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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 - QSB-A
(X) QUARTERLY REPORT PURSUANT TO 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended August 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.
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(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 August 31, 1998, the issuer had 7,410,585 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:
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PAGE
NUMBER
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SERACARE, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Consolidated Balance Sheets -
as of August 31, 1998 (Unaudited) and
as of February 28, 1998 (Audited) 3
Consolidated Statements of Operations - (Unaudited)
For the three and six months ended August 31, 1998 and
For the three and six months ended August 31, 1997 4
Consolidated Statements of Cash Flows - (Unaudited)
For the six months ended August 31, 1998 and
For the six months ended August 31, 1997 5
Notes to Consolidated Financial Statements 7
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2
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SERACARE, INC.
CONSOLIDATED BALANCE SHEET
AS OF AUGUST 31, 1998 8-31-98 2-28-98
(IN WHOLE DOLLARS) (Unaudited) (Audited)
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<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,001,202 $ 5,497,524
Accounts receivable 7,642,422 4,612,968
Inventory 11,433,723 7,644,601
Prepaid expenses and other current assets 626,247 243,785
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Total Current Assets 20,703,594 17,998,878
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PROPERTY AND EQUIPMENT - NET 4,333,201 2,780,850
FDA LICENSES, less accumulated amortization
of $91,979 and $57,351 4,675,371 2,759,999
DONOR BASE AND RECORDS, less accumulated
amortization of $104,893 and $61,149 3,002,873 1,688,762
REORGANIZATION VALUE IN EXCESS OF AMOUNTS ALLOCATED
TO IDENTIFIABLE ASSETS, less accumulated amortization
of $97,919 and $78,635 673,534 692,818
GOODWILL, less accumulated amortization of $358,050
and $84,292 13,065,484 9,748,357
DEFERRED BOND DISCOUNT, less accumulated
amortization of $631,676 and $49,349 7,658,898 8,241,225
OTHER ASSETS, including start-up costs
of $1,530,524 and $739,171 3,460,799 1,318,483
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TOTAL ASSETS $ 57,573,754 $ 45,229,372
-------------- --------------
-------------- --------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 1,777,611 $ 2,495,588
Accrued payroll and related expenses 281,220 230,474
Accrued expenses 1,335,266 1,266,854
Deferred income 397,353 1,131,178
Line of credit 10,511,000
Bridge loans from related parties 1,995,500 2,121,500
Notes payable 2,738,447 1,296,947
Current portion of long-term debt 239,563 12,211
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Total Current Liabilities 19,275,960 8,554,752
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LONG-TERM DEBT 16,710,169 16,196,670
SERIES A REDEEMABLE PREFERRED STOCK, $.001 par
value, 25,000,000 shares authorized; 1,000 shares
issued and outstanding 147,323 231,130
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, 7,410,585 and 4,372,153
issued and outstanding 7,411 7,210
Additional paid-in capital 20,593,031 20,293,232
Retained earnings (deficit) 839,845 (53,637)
-------------- --------------
Total stockholders' equity 21,440,302 20,246,820
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 57,573,754 $ 45,229,372
-------------- --------------
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</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
3
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SERACARE, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(IN WHOLE DOLLARS, EXCEPT PER SHARE DATA)
(UNAUDITED)
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<CAPTION>
For the Six Months Ended For the Three Months Ended
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August 31, August 31, August 31, August 31,
1998 1997 1998 1997
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<S> <C> <C> <C> <C>
Revenues
Net sales 17,709,074 $ 3,506,365 $ 10,047,289 $ 1,920,512
Income from joint venture 388,623 188,985
----------- ----------- ----------- -----------
Total revenue 18,097,697 3,506,365 10,236,274 1,920,512
Cost of sales 13,605,595 3,082,623 7,665,635 1,655,137
----------- ----------- ----------- -----------
Gross profit 4,492,102 423,742 2,570,639 265,375
General and administrative expenses 1,992,583 521,607 1,061,866 246,631
Non-cash general and administrative expenses 10,710 0 5,355 0
----------- ----------- ----------- -----------
Net income (loss) from operations 2,488,809 (97,865) 1,503,418 18,744
Interest expense 1,433,266 110,828 813,840 62,214
Non-cash interest expense 613,497 312,048
Other expense (income), net (461,436) (980) (329,161) (38)
----------- ----------- ----------- -----------
