<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended May 31, 1998
-------------
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to .
--------------------- ----------------------
Commission file number 0-21781
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SERACARE, INC.
- ------------------------------------------------------------------------------
(Exact name of Small Business Registrant as specified in its charter)
DELAWARE 95-4343492
- ---------------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1925 CENTURY PARK EAST, SUITE 1970
LOS ANGELES, CALIFORNIA 90067
- ---------------------------------------- --------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (310) 772-7777
---------------
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. ( X ) Yes ( ) No
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 13 or 15 (d) of the Securities Act of
1934 subsequent to the distribution of securities under a plan confirmed by a
court. Yes ( X ) No ( )
As of June 30, 1998, the issuer had 7,210,539 shares of its common stock, $.001
par value issued and outstanding.
Transitional Small Business Disclosure Format Yes No X
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UNAUDITED FINANCIAL STATEMENTS ARE PROVIDED AS FOLLOWS:
<TABLE>
<CAPTION>
PAGE
NUMBER
SERACARE, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
<S> <C>
Consolidated Balance Sheets -
as of May 31, 1998 (Unaudited) and
as of February 28, 1998 (Audited) 3
Consolidated Statements of Operations - (Unaudited)
For the three months ended May 31, 1998 and
For the three months ended May 31, 1997 4
Consolidated Statements of Cash Flows - (Unaudited)
For the three month period ended May 31, 1998 and
For the three month period ended May 31, 1997 5
Notes to Consolidated Financial Statements 7
</TABLE>
2
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<TABLE>
<CAPTION>
SERACARE, INC.
CONSOLIDATED BALANCE SHEET
AS OF MAY 31, 1998 5-31-98 2-28-98
(IN WHOLE DOLLARS) (UNAUDITED) (AUDITED)
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,381,668 $ 5,497,524
Accounts receivable (net) 8,547,470 4,612,968
Inventory 9,408,845 7,644,601
Prepaid expenses and other current assets 382,826 243,785
----------- -----------
Total Current Assets 19,720,809 17,998,878
----------- -----------
PROPERTY AND EQUIPMENT - NET 2,853,436 2,780,850
FDA LICENSES, less accumulated amortization
of $70,271 and $57,351 2,747,079 2,759,999
DONOR BASE AND RECORDS, less accumulated
amortization of $78,023 and $61,149 1,792,305 1,688,762
REORGANIZATION VALUE IN EXCESS OF AMOUNTS ALLOCATED
TO IDENTIFIABLE ASSETS, less accumulated amortization
of $88,277 and $78,635 683,176 692,818
GOODWILL, less accumulated amortization of $183,654
and $84,292 9,780,071 9,748,357
DEFERRED BOND DISCOUNT, less accumulated
amortization of $335,213 and $49,349 7,955,361 8,241,225
OTHER ASSETS, including start-up costs
of $1,147,803 and $739,171 2,078,627 1,318,483
----------- -----------
TOTAL ASSETS $47,610,864 $45,229,372
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 2,660,984 $ 2,495,588
Accrued payroll and related expenses 323,130 230,474
Accrued expenses 1,410,079 1,266,854
Deferred income (Note 4) 1,096,522 1,131,178
Line of credit (Note 3) 3,207,000
Bridge loans from related parties 995,500 2,121,500
Notes payable 1,088,447 1,296,947
Current portion of long-term debt 12,547 12,211
----------- -----------
Total current liabilities 10,794,209 8,554,752
----------- -----------
LONG-TERM DEBT 16,193,400 16,196,670
SERIES A REDEEMABLE PREFERRED STOCK, $.001 par value, 25,000,000 shares
authorized; 1,300 shares issued and outstanding (1,600,000 at 2-28-98) 189,644 231,130
STOCKHOLDERS' EQUITY
Series B convertible preferred stock, $.001 par value, 15,000 shares
authorized and outstanding
Liquidation value $100 per share 15 15
Common stock, $.001 par value, 25,000,000 shares
authorized and 7,210,539 issued and outstanding 7,210 7,210
Additional paid-in capital 20,293,232 20,293,232
Retained earnings (deficit) 133,154 (53,637)
----------- -----------
Total stockholders' equity 20,433,611 20,246,820
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $47,610,864 $45,229,372
----------- -----------
----------- -----------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
3
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<TABLE>
<CAPTION>
SERACARE, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(IN WHOLE DOLLARS, EXCEPT PER SHARE DATA)
(UNAUDITED)
For the Three Months Ended
-------------------------------------
May 31, May 31,
1998 1997
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<S> <C> <C>
Revenues
Net sales $ 7,661,785 $ 1,585,853
