<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 13, 1998
SERACARE, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-21781 95-4343492
- --------------- ------------ ----------------
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification
incorporation) Number)
1925 Century Park East, Suite 1970, Los Angeles, California 90067
- ----------------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (310) 772-7777
--------------
Not Applicable
-------------------------------------------------------------
(Former name or former address, if changed since last report)
Total sequentially numbered pages in this document: __.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED
(1) Unaudited Combined Financial Statements of Consolidated
Technologies, Inc. and Affiliate for the nine months ended
September 30, 1997 and 1996.
a. Combined Balance Sheet as of September 30, 1997 and 1996.
b. Combined Statement of Operations for the nine months
ended September 30, 1997 and 1996.
c. Combined Statement of Stockholders' Deficit for the
nine months ended September 30, 1997 and 1996.
d. Combined Statement of Cash Flows for the nine months
ended September 30, 1997 and 1996.
e. Notes to Combined Financial Statements.
(2) Unaudited Financial Statements of Western States Group, Inc.
for the nine months ended November 30, 1997 and 1996.
a. Balance Sheet as of November 30, 1997 and 1996.
b. Statement of Operations for the nine months ended
November 30, 1997 and 1996.
c. Statement of Stockholders' Equity for the periods ended
November 30, 1997 and 1996.
d. Statements of Cash Flows for the nine months ended
November 30, 1997 and 1996.
e. Notes to Financial Statements.
(b) PRO FORMA FINANCIAL INFORMATION
1. Unaudited Pro forma Balance Sheet as of November 30, 1997.
2. Unaudited Pro forma Consolidated Statement of Operations for
the nine months ended November 30, 1997.
3. Unaudited Pro forma Consolidated Statement of Operations for
the year ended February 28, 1997.
(c) EXHIBITS
1. Exhibit 2.2 - Consent of BDO Seidman LLP.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SERACARE, INC.
Date: March 12, 1998 By: /s/ BARRY D. PLOST
-------------------------------
Barry D. Plost
Chairman of the Board, President
and Chief Executive Officer
By: /s/ JERRY L. BURDICK
-------------------------------
Jerry L. Burdick
Executive Vice President and
Chief Financial Officer
<PAGE>
ITEM 7. (a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
(1) Unaudited Combined Financial Statements of Consolidated
Technologies, Inc. and Affiliate for the nine months ended
September 30, 1997 and 1996.
a. Combined Balance Sheet as of September 30, 1997 and 1996.
b. Combined Statement of Operations for the nine months ended
September 30, 1997 and 1996.
c. Combined Statement of Stockholders' Deficit for the nine
months ended September 30, 1997 and 1996.
d. Combined Statement of Cash Flows for the nine months ended
September 30, 1997 and 1996.
e. Notes to Combined Financial Statements.
(2) Unaudited Financial Statements of Western States Group, Inc. for
the nine months ended November 30, 1997 and 1996.
a. Balance Sheet as of November 30, 1997 and 1996.
b. Statement of Operations for the nine months ended November 30,
1997 and 1996.
c. Statement of Stockholders' Equity for the periods ended
November 30, 1997 and 1996.
d. Statements of Cash Flows for the nine months ended November 30,
1997 and 1996.
e. Notes to Financial Statements.
<PAGE>
CONSOLIDATED TECHNOLOGIES, INC.
AND AFFILIATE
COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
<PAGE>
CONSOLIDATED TECHNOLOGIES, INC.
AND AFFILIATE
CONTENTS
FINANCIAL STATEMENTS
Combined balance sheets 3-4
Combined statements of operations 5
Combined statements of stockholders' deficit 6
Combined statements of cash flows 7-8
Summary of significant accounting policies 9-12
Notes to combined financial statements 13-19
<PAGE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997 1996
ASSETS (NOTE 5)
<S> <C> <C>
CURRENT
Cash and cash equivalents $ 20,045 $ 198,446
Trade accounts receivable 222,552 70,438
Accounts receivable - related party (Note 9) 30,409 63,377
Inventories (Note 1) 992,440 657,898
Notes receivable - related party (Note 9) - 84,865
Prepaid expenses and other assets 70,184 24,044
Total current assets 1,335,626 1,099,068
PROPERTY AND EQUIPMENT - NET (NOTE 2) 404,799 405,101
OTHER ASSETS
Note receivable - stockholder (Note 4) 250,391 246,404
Restricted cash (Note 6) 156,446 156,692
Note receivable - officers (Note 9) 52,483 55,433
Investment in joint venture (Note 3) 94,950 91,123
Other assets (Note 9) 112,008 51,761
Total other assets 666,278 601,413
$2,406,703 $2,105,582
</TABLE>
3
<PAGE>
CONSOLIDATED TECHNOLOGIES, INC.
AND AFFILIATE
(UNAUDITED)
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997 1996
LIABILITIES AND STOCKHOLDERS' DEFICIT
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 161,835 $ 113,824
Accounts payable - related party (Note 9) - 224,000
Accrued liabilities 145,757 129,191
Current maturities under capital lease
obligation (Note 8) 16,477 25,000
Notes payable (Note 5) 307,071 428,843
Unsecured loan - related party (Note 9) 264,000 -
Total current liabilities 895,140 920,858
BONDS PAYABLE (NOTE 6) 1,000,000 1,000,000
NOTE PAYABLE - RELATED PARTY (NOTES 7 AND 9) 599,042 278,362
CAPITAL LEASE OBLIGATION (NOTE 8) - 18,005
Total liabilities 2,494,182 2,217,225
COMMITMENTS AND CONTINGENCY (NOTES 8, 10 AND 11)
STOCKHOLDERS' DEFICIT
Common stock:
Class A, no par value, 1,000,000 shares
authorized, 163,500 shares issued and
outstanding 163,500 163,500
Class B, no par value, 1,000,000 shares
authorized, 163,500 shares issued and
outstanding 163,500 163,500
$1 par value, 10,000 shares authorized,
1,389 shares issued and outstanding 1,389 1,389
Additional paid-in capital 500,078 500,078
Accumulated deficit (915,946) (940,110)
Total stockholders' deficit (87,479) (111,643)
$2,406,703 $2,105,582
</TABLE>
SEE ACCOMPANYING SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
AND NOTES TO COMBINED FINANCIAL STATEMENTS.
4
<PAGE> CONSOLIDATED TECHNOLOGIES, INC.
AND AFFILIATE
(UNAUDITED)
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1997 1996
<S> <C> <C>
REVENUE:
Product $2,377,550 $2,469,147
Services 132,009 79,945
Other 27,085 73,450
Total revenue 2,536,644 2,622,542
Cost of revenue 2,084,118 1,862,450
GROSS PROFIT 452,526 760,092
Operating expenses:
Salaries, wages and employee benefits 545,869 411,032
General and administrative expenses 198,932 152,665
Consulting services (Note 9) - 65,000
TOTAL OPERATING EXPENSES 744,801 628,697
OPERATING INCOME (LOSS) (292,275) (131,395)
OTHER INCOME (EXPENSE):
Equity in earnings of joint venture (Note 3) 483,987 375,871
Interest and other income 63,416 41,444
Interest and other expenses (180,247) (154,708)
TOTAL OTHER INCOME 367,156 262,607
NET INCOME $ 74,881 $ 394,002
</TABLE>
SEE ACCOMPANYING SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
AND NOTES TO COMBINED FINANCIAL STATEMENTS.