Net income (loss) (Note 6) 893,482 $ (207,713) $ 706,691 $ (43,432)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Earnings (loss) per common share (Note 2)
Basic 0.123 $ (0.049) $ 0.097 $ (0.010)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Diluted 0.076 $ (0.049) $ 0.060 $ (0.010)
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----------- ----------- ----------- -----------
Weighted average shares issued and outstanding
Basic 7,243,918 4,204,840 7,277,252 4,260,293
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Diluted 11,777,067 4,204,840 11,777,067 4,260,293
----------- ----------- ----------- -----------
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</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
4
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SERACARE, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN WHOLE DOLLARS)
(UNAUDITED) For the Six Months Ended
-------------------------------
August 31, August 31,
INCREASE (DECREASE) IN CASH 1998 1997
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $893,482 ($207,713)
Adjustments to reconcile net income (loss) to
cash provided by (used in) operating activities:
Depreciation and amortization 665,110 142,810
Income from joint venture (388,623)
Gain on sale of land and buildings (533,547)
Non-cash interest expense 613,487
Non-cash general and administrative expense 10,710
(Increase) decrease from changes in:
Accounts receivable (2,830,874) 85,330
Inventory (3,310,447) (1,161,747)
Prepaid expenses and other current assets (1,022,073) 14,211
Other assets (439,055) (34,180)
Accounts payable (887,277) (105,936)
Accrued payroll and related expenses 50,746
Accrued expenses 5,320 217,351
Deferred income (733,825) 581,780
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Net cash used in operating activities (7,906,866) (468,094)
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CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (553,947) (362,358)
Proceeds from sale of land and buildings 801,891
Cash paid to purchase American Plasma, Inc., net of cash acquired (7,824,065)
Additions to other intangible assets (1,004,433)
Cash acquired in non-cash transaction 250,000
Distributions from unconsolidated subsidiary 235,000
Additions to FDA licenses 0 (438,995)
Additions to donor base and records (257,855) (273,913)
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Net cash used in investing activities (8,603,409) (825,266)
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CASH FLOWS FROM FINANCING ACTIVITIES
Advances under line of credit 10,511,000
Proceeds from notes payable 2,000,000
Repayments of long-term debt (28,740) (417,958)
Repayments of notes payable (558,500)
Repayments of bride loans from related parties (1,376,000)
Payments on redemption of preferred stock (83,807) (77,385)
Proceeds from issuance of stock 300,000 176,250
Proceeds from bridge loans from related parties 1,250,000 1,113,447
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Net cash provided by financing activities 12,013,953 794,354
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NET DECREASE IN CASH AND CASH EQUIVALENTS (4,498,322) (499,006)
CASH AND CASH EQUIVALENTS, beginning of period 5,497,524 544,077
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CASH AND CASH EQUIVALENTS, end of period $1,001,202 $45,071
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</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
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SERACARE, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN WHOLE DOLLARS)
(UNAUDITED)
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
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(a) Cash paid for:
Interest $1,433,266 $110,828
State income taxes $0 $16,000
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(b) Non-cash investing and financing activities
During the six months ended August 31, 1998, the Company sold certain
properties to an unrelated party for a total of $975,000, consisting of
$150,000 in cash, notes receivable totalling $651,891 and assumption by the
buyer of a $173,109 mortgage payable.
On July 13, 1997, Silver State Plasma Products, Inc. exercised their option
to convert $247,328 then owing them into 112,813 shares of the Company's
common stock.
On August 13, 1997, the Company acquired two plasma centers plus $250,000
in exchange for three of the Company's plasma centers.
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 August 31, 1998, and the results of their operations and cash
flows for the three months and six months ended August 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 and six months ended August 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 and six months ended August 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 and six months ended
August 31, 1997, because the affect 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. During September 1998, this credit facility was
increased to $12 million.