Income from joint venture 199,638 -
------------ -----------
Total Revenue 7,861,423 1,585,853
Cost of sales 5,939,960 1,427,486
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Gross profit 1,921,463 158,367
General and administrative expenses 930,717 274,976
Non-cash general and administrative expenses 5,355 -
------------ -----------
Net income (loss) from operations 985,391 (116,609)
Interest expense 619,426 48,614
Non-cash interest expense 301,449 -
Other expense (income), net (122,275) (942)
------------ -----------
Income (loss) before income taxes 186,791 (164,281)
Income Taxes (Note 6) - -
------------ -----------
Net income $ 186,791 $ (164,281)
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Earnings (loss) per common share (Note 2)
Basic $ 0.03 $ (0.04)
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------------ -----------
Diluted $ 0.02 $ (0.04)
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Weighted average shares issued and outstanding (Note 2)
Basic 7,210,585 4,149,387
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------------ -----------
Diluted 11,777,067 4,149,387
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</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
4
<PAGE>
<TABLE>
<CAPTION>
SERACARE, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN WHOLE DOLLARS)
(UNAUDITED) For the Three Months Ended
-------------------------------------
May 31, May 31,
INCREASE (DECREASE) IN CASH 1998 1997
-------------- -----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 186,791 $ (164,281)
Adjustments to reconcile net income (loss) to
cash provided by (used in) operating activities:
Depreciation and amortization 279,840 64,826
Income from joint venture (199,638) -
Non-cash interest expense 301,449 -
Non-cash general and administrative expense 5,355 -
(Increase) decrease from changes in:
Accounts receivable (3,934,502) (115,651)
Inventory (1,764,244) (396,830)
Prepaid expenses and other current assets (563,651) (120)
Other assets (272,814) (8,483)
Accounts payable 565,006 (35,167)
Accrued payroll and related expenses 92,656 (11,067)
Accrued expenses 168,225 62,215
Deferred income (34,656) 492,507
------------ -----------
Net cash used in operating activities (5,170,183) (112,051)
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (170,902) (170,034)
Additions to other intangible assets (582,434) -
Distributions from joint venture 100,000 -
Additions to FDA licenses - (232,420)
Additions to donor base and records (120,417) (154,946)
------------ -----------
Net cash used in investing activities (773,753) (557,400)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Advances under line of credit 3,207,000 -
Repayments of long-term debt (2,934) (83,959)
Repayments of notes payable (208,500) -
Repayments of bride loans from related parties (1,126,000) -
Payments on redemption of preferred stock (41,486) (38,307)
Proceeds from bridge loans from officers - 325,000
------------ -----------
Net cash provided by financing activities 1,828,080 202,734
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NET DECREASE IN CASH AND CASH EQUIVALENTS (4,115,856) (466,717)
CASH AND CASH EQUIVALENTS, beginning of period 5,497,524 544,077
------------ -----------
CASH AND CASH EQUIVALENTS, end of period $ 1,381,668 $ 77,360
------------ -----------
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</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
5
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<TABLE>
<CAPTION>
SERACARE, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN WHOLE DOLLARS)
(UNAUDITED)
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for the three months ended: May 31, 1998 May 31, 1997
-------------- -----------------
Interest $316,407 $48,614
State income taxes $0 $16,000
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
6
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SeraCare, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
1. STATEMENT OF INFORMATION FURNISHED
In the opinion of management, the accompanying unaudited financial statements
contain all adjustments (consisting only of normal and recurring accruals)
necessary to present fairly the financial position of SeraCare, Inc. and
Subsidiaries as of May 31, 1998, and the results of their operations and cash
flows for the three months ended May 31, 1998 and 1997. These results have been
determined on the basis of generally accepted accounting principles and
practices applied consistently with those used in the preparation of the audited
financial statements included in the Company's Annual Report on Form 10-KSB for
the fiscal year ended February 28, 1998.
