<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 - QSB
(X) QUARTERLY REPORT PURSUANT TO 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the quarterly period ended November 30, 1997
------------------
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to .
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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
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Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. ( X ) Yes ( ) No
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 13 or 15 (d) of the Securities Act of
1934 subsequent to the distribution of securities under a plan confirmed by a
court. Yes ( X ) No ( )
As of November 30, 1997, the issuer had 5,549,800 shares of its common stock,
$.001 par value issued and outstanding.
Transitional Small Business Disclosure Format Yes No X
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<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UNAUDITED FINANCIAL STATEMENTS ARE PROVIDED AS FOLLOWS:
PAGE
NUMBER
SERACARE, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Consolidated Balance Sheets -
as of November 30, 1997 (Unaudited) and
as of February 28, 1997 (Audited) 3
Consolidated Statements of Operations - (Unaudited)
For the three and nine month periods ended
November 30, 1997 and For the three and nine
month periods ended November 30, 1996 4
Consolidated Statements of Cash Flows - (Unaudited)
For the nine month period ended
November 30, 1997 and For the nine month
period ended November 30, 1996 5
Notes to Consolidated Financial Statements 7
<PAGE>
SERACARE, INC.
CONSOLIDATED BALANCE SHEET
AS OF NOVEMBER 30, 1997 11-30-97 2-29-97
(IN WHOLE DOLLARS) (Unaudited) (Audited)
----------- ----------
ASSETS
CURRENT ASSETS
Cash $ 779,363 $ 544,077
Accounts receivable 3,451,149 236,571
Inventory 2,246,717 342,504
Prepaid expenses 159,414 62,269
------------ ------------
Total Current Assets 6,636,643 1,185,421
------------ ------------
PROPERTY AND EQUIPMENT - NET 2,107,714 890,153
LAND AVAILABLE FOR SALE 25,000 25,000
FDA Licenses, less accumulated amortization 2,730,087 1,321,745
of $44,484 and $26,250.
DONOR BASE AND RECORDS, less accumulated 1,513,683 879,008
amortization of $41,959 and $35,000.
REORGANIZATION VALUE IN EXCESS OF AMOUNTS
ALLOCATED TO IDENTIFIABLE ASSETS, less
accumulated amortization 700,995 969,447
of $89,684 and $53,022.
GOODWILL, less accumulated amortization
of $51,809 and $16,434. 866,113 901,487
OTHER ASSETS 600,276 150,939
------------ ------------
TOTAL ASSETS $ 15,180,511 $ 6,323,200
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 1,188,071 $ 605,492
Accrued payroll and related expenses 219,955 177,995
Accrued expenses 859,285 162,711
Bridge loans payable - Directors 1,522,500 197,500
Bridge loans payable - Other 1,638,447 0
Other notes payable 600,000 0
Current portion of long-term debt 358,567 432,358
Customer advances 1,017,532 0
------------ ------------
Total current liabilities 7,404,357 1,576,056
------------ ------------
LONG-TERM DEBT 178,118 678,484
SERIES A REDEEMABLE PREFERRED STOCK,
2,200 issued and outstanding 285,174 389,047
STOCKHOLDERS' EQUITY
Common stock, $.001 par value, 25,000,000
shares authorized, 5,549,800 (including
119,875 to be issued) and 4,149,387
issued and outstanding 5,550 4,149
Additional paid-in capital 7,791,148 4,182,954
Accumulated deficit since February 6, 1996 (483,836) (507,490)
------------ ------------
Total stockholders equity $ 7,312,862 $ 3,679,613
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 15,180,511 $ 6,323,200
------------ ------------
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SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
SERACARE, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(IN WHOLE DOLLARS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
For the Nine Months Ended For the Three Months Ended
---------------------------------- -----------------------------------
November 30, November 30, November 30, November 30,
1997 1996 1997 1996
------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Net sales $ 7,243,018 $ 4,712,069 $ 3,736,653 $ 1,933,774
Cost of sales 6,010,897 4,329,403 2,928,274 1,828,631
------------- ------------- ------------- --------------
Gross profit 1,232,121 382,666 808,379 105,143
General and administrative expenses 1,024,119 397,846 502,512 105,570
------------- ------------- ------------- --------------
