HEMACARE CORP /CA/, 10-K405, 1996-04-01

HEMACARE CORP /CA/
10-K405, 1996-04-01
MISC HEALTH & ALLIED SERVICES, NEC

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark one)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (Fee Required)

For fiscal year ended December 31, 1995
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 0-15223

HEMACARE CORPORATION
(Exact name of registrant as specified in its charter)

State or other jurisdiction of I.R.S. Employer I.D.
incorporation or organization: California Number: 95-3280412
----------

4954 Van Nuys Boulevard
Sherman Oaks, California 91403
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (818) 986-3883

Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock
(without par value)

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: YES /X/ NO ___

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K: /X/

As of March 25, 1996, 5,929,285 shares of Common Stock of the Registrant were
issued and outstanding. The aggregate market value of the Common Stock held
by non-affiliates of the Registrant on that date (based upon the average of
the closing bid and asked prices of the Common Stock as reported on NASDAQ)
was approximately $17,058,704.

Portions of the Registrant's definitive Proxy Statement for its June 5, 1996
Annual Meeting of Shareholders (which has not been filed as of the date of
this filing) are incorporated by reference into Part III.
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1
<PAGE>
PART I

ITEM 1. BUSINESS.

General

HemaCare Corporation was formed in 1978 to provide high quality, community-
based blood products and services to hospitals. The Company is an industry
leader in the commercial application of apheresis (cell separation)
technology to blood banking. HemaCare provides blood component products,
including single donor apheresis platelets, and therapeutic apheresis
services to hospitals. The Company believes it is the largest commercial
provider of apheresis-derived blood products and therapeutic blood services
in southern California, based on its knowledge of the industry and
information provided by its suppliers and trade organizations.

The Company's corporate headquarters are located in Sherman Oaks, California,
a suburb of Los Angeles. Southern California operations are conducted from
this location and, starting in February 1996, from a blood center located at
the University of Southern California Health Sciences Campus. In December
1995, the Company, opened a full-service regional blood program in St. Louis,
Missouri. Therapeutic services are provided in northern Georgia from a
facility located in metropolitan Atlanta.

Changes in the health care industry are forcing hospitals to find ways of
providing cost-effective, blood products and services, in a community-based,
patient-focused model. Management believes that this environment provides
opportunities for a national expansion of the Company's blood products and
services business, together with the addition of other blood-related
businesses. The Company s first two expansion projects are its University
of Southern California Blood Center in Los Angeles, California and the
Gateway Community Blood Program in St. Louis, Missouri.

From 1990 to November 1995, the Company, through its wholly-owned subsidiary,
HemaBiologics, Inc. ( HBI ), pursued the research and development of
Immupath(TM), an anti-HIV hyperimmune plasma-based product intended to be
used in the treatment of Acquired Immune Deficiency Syndrome ( AIDS ). The
net losses incurred by the Company during this period were primarily due to
Immupath-related expenses. In November 1995, after an unsuccessful search for
third-party funding to continue the development of Immupath, the Company's
Board of Directors decided to discontinue HBI's activities. (See "Discontinued
Operations")

Certain medical terms included in the following discussions are further
explained in a glossary located at the end of this Item 1. HemaCare
Corporation and its wholly-owned subsidiaries are collectively referred to
herein as "HemaCare" or the "Company".

Expansion Strategy and Recent Expansion
- ---------------------------------------

Management believes that the current health care industry environment, with
its ever increasing emphasis on quality, cost-effective pricing, and customer
service, provides strategic opportunities for a national expansion of
HemaCare's blood products and services businesses and for expanding the range
of the Company's products and services through internal development and/or
acquisition of related and complementary businesses and technologies. The
Company's most recent expansion projects, the University of Southern
California Blood Center ("USC Blood Center") and Gateway Community Blood
Program ("Gateway") represent the Company's implementation of its expansion
strategies.

The USC Blood Center, a full-service blood donation and services facility,
opened in February 1996. Located on the USC Health Sciences Campus in Los
Angeles, California, the center provides services to the USC/Norris
Comprehensive Cancer Center and Hospital and the USC University Hospital (the
"USC Hospitals"). The USC Hospitals have agreed that HemaCare will be their
primary provider of blood products and therapeutic services. The USC Blood
Center facility is leased from USC and is staffed and operated by HemaCare
under its Food and Drug Administration ("FDA") license. Pathologists on the
USC medical faculty provide medical direction services for the USC Blood
Center as consultants to the Company.

2
<PAGE>
Gateway, which commenced operations in December 1995, provides a
comprehensive blood program to hospitals and patients in metropolitan St.
Louis and to nearby Missouri and Illinois communities. In February 1996,
Gateway opened a satellite collection center near Belleville, Illinois, in
response to requests by local physicians and hospitals. Additional satellite
collection and distribution centers are planned as necessary to provide
convenient service to Gateway's donors and customers. In addition to
collecting whole blood and platelets at its fixed sites, Gateway conducts
mobile blood drives with local business, schools, churches and civic
organizations. In connection with Gateway's formation, the Company entered
into a letter of intent to make royalty payments to certain parties in
consideration of certain commitments to the establishment of Gateway. The
definitive agreement providing for the payment of these royalties has not
been completed due to a dispute with one of the parties. The letter of intent
provides for cash royalties of 20 percent of Gateway's cash flow and shares
of HemaCare stock with a value equal to the cash royalty, up to a maximum of
500,000 shares of HemaCare stock. Royalty payments commence after the Company
recovers its initial investment in Gateway including capital expenditures and
operating deficits and terminate in 2003.

Management is evaluating a number of additional expansion opportunities,
including blood centers and regional programs similar to the USC Blood Center
and Gateway and operations similar to the Company's existing southern
California business. However, further expansion will require that the
Company obtain additional financing. Various financing arrangements are
under consideration, but there can be no assurance that the Company will be
able to obtain the funds necessary to finance additional expansion projects.
In addition, there can be no assurance that the recent or future expansion
projects will be successfully implemented or profitable.

Blood Products
- --------------

General

The Company provides a full range of component blood products to hospitals in
southern California and Missouri. These products include whole-blood
components ("components") such as packed red cells and fresh frozen plasma
and single donor apheresis platelet products ("apheresis platelets" or
"platelets ). Currently, only packed red cells can be provided to hospitals
in Illinois. The Company has applied to amend its FDA Product license to
allow Gateway to provide a full range of products to its hospital customers
in Illinois and other states.

The Company produces most of the platelet products it sells from donations
made at its Sherman Oaks location. Sales of components prior to 1996
consisted entirely of distributed products purchased from third-party
providers. In December 1995, the Company began whole-blood collections and
component manufacturing at its St. Louis, Missouri facility, and in February
1996, component manufacturing commenced at the Sherman Oaks, California
location for whole-blood collected at the USC Blood Center.

Single Donor Apheresis Platelets

The Company collects single donor platelets, using apheresis technology, at
its FDA licensed donor center in Sherman Oaks, California, and intends to
commence platelet collection at the USC Blood Center and Gateway locations in
the second quarter of 1996. Platelet donors must pass the Company's
stringent donor screening standards. After collection, the platelets are
tested, labeled and delivered to hospital clients. Temperature control and
constant movement (using a rotator) maintain the platelets' viability for
five days. When necessary to meet its customer's needs, the Company also
purchases and distributes platelet products. All platelet suppliers are FDA
licensed and accredited by the American Association of Blood Banks.
Platelets are sold to hospitals for transfusion into cancer patients
undergoing chemotherapy, patients undergoing major surgery such as open heart
surgery or transplant procedures, and trauma or other patients with
conditions associated with massive blood loss. Approximately 11% of
platelets sold in 1995 were distributed product purchased from outside
suppliers.

3
<PAGE>

Apheresis technology allows a single donor to provide enough platelets for
one to three therapeutic doses. Conventional technology requires the
administration of platelets separated from six to ten pints of whole blood
drawn from six to ten different donors to provide a therapeutic dose. As a
result, a therapeutic dose of conventional platelets exposes the patient to
a number of different donors and increases the risk of exposure to
transfusion-related infections or allergic reactions. Apheresis-derived
platelets, such as those sold by HemaCare, greatly reduce patient risk since
a therapeutic dose is derived from a single donor. This is especially
important to immune-compromised patients.

Platelet apheresis technology involves the use of a cell separator operated
by a trained nurse-specialist. The procedure removes blood from a donor
through a needle in one arm, pumping the blood through the cell separator
where the desired platelet component is retained and returning the blood,
including the red cells, to the donor. The procedure typically requires one
to three hours and may be done every two weeks, up to 24 times per year,
since donating platelets does not deplete donors of red blood cells. In
order to attract and retain qualified donors at its Sherman Oaks, California
location, the Company reimburses these donors for their time and commitment.
The cash reimbursement is variable, based on the number and frequency of
donations, and includes a bonus program. The Company also plans to recruit
non-cash compensated donors (volunteers under California law) for its USC
Blood Center and Gateway platelet donation programs. Unless existing
exemptive legislation is extended, California law will require that hospitals
in California use blood products provided by volunteers by the end of 2001.