The results of operations for the three month period ended May 31, 1998 are not
necessarily indicative of the results to be expected for any other period or for
the entire current fiscal year.
Certain information and footnote disclosures normally included in financial
statements presented in accordance with generally accepted accounting principles
have been condensed or omitted in accordance with the rules to Form 10-QSB. The
accompanying financial statements should be read in conjunction with the
Company's audited financial statements and notes thereto included in the
Company's Annual Report on Form 10-KSB for the fiscal year ended February 28,
1998.
2. EARNINGS PER SHARE
Basic earnings (loss) per common share amounts are calculated based upon the
weighted average number of shares actually outstanding during the period.
Diluted earnings per share for the three months ended May 31, 1998 have been
calculated by considering dilutive common stock options, purchase warrants and
convertible debt instruments in such calculation. Common stock options, purchase
warrants and convertible debt instruments have not been considered in
calculating the diluted amount for the three months ended May 31, 1997 as their
inclusion would be anti-dilutive.
3. CREDIT FACILITY
Effective April 24, 1998, the Company consummated a $10 million, two-year
committed credit facility with Brown Brothers Harriman & Co. Under the terms of
the agreement, interest will accrue at Bank of Boston prime rate plus .75 base
points and will be payable quarterly. The agreement contains various covenants
relating to: minimum effective capital; maximum total liabilities/effective
capital; minimum current ratio; minimum EBITDA/interest expense + capital: and
other non-financial covenants relating to restrictions on additional
indebtedness, guarantees of indebtedness, limitations on investments, asset
sales, mergers or other changes of control, divestitures, acquisitions,
dividends and distributions.
4. DEFERRED INCOME
As of May 31, 1998, the Company had received cash advances from a customer
totaling $1,096,522. These advances were used primarily for working capital
related principally to the newly established plasma centers.
7
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SeraCare, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
5. ACQUISITIONS
Effective January 1, 1998, the Company acquired substantially all of the
operating assets of Consolidated Technologies, Inc. a biomedical manufacturing
company specializing in the supply of products and services to the in-vitro
diagnostic industry. At the same time, the Company acquired Western States
Group, Inc., a worldwide marketing organization for therapeutic blood plasma
products, diagnostic test kits, specialty plasma and bulk plasma.
On November 29, 1997, the Company acquired five plasma centers from American
Plasma Management, Inc.
The unaudited proforma results of operations, assuming these acquisitions had
occurred as of the beginning of the 1997 quarter for revenue, net loss per
share, are as follows:
<TABLE>
<CAPTION>
Quarter Ended
May 31, 1997
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<S> <C>
Revenue $ 6,294,915
Net loss $ (827,425)
Loss per share
Basic $ (.14)
Diluted $ (.14)
</TABLE>
6. INCOME TAXES
No provision for current income taxes has been made for the period ending May
31, 1998, because the Company has a loss carryforward which exceeds the net
income reflected. Regarding deferred taxes, the Company uses the asset and
liability method for financial accounting and reporting of deferred income
taxes. This method provides for recognition of deferred tax assets in the
current period for the future benefit of net operating loss carryforwards and
items of expense which have been recognized in the financial statements, but
will be deductible for income tax purposes in future periods. The Company has
determined that it was not more likely than not that the deferred tax asset will
be realized, therefore a 100% valuation allowance was established and the
deferred tax benefit has not been reflected in the current statements.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
EXCEPT FOR HISTORICAL INFORMATION CONTAINED HEREIN, THE STATEMENTS IN THIS
REPORT (INCLUDING WITHOUT LIMITATION, STATEMENTS INDICATING THAT THE COMPANY
"EXPECTS," "ESTIMATES," "ANTICIPATES," OR "BELIEVES" AND ALL OTHER STATEMENTS
CONCERNING FUTURE FINANCIAL RESULTS, PRODUCT OFFERINGS OR OTHER EVENTS THAT HAVE
NOT YET OCCURRED) ARE FORWARD-LOOKING STATEMENTS THAT ARE MADE PURSUANT TO THE
SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995,
SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND SECTION 27A
OF THE SECURITIES ACT OF 1933, AS AMENDED. FORWARD-LOOKING STATEMENTS INVOLVE
KNOWN AND UNKNOWN FACTORS, RISKS AND UNCERTAINTIES WHICH MAY CAUSE THE COMPANY'S
ACTUAL RESULTS IN FUTURE PERIODS TO DIFFER MATERIALLY FROM FORECASTED RESULTS.