Net income (loss) from operations 208,002 (15,180) 305,867 (427)
Interest expense 185,628 139,301 74,800 48,157
Other expense (income), net (1,280) (88,310) (300) 38,412
------------- ------------- ------------- --------------
Net income (loss) $ 23,654 $ (66,171) $ 231,367 $ (86,996)
------------- ------------- ------------- --------------
------------- ------------- ------------- --------------
Earnings (loss) per common share (Note 2) $ 0.005 $ (0.030) $ 0.048 $ (0.035)
------------- ------------- ------------- --------------
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Weighted average number of common
and common equivalent shares (Note 2) 4,405,000 2,233,000 4,804,000 2,469,000
------------- ------------- ------------- --------------
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</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
SERACARE, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN WHOLE DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
For the Nine Months Ended
----------------------------
November 30, November 30,
1997 1996
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN CASH
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) 23,654 (66,171)
Adjustments to reconcile net income (loss) to
cash provided by (used in) operating activities:
Depreciation and amortization 191,038 121,649
(Increase) decrease from changes in:
Accounts receivable (3,214,578) (20,930)
Inventory (1,904,213) (157,407)
Prepaid expenses and other current assets (97,145) (20,653)
Other assets (449,337) (80,269)
Accounts payable 582,579 (149,649)
Accrued liabilities 720,323 (308,786)
Prepayments on inventory - 211,894
---------- ---------
Net cash used in operating activities (4,147,679) (470,322)
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Assets acquired for cash (1,250,000) (500,000)
Purchases of property and equipment (861,369) (420,146)
Additions to FDA licenses (526,576) -
Additions to donor base and records (141,634) -
Cash acquired in non-cash transaction 250,000 19,860
Cost in excess of book value of assets acquired - (74,898)
---------- ---------
Net cash used in investing activities (2,529,579) (975,184)
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments of long-term debt (574,157) (246,428)
Payments on redemption of preferred stock (103,873) (76,389)
Proceeds from bridge loans from officers 1,325,000 550,000
Payments on bridge loans from officers - (227,500)
Proceeds from bridge loans from others 1,638,447 0
Proceeds of private placements 3,609,595 1,137,500
Customer advances 1,017,532 -
---------- ---------
Net cash provided by financing activities 6,912,544 1,137,183
---------- ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS 235,286 (308,323)
CASH AND CASH EQUIVALENTS, beginning of period 544,077 580,476
---------- ---------
CASH AND CASH EQUIVALENTS, end of period 779,363 272,153
---------- ---------
---------- ---------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
SERACARE, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN WHOLE DOLLARS)
(UNAUDITED)
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
(a) Cash paid for:
Interest 185,628 139,301
State income taxes 16,000 8,500
(b) Non-cash transactions:
On July 2, 1996, the Company acquired the assets of Silver State Plasma
Center in exchange for a $300,000 note payable and $500,00 in cash (see
Note 1 to the Annual Report on Form 10KSB for the period ended February 28,
1997).
On July 9, 1996, the Company acquired BHM Labs, Inc. in exchange for 3,600
shares of the Company's Series A Redeemable Preferred Stock (see Notes 1
and 6 the Annual Report on Form 10KSB).
On July 13, 1997, Silver State Plasma Products, Inc. exercised their option
to converted the $247,328 then owing into 112,813 shares of the Company's
common stock.
Effective on August 13, 1997, the Company and Serologicals Corporation
completed an asset exchange whereby the Company transferred three centers
in Pueblo and Colorado Springs to Serologicals in exchange for two centers
located in Reno, Nevada and Ft Smith, Arkansas and $250,000.
On November 29, 1997, the Company acquired the operating assets of American
Plasma Management, Inc., American Plasma Reno, Inc., and American Plasma
Systems, Inc. which consisted primarily of the operating assets for five
plasma collection centers including: FDA licenses; donor base and records;
and property and equipment for $1,250,000 in cash and a note for $600,000.