Component Blood Products

In response to requests by its hospital clients to provide a steady, reliable
supply of whole-blood components, HemaCare began selling component blood
products such as packed red cells, fresh frozen plasma and cryoprecipitate in
1991. From 1991 through 1995, all component products sold were purchased
under contractual relationships with blood centers located throughout the U.S.
All suppliers are FDA licensed and accredited by the American Association of
Blood Banks.

Starting in 1996, component products sold will include both purchased and
Company-manufactured products. Component products manufactured by Gateway,
under HemaCare's FDA license, are sold to hospitals in the St. Louis
metropolitan area and adjacent communities. Component products manufactured
at the Sherman Oaks facility are sold primarily to the USC Hospitals under
the terms of the Company's agreements with these hospitals.

Blood Services
- --------------

General

Since its inception, the Company has performed more than 29,000 therapeutic
apheresis procedures in the treatment of more than 27 diseases. Therapeutic
apheresis ("therapeutics" or "therapeutic services"), a technique for
removing harmful components from a patient's blood, is used in the treatment
of patients with autoimmune diseases and other disorders. Therapeutic
services are provided to hospitals in southern California and to a lesser
extent, northern Georgia. The Company may in the future, provide therapeutic
services in Missouri and Illinois through Gateway.

The number of therapeutic procedures performed and the gross profit margin on
therapeutic services have declined over the last several years. Management
believes that this decline is the result of a recessionary economy in the
early 1990's, restricted opportunities for growth in southern California,
its primary market, and changes in the health care utilization and
reimbursement imposed by third-party payors.

Therapeutic services are provided upon the request of a hospital who has
received an order from a patient's physician or directly upon the request
by a physician for his or her patient. The Company customarily bills the
hospital directly for its therapeutic services. Therapeutic treatments are
administered through the use of mobile units operated at the patient's
bedside or in a hospital outpatient setting. The mobile therapeutics unit
is self-contained and includes a state-of-the-art blood cell separator and
the disposables and supplies needed to perform the procedure. Treatments
are administered by trained, nurse-specialists, acting in accordance with
documented operating procedures and quality assurance protocols, under the
supervision of a specially trained physician.

Joshua Levy, M.D., a principal shareholder, director and medical director of
the Company, through his private practice, treats patients who require
therapeutic services. Sales by the Company to unaffiliated hospital
customers for therapeutic services for Dr. Levy's patients amounted to
approximately 7% ($802,000) of the Company's total revenues for 1995. There
are no agreements between Dr. Levy or the Company and the Company's hospital

4
<PAGE>

customers that require the hospitals to select HemaCare to provide
therapeutic services to these patients. Recent amendments to the Federal
self-referral laws and related regulations could restrict the Company's
ability to provide therapeutic services to Dr. Levy's patients who are
covered by Medicare or MediCal (approximately 50% of Dr. Levy's therapeutics
patients). However, the legal requirements are complex, and the Company has
requested a clarification of their application to its business from
regulatory authorities. Dr. Levy has informed the Company that, in the event
of an adverse response, it would be his intention to change his relationship
with the Company to allow the Company to retain revenue from services for
these patients. (See "Government Regulation")

The Company provides therapeutic services using all currently recognized
treatment methods: 1) conventional plasma exchange and cell depletion,
2) in-line immunoadsorbant columns, and 3) stem cell rescue.

Conventional Plasma Exchange and Cell Depletion

The primary blood service provided by the Company, accounting for 92% of
therapeutics procedures in 1995, is conventional plasma exchange and cell
depletion therapy. This procedure involves removing harmful substances from
a patient's blood, using automated equipment. As the patient's blood flows
through the cell separator, abnormal or excess proteins or components
associated with the disease being treated are selectively removed. The
remaining blood components are returned to the patient.

Most individual treatments involve the removal of two to four liters of
abnormal plasma or certain cellular components. Replacement fluids are used
to maintain the patient's blood volume. Patients suffering from diseases
such as multiple myeloma, HIV-polyneuropathy, leukemia, systemic lupus
erythematosus, lupus nephritis, scleroderma, hyperviscosity syndrome,
thrombocytosis, myasthenia gravis and Guillain-Barre syndrome may benefit
from therapeutic treatments. A patient may require from four to twenty
treatments over a period of time ranging from a few days to three months.
Each treatment may last from two to four hours.

Immunoadsorption

Since 1988, the Company has also provided a second generation therapeutics
treatment which adds an immunoadsorption column in-line to the apheresis
equipment to selectively remove immune complexes. Currently, only one
manufacturer offers an FDA approved column for commercial use. However, if
additional columns were to be approved by the FDA, broadened clinical
applications for column treatments could develop.

Autologous Stem Cell Rescue and Cryopreservation

In 1990, the Company began providing a technology known as peripheral stem
cell collection in California. In this application, stem cells (those cells
which mature into all the different cellular components of blood) are
collected from a cancer patient using apheresis technology. The patient
then receives a series of treatments of intensive chemotherapy followed by
reinfusion of the patient's own stem cells. In 1994, the Company combined
cryopreservation with its stem cell collection to provide a full-service
program. This program consists of mobile, peripheral stem cell collection
for certain cancer patients, followed by processing, freezing and short-term
storage (cryopreservation) of the stem cells prior to reinfusion into the
treated patient. The addition of cryopreservation service enables the
Company to provide a full service stem cell program to community hospitals.

In 1995, the Company provided its first full-service stem cell procedure to
a community hospital. However, the Company's cryopreservation service has
not yet begun full commercial operations because of the resistance of third
party payors to reimbursing community hospital customers for this procedure.
The procedure is generally reimbursed to larger hospitals with established
programs. The Company believes that increasing pressure from physicians and
patients will, in the future, result in acceptance of the procedure for
reimbursement by third party payors to community hospitals and that the
Company will benefit by being prepared to perform the service with its
experienced and qualified personnel.

5
<PAGE>

Discontinued Operations
- ------------------------

Overview

From 1990 through 1994, HBI conducted research and development activities
relating to Immupath, an anti-HIV hyperimmune plasma product. During the
past century, hyperimmune plasma products have been successfully used in the
treatment and prophylaxis of diseases such as polio, tetanus, Rh disease of
the newborn, hepatitis, vaccinia, herpes zoster, rabies and cytomegalovirus.
By providing patients with a wide variety of anti-HIV antibodies which they
cannot manufacture themselves, Immupath was believed to have the potential
for the treatment of AIDS.

In late 1994, the Company determined that ongoing Immupath research and
development activities could no longer be funded internally. At that time,
most Immupath related activity was suspended, and a search for alternative
financing was initiated. Although a number of potential financing sources
were investigated, none proved viable, and in November 1995, the Company's
Board of Directors decided to discontinue HBI's operations, including
research and development activities and the associated specialty plasma
business. As a result of this decision, the Company recorded a loss on
disposal of discontinued operations of $3.1 million in the fourth quarter
of 1995, which includes the write off of the research and development and
specialty plasma assets and a reserve for operating losses and contingent
liabilities related to the disposal of HBI's discontinued operations. The
Company does not expect the discontinued operations to have a material
impact on its future operating performance.

Research and Development

During the wind down of the research and development operations, the Company
is exploring opportunities to sell HBI's research and development assets and
to transfer the research project to a third party. The Company has a
manufactured a supply of Immupath sufficient to supply the 20 patients still
receiving treatment for approximately 24 months.

Specialty Plasma Business

To obtain the raw material for the manufacturing of Immupath, HBI operated
four FDA licensed plasma donor centers. When anti-HIV plasma donations were
suspended because of lack of funding for the Immupath project, the centers
continued to collect plasma from donors who have unusual and valuable
antibodies for sale to pharmaceutical and diagnostic reagent manufacturers.
Although this activity was intended to cover the operating costs of the
centers until the Immupath project received additional funding, the specialty
plasma business incurred losses from its inception. Two of the plasma
centers were closed in 1994 and a third was closed in 1995. The remaining
center, located in San Diego, California, will be sold or closed as a part
of the discontinued operations wind down, and the FDA licenses are being
offered for sale.

Competition
- ------------

General

The Company competes on the basis of its responsiveness to customer needs,
the price and quality of services and products and the efficiency with which
they are rendered or produced. However, many blood providers, including the
American Red Cross, have greater financial, technical and personnel resources
than the Company, and additional companies may enter the field, increasing
competition. In addition, some medical teaching and other hospitals have in-
house blood banking and therapeutic service capabilities which, do not
compete directly with the Company, but do reduce the market for third-party
services.

Blood Products

The primary competition for the Company's single donor platelets and
component blood products is the American Red Cross. Community and
hospital-based blood banks also compete with HemaCare to a lesser extent.
Key competitive factors in the industry include reputation for responsive
service, quality of product and price. The Company believes that it
provides superior quality platelet products due to its more selective and
stable donor pool, its apheresis production techniques, its stringent testing
standards and its experienced and qualified staff.