THOSE FACTORS, RISKS AND UNCERTAINTIES INCLUDE, BUT ARE NOT LIMITED TO: THE
POSITIONING OF THE COMPANY'S PRODUCTS IN THE COMPANY'S MARKET SEGMENT; THE
COMPANY'S ABILITY TO EFFECTIVELY MANAGE ITS VARIOUS BUSINESSES IN A RAPIDLY
CHANGING ENVIRONMENT; NEW COMPETITION FOR DONORS AND CUSTOMERS; THE INABILITY OF
THE COMPANY TO OBTAIN FDA APPROVAL OF NEWLY ESTABLISHED CENTERS; AND THE
INTRODUCTION OF SYNTHETIC PRODUCTS WHICH COULD ELIMINATE THE NEED FOR PLASMA
PRODUCTS.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MAY 31, 1998 AS COMPARED TO THREE MONTHS ENDED MAY 31, 1997
REVENUE
Net revenue of the Company increased by 396%, or $6,275,570 to $7,861,423 during
the 1998 period. The increase was attributable primarily to the acquisitions of
Western States Group, Inc. and the operating assets of Consolidated
Technologies, Inc effective January 1, 1998, which contributed $3,152,094 and
$1,251,243 respectively to the increase. Also contributing was a 79% increase in
the volume of plasma collected during the period by the Biologics Division, due
in part to the November 1997 acquisition of centers located in: Salt Lake City,
Utah; Reno, Nevada; Kalamazoo, Michigan; South Bend, Indiana; and Boise, Idaho;
and in part to the ramping up of the newly established centers located in:
Pasco, Washington; Toledo, Ohio; Raleigh, North Carolina; Macon, Georgia;
Clearfield, Utah; Pocatello, Idaho; Savannah, Georgia; and Wilmington, Delaware.
The Company collected about 71,490 liters of plasma during the three month
period ended May 31, 1998 compared to about 39,876 for the comparable prior year
period or an increase of about 31,614. The centers located in Raleigh, Macon,
Toledo and Pasco were operating under Reference Number's from the FDA during the
period and were thus not allowed to sell or ship plasma, although they were
collecting plasma during the period. Clearfield received final FDA approval in
May 1997. In addition, revenue from the Biologics Division was higher compared
to the same period last year as a result of a structural change in pricing under
the Grupo Grifols agreement whereby the Company pays for testing and softgoods.
GROSS PROFIT
Gross profit increased by $1,763,096 or 1113% percent in the 1998 period to
$1,921,463. The increased revenues as discussed above were substantially offset
by: the operating expenses associated with Western States Group, Inc. and
Consolidated Technologies; and the higher salaries costs, donor fees, and other
operating costs resulting from the 79% increase in the volume of plasma
collected. Higher
9
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softgoods and testing costs were caused by the increased volumes and by the
structural change in pricing under the Grupo Grifols agreement whereby the
Company pays for testing and softgoods.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses in 1998 increased by $661,096 to $936,072
an increase of 240% due mainly to the inclusion of such expenses attributable
to Western States Group, Inc. and Consolidated Technologies. Legal and
professional fees, travel expenses, and salaries expense were also higher.
INTEREST EXPENSE
Interest paid increased by $570,812 to $619,426 due primarily to the increased
debt required to finance acquisitions. The non-cash interest of $301,449
represents the amortization of the bond discount associated with the February
1998 $16.0 million subordinated debenture issue.
NET INCOME
As a result of the above, there was a net income for the three months ended May
31, 1998 of $186,791 compared to a net loss of $164,281 for the same prior year
period.