5
<PAGE>
CONSOLIDATED TECHNOLOGIES, INC.
AND AFFILIATE
(UNAUDITED)
COMBINED STATEMENTS OF STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
CONSOLIDATED TECHNOLOGIES, INC. CONE BIOTECH
ADDITIONAL
COMMON STOCK COMMON PAID-IN ACCUMULATED
CLASS A CLASS B STOCK CAPITAL DEFICIT
------------- ------------- ------------ ---------- -----------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1996 $163,500 $163,500 $1,389 $500,078 $(1,334,112)
Net income 357,923
Balance, September 30, 1996 163,500 163,500 1,389 500,078 (394,002)
Balance, January 1, 1997 163,500 163,500 1,389 500,078 (984,827)
Distribution to shareholder (6,000)
Net income 74,881
Balance, September 30, 1997 $163,500 $163,500 $1,389 $500,078 $(915,946)
SEE ACCOMPANYING SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO COMBINED FINANCIAL STATEMENTS.
</TABLE>
6
<PAGE>
CONSOLIDATED TECHNOLOGIES, INC.
AND AFFILIATE
(UNAUDITED)
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
NINE MONTHS ENDED SEPTEMBER 30, 1997 1996
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 74,881 $ 394,002
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 84,961 80,544
Undistributed earnings of affiliate (58,988) (31,872)
Changes in operating assets and liabilities:
Trade accounts receivable (107,176) 11,474
Accounts receivable, related party 2,674 26,693
Inventories (212,356) (286,689)
Prepaid expenses and other assets (43,028) (9,753)
Other assets - -
Accounts payable (28,692) 3,841
Accrued liabilities 86,032 52,055
Net cash provided by operating activities (201,692) 240,295
INVESTING ACTIVITIES:
Capital expenditures (88,565) (23,706)
Increase in note receivable from stockholder - (134,278)
Increase in note receivable, related party 82,224 (84,865)
Repayment on (increase in) note receivable-officers 6,119 22,773
Net decrease (increase) in other assets (58,671) (18,086)
Distribution to stockholder (6,000) -
Net cash used in investing activities (64,893) (238,162)
</TABLE>
7
<PAGE>
CONSOLIDATED TECHNOLOGIES, INC.
AND AFFILIATE
(UNAUDITED)
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
INCREASE IN CASH AND CASH EQUIVALENTS
NINE MONTHS ENDED SEPTEMBER 30, 1997 1996
<S> <C> <C>
FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt-related party 260,307 1,074,000
Proceeds from unsecured loan-related party 1,066,000 614,000
Principal payments on unsecured loan-related party (902,000) (390,000)
Principal payments on long-term debt-related party (100,958) (1,074,000)
Principal payments on long-term debt (91,999) (83,891)
Principal payments under capital lease obligation (20,364) (18,490)
Net cash used in financing activities 210,986 121,619
Net decrease/increase in cash and cash equivalents (55,599) 123,753
Cash and cash equivalents at beginning of period 75,639 74,693
Cash and cash equivalents at end of period $ 20,041 $ 198,446
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid $ 150,000 $ 150,000
Interest received $ 20,000 $ 8,000
SUPPLEMENTAL DISCLOSURES OF NON-CASH FINANCING ACTIVITY:
Conversion of accounts payable to note payable $ 439,693 $ -
</TABLE>
SEE ACCOMPANYING SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
AND NOTES TO COMBINED FINANCIAL STATEMENTS.
8
<PAGE>
CONSOLIDATED TECHNOLOGIES, INC.
AND AFFILIATE
(UNAUDITED)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF Consolidated Technologies, Inc. and its affiliate, Conco
BUSINESS Associates, Inc. dba Cone Biotech (the "Companies")
develop and manufacture intermediate biological
materials, in vitro diagnostics products and proficiency
testing specimens. The Companies market their products
and services to manufacturers and suppliers of in vitro
diagnostics and providers of proficiency testing
programs throughout the United States.
The intermediate biological materials processed by the
Companies are used in the formulation of in vitro
diagnostics having applications in laboratory
disciplines such as immunology, clinical chemistry,
toxicology and infectious disease. Proficiency testing
specimens manufactured from the intermediate biological
materials are primarily used in evaluating the
performance of laboratories in testing for substances
included in the specimens.
PRINCIPLES OF The accompanying combined financial statements include
COMBINATION the accounts of Consolidated Technologies, Inc. ("CTI")
and Cone Biotech ("CB"), both of which are under common
control. All material intercompany balances and
transactions are eliminated.
INVESTMENT IN CB uses the equity method to account for its investment
JOINT VENTURE in a 50% owned joint venture.
INVENTORIES Inventories, which primarily consist of blood plasma as
raw materials and proficiency testing kits as finished
goods, are valued at the lower of cost or market. Cost
is determined by the first-in, first-out ("FIFO") method.
PROPERTY, Property and equipment are stated at cost and are
EQUIPMENT, depreciated over the estimated useful lives of five to
DEPRECIATION AND seven years using the double declining balance method.
AMORTIZATION Leasehold improvements are recorded at cost and are
amortized using the straight-line method, over the
lesser of the estimated useful lives of the property
or the lease term.
9
<PAGE>
CONSOLIDATED TECHNOLOGIES, INC.
AND AFFILIATE
(UNAUDITED)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INCOME TAXES The Companies have elected S Corporation filing status for
federal income tax purposes. Accordingly, no provision for
federal income taxes is required. Stockholders are taxed
individually on their pro rata share of respective
corporate earnings.
CASH AND CASH For purposes of reporting cash flows, the Companies
EQUIVALENTS consider certificates of deposit purchased with an
original maturity of three months or less to be cash
equivalents. Cash includes cash on hand and in banks.
ACCOUNTING The preparation of financial statements in conformity with
ESTIMATES 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 CASH AND CASH EQUIVALENTS. The carrying amounts at
FINANCIAL September 30, 1997 and 1996 approximates the fair value
INSTRUMENTS because of the short maturity of those investments.
NOTES RECEIVABLE. Based on discounted cash flows, the fair
values of the notes receivable approximates the carrying
value at September 30, 1997 and 1996.
LONG-TERM DEBT. Based on borrowing rates currently
available to the Companies for bank loans with similar
terms and average maturities, the fair value of long-term
debt, including the current portion thereof, approximates
its carrying value at September 30, 1997 and 1996.
10
<PAGE>
CONSOLIDATED TECHNOLOGIES, INC.
AND AFFILIATE
(UNAUDITED)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
LONG-LIVED In accordance with SFAS 121, "Accounting for the Impairment
ASSETS of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of", management reviews long-lived assets and
intangible assets for impairment whenever events or
changes in circumstances indicate the carrying amount of
an asset may not be fully recoverable. As part of this
assessment, management prepares an analysis of the
undiscounted cash flows for each product that has
significant long-lived or intangible asset values
associated with it. This analysis for the asset values
as of December 31, 1996 and 1995 indicated there was no
impairment to these assets' carrying values.