6
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Blood Services

Competitors of the Company's therapeutic blood services business include the
American Red Cross, a number of small blood banks and local kidney
specialists (nephrologists) who supplement hemodialysis services with
therapeutic apheresis services. In addition, some of the diseases which are
treated by therapeutic apheresis can also be treated by other medical
therapies. Since therapeutic apheresis treatment requests are often
sporadic and unpredictable, most community hospitals cannot afford to equip,
staff and maintain an apheresis unit. The Company's mobile service enables
such hospitals to offer state-of-the-art therapeutic apheresis services to
their patients on an "as needed" basis without incurring the fixed costs
associated with providing these services from in-house resources.

Marketing
- ----------

The Company markets its therapeutic services and blood products through a
combination of medical education, technical and trade show presentations,
advertising and promotional programs, in-person sales and other marketing
programs directed to selected physicians, hospitals and donors. Such
programs emphasize the cost and safety benefits of using the Company's blood
services and products. The Company uses a depot system for distributing its
blood products to certain of its customers which enhances convenience and
product availability. This depot system provides the customer with an on-
site inventory of blood products stocked by the Company under a standing
order. If the customer cannot make use of a depot inventory product before
its expiration date, the Company attempts to relocate the product to a
customer in need of such product at no additional charge to the depot
customer. Due to the nature of this arrangement, depot systems are
implemented only at larger volume order customer locations.

Human Resources
- ---------------

At March 1, 1996, the Company had approximately 85 full-time and 35 part-time
employees. Most of the Company's professional and management personnel
possess prior experience in hospitals, medical companies or blood banks.

None of the Company's employees are represented by a labor union. The
Company considers its relations with its employees to be good.

Supplies
- --------

The Company maintains relationships with numerous suppliers who provide cell
separator equipment, disposables, supplies, replacement fluids and
distributed blood products. To date, the Company has experienced little
difficulty in obtaining its equipment and supplies from its sources.
However, if there were material changes in the sources of its supplies, the
Company's operations could be adversely affected.

The Company relies on blood donors to provide the platelets and whole blood
required to produce the blood products manufactured and sold by the Company.
The Company, unlike the American Red Cross and most community blood banks,
compensates most of its Sherman Oaks platelet donors thereby enhancing its
ability to retain its pool of repeatedly tested, frequent donors. However,
most of the USC Blood Center and Gateway donors are expected to be volunteers.
Accordingly, the Company will compete directly with the American Red Cross
and other blood banks in recruiting volunteer donors at its USC Blood Center
and at Gateway. The growth of the Company's manufactured blood products
business is dependent on the Company's ability to attract, screen and retain
qualified compensated and volunteer donors.

Government Regulation
- ---------------------

The Company's business is subject to various federal, state and local
regulations including those of the FDA and California Department of Health
Services. The Company's blood products business is operated under an FDA
Establishment License, a State of California Biologics License and is
accredited by the American Association of Blood Banks ("AABB"). Gateway
operates under HemaCare s FDA Establishment License. The states of
Missouri and Illinois do not separately regulate blood banking operations
in their states. State and federal laws set forth antikickback and self-
referral prohibitions and otherwise regulates financial relationships between
blood banks and hospitals, physicians and other persons who refer business
to them. While the Company believes its present operations comply

7
<PAGE>

with applicable regulations, there can be no assurance that future
legislation or rule making, or the interpretation of existing laws and
regulations will not prohibit or adversely impact the delivery by HemaCare
of its services and products.

The Company primarily relies on its licensed and accredited laboratory to
perform the various tests required by the FDA and State of California to
ensure the purity, potency and quality of the blood products that are sold.
The laboratory is staffed by state licensed medical technologists and
laboratory technicians.

Since 1976, California law has prohibited the infusion of blood products into
patients if the donors of those products were paid unless, in the opinion of
the recipient's physician, blood from a non-paid donor was not immediately
available. The Company's apheresis platelet products, which are obtained
from paid donors, are exempted from this requirement by a state statute
passed in late 1994, but which contains a "sunset" provision under which
the exemption expires on December 31, 2001.

Recent amendments to the Federal self-referral laws and related regulations
could restrict the Company's ability to provide therapeutic services to Dr.
Levy's patients who are covered by Medicare or MediCal. It is estimated that
revenues from these patients represents approximately 3.5% of the Company's
1995 revenues ($401,000). However, the legal requirements are complex, and
the Company has requested a clarification of their application to its
business from regulatory authorities. Dr. Levy has informed the Company,
in the event of an adverse response, it would be his intention to change his
relationship with the Company to allow the Company to retain revenue from
services for these patients. The Company has been informed by counsel
that legislation may be introduced in Congress which, if adopted, would
exclude the services performed by the Company in hospitals from self-referral
prohibitions. However, there can be no assurance that such legislation will
be introduced and, if introduced, that it will be enacted.

Health care reform is still under consideration by lawmakers, and it is not
certain as to what changes may be made in the future regarding health care
policies. However, policies regarding price controls, universal health
insurance and managed competition may materially impact the Company's
operations.

Malpractice and Product Liability Insurance
- -------------------------------------------

The nature of the Company's business is such that it may be subject to
substantial liabilities for personal injury. There can be no assurance that
potential insurance claims will not exceed present coverage or that
additional insurance coverage would be available at affordable premium costs.
If such insurance were ineffective or inadequate for any reason, the
Company could be exposed to significant liabilities. HemaCare has medical
malpractice insurance in the amount of $2,000,000 for a single occurrence
and $5,000,000 in the aggregate per year.

The state laws of California, Missouri, Illinois and the laws of virtually
all other states classify the provision and use of whole blood, plasma and
blood products for the purpose of injections and transfusions into human
beings as a service rather than the sale of a product. Therefore, the
Company should not be subject to product liability claims as a result of
injuries arising out of the therapeutic infusion of its blood products and
does not intend to obtain product liability insurance at this time.

Glossary
- --------

Antibodies - Protective substances, protein in nature, circulating in body
fluids as the result of exposure to a specific antigen. Chemically active
against that antigen only.

Antigen - Any substance which is foreign to the recipient and triggers the
body's immune mechanism resulting in the production of specific antibodies.

Autoimmune Diseases - Those diseases in which the patient's immune system has
become overly active to the point where it produces antibodies which are
directed against its own tissues or cells.

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Autologous - A blood product obtained from a patient and subsequently
reinfused into that patient.

Cryopreservation - The process of freezing tissues or cells, usually in
protective fluids, and storage at extremely low temperatures in a frozen
state (e.g., -70 C or colder).

Human Immunodeficiency Virus (HIV) - The infectious agent of the disease
commonly referred to as Acquired Immune Deficiency Syndrome (AIDS).

Immunoadsorbant Column - A device through which plasma is passed in order to
separate or remove certain harmful components such as immune complexes.

Plasma - The liquid portion of whole blood; composed of a mixture of soluble
proteins including antibodies, minerals and nutrients.

Platelets - One of the cellular components of blood; takes part in the blood
clotting process.

Platelet Apheresis - The process of removing blood from a donor, separating
it into its various components and retaining the concentrated platelets which
will then be transfused into a patient deficient in platelets. The remaining
blood components are returned to the donor.

Stem Cells - Cells which originate in the bone marrow and mature into the
different cellular components of blood (i.e., progenitor cells). Frequently
transfused into certain cancer patients in order to facilitate regeneration
of blood components after bone marrow has been purposely destroyed by
chemotherapy or radiation.

Therapeutic Apheresis - The application of hemapheresis technology to the
clinical treatment of autoimmune diseases and blood cell disorders by
removing selected, abnormal components or cells and returning all other
components.

ITEM 2. PROPERTIES.

The Company occupies a 12,000-square foot facility in Sherman Oaks,
California, where it maintains its corporate office and operates a platelet
apheresis center, a blood bank/laboratory and manufacturing facility for
whole blood components. The lease terminates in July 1997.

The USC Blood Center operates a blood donation and therapeutics center in a
1,600 square foot facility in Los Angeles, California, under a lease which
terminates in February 1999.

Gateway occupies a 12,260 square foot facility in St. Louis, Missouri, where
it maintains its offices and operates a blood donation and blood services
center and manufactures whole blood components. The lease terminates in
February 2001. In February 1996, Gateway leased an additional 1,071 square
feet of space near Belleville, Illinois for the operation of a blood donation
facility. This lease expires in January 1997.

The Company also leases approximately 20,000 square feet of space in San
Diego and Valenica, California, which will be subleased or otherwise disposed
of in connection with the disposal of HBI s operations.

ITEM 3. LEGAL PROCEEDINGS.