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SeraCare, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
4. DEFERRED INCOME
As of August 31, 1998, the Company had received cash advances from a customer
totaling $397,353. These advances were used primarily for working capital
related principally to the newly established centers.
5. ACQUISITIONS
Effective on July 6, 1998, SeraCare, Inc., a Delaware corporation (the
"Company") acquired all of the stock of American Plasma, Inc., a Texas
corporation (herein referred to as "American") located in Houston, Texas.
American operates eleven plasmapheresis centers located in: Houston, Texas (4),
South Houston, Texas; Beaumont, Texas; Longview, Texas; Casa Grande, Arizona;
Phoenix, Arizona; Mesa, Arizona; and, Amarillo, Texas. Under terms of the Stock
Purchase Agreement dated September 29, 1998, the purchase price paid by SeraCare
(which is subject to adjustment) consisted of $8,705,428 in cash. The purchase
price was determined through arms length negotiations between the Company and
American. The Company financed the acquisition by drawing $5.5 million from its'
revolving credit facility with Brown Brothers Harriman and by obtaining bridge
loans from a related party of $1.250 million and from an unrelated party of $2.0
million. In the acquisition of the stock of American, the Company acquired all
of the operating assets of American and assumed certain liabilities of American,
with the exception of certain "Excluded Liabilities". The Company plans to
continue to operate American as a wholly owned subsidiary.
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 plasmapheresis centers from
American Plasma Management, Inc. The centers are located in South Bend,
Indiana; Boise, Idaho; Kalamazoo, Michigan; Salt Lake City, Utah; and, Reno,
Nevada.
All acquisitions were accounted for using the purchase method of accounting.
Accordingly, the results of operations have been reported as of the effective
dates of the respective acquisitions. The purchase cost in each transaction has
been allocated to the net assets acquired based upon fair values at the date of
acquisition. The excess purchase price over the net assets acquired has been
recorded as goodwill and is being amortized over twenty years.
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The unaudited proforma operating results for Revenue, Net income and Net income
per share, assuming all of these acquisitions had occurred as of the beginning
of the indicated six-month periods, are as follows:
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Six Months Ended Six Months Ended
August 31, 1998 August 31, 1997
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<S> <C> <C>
Revenue $22,891,880 $22,154,049
Net income $ 931,839 $ 766,936
Net income per share
Basic $ .129 $ .154
Diluted $ .079 $ .106
Weighted average shares issued and outstanding
Basic 7,243,918 4,966,364
Diluted 11,777,067 7,214,418
</TABLE>
6. INCOME TAXES
No provision for current income taxes has been made for the three and six months
ending August 31, 1998, because the Company has a loss carry-forward 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
carry-forwards 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 previously provided a 100% valuation allowance relating to the
recognition of deferred tax benefits and is currently evaluating whether the
deferred tax asset will be realized during the current fiscal year.
7. OTHER INCOME
During the six months ended August 31, 1998, the Company sold to unrelated
parties, certain properties located in: South Bend, Indiana; Kalamazoo,
Michigan; Salt Lake City, Utah; and, Fort Worth, Texas and recognized gains of
$400,547 on such sales. The Company also entered into lease agreements on
certain of these properties at fair market value, for initial terms of five
years and including two five-year renewal options.