11
<PAGE>
CONSOLIDATED TECHNOLOGIES, INC.
AND AFFILIATE
(UNAUDITED)
NOTES TO COMBINED FINANCIAL STATEMENTS
1. INVENTORIES Inventories consist of the following at September 30:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Raw materials $ 422,001 $ 172,176
Work-in-process 95,238 74,038
Finished goods 475,201 411,684
$ 992,440 $ 657,898
</TABLE>
2. PROPERTY AND Property and equipment consist of the following at
EQUIPMENT September 30:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Land $ 250 $ 250
Machinery and equipment 1,060,718 956,448
Buildings and improvements 251,721 247,133
Equipment under capital lease 118,200 118,200
Furniture and fixtures 102,401 101,134
1,533,290 1,423,165
Accumulated depreciation
and amortization (1,128,491) (1,018,064)
$ 404,799 $ 405,101
</TABLE>
Depreciation and amortization expense on property and
equipment were $75,050 and $70,632 in 1997 and 1996,
respectively, and were included in general and
administrative expenses.
12
<PAGE>
CONSOLIDATED TECHNOLOGIES, INC.
AND AFFILIATE
(UNAUDITED)
NOTES TO COMBINED FINANCIAL STATEMENTS
3. INVESTMENT In November 1993, CB and Serafy Laboratories, Inc.
IN JOINT ("Serafy") signed a limited partnership agreement and
VENTURE formed Seracon Diagnostics Company ("Seracon"). CB owns
50% of Seracon. Seracon was formed to manufacture, label,
package and distribute specimens pursuant to an agreement
between CTI, Seracon, Serafy and the College of American
Pathologists ("CAP"). In general, Seracon provides
specimens, test materials and related services for CAP's
Interlaboratory Comparison Survey Program.
Following is a summary of financial position and results of
operations of Seracon for the years ended September 30:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Total assets $ 255,464 $ 314,218
Current liabilities $ 65,563 $ 131,970
Partners' capital 189,901 182,248
Total liabilities and
Partners' capital $ 255,464 $ 314,218
Sales $3,054,170 $3,388,114
Net income $ 967,974 $ 751,743
CB's proportionate share
of earnings $ 493,987 $ 375,871
</TABLE>
13
<PAGE>
CONSOLIDATED TECHNOLOGIES, INC.
AND AFFILIATE
(UNAUDITED)
NOTES TO COMBINED FINANCIAL STATEMENTS
4. NOTES In January of 1996, CB signed an unsecured draw note with
RECEIVABLE - its sole stockholder. The balance of this note was
STOCKHOLDER $250,391 at September 30, 1997 and 1996. The stated annual
interest rate is 7%. This note will mature on January 17,
1998. Accrued interest as of September 30, 1997 and 1996
was $41,903 and $12,717.
5. NOTES Notes payable consist of the following at September 30:
PAYABLE
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
CB note payable to Minstar, Inc.,
in default and due on demand, guaranteed
by a stockholder, stated interest rate
is 3.61%, principal and accrued interest
were due on September 1994 $ 45,070 $ 78,628
CTI note payable to First Commercial
Capital, Inc., in technical default,
collateralized by accounts receivable,
inventory, equipment, guaranteed by a
majority stockholder and guaranteed
85% by SBA, monthly installments are
$11,199, interest is prime plus 2.5%,
matures December 2000 262,001 350,215
$307,071 $428,843
</TABLE>
14
<PAGE>
CONSOLIDATED TECHNOLOGIES, INC.
AND AFFILIATE
(UNAUDITED)
NOTES TO COMBINED FINANCIAL STATEMENTS
5. NOTES Prime rate at September 30, 1997 and 1996 was 8.5%.
PAYABLE
(CONTINUED) The loan agreement with First Commercial Capital (the
"Lendor") contains various covenants pertaining to
maintenance of certain financial ratios, restriction of
additional business debt, compensation and dividend
restrictions. At September 30, 1997 and 1996, CTI was in
breach of the compensation restrictions and additional
business debt covenants. Under the terms of the agreement,
the Lendor may call the loan if the company is in
violation of any covenants. As of March 9, 1998, the
Lendor had not waived these requirements. Accordingly,
the entire amount of the note, $262,001 and $350,215,
respectively, was included in current liabilities at
September 30, 1997 and 1996, respectively.
6. BONDS Bonds payable consists of the following at September 30:
PAYABLE
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
CB bonds payable, collateralized
by any and all assets, guaranteed
by Minstar, Inc., interest due
semi-annually at 13.75% per
annum, matures December 2001 $1,000,000 $1,000,000
</TABLE>
According to the bond covenants, a minimum of $150,000
is required to be held in escrow from which semi-annual
interest to bondholders is paid.
7. NOTE PAYABLE On January 1, 1997, CTI restructured an unpaid accounts
RELATED PARTY payable balance into a signed, unsecured note. The note
payable accrues interest at 8 1/2%, principal and
interest payments are due in semi-monthly installments
of $6,250 commencing December 1998. The outstanding
balance of the note payable, related party at September
30, 1997 was $599,242.
15
<PAGE>
CONSOLIDATED TECHNOLOGIES, INC.
AND AFFILIATE
(UNAUDITED)
NOTES TO COMBINED FINANCIAL STATEMENTS
8. LEASES As of September 30, 1997, future minimum lease payments
related to the rental of office and manufacturing
facilities and equipment are as follows:
<TABLE>
<CAPTION>
OPERATING CAPITAL
<S> <C> <C>
1997 $ 63,299 $ 5,253
1998 255,889 11,224
1999 231,224 -
2000 22,306 -
2001 21,510 -
Later years 14,340 -
Total minimum lease payments $608,568 16,477
Less: current portion (16,477)
Long-term lease obligations $ -
</TABLE>
The Companies follow the provisions of Statement of
Financial Accounting Standards No. 13, "Accounting for
Leases", in determining the criteria for capital leases.
Leases that do not meet such criteria are classified as
operating leases and are charged to expense in the year
incurred. Capital lease amortization expense was $8,812
and $17,750 at September 30, 1997 and 1996, respectively.
16
<PAGE>
CONSOLIDATED TECHNOLOGIES, INC.
AND AFFILIATE
(UNAUDITED)
NOTES TO COMBINED FINANCIAL STATEMENTS
9. RELATED During 1996, CTI purchased approximately 46% respectively,
PARTY of its raw materials from Cone BioProducts. This supplier
TRANSACTIONS is controlled by a relative of an officer and stockholder
of CTI. At September 30, 1997 and 1996, amounts due to the
supplier included in notes payable, related party and
accounts payable, related party were approximately
$599,042 (see Note 7) and $343,362, respectively. Cone
BioProducts provides consulting services and direct
management assistance to the Companies. Fees and expenses
paid to Cone BioProducts amounted to $90,000 for the nine
months ended September 30, 1997 and 1996 and are included
in the cost of revenue.
An officer of CTI served as a consultant to CTI on
various aspects of CTI's business issues. Fees paid
for these services by CTI during the nine months ended
September 30, 1996 was approximately $65,000.