On March 11, 1994, the Company was served with a lawsuit filed by a former
employee against the Company and its wholly owned subsidiary, HBI, in the
Superior Court of the State of California, related to the termination of
this employee and seeking relief in the amount of $550,000. The case is
still in the discovery stage in the proceedings and neither management nor
counsel are in a position to evaluate the probable merits of the claim
asserted by this former employee. Accordingly, the resolution of this lawsuit
could have a material impact on the Company's financial condition and results
of operations.

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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

None.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.

Market for Common Stock
- ------------------------

The Company's Common Stock is traded in the NASDAQ Small-Cap Issues market
under the symbol HEMA. The following table sets forth the range of high and
low closing bid prices of the Common Stock, as reported by NASDAQ, for the
quarters ended March 31, June 30, September 30 and December 31, 1995 and
1994. These prices reflect inter-dealer quotations, without retail markups,
markdowns or commissions, and do not necessarily represent actual
transactions.
1995 1994
Quarter ended High Low High Low

March 31 $ 3.00 $ 2.06 $ 7.00 $ 5.38
June 30 $ 2.63 $ 2.00 $ 5.75 $ 3.75
September 30 $ 4.63 $ 2.56 $ 4.38 $ 3.13
December 31 $ 4.25 $ 3.50 $ 4.00 $ 2.50

No cash dividends had been paid as of March 1, 1996. The Company does not
anticipate paying cash dividends in the foreseeable future. As of March 1,
1996, there were approximately 360 holders of record of the Company's Common
Stock.

ITEM 6. SELECTED FINANCIAL DATA.

<TABLE>
<CAPTION>
Year Ended December 31,
1995 1994 1993 1992 1991
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>

Revenues................. $10,782,884 $10,847,651 $11,556,280 $11,960,489 $ 8,250,416
Gross Profit............. 2,707,316 2,963,432 3,307,122 3,818,890 3,159,854
Income from continuing
operations............. 479,755 676,337 763,698 885,963 1,125,280
Discontinued Operations:
Loss from discontinued
operations............ (901,706) (2,963,742) (3,309,466) (1,884,883) (1,356,043)
Loss on disposal of
discontinued
operations............ (3,113,925) -- -- -- --
Net loss................. (3,535,876) (2,287,405) (2,545,768) (998,920) (230,763)

Per Share Amounts:
- -------------------
Income from continuing
operations............. 0.08 0.13 0.16 0.21 0.33
Discontinued Operations:
Loss from discontinued
operations............ (0.15) (0.57) (0.68) (0.44) (0.40)
Loss on disposal of
discontinued
operations............ (0.53) -- -- -- --
Net loss................. (0.60) (0.44) (0.52) (0.23) (0.07)

Total assets............. 4,455,656 6,288,909 6,717,235 7,161,762 5,109,019
Long-term debt and
capital lease
obligations, net of
current portion........ 648,614 286,998 431,574 463,806 758,237
Shareholders' equity..... 1,226,690 3,899,935 4,584,786 4,665,862 2,690,328

</TABLE>

10
<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.

All comparisons within the following discussions are to the previous year.

Revenues - Continuing Operations
- --------------------------------

Total revenues for 1995 approximated the 1994 amount, while 1994 revenues
decreased approximately 6% ($709,000) from the 1993 amount. A decrease in
1995 blood service revenues was approximately offset by an increase in blood
products revenues. The 1995 change in therapeutics revenues reflects a
continuing downward trend in demand. Both blood products and blood services
revenues decreased in 1994. In 1995 and 1994, the Company's businesses were
negatively impacted by the slow recovery of the southern California economy,
which continued to lag behind the nation as a whole, and pressures imposed
by third-party payors to reduce health care utilization, including certain
specialized treatments for which the Company provides blood products or
services. In addition, the Company lost several major platelet customers
in 1994, one of which was closed most of the year because of damage from
the January earthquake and others which developed in-house blood donation
facilities.

Blood Products

Blood products (apheresis platelet and component) revenues increased 2%
($135,000) in 1995 and decreased 7% ($489,000) in 1994. The 1995 revenue
increase was due to a 3% ($141,000) increase in platelet revenues resulting
from a 1% increase in the number of units sold and a 2% increase in the
price per unit. In 1994, platelet revenues decreased 18% ($926,000) as a
result of a 19% decrease in units sold and an offsetting 2% overall increase
in the price per unit. Revenues from sales of component products distributed
by the Company were flat in 1995 and increased 16% ($355,000) in 1994, as a
result of a 9% increase in units sold and a 7% increase in the price per
unit.

The decrease in platelet sales in 1994 reflects the loss of: 1) a significant
hospital customer because of damage from the January 1994 earthquake and
2) major customers who developed in-house platelet manufacturing programs,
reducing their demand for the Company's products. The Company added new
customers in 1994 which offset some of the reductions described above.
Management believes that the future growth of platelet product sales will be
modest in the southern California market, and although it expects demand for
component products to increase, sales of distributed component products may
also be flat because the Company may not be able to obtain purchased products
for its customers at an attractive price because of the overall blood
shortage in the U.S. Sales of Company-manufactured component products are
expected to increase as donation's at the USC Blood Center and Gateway
increase.

Blood Services

Blood Services revenue decreased 5% ($200,000) in 1995 and 5% ($220,000) in
1994. Los Angeles therapeutics revenues declined 4% ($154,000) in 1995 and
remained relatively stable for 1994. In 1995, the number of therapeutic
procedures performed in the Los Angeles area decreased by 6%, while the
price per procedure increased slightly. The number of 1994 Los Angeles
therapeutics procedures and the related revenue approximated the 1993
amounts. The choice of therapeutic apheresis rather than an alternative
treatment for a particular diagnosis often depends on general acceptance
by the medical community and the willingness of third-party payors to
reimburse hospitals for the cost of this treatment. In addition, other
changes in medical practices can affect the usage of therapeutic apheresis
technology. An increase in the use of high dosage radiation, chemotherapy
and stem cell therapy to treat certain cancers has resulted in an increase
in the number of stem cell collection procedures performed by the Company.
However, because of the large market share of the therapeutics business
in southern California enjoyed by HemaCare, management expects that unless
there are additional medical applications approved for therapeutics or other
significant changes in market factors, future therapeutics revenues will
remain flat or decline in southern California.

Therapeutics revenues from the northern Georgia operation decreased 17%
($54,000) in 1995 and 27% ($121,000) in 1994. The decrease in revenues is
a result of 34% and 20% declines in the number of procedures performed in
1995 and 1994, respectively. The decrease in 1995 revenues was partially
offset by an increase in the revenue per procedure of 26%, while revenue
per procedure declined by 13% in 1994.

11
<PAGE>

Gross Profit - Continuing Operations
- ------------------------------------

Gross profit as a percentage of revenue decreased to 25% in 1995 from 27%
in 1994 and 29% in 1993. The decrease in the 1995 gross profit margin is
due to the operating losses associated with starting up the USC Blood Center
and Gateway projects. In 1994, the gross profit margin remained relatively
stable, despite the negative impact of expenses associated with start up of
the new stem cell business which incurred $250,000 in operating losses.

Expansion Operations

The USC Blood Center and Gateway commenced operations in February 1996 and
December 1995, respectively. Operating losses associated with the start up
of these new operations reduced the Company s 1995 overall gross profit
margin by 2%. (See "Liquidity and Capital Resources")

Blood Products

The gross profit margin on platelets decreased in 1995 and 1994, while the
gross profit margin on component products increased in both years.

The 1995 decrease in platelet profit margin was due to higher disposables
costs and an increase in the number of distributed platelets sold. The
Company's profit margin on purchased and distributed platelets is less than
the profit margin on the Company's manufactured platelets. The 1994
decrease in platelet gross profit margin was due to higher expenses per unit
of platelets sold because of higher supply and laboratory costs and the
impact of overhead costs on lower volumes of sales.

The increase in the 1995 component sales gross profit margin was due to an
increase in the average sales price per unit. In 1994, profitability for
component products increased because of increased average per unit sales
prices and reductions in purchase prices.

Blood Services

The gross profit margin on the Los Angeles therapeutic services decreased
in 1995 due primarily to a lower volume of procedures performed. In 1994,
profitability of Los Angeles therapeutic services improved primarily because
of an overall price increase together with decreases in per unit labor costs
resulting from the use of flexible staffing.

In the second quarter of 1995, the Georgia therapeutics operation began
sharing office space and certain administrative services with an unaffiliated
company in a similar but non-competitive business. This change reduced 1995
overhead costs for this operation by 47% ($72,000). Management believes that
this reduction in overhead will allow Georgia therapeutics business to
operate at least at break even in 1996. However, because the success of the
Georgia operations is uncertain, the Company wrote off the related goodwill
balance of approximately $71,000 at December 31, 1994.

General and Administrative Expenses
- -----------------------------------

General and administrative expenses were 3% ($59,000) lower in 1995 and 11%
($275,000) lower in 1994. The decrease in 1995 expenses is primarily due to
the 1994 write off of goodwill associated with the acquisition of the
Company's northern Georgia therapeutic services operation. The decrease in
1994 expenses was the result of management's implementation of corporate
spending controls, including staffing reductions.