For further details, see the Company's Current Report on Form 8K dated
November 29, 1997.
<PAGE>
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 November 30, 1997, and the results of their operations and
cash flows for the three and nine month periods ended November 30, 1997 and
1996. These results have been determined on the basis of generally accepted
accounting principles and practices applied consistently with those used in the
preparation of the audited financial statements included in the Company's Annual
Report on Form 10-KSB for the fiscal year ended February 28, 1997.
The results of operations for the three and nine month periods ended November
30, 1997 are not necessarily indicative of the results to be expected for any
other period or for the entire current fiscal year.
Certain information and footnote disclosures normally included in financial
statements presented in accordance with generally accepted accounting principles
have been condensed or omitted in accordance with the rules to Form 10-QSB. The
accompanying financial statements should be read in conjunction with the
Company's audited financial statements and notes thereto included in the
Company's Annual Report on Form 10-KSB for the fiscal year ended February 28,
1997.
2. EARNINGS PER SHARE
Earnings (loss) per common share amounts are calculated based upon the weighted
average number of shares actually outstanding during the period. Common stock
options and purchase warrants, which are considered common stock equivalents,
have not been considered in the average number of common shares outstanding for
the three month and nine month periods ending November 30, 1997 and 1996 as
their inclusion would be anti-dilutive.
3. BRIDGE LOANS
During the nine months ended November 30, 1997, the Company obtained bridge
loans of $2,963,447. Of this amount $1,325,000 was from an officer of the
Company and $1,638,447 was from unrelated parties. The loans were made at
interest rates of ten and twelve percent plus warrants to purchase shares of the
Company's common stock at prices ranging from $2.00 to 3.00 per share which are
exercisable over three years from the date of issuance.
4. CUSTOMER ADVANCES
During the nine months ended November 30, 1997, the Company received cash
advances from a customer totaling $1,017,532. These advances were used
primarily for working capital related principally to the newly established
centers.
<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.
RECENT DEVELOPMENTS
On November 29, 1997 (the "Closing Date") SeraCare Acquisitions, Inc. (SeraCare)
a Nevada corporation and a wholly-owned subsidiary of SeraCare, Inc. (the
"Company") acquired substantially all of the operating assets of American Plasma
Management, Inc., American Plasma Systems, Inc., and American Plasma Reno, Inc.
(collectively referred to as "Seller") consisting primarily of five operating
plasma collection centers located in Salt Lake City, Utah; Reno, Nevada;
Kalamazoo, Michigan; South Bend, Indiana; and Boise, Idaho, including inventory
on hand as of the Closing Date. Under terms of the Asset Purchase Agreement
dated November 29, 1997, the total purchase price paid by SeraCare was
$1,850,000, of which $1,250,000 was paid in cash and $600,000 of which was in
the form of a promissory note in favor of Seller bearing interest at 8% per
annum and due in one balloon payment no later than October 31, 1998. For
further information see the Current Report on Form 8-K dated November 29, 1997.
RESULTS OF OPERATIONS
THREE MONTHS ENDED NOVEMBER 30, 1997 AS COMPARED TO THREE MONTHS ENDED
NOVEMBER 30, 1996
SALES
Net sales of the Company increased by 93%, or $1,802,879 to $3,736,653 during
the 1997 period. The increase was primarily attributable to a structural change
in pricing under the Grupo Grifols agreement whereby the Company pays for
testing and softgoods and the timing of initial shipments to Grupo Grifols S.A.
Also contributing factors were the acquisition of five American Plasma centers
(see Recent Developments) and the final FDA approval of the Clearfield, Utah
location. The Company collected about 52,959 liters of plasma during the three
month period ended November 30, 1997 compared to about 37,654 for the comparable
prior year period or an increase of about forty one percent. The increased
volumes were the result of both the previously announced acquisitions and the
newly established centers in: Clearfield, Utah; Raleigh, North Carolina; Macon,
Georgia; Pasco, Washington;
<PAGE>
and Toledo, Ohio. With the exception of Clearfield, which received final FDA
approval in May 1997, the other newly established centers 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.