CTI owns a 30% interest in Cenetron. CTI also has a note
receivable from the entity, with the outstanding
principal and accrued interest at 9.75% due and payable
at June 30, 1997. The unpaid balance on this note at
September 30, 1996 was approximately $85,000. The
remaining balance of this note was collected in March of
1997. The investment in Cenetron is carried at cost and
is included in other assets in the accompanying combined
balance sheets. The accrued interest is included in
prepaid expenses and other assets at September 30, 1996.
CB conducts some of its operations through a joint
venture in the form of a partnership, which is
principally accounted for using the equity method,
discussed in more detail in Note 3. Included in CB's
revenues for 1997 and 1996 are equity in income of the
joint venture of approximately $494,000 and $376,000,
respectively. In addition, CTI sold approximately $1.1
million and $1.3 million of goods to the joint venture
during 1997 and 1996, respectively. Trade receivables
from the joint venture at September 30, 1997 and 1996,
were approximately $15,409 and $30,895, respectively.
17
<PAGE>
CONSOLIDATED TECHNOLOGIES, INC.
AND AFFILIATE
(UNAUDITED)
NOTES TO COMBINED FINANCIAL STATEMENTS
Seracon and Proficiency Testing Services ("PTS") have
common ownership. During 1996, PTS made a $224,000 advance
to CTI. According to the verbal agreement, CTI is required
to repay the unsecured loan plus accrued interest of 9.5%
per annum on demand.
In December of 1993, CB agreed to loan up to $60,000 to an
officer of CB with unpaid principal and accrued interest
at 10% due and payable by December 12, 1998. Under this
agreement, CB loaned approximately $37,500 to this officer
in 1996. Unpaid principal balance and accrued interest due
CB in connection with the note receivable at September 30,
1997 and 1996 are approximately $52,000 and $52,000,
respectively.
10. CONCENTRATION Plasma collection, storage, labeling and distribution
OF CREDIT activities are subject to strict regulation and licensing
RISK AND by the U.S. Food and Drug Administration ("FDA"). The
SIGNIFICANT Companies's facilities are subject to periodic inspection
CUSTOMERS by the FDA. Failure to comply or correct deficiencies with
applicable laws or regulations could subject the Companies
to enforcement action, including product seizures, recalls,
center or facility closure, license revocations and civil
and criminal penalties. Any future enforcement action by
the FDA could have a material adverse effect on the
Companies' business.
Laws and regulations with similar substantive and
enforcement provisions are also in effect in many of the
states and municipalities where the Companies do 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
Companies' business.
Financial instruments which potentially expose the Company
to concentrations of credit risk, as defined by Statement
of Financial Accounting Standards No. 105, consist
primarily of accounts receivable.
Approximately 86% and 90% of the net sales were made to
three customers in 1997 and 1996, respectively.
18
<PAGE>
CONSOLIDATED TECHNOLOGIES, INC.
AND AFFILIATE
(UNAUDITED)
NOTES TO COMBINED FINANCIAL STATEMENTS
11. SUBSEQUENT On January 1, 1997, CTI purchased all of the assets of Cone
EVENTS BioProducts (a proprietorship) for $260,307. Consideration
included two promissory notes in the amount of $63,224 and
$197,083. The first note matured June 1, 1997 and was paid
on June 1, 1997. The second note will mature on November
16, 1998. In addition, the sole proprietor of Cone
BioProducts was granted an exclusive right and option to
purchase 33 1/3% of the total outstanding shares of CTI's
common stock for $482,000. This option may be exercised
at any time CTI receives an offer to sell at least 51% of
CTI's common stock. The sole proprietor of Cone
BioProducts is related to the sole owner of CTI.
On February 13, 1998, the stockholders of the Companies
sold substantially all of the Companies'operating
assets - excluding cash and accounts receivable, but
including inventories, leasehold interests, and equipment
to a third party for cash and stock in a publicly-traded
Company. According to the Asset Purchase Agreement, all
accounts payable, accrued liabilities and notes payable,
including revolving lines of credit were not be assumed
by the purchaser. Certain key executives received
multi-year employment agreements.
19
<PAGE>
THE WESTERN STATES GROUP, INC.
FINANCIAL STATEMENTS
(UNAUDITED)
NINE MONTHS ENDED NOVEMBER 30, 1997 AND 1996
<PAGE>
THE WESTERN STATES
GROUP, INC.
FINANCIAL STATEMENTS
(UNAUDITED)
NINE MONTHS ENDED NOVEMBER 30, 1997 AND 1996
<PAGE>
THE WESTERN STATES GROUP, INC.
(UNAUDITED)
CONTENT
<TABLE>
<CAPTION>
<C> <C>
FINANCIAL STATEMENTS
Balance sheets 3-4
Statements of operations 5
Statements of stockholders' equity 6
Statements of cash flows 7-8
NOTES TO FINANCIAL STATEMENTS 9-15
</TABLE>
2
<PAGE>
THE WESTERN STATES GROUP, INC.
(UNAUDITED)
BALANCE SHEETS
<TABLE>
<CAPTION>
NOVEMBER 30, 1997 1996
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS (Note 5)
CURRENT ASSETS
Cash and equivalents $ 374,896 $ 430,568
Trade accounts receivables 1,315,762 1,044,379
Other receivables 1,500 250
Inventory (Note 3) 433,238 608,349
- ----------------------------------------------------------------------------------------------------------------------------------
Total current assets 2,125,396 2,083,546
- ----------------------------------------------------------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT
Office furniture and equipment 69,022 68,009
Less accumulated depreciation and amortization 62,631 60,089
- ----------------------------------------------------------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT, net 6,391 7,920
- ----------------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS
Other 11,221 11,221
Investment in related party partnership (Note 2) - 389,630
- ----------------------------------------------------------------------------------------------------------------------------------
Total other assets 11,221 400,851
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 2,143,008 $ 2,492,317
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
THE WESTERN STATES GROUP, INC.
(UNAUDITED)
BALANCE SHEETS
<TABLE>
<CAPTION>
NOVEMBER 30, 1997 1996
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 277,642 $ 533,479
Income taxes payable 54,412 263,000
Other current liabilities - 19,079
- ----------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 332,054 815,558
- ----------------------------------------------------------------------------------------------------------------------------------
DEFERRED INCOME TAXES (Note 6) - 157,000
Total liabilities 332,054 972,558
- ----------------------------------------------------------------------------------------------------------------------------------
COMMITMENTS (Note 5)
STOCKHOLDERS' EQUITY
Common stock, no par value; 100,000 shares
authorized, 1,000 issued and outstanding 1,000 1,000
Retained earnings 1,809,954 1,518,759
- ----------------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 1,810,954 1,519,759
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,143,008 $ 2,492,317
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING SUMMARY OF ACCOUNTING POLICIES AND NOTES TO FINANCIAL
STATEMENTS.
4
<PAGE>
THE WESTERN STATES GROUP, INC.