Discontinued Operations
- -----------------------
The Company incurred research and development expenses and associated
speciality plasma business losses of $902,000 in 1995, $2,964,000 in 1994
and $3,309,000 in 1993 for Immupath, its experimental treatment for HIV/AIDS,
and the associated plasma donation centers. During 1994 and 1993, the
Company engaged in on-going activities related to the research project
including treating patients from the California clinical trials and
continuing to research the manufacturing of a second generation Immupath
product. In late 1994, the Company determined that ongoing Immupath research
and development activities could no longer be funded internally. In
November 1995, the Company's Board of Directors decided to discontinue its
research and development activities. As a result of this decision, the

12
<PAGE>

Company recorded a loss on disposal of discontinued operations of $3.1
million in the fourth quarter of 1995 which includes a reserve for operating
losses and contingent liabilities related to the disposal of the research
and development and specialty plasma businesses. The Company does not
expect the discontinued operations to have a material impact on its future
operating results.

Liquidity and Capital Resources
- -------------------------------

At December 31, 1995, the Company had cash and short-term investments of
$996,608. The Company's $700,000 line of credit with its commercial bank
is in effect until April 30, 1996, with a provision that the Company
maintain cash and/or short-term security balances of at least $400,000
(excluding borrowings) at all times, which it has done. After recording the
loss on disposal of its discontinued operations, the Company was in default
under certain of the covenants of its line of credit agreement. The bank
has waived compliance with these covenants through April 30, 1996. At
December 31, 1995, there were no borrowings outstanding on the line of
credit, and the Company has requested its bank to renew the credit agreement.

The USC Blood Center draws its donors from the practices of physicians
associated with the USC Hospitals, the families of hospitalized patients,
students at the University of Southern California and the local community.
Under the terms of the Company's three-year agreements with the Hospitals,
products produced from collections at the USC Blood Center are first to be
made available to fill the needs of the Hospitals. If all products produced
are not purchased by the Hospitals, the Company may sell them to other
customers. Until its operations reaches break even, the Company will be
required to fund the Center's start up losses. The Company is further
obligated to fund the costs of tenant improvements for the center. Up to
$100,000 of these charges are recoupable through surcharges payable by the
Hospitals.

Gateway opened for business and began conducting blood drives in December
1995. Gateway, which competes directly with the American Red Cross, is
currently building its donor and customer base. Until Gateway's operations
achieve break even, the Company will be required to fund its working capital
needs. Based on hospital usage and purchasing patterns, the St. Louis blood
products and services market is believed to generate $40 million per year
in sales of blood products and services. Management believes that Gateway
will be able to capture a sufficient portion of this market to make its
operation profitable, however, the success of operations will be dependent
on a number of factors and circumstances, many of which will be outside the
Company's control. Accordingly, there can be no assurance that profitable
operations will be achieved.

Management is evaluating a number of additional expansion opportunities,
including blood centers and regional programs similar to the USC Blood
Center and Gateway and operations similar to the Company's existing
southern California business. However, further expansion will require that
the Company obtain additional financing. Various financing arrangements are
under consideration, but there can be no assurance that the Company will be
able to obtain the funds necessary to finance additional expansion projects.

Winding down discontinued operations will require funding operating costs,
including salaries and benefits and facilities costs, until disposal of these
operations is complete. Approximately $336,000 of the reserve provided for
disposal is expected to be funded from the Company's working capital in 1996.
Up to an additional $600,000 of the reserve may be funded from working
capital or capital resources in future periods. However, although the
reserve for disposal was estimated based on the best available information,
there can be no assurance that the reserve provided will be sufficient to
cover all disposal costs.

13
<PAGE>

In February 1996, the Company terminated an agreement with a vendor, based
on the inability of the vendor's product to perform to the standards
outlined in the agreement. The vendor is disputing the basis for the
termination. The Company intends to vigorously defend any legal action
which may result from this dispute, and the resolution of this matter is not
expected to have a material impact on the Company's financial position or
future results of operations.

At December 31, 1995, the Company had working capital of approximately
$1,382,000. The Company's continuing operations, other than the USC Blood
Center and Gateway, are profitable and cash flow positive. The Company
anticipates that positive cash flow from its operations, its cash and
investments on hand and funds available under its credit line will be
sufficient to provide funding for the anticipated 1996 operating deficits of
the USC Blood Center and Gateway, fund the costs of disposing of its
discontinued operations and meet its other working capital needs for 1996
(including capital and operating lease commitments of approximately
$981,000).

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The Index to Financial Statements and Schedules appears on page F-1, the
Independent Auditors' Report appears on F-2, and the Consolidated Financial
Statements and Notes to Consolidated Financial Statements appear on pages
F-3-12.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES.

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

The information required by this Item is set forth under the caption
"Election of Directors" in the Company's definitive Proxy Statement to be
filed with the Securities and Exchange Commission and is incorporated herein
by this reference as if set forth in full.

ITEM 11. EXECUTIVE COMPENSATION.

The information required by this Item is set forth under the caption
"Executive Compensation" in the Company's definitive Proxy Statement to be
filed with the Securities and Exchange Commission and is incorporated
herein by this reference as if set forth in full.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The information required by this Item is set forth under the caption
"Principal Shareholders" in the Company's definitive Proxy Statement to be
filed with the Securities and Exchange Commission and is incorporated herein
by this reference as if set forth in full.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The information required by this Item is set forth under the caption
"Certain Transactions" in the Company's definitive Proxy Statement to be
filed with the Securities and Exchange Commission and is incorporated herein
by this reference as if set forth in full.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

The following are filed as part of this Report:

(a) 1. Financial Statements

14
<PAGE>

An index to Financial Statements and Schedules appears on page F-1.

(a) 2. Financial Statement Schedules

The following financial statement schedule is filed herewith:

Schedule II - Valuation and Qualifying Accounts

All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission
are ot required under related instructions or are inapplicable, and
therefore have been omitted.

(a) 3. Exhibits

The following exhibits listed are filed or incorporated by reference
as part of this Report.

3.1 Restated Articles of Incorporation of the Registrant

3.2 Bylaws of the Registrant--incorporated by reference to
Exhibit 3.2 to Form 10-K of the Registrant for the year
ended December 31, 1992

4.1 Warrant Agreement between the Registrant and Medicorp Inc.
dated February 17, 1993--incorporated by reference to
Exhibit 4 to the Current Report on Form 8-K of the
Registrant dated February 17, 1993

4.2 Warrant Agreement between the Registrant and Huss Kealy
Sinclair dated May 7, 1993--incorporated by reference to
Registration Statement on Form S-3 of the Registrant (File
No. 33-44869)

4.3 Form of Warrant Agreement between the Registrant and each
of the following consultants: British Far East Holdings,
Ltd., Joseph T. McDonald and E. Keene Wolcott dated
September 30, 1994--incorporated by reference to Exhibit
4.1 to Form 10-Q of the Registrant for the quarter ended
September 30, 1994

4.4 Offshore Securities Subscription Agreement between the
Registrant and Tesoma Overseas, Inc., dated April 8, 1994-
-incorporated by reference to Exhibit 4.1 to Form 10-Q of
the Registrant for the quarter ended March 31, 1994

4.5 Warrant Agreement between the Registrant and Torrey Pines
Securities, Inc., dated April 8, 1994--incorporated by
reference to Exhibit 4.2 to Form 10-Q of the Registrant
for the quarter ended March 31, 1994

4.6 Amendment to Warrant Agreement between the Registrant and
Torrey Pines Securities dated April 3, 1995--incorporated
by reference to Exhibit 4.1 to Form 10-Q of he Registrant
for the quarter ended March 31, 1995

4.7 Warrant Agreement between the Registrant and M.A. Levy and
Associates dated March 1, 1995--incorporated by reference
to Exhibit 4.7 to Form 10-K of the Registrant for the year
ended December 31, 1994

4.8 Form of Warrant Agreement between the Registrant and
Tesoma Overseas, Inc. dated February 9, 1995--incorporated
by reference to Exhibit 4.8 to Form 10-K of the Registrant
for the year ended December 31, 1994

15
<PAGE>

10.1* 1986 Employee Stock Option Plan, as amended and restated
through October 1994--incorporated by reference to Exhibit
10.4 to Form 10-Q of the Registrant for the quarter ended
September 30, 1994

10.2 Lease dated July 10, 1986 between the Registrant and
Addison Place Partners--incorporated by reference to
Registration Statement on Form S-18 of the Registrant
(File No. 33-8513-LA)

10.4* Employment Agreement between Harold I. Lieberman and the
Registrant, dated September 19, 1988--incorporated by
reference to Exhibit 10.4 to Form 10-K of the Registrant
for the year ended December 31, 1994

10.5* Amendment to Employment Agreement between the Registrant
and Harold I. Lieberman, dated September 19, 1989--
incorporated by reference to Exhibit 10.5 to Form 10-K of
the Registrant for the year ended December 31, 1994