GROSS PROFIT
Gross profit increased by $703,236 or 669 percent in the 1997 period to $808,379
due to increased margins and volumes, mostly offset by: increased testing and
softgoods costs; higher salaries and related expenses; higher donor fees; and an
increase in other operating costs. These higher costs were primarily the result
of: a structural change in pricing under the Grupo Grifols agreement whereby
the Company pays for testing and softgoods; higher volumes; and increased
competition in certain locations.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses in 1997 increased by $396,942 to $502,512
an increase of 376 percent due mainly to the higher legal and professional fees
resulting from various administrative matters, increased travel expenses and
higher executive salaries.
INTEREST EXPENSE
Interest expense was $74,800 in the 1997 period compared to $48,157 for the
comparable 1996 period primarily due to the increase in bridge loans in the 1997
period, partially offset by a decrease in long-term debt.
INCOME TAXES
As of November 30, 1997, the tax effects of temporary differences for
depreciation, amortization, and valuation allowances from current and prior
periods and net operating loss carryforwards could give rise to the recording of
deferred tax assets. The Company is unable to reasonably determine the amounts
of net operating loss carryforwards available to offset against future taxable
income. Furthermore, the Company was unable to determine whether it was more
likely than not that the deferred tax asset would be realized, therefore a 100%
valuation allowance was established.
NET INCOME
As a result of the above, there was a net income for the three months ended
November 30, 1997 of $231,367 compared to a net loss of $86,996 in the 1996
period.
NINE MONTHS ENDED NOVEMBER 30, 1997 AS COMPARED TO NINE MONTHS ENDED NOVEMBER
30, 1996
SALES
Net sales of the Company increased by 54%, or $2,530,949 to $7,243,018 during
the 1997 period. The increase was primarily attributable to a structural change
in pricing under the Grupo Grifols agreement whereby the Company pays for
testing and softgoods and the timing of initial shipments to Grupo Grifols S.A.
Also contributing factors were: the final FDA approval of the Clearfield, Utah
location which allowed the company to sell the plasma which had been collected
since it opened in November 1996; increased plasma collections at the Company's
Las Vegas plasma collection center; increased sales of hyperimmune plasma; and
the acquisition of five American Plasma centers (see Recent Developments). The
Company collected about 136,792 liters of plasma during the nine month period
ended November 30, 1997 compared to about 104,249 for the comparable prior year
period or an increase of about thirty one percent. The increased volumes were
the result of both the previously announced acquisitions and the newly
established centers in: Clearfield, Utah; Raleigh, North Carolina; Macon,
Georgia; Pasco,
<PAGE>
Washington; and Toledo, Ohio. With the exception of Clearfield, which received
final FDA approval in May 1997, the other newly established centers 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.
GROSS PROFIT
Gross profit increased by $849,455 or 222 percent in the 1997 period to
$1,232,121 due to increased margins and volumes, mostly offset by: increased
testing and softgoods costs; higher salaries and related expenses; higher donor
fees; and an increase in other operating costs. These higher costs were
primarily the result of: a structural change in pricing under the Grupo Grifols
agreement whereby the Company pays for testing and softgoods; higher volumes;
and increased competition in certain locations.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses in 1997 increased by $626,273 to $1,024,119
an increase of 157 percent due mainly to the higher legal and professional fees
resulting from various administrative matters, increased travel expenses and
higher executive salaries.
INTEREST EXPENSE
Interest expense was $185,628 in the 1997 period compared to $139,301 for the
comparable 1996 period primarily due to the increase in bridge loans in the 1997
period, partially offset by a decrease in long-term debt.