9
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
EXCEPT FOR HISTORICAL INFORMATION CONTAINED HEREIN, THE STATEMENTS IN THIS
REPORT (INCLUDING WITHOUT LIMITATION, STATEMENTS INDICATING THAT THE COMPANY
"EXPECTS," "ESTIMATES," "ANTICIPATES," OR "BELIEVES" AND ALL OTHER STATEMENTS
CONCERNING FUTURE FINANCIAL RESULTS, PRODUCT OFFERINGS OR OTHER EVENTS THAT
HAVE NOT YET OCCURRED) ARE FORWARD-LOOKING STATEMENTS THAT ARE MADE PURSUANT
TO THE SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995, SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND
SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED. FORWARD-LOOKING
STATEMENTS INVOLVE KNOWN AND UNKNOWN FACTORS, RISKS AND UNCERTAINTIES WHICH
MAY CAUSE THE COMPANY'S ACTUAL RESULTS IN FUTURE PERIODS TO DIFFER MATERIALLY
FROM FORECASTED RESULTS. THOSE FACTORS, RISKS AND UNCERTAINTIES INCLUDE, BUT
ARE NOT LIMITED TO: THE POSITIONING OF THE COMPANY'S PRODUCTS IN THE
COMPANY'S MARKET SEGMENT; THE COMPANY'S ABILITY TO EFFECTIVELY MANAGE ITS
VARIOUS BUSINESSES IN A RAPIDLY CHANGING ENVIRONMENT; NEW COMPETITION FOR
DONORS AND CUSTOMERS; THE INABILITY OF THE COMPANY TO OBTAIN FDA APPROVAL OF
NEWLY ESTABLISHED CENTERS; AND THE INTRODUCTION OF SYNTHETIC PRODUCTS WHICH
COULD ELIMINATE THE NEED FOR PLASMA PRODUCTS.
RESULTS OF OPERATIONS
THREE MONTHS ENDED AUGUST 31, 1998 AS COMPARED TO THREE MONTHS ENDED AUGUST 31,
1997
REVENUE
Total revenue of the Company increased by 432% or $8,315,762 to $10,236,274
during the 1998 period. The increase was attributable primarily to the
acquisitions Western States Group, Inc. and the operating assets of Consolidated
Technologies, Inc. (effective January 1, 1998), which contributed $2,248,070 and
$1,295,248 respectively to the increase. Also contributing was a 130% increase
in the volume of plasma collected during the period by the Biologics Division,
due in part to the acquisition of American Plasma, Inc., effective July 6, 1998
and the November 1997 acquisition of centers located in: Salt Lake City, Utah;
Reno, Nevada; Kalamazoo, Michigan; South Bend, Indiana; and Boise, Idaho; and 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 approximately 100,788 liters of plasma during the three-month period
ended August 31, 1998 compared to about 43,921 liters for the comparable prior
year period or an increase of 56,867 liters. The centers located in 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. Raleigh and Macon received final FDA approval in
August 1998 and as a result shipped about $1.4 million in sales the quarter. In
addition, Biologics Division revenue was higher compared to the same period last
year as a result of a structural change in pricing related to sales to customers
outside the United States whereby testing and softgoods is included in the unit
pricing.
GROSS PROFIT
Gross profit increased by $2,305,264 or 869% in the 1998 period to $2,570,639.
The increased revenues as discussed above were substantially offset by: the
operating expenses associated with American Plasma, Inc., Western States Group,
Inc. and Consolidated Technologies; and the higher salaries costs,
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donor fees, and other operating costs resulting from the 130% increase in the
volume of plasma collected. Higher softgoods and testing costs were the result
of the increased volumes and the structural change in pricing related to sales
outside the United States whereby the Company pays for testing and softgoods.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses in 1998 increased by $820,591 to $1,067,221
an increase of 332%, due mainly to the inclusion of such expenses attributable
to American Plasma, Inc, 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 $751,626 to $813,840 due primarily to the increased
debt required to finance acquisitions. The non-cash interest of $312,048
represents the amortization of the bond discount associated with the February
1998 $16.0 million subordinated debenture issue.
OTHER INCOME
Other income in 1998 quarter is principally the gain from the sale of certain
properties during the period.
NET INCOME
As a result of the above, there was a net income for the three months ended
August 31, 1998 of $706,691 compared to a net loss of $43,432 for the same
prior year period.
SIX MONTHS ENDED AUGUST 31, 1998 AS COMPARED TO SIX MONTHS ENDED AUGUST 31, 1997
REVENUE
Total revenue of the Company increased by 438% or $14,591,332 to $18,097,697
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
$5,400,164 and $2,546,491 respectively to the increase. Also contributing was a
106% increase in the volume of plasma collected during the period by the
Biologics Division, due in part to the July 1, 1998 acquisition of American
Plasma, Inc., effective July 6, 1998 and 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 172,278 liters of
plasma during the six month period ended August 31, 1998 compared to about
83,797 liters for the comparable prior year period, an increase of about 88,481
liters. The centers located in 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. Raleigh and
Macon received final FDA approval in August 1998 and as a result shipped
approximately $1.4 million in sales during the 1998 period. Clearfield received
final FDA approval in May 1997. In addition, Biologics Division revenue was
higher compared to the same period last year as a result of a structural change
in pricing related to sales to customers outside the United States whereby
testing and softgoods is included in the unit pricing.