10.6 License agreement between the Registrant and Medicorp Inc.
dated February 17, 1993--incorporated by reference to
Exhibit 10 to the Current Report on Form 8-K of the
Registrant dated February 17, 1993

10.7 Revolving Credit Agreement between the Registrant and Bank
Leumi Le-Israel, B.M., dated April 30, 1995 and related
security agreements--incorporated by reference to
Exhibit 10.1 to Form 10-Q of the Registrant for the
quarter ending March 31, 1995

10.8 Computer System Acquisition Agreement between the
Registrant and EtCom Canada, Inc. dated May 17, 1994--
incorporated by reference to Exhibit 10.4 to Form 10-Q of
the Registrant for the quarter ended June 30, 1994

10.9 Disclosure and License Agreement for Blood Derived
Therapeutic Products between HemaBiologics, Inc., a wholly
owned subsidiary of the Registrant, and The New York Blood
Center dated November 1, 1994--incorporated by reference to
Exhibit 10.9 to Form 10-K of the Registrant dated December
31, 1995

10.10 Promissory Note to HemaBiologics, Inc., a wholly owned
subsidiary of the Registrant, from Joshua Levy dated
January 1, 1996

10.11 Pledge Agreement between HemaBiologics, Inc., a wholly
owned subsidiary of the Registrant, and Joshua Levy dated
January 1, 1996

11 Computation of earnings (loss) per common equivalent share

21 Subsidiaries of the Registrant

23 Consent of Arthur Andersen LLP

27 Financial Data Schedule

* Denotes a management contract or compensatory plan or arrangement.

(b) Reports on Form 8-K.

None.

16
<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.

HEMACARE CORPORATION

Dated: March 29, 1996 \s\ Sharon C. Kaiser
--------------------------
Sharon C. Kaiser,
Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant in the capacities indicated on the 29th day of March, 1996.

Signature Title
--------- -----

\s\ Thomas M. Asher
------------------------
Thomas M. Asher Chairman of the Board

\s\ Hal I. Lieberman
- -------------------------
Hal I. Lieberman President, Chief Executive Officer
and Director(Principal Executive
Officer)

\s\ Joshua Levy
- -------------------------
Joshua Levy Senior Vice President, Medical
Affairs and Director

\s\ Sharon C. Kaiser
- --------------------------
Sharon C. Kaiser Chief Financial Officer
(Principal Financial and Accounting
Officer)

\s\ Jon B. Victor
- --------------------------
Jon B. Victor Director

__________________________
Glenn W. Bartlett Director

__________________________
Willis L. Warner Director

17
<PAGE>

Index to Consolidated Financial Statements and Schedules
Item 14(a)(1) and (2)

Sequential
Page
Number

Report of Independent Public Accountants . . . . . . . . . . . . F-2

Consolidated balance sheets at December 31, 1995 and
December 31, 1994 . . . . . . . . . . . . . . . . . . . . . . . F-3

For the years ended December 31, 1995, 1994 and 1993:

Consolidated statements of operations . . . . . . . . . . . F-4

Consolidated statements of shareholders' equity . . . . . . F-5

Consolidated statements of cash flows . . . . . . . . . . . F-6

Notes to consolidated financial statements . . . . . . . . . . . F-7

Report of Independent Public Accountants on Financial
Statement Schedule. . . . . . . . . . . . . . . . . . . . . . . S-1

Schedule II - Valuation and Qualifying Accounts. . . . . . . . . S-2

All other schedules are not submitted because either they are not applicable,
not required or because the information required is included in the
Consolidated Financial Statements, including the notes thereto.

F-1
18
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders and Board of Directors of HemaCare Corporation:
- -------------------------------------------------------------------

We have audited the accompanying consolidated balance sheets of HemaCare
Corporation (a California corporation) and subsidiaries as of December 31,
1995 and 1994, and the related consolidated statements of operations,
shareholders' equity and cash flows for each of the three years in the
period ended December 31, 1995. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of HemaCare
Corporation and subsidiaries as of December 31, 1995 and 1994, and the
results of their operations and their cash flows for each of the three years
in the period ended December 31, 1995 in conformity with generally accepted
accounting principles.

/s/ Arthur Andersen LLP
-----------------------------
ARTHUR ANDERSEN LLP

Los Angeles, California
March 7, 1996

F-2
19
<PAGE>

ITEM 14 (a). FINANCIAL STATEMENTS

HEMACARE CORPORATION
CONSOLIDATED BALANCE SHEET
AT DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>

December 31,
1995 1994
----------- -----------
<S> <C> <C>

ASSETS

Current assets:
Cash and cash equivalents................. $ 996,608 $ 786,334
Short-term investments.................... -- 295,434
Accounts receivable, net of allowance for
doubtful accounts - $94,489 (1995) and
$141,243 (1994).......................... 1,626,923 1,606,566
Product inventories....................... 141,072 117,683
Supplies.................................. 327,517 324,047
Prepaid expenses.......................... 116,874 109,972
Note receivable from officer - current.... 15,000 --
------------- -------------
Total current assets................... 3,223,994 3,240,036

Plant and equipment, net of accumulated
depreciation and amortization of
$1,513,443 (1995) and $1,895,863 (1994)... 1,050,576 1,463,261
Note receivable from officer - non-current.. 93,973 90,470
Licenses.................................... - 1,394,337
Other assets................................ 87,113 100,805
------------- -------------
$ 4,455,656 $ 6,288,909
============ =============

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
Accounts payable.......................... $ 472,701 $ 765,233
Accrued blood purchases................... 251,487 202,312
Accrued payroll and payroll taxes......... 309,315 324,408
Other accrued expenses.................... 263,506 267,062
Current obligations under capital leases.. 208,521 221,555
Line of credit payable to bank............ -- 200,000
Reserve for discontinued operations -
current.................................. 336,387 --
------------- -------------
Total current liabilities.............. 1,841,917 1,980,570

Obligations under capital leases, net
of current portion........................ 648,614 286,998
Other accrued employee benefits............. 138,435 121,406
Reserve for discontinued operations -
non-current............................... 600,000 --
Commitments and contingencies...............
Shareholders' Equity:
Common stock, without par value -
20,000,000 shares authorized,
5,911,285 and 5,366,381 issued and
outstanding in 1995 and 1994,
respectively............................. 12,179,302 11,316,671
Accumulated deficit........................ (10,952,612) (7,416,736)
------------- ------------
Total shareholders' equity............. 1,226,690 3,899,935
------------- ------------
$ 4,455,656 $ 6,288,909
============= ============
</TABLE>

See Notes to Consolidated Financial Statements

F-3
20
<PAGE>

HEMACARE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
Years ended December 31,
1995 1994 1993
------------ ------------ -------------
<S> <C> <C> <C>
Revenues:
Blood services......................... $ 3,741,174 $ 3,940,809 $ 4,160,823
Blood products......................... 7,041,710 6,906,842 7,395,457
------------- ------------- -------------
Total revenues...................... 10,782,884 10,847,651 11,556,280

Cost of sales and services:
Blood services........................ 2,564,856 2,752,751 2,759,905
Blood products........................ 5,510,712 5,131,468 5,489,253
------------- ------------- -------------
Total cost of sales and services... 8,075,568 7,884,219 8,249,158
------------- ------------- -------------
Gross profit....................... 2,707,316 2,963,432 3,307,122

General and administrative expense....... 2,225,453 2,284,350 2,559,025
Interest (income) expense:
Interest income........................ (45,355) (40,224) (80,373)
Interest expense....................... 47,463 42,969 64,772
------------- ------------- -------------
Income from continuing operations before
income taxes........................... 479,755 676,337 763,698
Provision for income taxes............... -- -- --

Discontinued operations:
Loss from discontinued operations...... (901,706) (2,963,742) (3,309,466)
Loss on disposal of discontinued
operations, including provision
of $1,034,787 for operating losses
during phase-out period............... (3,113,925) -- --
------------- ------------- -------------
Net loss........................... $ (3,535,876) $ (2,287,405) $ (2,545,768)
============= ============= =============

Per share amounts:
Income from continuing operations...... $ 0.08 $ 0.13 $ 0.16

Discontinued operations:
Loss from discontinued operations...... (0.15) (0.57) (0.68)
Loss on disposal of discontinued
operations, including provision for
operating losses during phase-out
period................................ (0.53) -- --
------------- ------------- -------------
Net loss........................... $ (0.60) $ (0.44) $ (0.52)
============= ============= =============

Weighted average common and common
equivalent shares outstanding........ 5,844,267 5,240,793 4,879,671
============= ============= =============

</TABLE>
See Notes to Consolidated Financial Statements

F-4
21
<PAGE>

HEMACARE CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 and 1993

<TABLE>
<CAPTION>
Common Stock Accumulated
Shares Amount Deficit Total
----------- ----------- ------------- ------------
<S> <C> <C> <C> <C>