(UNAUDITED)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED NOVEMBER 30, 1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
NET SALES $ 7,097,306 $5,177,180
COST OF SALES 5,344,977 3,905,583
- -------------------------------------------------------------------------------
GROSS PROFIT 1,752,329 1,271,597
OPERATING EXPENSES
Sales and marketing 399,287 401,455
General and administrative 1,064,630 473,880
Officer compensation (Note 2) - -
- -------------------------------------------------------------------------------
Total operating expenses 1,463,917 875,335
- -------------------------------------------------------------------------------
OPERATING INCOME 288,412 396,262
OTHER INCOME
Related party partnership (Note 2) 40,370 300
Interest 12,654 7,199
- -------------------------------------------------------------------------------
Total other income 53,024 7,499
- -------------------------------------------------------------------------------
INCOME BEFORE INCOME TAX EXPENSE 341,436 403,761
INCOME TAX EXPENSE (BENEFIT) (Note 6) 136,000 116,223
- -------------------------------------------------------------------------------
NET INCOME $ 205,436 $ 287,538
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING SUMMARY OF ACCOUNTING POLICIES AND NOTES TO FINANCIAL
STATEMENTS.
5
<PAGE>
THE WESTERN STATES GROUP, INC.
(UNAUDITED)
STATEMENTS OF STOCKHOLDERS' EQUITY
NINE MONTHS ENDED NOVEMBER 30, 1997 AND 1996
<TABLE>
<CAPTION>
COMMON STOCK RETAINED
SHARES AMOUNT EARNINGS TOTAL
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCE,
March 1, 1996 1,000 $ 1,000 $ 1,231,221 $ 1,232,221
Net income 287,538 287,538
- ----------------------------------------------------------------------------------------------------------------------------------
BALANCE,
November 30, 1996 1,000 1,000 1,518,759 1,519,759
BALANCE,
March 1, 1997 1,000 1,000 1,588,154 1,589,154
Net income 205,436 205,436
- ----------------------------------------------------------------------------------------------------------------------------------
BALANCE,
November 30, 1997 1,000 $ 1,000 $ 1,809,954 $ 1,810,954
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING SUMMARY OF ACCOUNTING POLICIES AND NOTES TO FINANCIAL
STATEMENTS.
6
<PAGE>
THE WESTERN STATES GROUP, INC.
(UNAUDITED)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
INCREASE (DECREASE) IN CASH AND EQUIVALENTS
NINE MONTHS ENDED NOVEMBER 30, 1997 1996
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 205,436 $ 287,538
Adjustments to reconcile net income (loss) to net
cash (used in) provided by operating activities:
Depreciation and amortization 1,531 2,005
Equity in net income of partnership investment (40,370)
Distribution of partnership interest as bonus 555,097
(Increase) decrease from changes in:
Trade accounts receivables (476,307) (668,833)
Other receivables (1,500) 250
Inventory (72,445) 57,681
Other assets - 4,000
Accounts payable (70,060) 340,559
Accrued expenses (19,079) 12,769
Income tax payable (146,588) (270,949)
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash (used in) provided by operating activities (64,285) (234,980)
- ----------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in partnership - (189,630)
Purchase of equipment - -
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities - (189,630)
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
THE WESTERN STATES GROUP, INC.
(UNAUDITED)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
INCREASE (DECREASE) IN CASH AND EQUIVALENTS
NINE MONTHS ENDED NOVEMBER 30, 1997 1996
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of line of credit -
- ----------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH (64,285) (424,610)
CASH AND EQUIVALENTS AT, beginning of period 439,181 744,943
- ----------------------------------------------------------------------------------------------------------------------------------
CASH AND EQUIVALENTS AT, end of period $ 374,896 $ 430,568
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
CASH PAID FOR:
Interest $ - $
Income taxes $ 201,000 $ 81,000
- ----------------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING ACTIVITIES:
During the nine months ended November 30, 1997, the Company distributed its investment in a related party partnership of
approximately $555,000 to its principal officer-stockholder (see Note 2).
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING SUMMARY OF ACCOUNTING POLICIES AND NOTES TO FINANCIAL
STATEMENTS.
8
<PAGE>
THE WESTERN STATES GROUP, INC.
(UNAUDITED)
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF GENERAL
ACCOUNTING
POLICIES The Western States Group, Inc. (the Company) is engaged
in the worldwide sale, marketing and distribution of
source plasma, specialty plasma and the marketing of
di a gnostic test components. Sales through its
TheraSource International Division are directed to the
therapeutic products industry and sales through the
Western States Plasma Company are directed to the
diagnostics products industry. Both divisions are
active worldwide with sales both within the United
States and outside the United States. The Company is a
vendor approved supplier to numerous pharmaceutical and
healthcare companies and is an FDA licensed distributor
in the United States. Human source plasma distributed
by the Company is primarily sold to fractionators who
process the plasma into various therapeutic products
such as clotting factors, albumin, immune globulin and
various other derived products. The Company also
markets and distributes a wide range of diagnostic and
therapeutic products including many antibodies and
other biological specimens. The Company obtains the
plasma and other products it sells from FDA licensed
plasma collection centers, from fractionators and from
manufacturers of diagnostic components. The products
are frequently shipped directly from the supplier to
the customer.
The Company was incorporated in California in 1984.
REVENUE RECOGNITION
The Company recognizes revenue upon shipment of
products to customers.
9
<PAGE>
THE WESTERN STATES GROUP, INC.
(UNAUDITED)
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF INVENTORY
ACCOUNTING
POLICES Inventory is valued at the lower of cost or market.
(CONTINUED) Cost is determined by the first-in, fist-out (FIFO)
method.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Depreciation
is computed using accelerated methods over the
estimated useful lives of the respective assets.
Leasehold improvements are amortized using the
straight-line method over the estimated life of the
asset or the remaining term of the lease, whichever is
shorter. The estimated useful lives of the assets
range from 5 to 7 years.
CASH AND CASH EQUIVALENTS
The Company considers as cash and cash equivalents all
cash on hand and in banks, certificates of deposit and
other highly-liquid investments with original
maturities of 3 months or less.
FDA LICENSES
Food and Drug Administration ("FDA") licenses are
required to operate as a distributor. The cost of
acquiring FDA licenses was fully amortized by May 31,
1996.
10
<PAGE>
THE WESTERN STATES GROUP, INC.
(UNAUDITED)
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF FAIR VALUE OF FINANCIAL INSTRUMENTS
ACCOUNTING
POLICIES
(CONTINUED) Statement of Financial Accounting Standards No. 107,
"Disclosures About Fair Value of Financial
Instruments," requires disclosure of the fair value of
certain financial instruments. Accounts receivable and
accounts payable as reflected in the financial
statements approximate fair value because of the short-
term maturity othese instruments. The fair value of
the investment in partnership cannot be estimated due
to its related-party nature.
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity
with generally accepted accounting principals requires
management to make estimates and assumptions that
affect the amounts reported in the financial statements
and footnotes thereto. Actual results could differ
from those estimates.
INCOME TAXES
The company recognizes deferred tax liabilities and
assets for the expected future tax consequences of
events that have been recognized in a company's
financial statements or tax returns. Deferred tax
liabilities and assets are determined based on the
difference between the financial statement carrying
amounts and tax bases of assets and liabilities using
enacted tax rates in effect in the years which the
differences are expected to reverse.
11
<PAGE>
THE WESTERN STATES GROUP, INC.