LIQUIDITY AND CAPITAL RESOURCES
As of May 31, 1998 the Company's current assets exceeded current liabilities by
$8,926,600. The use of cash during the quarter was consistent with the Company's
strategic plan for strong growth and the Company feels that progress has been
made during the period. With a continuation of a strategic focus on growth, the
short-term impact on the Company's earnings and cash flow has been to defer
profitability and positive cash flows. The Company believes, however, that the
acquisitions of Western States Group, Inc., the operating assets of Consolidated
Technologies, Inc., the November 1998 acquisition of centers located in: Salt
Lake City, Utah; Reno, Nevada; Kalamazoo, Michigan; South Bend, Indiana; and
Boise, Idaho; and the continuing ramp-up of the newly established centers
located in: Pasco, Washington; Toledo, Ohio; Raleigh, North Carolina; Macon,
Georgia; Clearfield, Utah; Pocatello, Idaho; Savannah, Georgia; and Wilmington,
Delaware represent substantial progress toward becoming a significant company
within the plasma products industry. The Company expects that plasma pricing and
plasma products demand will continue to strengthen and that reductions in the
cost of softgoods, supplies and testing will continue to reflect in improved
gross margins.
Net cash used in operating activities during the three-month period ended May
31, 1998 was $5,170,183 compared to $112,051 during the same prior year period.
This was due primarily to the increase in accounts receivable and inventory
partially offset by the increases in accounts payable and other accrued expenses
attributable to the acquisitions of Western States Plasma Group, Inc. and
Consolidated Technologies and the 79% increase in the volume of plasma
collected. Also contributing was an increase in accounts receivable resulting
from the payment terms of the Grupo Grifols sales agreement and an increase in
inventory due to a thirty day hold period pursuant to the terms of the Grupo
Grifols agreement and to the new First Time Donor program initiated by ABRA
effective July 1, 1997.
Cash flows used in investing activities for the three months ended May 31, 1998
was $773,753 compared to $557,400 for the comparable prior year period. This
increase resulted primarily from the capital requirements of the newly
established plasma collection centers in Raleigh, Macon, Pasco, Toledo,
Pocatello, Wilmington and Savannah.
Cash flow provided by financing activities was $1,828,080 for the current year
period compared to $202,734 for the comparable prior period. This increase was
mostly due to advances under the new revolving line of credit, partially offset
by repayment of bridge loans from both related and unrelated parties.
10
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Management believes that internally generated cash flow combined with the newly
established $10.0 million, two-year revolving line of credit will be sufficient
to meet the ongoing working capital requirements of the Company's current
operations for the balance of fiscal 1998. Any significant expansion or
acquisition however, will need to be funded by a combination of internally
generated cash flows, short-term bridge financing, private placements, and/or a
possible public offering.
11
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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)
Dated: September 9, 1998 By: /s/ Barry D. Plost
-------------------------------
Barry D. Plost, President & CEO
By: /s/ Jerry L. Burdick
-------------------------------
Jerry L. Burdick
Principal Accounting and
Finance Officer
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<RESTATED>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-1999
<PERIOD-START> FEB-28-1998
<PERIOD-END> MAY-31-1998
<CASH> 1,381,668
<SECURITIES> 0
<RECEIVABLES> 8,547,470
<ALLOWANCES> 0
<INVENTORY> 9,408,845
<CURRENT-ASSETS> 19,720,809
<PP&E> 2,853,436
<DEPRECIATION> 0
<TOTAL-ASSETS> 47,610,864
<CURRENT-LIABILITIES> 10,794,209
<BONDS> 16,193,400
189,644
15
<COMMON> 7,210
<OTHER-SE> 20,426,386
<TOTAL-LIABILITY-AND-EQUITY> 47,610,864
<SALES> 7,661,785
<TOTAL-REVENUES> 7,861,423
<CGS> 0
<TOTAL-COSTS> 5,939,960
<OTHER-EXPENSES> 936,072
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 920,875
<INCOME-PRETAX> 186,791
<INCOME-TAX> 0
<INCOME-CONTINUING> 186,791
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 186,791
<EPS-PRIMARY> .03
<EPS-DILUTED> .02
</TABLE>