Balances, December 31, 1992............ 4,357,075 $ 7,249,425 $ (2,583,563) $ 4,665,862
Exercise of stock options and warrants. 29,417 85,892 -- 85,892
Issuance of common stock............... 400,000 1,776,840 -- 1,776,840
Issuance of common stock for employee
401(k) and incentive bonus plans...... 5,951 51,960 -- 51,960
Issuance of warrants.................. -- 550,000 -- 550,000
Net loss............................... -- -- (2,545,768) (2,545,768)
---------- ------------ ------------- ------------
Balances, December 31, 1993............ 4,792,443 9,714,117 (5,129,331) 4,584,786

Exercise of stock options and warrants. 315,833 665,863 -- 665,863
Issuance of common stock............... 250,000 890,087 -- 890,087
Issuance of common stock for employee
401(k) and incentive bonus plans...... 8,105 46,604 -- 46,604
Net loss.............................. -- -- (2,287,405) (2,287,405)
---------- ------------ ------------- ------------
Balances, December 31, 1994............ 5,366,381 11,316,671 (7,416,736) 3,899,935

Exercise of stock options and warrants. 528,083 795,925 -- 795,925
Compensation expense related to the
issuance of common stock options at
a price below market.................. -- 12,038 -- 12,038
Issuance of common stock for employee
401(k) and incentive bonus plans...... 16,821 54,668 -- 54,668
Net loss............................... -- -- (3,535,876) (3,535,876)
---------- ----------- ------------- ------------
Balances, December 31, 1995............ 5,911,285 $12,179,302 $(10,952,612) $ 1,226,690
========== =========== ============= ============

</TABLE>

See Notes to Consolidated Financial Statements

F-5
22
<PAGE>

HEMACARE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
Years ended December 31,
1995 1994 1993
------------- ------------- -------------
<S> <C> <C> <C>

Cash flows from operating activities:
Net loss................................... $ (3,535,876) $ (2,287,405) $ (2,545,768)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Write-off of assets from discontinued
operations............................ 2,079,138 -- --
Increase in reserves for discontinued
operations............................ 936,387 -- --
Write-off of intangible assets.......... -- 71,209 --
Depreciation and amortization of
plant and equipment................... 434,430 476,880 426,854
Amortization of intangible assets....... 64,037 65,430 60,124
Provision for losses on accounts
receivable............................ 29,015 (22,811) 43,065
Provision for 401(K) matching........... -- -- 49,984
Issuance of common stock for
employee compensation................. 66,706 46,604 51,960

Changes in operating assets and liabilities:
Decrease (increase) in accounts
receivable............................ (49,372) (130,522) 707,184
Decrease (increase) in inventories,
supplies and prepaid expenses......... (33,761) 31,902 (122,930)
Increase in other assets, net........... (92,577) (7,262) (40,297)
Increase (decrease) in accounts payable
and accrued expenses.................. (257,404) 307,545 (12,845)
Increase (decrease) in other accrued
employee benefits..................... 17,029 (79,467) 53,220
------------- ------------- -------------
Net cash used in operating activities...... (342,248) (1,527,897) (1,329,449)
------------- ------------- -------------

Cash flows from investing activities:
Acquisition of licenses.................... -- (315,000) (250,000)
Increase in note receivable from officer... (18,503) (90,470) --
Decrease (increase) in short-term
investments.............................. 295,434 201,368 40,108
Purchase of plant and equipment, net....... (181,527) (108,358) (714,170)
------------- ------------- -------------
Net cash used in investing activities...... 95,404 (312,460) (924,062)
------------- ------------- -------------

Cash flows from financing activities:
Proceeds from issuance of common stock..... 795,925 1,555,950 1,862,732
Proceeds from line of credit............... -- 400,000 --
Principal payments on line of credit
and capital leases....................... (338,807) (479,176) (290,004)
------------- ------------- -------------
Net cash provided by financing
activities............................... 457,118 1,476,774 1,572,728
------------- ------------- -------------

Increase (decrease) in cash and cash
equivalents.............................. 210,274 (363,583) (680,783)
Cash and cash equivalents at beginning
of period................................ 786,334 1,149,917 1,830,700
------------- ------------- -------------
Cash and cash equivalents at end
of period................................ $ 996,608 $ 786,334 $ 1,149,917
============= ============= =============

Supplemental disclosure:
Interest paid.............................. $ 47,463 $ 42,969 $ 64,772
============= ============= =============

Items not impacting cash flows:
Increase in capital lease obligations...... $ 487,389 $ 107,623 $ 274,440
============= ============= =============
Issuance of common stock warrants for
acquisition of license................... $ -- $ -- $ 550,000
============= ============= =============

See Notes to Consolidated Financial Statements

F-6
23

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Organization
- ---------------------

HemaCare Corporation was incorporated in California in 1978 for the
purpose of providing community-based blood services and blood products to
hospitals.

In September 1995, the Company formed Gateway Community Blood Program, Inc.
("Gateway"), a wholly-owned subsidiary incorporated in Missouri, to provide
blood products and services in portions of Missouri and Illinois.

From 1990 to November 1995, the Company, through its wholly-owned subsidiary
HemaBiologics, Inc. ("HBI"), conducted research and development of
Immupath(TM), an anti-HIV hyperimmune plasma-based product intended to be
used in the treatment of Acquired Immune Deficiency Syndrome ("AIDS ").
In November of 1995, the Company's Board of Directors decided to discontinue
the operations of HBI. (Note 11)

In 1992, the Company acquired Georgia Hemapheresis Services (GHS), a
company it had previously managed. GHS was merged into HemaCare Corporation
and is now a division HemaCare Corporation. GHS provides therapeutic services
to hospitals in northern Georgia.

HemaCare Corporation and its wholly-owned subsidiaries are referred
to as "HemaCare" or the "Company" in these Notes.

Note 2 - Summary of Accounting Policies
- ---------------------------------------

Principles of Consolidation: The accompanying consolidated financial
statements include the accounts of HemaCare, Gateway and HBI. All
significant intercompany balances and transactions have been eliminated in
consolidation.

Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements. Estimates also affect the reported amounts of
revenue and expenses during the reporting period. Actual results could
differ from those estimates. (Note 11)

Cash, Cash Equivalents and Short-term Investments: The Company considers all
highly liquid investments with an original maturity of three months or less
to be cash equivalents. Short-term investments consist of U.S. government
treasury bills.

Financial Instruments: Cash and cash equivalents, short-term investments,
accounts receivable and accounts payable are carried at cost which
approximates fair value. The interest rate applied to notes receivable and
capital leases is equal to the Company's borrowing rate, and therefore
their carrying value approximates fair value.

Revenues and Accounts Receivable: Revenues are recognized upon the sale of
blood products or the performance of blood services. Blood services revenues
consist primarily of mobile therapeutics sales, while blood product revenues
consist primarily of sales of single donor platelets and blood components

F-7
24
<PAGE>

that are manufactured or purchased and distributed by the Company. Accounts
receivable are reviewed periodically for collectibility.

Inventories and Supplies: Inventories consist of Company-manufactured
platelets and whole blood components as well as component blood products
purchased for resale. Supplies consist primarily of medical supplies
directly related to procedures for collecting and manufacturing products and
providing therapeutic services.

Plant and Equipment: Plant and equipment is stated at original cost.
Furniture, fixtures, equipment and automobiles are depreciated using
the straight-line method over 3 to 5 years. Leasehold improvements
are amortized over the length of the lease, ranging from 5 to 10
years. Capital equipment leases are recorded at the lower of the
present value of the minimum lease payments or the fair value of the
equipment at the beginning of the lease term. The cost of normal
repairs and maintenance are expensed as incurred.

Other Assets: As of December 31, 1995 and 1994, other assets consisted
primarily of deposits.

Licenses: At December 31, 1994, licenses consisted of FDA licenses which
permitted the Company to harvest and sell certain blood products and a
license agreement with Medicorp Inc. ("Medicorp") for the rights to the
United States patent to commercialize Immupath. Costs were amortized on a
straight-line basis over the shorter of the length of the license agreement
or 40 years. Accumulated amortization of licenses was $175,522 at December
31, 1994. In November 1995, the Company discontinued operations of HBI and
wrote off the unamortized book value of the licenses. (Notes 9 and 11)

Goodwill: In 1993, goodwill associated with the acquisition of GHS
was being amortized over 40 years. Due to market factors, GHS has
incurred losses for the past three years. Although management
believes that GHS can operate at least at break-even level and has
taken steps to reduce its operating costs, the Company wrote off
goodwill ($71,209) related to the acquisition in 1994. The write off
is included in General and Administrative Expense.

Long-Lived Assets: In March 1995, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No.
121 "Accounting For the Impairment of Long-Lived Assets and For Long-
Lived Assets to Be Disposed Of" ("SFAS 121"). SFAS 121 requires that
long-lived assets and certain identifiable intangibles to be held and
used by an entity be reviewed whenever events or changes in
circumstances indicate that the carrying amount of an asset may not
be recoverable. SFAS 121 must be adopted by the Company no later than
January 1, 1996. The Company does not expect that the implementation
of this statement will have a material impact on its financial
position or its results of operations.