INCOME TAXES
As of November 30, 1997, the tax effects of temporary differences for
depreciation, amortization, and valuation allowances from current and prior
periods and net operating loss carryforwards could give rise to the recording of
deferred tax assets. The Company is unable to reasonably determine the amounts
of net operating loss carryforwards available to offset against future taxable
income. Furthermore, the Company was unable to determine whether it was more
likely than not that the deferred tax asset would be realized, therefore a 100%
valuation allowance was established.
NET INCOME
As a result of the above, there was a net income for the nine months ended
November 30, 1997 of $23,654 compared to a net loss of $66,171 in the 1996
period.
LIQUIDITY AND CAPITAL RESOURCES
As of November 30, 1997, the Company's current liabilities exceeded current
assets by $767,714. This was due to cash used in operations and investing
activities, offset by the bridge loans from related parties, bridge loans from
unrelated parties, the proceeds from private placements and the advance payments
from a certain customer. The use of cash is 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 in
the volume of plasma collected and expanding the Company's international
presence, the short-term impact on the Company's earnings and cash flow has
been to defer significant profitability and positive cash flows. The Company
believes that the acquisition of the five American Plasma centers will provide a
significant increase to volumes. In addition, the volumes in several of the
newly established centers are continuing to increase and will reach maturity
during the coming fiscal year. The Company expects that improved plasma pricing
and recently negotiated reductions in the cost of softgoods, supplies and
testing will result in improved gross margins. Meanwhile, the Company's
projected capital requirements for fiscal 1998 include the establishment of
<PAGE>
additional plasma centers and the acquisitions of Western States Plasma Group,
Inc. and Consolidated Technologies, Inc. and an affiliate.
Net cash used in operations increased from $470,322 for the nine months of 1996
to cash used in operations of $4,147,679 for the comparable period in 1997.
The increase was primarily the result of an increase in accounts receivable
related to the payment terms of the Grupo Grifols agreement, an increase in
inventory associated with a thirty day hold period persuant to the terms of the
Grupo Grifols agreement, an increase in inventory related to the new First Time
Donor program initiated by ABRA effective July 1, 1997, and the establishment of
the new centers.
Cash flows used in investing activities for the nine months ended November 30,
1997 was $2,529,579 compared to $975,184 for the comparable prior year period.
This increase in cash used resulted primarily from the acquisition of the
American Plasma centers and the capital requirements of the newly established
plasma collection centers in Raleigh, Macon, Pasco, Toledo, Pocatello,
Wilmington and Savanah.
Cash flows provided by financing activities was $6,912,544 for the current year
period compared to $1,137,183 for the comparable prior period. This increase
was mostly due to the proceeds of various private placements, bridge loans from
both related and unrelated parties and the advance payments from a customer
which were used to finance the Company's expansion program and for working
capital.
Management believes that the funds necessary to meet the Company's projected
capital requirements for the balance of fiscal 1998 will continue to exceed
internally generated cash flows and accordingly will need be funded by a
combination of internally generated cash flows, short-term bridge financing,
private placements, a subordinated debt placement and/or a possible public
offering. Accordingly, the Company is currently evaluating alternatives for
providing the required funding.
<PAGE>
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: January 14, 1998 By: /s/ Barry D. Plost
--------------------------------
Barry D. Plost, President & CEO
By: /s/ Jerry L. Burdick
--------------------------------
Jerry L. Burdick
Principal Accounting and
Finance Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-28-1998
<PERIOD-START> MAR-01-1997
<PERIOD-END> NOV-30-1997
<CASH> 779
<SECURITIES> 0
<RECEIVABLES> 3,451
<ALLOWANCES> 0
<INVENTORY> 2,247
<CURRENT-ASSETS> 6,637
<PP&E> 2,108
<DEPRECIATION> 0
<TOTAL-ASSETS> 15,181
<CURRENT-LIABILITIES> 7,404
<BONDS> 178
285
0
<COMMON> 6
<OTHER-SE> 7,791
<TOTAL-LIABILITY-AND-EQUITY> 15,181
<SALES> 7,243
<TOTAL-REVENUES> 7,243
<CGS> 0
<TOTAL-COSTS> 6,010
<OTHER-EXPENSES> 1,023
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