(UNAUDITED)
NOTES TO FINANCIAL STATEMENTS
2. RELATED PARTY
TRANSACTIONS
INVESTMENT IN PARTNERSHIP
At November 30, 1996, the Company had an investment of
$389,630 in a partnership. The partnership was
organized to invest in real estate and equities. During
the nine months ended November 30, 1997, the Company
distributed the interest in the partnership to the
principal officer-stockholder as additional
compensation. At the time of the distribution, the
cost-basis of the Company's interest in the partnership
was approximately $555,000.
GENERAL AND ADMINISTRATIVE EXPENSES
During the nine months ended November 30, 1997 and
1996, the Company paid approximately $6,900 and $3,800,
respectively, to the partnership described above for
lodging expenses for the Company's customers and
suppliers.
OTHER INCOME
Other income in 1997 and 1996 includes approximately
$40,000 and $300, respectively, of interest and capital
gains which represent the Company's share of earnings
by the partnership described above.
12
<PAGE>
THE WESTERN STATES GROUP, INC.
(UNAUDITED)
NOTES TO FINANCIAL STATEMENTS
3. INVENTORY The Company's inventory consists of:
NOVEMBER 30, 1997 1996
----------------------------------------------------------
Plasma $ 91,120 $368,818
Other products 342,118 221,531
----------------------------------------------------------
Total $421,028 608,349
----------------------------------------------------------
4. PROFIT SHARING The Company has a profit sharing plan pursuant to
PLAN Section 401(k) of the Internal Revenue Code. The plan
provides for discretionary contributions by the Company
as determined by a committee made up of shareholders of
the Company. For the nine months ended November 30,
1997 and 1996, the Company contributed $50,538 and
$45,127, to the plan.
5. COMMITMENTS LINE OF CREDIT
The Company has a line of credit expiring November 1,
1998, which provides for borrowings up to $250,000 at
the lender's prime rate (8.50% per annum at November
30, 1997) plus 1.25%. The terms of the line of credit
agreement require a minimum interest rate of 8.50% per
annum. The terms also require maintenance of certain
financial ratios. The line is secured by substantially
all assets of the Company and is personally guaranteed
by owner-officers of the Company. The Company did not
draw on the line during the nine months ended November
30, 1997 and 1996. The line of credit was terminated
subsequent to period end.
13
<PAGE>
THE WESTERN STATES GROUP, INC.
(UNAUDITED)
NOTES TO FINANCIAL STATEMENTS
5. COMMITMENTS LEASES
(CONTINUED)
The Company leases its facilities under operating
leases expiring in August 1998. Future minimum payments
due under this non-cancelable operating lease are:
NINE MONTHS ENDING NOVEMBER 30, Total
----------------------------------------------------------
1998 $ 16,000
----------------------------------------------------------
$ 16,000
Rent expense for the nine months ended November 30,1997 and
1996 was $23,702 and $23,204.
6. INCOME TAXES Deferred income taxes reflect the impact of temporary
differences between the amount of assets and
liabilities recognized for financial reporting purposes
and such amounts recognized for tax purposes.
The Company changed its tax accounting method from cash
to accrual basis during the fiscal year ended May 31,
1995. As a result of this change in accounting method,
the Company recorded a deferred tax liability of
$157,000 and $314,000 at May 31, 1997 and 1996, which
is due $157,000 each year through May 31, 1998.
7. CONCENTRATION The Company sells its products on credit to
OF CREDIT RISKS pharmaceutical companies, biotechnology companies,
AND SIGNIFICANT hospitals and other distributors.
CUSTOMERS
14
<PAGE>
THE WESTERN STATES GROUP, INC.
(UNAUDITED)
NOTES TO FINANCIAL STATEMENTS
7. CONCENTRATION Plasma processing, storage, labeling and distribution
OF CREDIT RISKS activities Are subject to strict regulation and
AND SIGNIFICANT licensing by the U.S. Food and Drug Administration
CUSTOMERS (FDA). The Company's facilities and those of its turn-
(CONTINUED) key manufacturers and its suppliers are subject to
periodic inspection by the FDA. Failure to comply or
correct deficiencies with applicable laws or
regulations could subject the Company, Its
manufacturers or its suppliers to enforcement action,
including product seizures, recalls, facility closure,
license revocation and civil and criminal penalties,
any one or more of which 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, its
manufacturers and its suppliers do 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.
For the nine months ended November 30, 1997,
approximately 15% of the net sales were made to one
customer. For the nine months ended November 30, 1996,
no individual customer accounted for 10% or more of
revenue. At November 30, 1997, approximately 60% of
accounts receivable was due from two customers. At
November 30, 1996, approximately 27% of accounts
receivable was due from two customers.
8. SUBSEQUENT On February 13, 1998, the stockholders of the Company
EVENTS sold all of the Company's outstanding shares of stock
to SeraCare, Inc. under terms of a Stock Purchase
Agreement for cash, common shares of SeraCare, Inc. and
cash payments to be determined by the future financial
performance of the Company. Certain key executives
received multi-year employment agreements.
In January 1998, the Company terminated its line of
credit.
15
<PAGE>
ITEM 7. (b) PRO FORMA FINANCIAL INFORMATION
The following Unaudited Pro Forma Consolidated Balance Sheet as of November
30, 1997 and the Unaudited Pro Forma Statement of Operations for the nine
months ended November 30, 1997 are based on the unaudited historical
Consolidated Financial Statements of the Company included in the Company's
Quarterly Report on Form 10QSB. The Unaudited Pro Forma Statement of
Operations for the year ended February 28, 1997 is based on the audited
historical Consolidated Financial Statements of the Company, included in the
Company's Annual Report on Form 10KSB/A. Both the nine month and year
Statements of Operations have been adjusted to give effect to the acquisition
of substantially all of the operating assets of Consolidated Technologies,
Inc. and all of the common stock of Western States Group, Inc., using the
purchase method of accounting and the assumptions and adjustments in the
accompanying notes to the Pro Forma Statements. The Unaudited Pro Forma
Consolidated Balance Sheet of the Company as of November 30, 1997 gives
effect to the transactions as if they occurred on November 30, 1997. The pro
forma consolidated statements of operations for the nine months ended
November 30, 1997 and the year ended February 28, 1997 give effect to the
transactions as if they occurred on the first day of each such period.
The pro forma adjustments are based upon available information and certain
assumptions that the Company believes are reasonable. The pro forma
statements of operations do not purport to represent what the Company's
financial results of operations would actually have been had the transaction
in fact occurred on such dates or to project the Company's financial position
or results of operations for any future period.
The Pro Forma Statements and the Notes thereto should be read in conjunction
with the historical Consolidated Financial Statements of the Company and
Notes thereto included in the Company's Annual Report on Form 10KSB/A for the
year ended February 28, 1997 which is hereby incorporated by this reference
and the audited historical Combined Financial Statements of Consolidated
Technologies, Inc. and Affiliate for the years ended December 31, 1996 and
1995 and the audited historical Financial Statements of The Western States
Group, Inc. for the years ended May 31, 1997 and 1996, which were included in
the initial filing of this Form 8K and which are hereby incorporated by this
reference.
