
base and records valued at $100,000 and goodwill (cost in excess of net
assets acquired) of $265,116. See Exhibit 6.12 attached to the Form 10SB
for a complete description of the transaction.
SILVER STATE PLASMA PRODUCTS, INC. On July 2, 1996, the Company acquired
the operating assets and licenses of Silver State Plasma Center in Las
Vegas, Nevada from Silver State Plasma Products, Inc. for $500,000 in cash
and a note payable for $300,000. The assets acquired consisted for fixed
assets valued at $227,210, an FDA license valued at $150,000, a donor base
and records valued at $100,000 and goodwill(cost in excess of net assets
acquired) of $322,790. See Exhibit 6.10 attached to the Form 10SB for a
complete description of the transaction.
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6. OTHER INCOME.
OTHER INCOME CONSISTS OF THE FOLLOWING:
OTHER INCOME:
PREFERENCE RECOVERIES FROM REORGANIZATION $100,722
DISCOUNT ON LEGAL FEES ACCRUED IN PRIOR PERIOD 25,000
OTHER 1,000
--------
$126,722
========
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PART III
ITEM 1. EXHIBITS
INDEX OF DOCUMENTS PREVIOUSLY FILED AS PART OF THIS REGISTRATION:
Exhibit
Number Description of Document
- ------ -----------------------
2.1 Restated Articles of Incorporation filed on February 6, 1996.
2.2 By-laws of American Blood Institute, Inc (now known as SeraCare,
Inc.) dated June 10, 1992.
3.1 Certificate of Designation of Series A Preferred Stock filed on July
10, 1996.
6.1 Employment Agreement dated February 5, 1996 between the Company and
Barry D. Plost
6.2 Employment Agreement dated November 14, 1995 between the Company and
Jerry L. Burdick
6.3 Employment Agreement dated November 14, 1995 between the Company and
Brian Olson
6.4 Employment Agreement dated September 3, 1996 between the Company and
Brad Rabe
6.5 Consulting Agreement dated July 2, 1996 between the Company and
Samuel Anderson
6.6 Bridge Note Agreement dated July 2, 1996 between the Company and
Barry D. Plost
6.7 Bridge Note Agreement dated July 17, 1996 between the Company and
Barry D. Plost
6.8 Bridge Note Agreement dated July 2, 1996 between the Company and
Samuel Anderson.
6.9 Asset Purchase Agreement dated September 3, 1996 between the Company
and Brad Rabe
6.10 Asset Exchange Agreement dated July 2, 1996 between the Company and
Silver State Plasma Products, Inc.
6.10(a) Note payable dated July 2, 1996 between the Company and Silver
State Plasma Products, Inc.
6.11 Amended and Restated Loan Agreement between the Company and CVD
Financial Corporation.
6.11(a) Note payable dated February 6, 1996 between the Company and CVD
Financial Corporation
6.12 Contract for Exchange of Corporate Stock date July 9, 1996 between
the Company and Mr. Burt H. McGhee
6.13 Series A Warrant Agreement dated September 4, 1996.
6.14 Series A Warrant Agreement dated October 23, 1996.
6.15 Registration Rights Agreement dated September 4, 1996.
6.16 Registration Rights Agreement dated October 23, 1996.
6.17 Dealer Warrant Agreement dated September 4, 1996.
6.18 Dealer Registration Rights Agreement September 4, 1996.
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6.19 Motion for Order Confirming Third Amended Joint Plan of
Reorganization of American Blood Institute, Inc., AVRE, Inc. and
Binary Associates, Inc. dated January 24, 1996.
6.19(a) Order Confirming Third Amended Joint Plan of Reorganization of
American Blood Institute, Inc., AVRE, Inc. and Binary Associates,
Inc. dated and filed January 24, 1996.
10.1 Subsidiaries of Registrant
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SIGNATURES
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.
--------------
(Registrant)
Date: February 5, 1997 By: /S/
-------------------------------------------
Barry D. Plost
President and Chief Executive Officer
66