GROSS PROFIT
Gross profit increased by $4,068,360 or 1060% in the 1998 period to $4,492,102.
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 106% increase in the volume of plasma collected.
Higher softgoods and testing
11
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costs were the result of the increased volumes and the structural change in
pricing related to sales outside the United States whereby the Company pays for
testing and softgoods.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses in 1998 increased by $1,481,686 to
$2,003,293 an increase of 284% due mainly to the inclusion of such expenses
attributable to American Plasma, Inc., 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 $1,322,438 to $1,433,266 due primarily to the
increased debt required to finance acquisitions. The non-cash interest of
$613,497 represents the amortization of the bond discount associated with the
February 1998 $16.0 million subordinated debenture issue.
OTHER INCOME
Other income in the 1998 period is principally the gain from the sale of certain
properties during the period.
NET INCOME
As a result of the above, there was a net income for the six months ended August
31, 1998 of $893,482 compared to a net loss of $207,713 for the same prior year
period.
LIQUIDITY AND CAPITAL RESOURCES
As of August 31, 1998 the Company's current assets exceeded current liabilities
by $1,427,634. 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 American Plasma, Inc., 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 believes that plasma pricing and plasma products demand
will continue to strengthen and that continuing reductions in operating costs
including: labor; softgoods; testing; supplies; and other operating expenses,
will continue to improve margins in future periods.
Net cash used in operating activities during the six-month period ended August
31, 1998 was $7,906,866 compared to $468,094 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 American Plasma, Inc., Western States Plasma
Group, Inc. and Consolidated Technologies and the 106% increase in the volume of
plasma collected. Also contributing was an increase in inventory and accounts
receivable resulting from the terms of the Grupo Grifols sales agreement and an
increase in inventory due to the Applicant Donor program initiated by ABRA and
effective July 1, 1997.
Cash flows used in investing activities for the six months ended August 31, 1998
was $8,603,409 compared to $825,266 for the comparable prior year period. This
increase resulted primarily from the
12
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acquisition of American Plasma, Inc. and 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 $12,013,953 for the current year
period compared to $794,354 for the comparable prior period. This increase was
mostly due to advances under the new revolving line of credit in support of the
newly acquired and start-up operations.
Management believes that internally generated cash flow combined with the $12
million revolving line of credit will be sufficient to meet the Company's
working capital requirements for the balance of fiscal 1998. However, 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. In addition, the Company
is currently evaluating various alternatives for restructuring its current debt
position.
The year 2000 issue is the result of computer programs being written using two
digits rather than four digits to define the applicable year. This could result
in a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices or engage in other normal business activities. The Company has
invested in the latest hardware and software and accordingly management believes
the Company is in full compliance with year 2000 standards and anticipates no
problems in maintaining this compliance into the future.
13
<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 25, 1999 By: /s/ Barry D. Plost
-------------------------------
Barry D. Plost, President & CEO
By: /s/ Jerry L. Burdick
-------------------------------
Jerry L. Burdick
Principal Accounting and
Finance Officer
14
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<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-28-1999
<PERIOD-START> MAR-01-1998
<PERIOD-END> AUG-31-1998
<CASH> 1,001,202
<SECURITIES> 0
<RECEIVABLES> 7,642,422
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<INVENTORY> 11,433,723
<CURRENT-ASSETS> 20,703,594
<PP&E> 4,333,201
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<CURRENT-LIABILITIES> 19,275,960
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147,323
15
<COMMON> 7,411
<OTHER-SE> 21,432,876
<TOTAL-LIABILITY-AND-EQUITY> 57,573,754
<SALES> 10,047,289
<TOTAL-REVENUES> 10,236,274
<CGS> 7,665,635
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<OTHER-EXPENSES> 1,067,221
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