<PAGE>
1. PRO FORMA CONSOLIDATED BALANCE SHEET AS OF NOVEMBER 30, 1997.
<TABLE>
<CAPTION>
SERACARE, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF NOVEMBER 30, 1997
(IN WHOLE DOLLARS) Adjustments to Reflect Acquisitions
---------------------------------------------------
(UNAUDITED)
SeraCare, Inc Subordinated Western States Consolidated Pro forma
Historical Debt Issuance Group, Inc. Technologies, Inc. Consolidated
---------------- --------------- -------------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 779,363 $ 15,267,143 $ (3,485,058) $ (5,600,000) $ 6,961,448
Accounts receivable 3,451,149 1,043,030 4,494,179
Inventory 2,246,717 783,649 839,567 3,869,933
Prepaid expenses 159,414 1,500 130,673 291,587
---------------- --------------- -------------- ------------------ ------------
Total Current Assets $ 6,636,643 $ 15,267,143 $ (1,656,879) $ (4,629,760) $15,617,147
---------------- --------------- -------------- ------------------ ------------
Property and equipment - net 2,107,714 6,391 344,106 2,458,211
Land available for sale 25,000 25,000
FDA licenses, net of amortization 2,730,087 2,730,087
Donor base and records, net of amortization 1,513,683 1,513,683
Reorganization value in excess of amounts
allotcated to identifiable assets, net of
amortization 700,995 700,995
Goodwill, net of amortization 866,113 2,490,909 5,815,677 9,172,699
Deferred Bond Discount 0 8,388,264 8,388,264
Other assets 600,276 11,221 611,497
---------------- --------------- -------------- ------------------ ------------
Total Assets $ 15,180,511 $ 23,655,407 $ 851,642 $ 1,530,023 $41,217,583
---------------- --------------- -------------- ------------------ ------------
---------------- --------------- -------------- ------------------ ------------
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $ 1,188,071 $ $ 413,354 $ $ 1,601,425
Accrued payroll and related expenses 219,955 219,955
Accrued expenses 859,285 859,285
Bridge loans - Directors 1,522,500 1,522,500
Bridge loans - Others 1,638,447 1,638,447
Other notes payable 600,000 600,000
Current portion of long-term debt 358,567 358,567
Customer advances 1,017,532 1,017,532
---------------- --------------- -------------- ------------------ ------------
Total current liabilities $ 7,404,357 $ 0 $ 413,354 $ 0 $ 7,817,711
---------------- --------------- -------------- ------------------ ------------
Long-term Debt 178,118 178,118
Subordinated debentures 16,000,000 16,000,000
Series A redeemable preferred stock, 0
2,200 issued and outstanding 285,174 285,174
Stockholders' equity 0
Common stock, $.001 par value, 25,000,000 0
shares authorized, 5,549,800 (including 0
119,875 to be issued) deemed issued
and outstanding 5,550 125 436 6,111
Additional paid-in capital 7,791,148 7,655,407 438,163 1,529,587 17,414,305
Accumulated deficit since February 6, 1996 (483,836) (483,836)
---------------- --------------- -------------- ------------------ ------------
Total stockholders equity $ 7,312,862 $ 7,655,407 $ 438,288 $ 1,530,023 $16,936,580
---------------- --------------- -------------- ------------------ ------------
Total Liabilities and Stockholders' Equity $ 15,180,511 $ 23,655,407 $ 851,642 $ 1,530,023 $41,217,583
---------------- --------------- -------------- ------------------ ------------
---------------- --------------- -------------- ------------------ ------------
See accompanying notes to unaudited pro forma consolidated balance sheet.
</TABLE>
<PAGE>
SeraCare, Inc.
Notes to Unaudited Pro Forma Consolidated Balance Sheet
As of November 30, 1997
The historical consolidated balance sheet presented for the Company is as of
November 30, 1997. The acquisitions are reflected as of December 31, 1997,
the effective date of such transactions. The Subordinated Debenture issuance
is reflected as of the date of issuance on February 13, 1998. The Adjustments
to Reflect Acquisitions reflect the full net impact of the indicated
transactions as follows:
SUBORDINATED DEBT ISSUANCE. The cash received from the issuance of $16.0 of
Subordinated Debentures has been adjusted to reflect the costs directly
related to the issuance including a referral fee and legal expenses. A part
of the cash received from the Subordinated Debt issuance was used to finance
the cash portions of acquisitions of Western States Group, Inc. and
Consolidated Technologies, Inc. and has been recorded accordingly. The
deferred bond discount represents the fair market value of the warrants
issued in conjunction with the issuance of the Subordinated Debentures plus
the costs directly related to the issuance.
WESTERN STATES GROUP, INC. The total cost for the purchase of all of the
stock of Western States acquisition has been preliminarily allocated to
tangible and identifiable intangible assets and liabilities based upon
management's estimate of their respective fair market values with the excess
of cost over the fair value of net assets acquired allocated to goodwill.
The amount of the purchase cost is subject to adjustment under terms of the
Stock Purchase Agreement. Additionally, allocation of the purchase cost may
be subject to revision when additional information concerning asset and
liability valuations is obtained. The purchase price is also subject to
adjustment over the twenty four month period following the effective date of
the acquisition based on the post-acquisition performance of Western States.
CONSOLIDATED TECHNOLOGIES, INC. The total cost for the purchase of
substantially all of the operating assets Consolidated Technologies has been
preliminarily allocated to tangible and identifiable intangible assets based
upon management's estimate of their respective fair market values with the
excess of cost over the fair value of net assets acquired allocated to
goodwill. The amount of the purchase cost is subject to adjustment under
terms of the Asset Purchase Agreement. The allocation of the purchase cost
may be subject to revision when additional information concerning asset and
liability valuations is obtained.
<PAGE>
2. UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE MONTHS
ENDED NOVEMBER 30, 1997.
<TABLE>
<CAPTION>
SERACARE, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED NOVEMBER 30, 1997
(In whole dollars, except per share data)
(Unaudited)
Western States Consolidated American Plasma
SeraCare, Inc. Group, Inc. Technologies, Inc. Management, Inc. Pro forma Pro forma
Historical Historical Historical Historical Adjustments Consolidated
--------------- -------------- ----------------- --------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 7,243,018 7,097,306 3,020,631 4,501,503 (126,000) $ 21,736,458
Cost of sales 6,010,897 5,344,977 2,084,118 3,622,152 (58,216) 17,003,928
--------------- -------------- ----------------- --------------- ------------ --------------
Gross profit 1,232,121 1,752,329 936,513 879,351 (67,784) 4,732,530
General and administrative expenses 1,024,119 1,463,918 744,801 1,175,453 (1,799,595) 2,608,696
--------------- -------------- ----------------- --------------- ------------ --------------
Net income (loss) from operations 208,002 288,411 191,712 (296,102) 1,731,811 2,123,834
Interest (income) expense - net 185,628 (12,654) 154,166 92,973 1,095,851 1,515,964
Other expense (income), net (1,280) (40,371) (37,335) (64,560) 64,560 (78,986)
--------------- -------------- ----------------- --------------- ------------ --------------
Net income (loss) before taxes $ 23,654 341,436 74,881 (324,515) 571,400 686,856
Taxes on income(*) 0 0 0 0 112,822 112,822
--------------- -------------- ----------------- --------------- ------------ --------------
Net income (loss) $ 23,654 341,436 74,881 (324,515) 458,578 574,034
--------------- -------------- ----------------- --------------- ------------ --------------
--------------- -------------- ----------------- --------------- ------------ --------------
Earnings (loss) per common share $ 0.116
--------------
--------------
Weighted average number of common
and common equivalent shares(1) 4,966,364
--------------
--------------
SERACARE, INC.
ADJUSTMENTS - PRO FORMA PRESENTATION
FOR THE NINE MONTHS ENDED NOVEMBER 30, 1997
SALES:
AMERICAN PLASMA MANAGEMENT INC.
Eliminate miscellaneous income not related to acquired business (126,000)
-------------
-------------
DIRECT COSTS:
CONSOLIDATED TECHNOLOGIES, INC.
Eliminate Cone Bio Products & Cenetron Consulting Fees relating to operations not acquired (2,350)
Eliminate expenses of Seguin Lab not acquired (157,985)
Add Goodwill amortization from acquisition 208,260
Change in manufacturing processing from outside vendor to Consolidated Technologies (223,549)
WESTERN STATESGROUP, INC.
Add Goodwill amortization from acquisition 81,783
AMERICAN PLASMA MANAGEMENT INC.
Amortization of donor base & records and FDA licenses acquired 35,625
-------------
TOTAL (58,216)
-------------
-------------
SG & A EXPENSES:
CONSOLIDATED TECHNOLOGIES, INC.
Adjust executive salaries as per agreement 14,301
Elimination of Sales Department (68,545)
Administrative Salaries and expenses not acquired including family members (409,645)
WESTERN STATES GROUP, INC.
Eliminate non-business donations (5,600)
Eliminate non-business professional fees (32,915)
Elimination of Pension Plan expense - plan desolved (50,538)
Elimination of expenses of condo not acquired (9,265)
Reduce executive salaries and bonuses as per agreement (563,753)
AMERICAN PLASMA MANAGEMENT INC.
Eliminate Administrative overhead not acquired (673,635)
-------------
Total (1,799,595)
-------------
-------------
INTEREST (EXPENSES) INCOME:
Eliminate Interest Income - Western States 10,825
Eliminate Interest Expense on obligations not acquired - CTI (168,878)
Eliminate Interest Expense on debt not acquired - American Plasma Mgnt (56,973)
Amortise Deferred Debenture discount allocable to acquisitions of WS and CTI 443,889
Add Interest Expense on cash borrowed and used in acquisition of WS and CTI 866,988
-------------
TOTAL 1,095,851
-------------
-------------
OTHER EXPENSE (INCOME), NET
Eliminate misc net income not related to operations acquired - American 64,560
-------------
-------------
</TABLE>
* Historical taxes on income have been excluded in favor of an overall
calculation which reflects available loss carry forwards.
<PAGE>
3. UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED
FEBRUARY 28, 1997.
<TABLE>
<CAPTION>
SERACARE, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED FEBRUARY 28, 1997
(In whole dollars, except per share data)
(Unaudited)
Western States Consolidated American Plasma
SeraCare, Inc. Group, Inc. Technologies, Inc. Management, Inc. Pro forma Pro forma
Historical Historical Historical Historical Adjustments Consolidated
--------------- -------------- ----------------- --------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 6,661,679 7,952,960 4,048,888 6,002,004 (168,000) $ 24,497,531
Cost of sales 6,148,820 5,953,978 2,630,475 4,829,536 (163,265) 19,399,544
--------------- -------------- ----------------- --------------- ------------ --------------
Gross profit 512,859 1,998,982 1,418,413 1,172,468 (4,735) 5,097,987
General and administrative expenses 753,179 1,941,458 942,893 1,567,270 (2,428,904) 2,775,896
--------------- -------------- ----------------- --------------- ------------ --------------
Net income (loss) from operations (240,320) 57,524 475,520 (394,802) 2,424,169 2,322,091
Interest expense 208,255 0 204,210 123,964 1,526,468 2,062,897
Other expense (income), net 62,533 (53,877) (77,974) (86,080) 86,080 (69,318)
--------------- -------------- ----------------- --------------- ------------ --------------
Net income (loss) (*) $ (511,108) 111,401 349,284 (432,686) 811,621 $ 328,512
--------------- -------------- ----------------- --------------- ------------ --------------
--------------- -------------- ----------------- --------------- ------------ --------------
Earnings (loss) per common share $ 0.131
--------------
--------------
Weighted average number of common
and common equivalent shares(1) 2,509,042
--------------
--------------
SERECARE, INC.
ADJUSTMENTS TO PRO FORMA PRESENTATION
FOR THE TWELVE MONTHS ENDED FEBRUARY 28, 1997
SALES:
AMERICAN PLASMA MANAGEMENT INC.
Eliminate miscellaneous income not related to acquired business (168,000)
------------
------------
DIRECT COSTS:
Consolidated Technologies, Inc.
Eliminate Cone Bio Products & Cenetron Consulting Fees relating to operations not acquired (133,200)
Eliminate expenses of Seguin Lab not acquired (84,738)
Add Goodwill amortization from acquisition 277,681
Change in manufacturing processing from outside vendor to Consolidated Technologies (379,552)
Western States
Add Goodwill amortization from acquisition 109,044
American Plasma Management Inc.
Amortization of donor base & records and FDA licenses acquired 47,500
------------
Total (163,265)
------------
------------
SG & A EXPENSES:
Consolidated Technologies, Inc.
Adjust executive salaries as per agreement 19,064
Eliminate Consulting fees not related to operations acquired (118,543)
Elimination of Sales Department (81,684)
Eliminate purchase of specialty materials not used in business acquired (39,504)
Elimination of administrative salaries and expenses not acquired including family members (256,818)
Western States Group, Inc.
Eliminate non-business related donations (11,100)
Eliminate non-business related professional fees (45,619)
Elimination of Pension Plan expense - plan desolved (49,368)
Eliminate expenses of Russian/Mexico Project which was abandoned (78,312)
Elimination of expenses of condo not acquired (13,604)
Elimination of Agency fees included in financial statements in error (140,236)
Reduce executive salaries as per agreement (715,000)
American Plasma Management Inc.
Eliminate Administrative overhead not acquired (898,180)
------------
Total (2,428,904)
------------
------------
INTEREST (EXPENSES) INCOME:
Eliminate Interest Income - Western States 53,877
Eliminate Interest Expense on obligations not acquired - CTI (199,280)
Eliminate Interest Exp on debt not acquired - American Plasma Mgnt (75,964)
Amortise Deferred Debenture Discount allocable to acquisition of WS and CTI 591,850
Add Interest Expense on cash borrowed and used in acquisition of WS and CTI 1,155,985
------------
Total 1,526,468
------------
------------
OTHER EXPENSE (INCOME), NET
Eliminate misc net income not related to operations acquired - American 86,080
------------
------------
</TABLE>
* Historical taxes on income have been excluded in favor of an overall
calculation which reflects available loss carry forwards.
<PAGE>
EXHIBIT 2.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
We consent to the incorporation by reference in this Form 8K/A of our report
dated May 2, 1997, on our audit of the consolidated financial statements of
SeraCare, Inc. and subsidiaries as of February 28, 1997, which report is
included in the SeraCare, Inc. Annual Report on Form 10-KSB/A for the fiscal
year ended February 28, 1997.
/S/ BDO SEIDMAN, LLP