Income Taxes: Income taxes are computed under the provisions of the
Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes" ("SFAS 109").

Per Share Data: Per share data is computed by dividing net income
(loss) by the weighted average number of common and dilutive common
share equivalents outstanding during each period. In 1995, 1994 and
1993, shares issuable upon the exercise of stock warrants and
options are included in the weighted average common shares
outstanding because their effect is dilutive on income from
continuing operations.

F-8
25
<PAGE>

Reclassification: Certain 1994 and 1993 amounts have been
reclassified to conform with 1995 presentations.

Note 3 - Plant and Equipment
- -----------------------------

Plant and equipment consists of the following:

December 31,
1995 1994
------------ -------------
Furniture, fixtures and
equipment....................... $ 2,148,912 $ 2,787,123
Leasehold improvements........... 167,572 299,678
Construction in progress......... 247,535 272,323
------------ ------------
2,564,019 3,359,124
Less accumulated depreciation
and amortization................ (1,513,443) (1,895,863)
------------ ------------
$ 1,050,576 $ 1,463,261
============ ============

Equipment with a cost of $1,172,251 in 1995 and $1,004,998 in 1994
is financed by capital leases. In the fourth quarter of 1995, the
Company wrote off $614,521, including $85,981 financed by capital
leases, of leasehold improvements, equipment and accumulated
depreciation which were related to HBI s discontinued operations. (Note 11)

Note 4 - Debt Financing
- -----------------------

Since August 1991, the Company has maintained a line of credit with
a commercial bank secured by its accounts receivable, inventory and
equipment. Under the terms of the credit line, the Company may
borrow up to 70 percent of eligible accounts receivable, up to a
maximum of $700,000. Interest on credit line borrowings is at the
lender's prime rate (8.5 percent at December 31, 1995) plus one-half
of a percentage point. The Company is required to maintain cash
and/or short-term security balances of at least $400,000 (excluding
borrowings) at all times. After the write off associated with
discontinued operations (Note 11), the Company was in default under
certain covenants of the credit line agreement. The bank has waived
compliance with these covenants through the April 30, 1996 effective
date of the credit line. The Company has requested its bank to renew
the credit agreement. There were no borrowings outstanding on the
credit line at December 31, 1995. At December 31, 1994, there was
$200,000 outstanding under the line of credit.

Note 5 - Leases
- ---------------

The Company has entered into several capital leases for equipment.
Future minimum capital lease payments, which expire at various times
during the period from 1996 to 2001, are as follows:

Year Ending December 31,
1996........................... $ 274,425
1997........................... 275,124
1998........................... 276,292
1999........................... 134,323
2000........................... 70,100
-----------
Total minimum lease payments... 1,030,264
Less: Amount representing
interest............... 173,129
-----------
Present value of minimum lease
payments..................... $ 857,135
===========

F-9
26
<PAGE>

Future minimum rentals under operating leases, which expire in 1996
through 2001, are as follows:

Year Ending December 31,
1996........................... $ 698,281
1997........................... 359,318
1998........................... 253,440
1999........................... 133,169
2000........................... 127,918
Thereafter..................... 20,842
-----------
$1,592,968
===========

Total rent expense under all operating leases was $565,617, $648,397
and $636,101 for the years ended December 31, 1995, 1994 and 1993,
respectively.

Note 6 - Income Taxes
- ---------------------

Effective January 1, 1993, the Company adopted SFAS 109. SFAS 109
requires, among other things, a change to the liability method of
computing deferred income taxes. The change had no cumulative income
or loss effect on the Company's financial statements. The Company incurred
losses for each of the last three years and therefore has not recorded a
provision for income taxes.

The approximate tax effects of temporary differences which gave rise
to significant deferred tax assets and liabilities at December 31,
1995 and 1994, are as follows:

1995 1994
----------- -----------
Current:
Accrued expenses deferred for
tax purposes..................... $ 650,827 $ 151,640
Deferred:
Depreciation and amortization .... 316,511 324,638
Deferred research and
development expenses............. 195,032 100,926
Other............................. (201,505) 10,295
Net operating loss carryforwards.. 2,659,094 2,280,248
Tax credit carryforwards.......... 966,697 810,216
------------ ------------
Total deferred assets............. 4,586,656 3,677,963
Valuation allowance............... (4,586,656) (3,677,963)
------------ ------------
$ 0 $ 0
============ ============

At December 31, 1995 and 1994, the Company had net operating loss
carryforwards available for federal income tax purposes of $6,722,000
(expiring from 2004 to 2010) and $5,887,000 (expiring from 2003 and
2009), respectively.

The Company also had net operating loss carryforwards available for
state income tax purposes of approximately $3,244,000 at December 31,
1995 and $3,045,000 at December 31, 1994, the majority of which are
California losses scheduled to expire between 1997 and 2000, in 1995,
and between 1995 to 1999, in 1994.

F-10
27
<PAGE>

At December 31, 1995, the Company had federal income tax credit
carryforwards of approximately $626,000 scheduled to expire between
the years 1996 and 2010 and state tax credit carryforwards of
approximately $341,000 which are not subject to expiration.

Note 7 - Shareholders' Equity
- -----------------------------

In May 1993, the Company sold 400,000 shares of common stock at $5.00
per share in a private placement from which it received net proceeds
of approximately $1,800,000. In connection with this sale, the
Company granted warrants (which expire May 6, 1998) to purchase
40,000 shares of the Company's common stock at $6.50 per share to the
sales agent who represented the Company.

In 1994, the shareholders of the Company voted to approve an
amendment to the 1986 Employee Stock Option Plan (the "Plan")
authorizing the Company to grant options to purchase up to an
aggregate of 960,000 shares of the Company's common stock. As of
December 31, 1995, there were options outstanding under the Plan to
purchase 395,800 shares of common stock at prices ranging from $1.13
to $6.69 per share (339,967 options were exercisable). As of
December 31, 1995, 271,751 options had been exercised under the Plan.

The table below summarizes transactions in the Plan during 1995, 1994
and 1993.

1995 1994 1993
---------- --------- ---------
Options outstanding at
beginning of year............. 581,083 516,916 461,832
Granted........................ 37,800 167,000 140,000
Exercised...................... 28,083 65,833 29,417
Canceled....................... 195,000 37,000 55,499
---------- --------- ---------
Options outstanding at end of
year ($1.13 to $7.62 per
share)....................... 395,800 581,083 516,916
========== ========= =========
Exercisable.................... 339,967 368,417 358,417
========== ========= =========
Available for grant............ 292,449 135,249 105,249
========== ========= =========

The Company makes a one-time grant of Plan options to each non-
employee director (Director) at the time of joining the Board.
Director options outstanding totaled 45,000 at December 31, 1995,
1994 and 1993. All options were at fair market value at date of
grant.

In April 1994, HemaCare sold 250,000 units of common stock and common
stock purchase warrants (at $4.00 per unit) in an offshore transaction
from which it received net proceeds of approximately $900,000. Each unit
consisted of one share of the Company's common stock and three warrants
to purchase additional shares. The terms of the warrants were modified
in July 1994 through an exchange offer. The first group of 250,000
warrants was exercised in full in September 1994 resulting in net proceeds
of approximately $500,000. The second group of 250,000 warrants was
fully exercised in the first quarter of 1995 and yielded net proceeds of
approximately $350,000. In consideration of this exercise, which was made
45 days prior the expiration date, a fourth group of 250,000 warrants
exercisable at a price of $3.50 per share and expiring in December 1998
was granted to the purchaser. The third group of 250,000 warrants was
exercised in June and July 1995, yielding net proceeds of approximately
$390,000. The fourth group of options remains outstanding at December
31, 1995. In connection with the sale of the units and the subsequent
exercise of related warrants, the Company granted to the finder

F-11
28
<PAGE>

warrants to purchase 50,000 shares of the Company's common stock
(Finder Warrants). The Finder Warrants expire five years from their
issue date and are exercisable at prices ranging from $1.45 to
$4.00. Up to 12,500 additional Finder Warrants may be issued at
$3.50 per share, depending on the number of the fourth group of
250,000 warrants which are exercised.

On September 30, 1994, the Company amended and restated the terms of
its July 1993 contingent warrant agreements with three consultants to
reduce the purchase price and the total number of shares of Common
Stock purchasable upon exercise of the warrants from 20,000 to 10,000
for each of the three agreements. The expiration date of the
warrants remain at June 30, 2002, but a contingency related to the
market price of the Company's common stock exceeding certain targets
before certain dates was removed.

In November 1995, the financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123 "Accounting for
Stock Based Compensation" ("SFAS 123"). SFAS 123 recommends changes
in accounting for employee stock based compensation plans and
requires certain disclosures with respect to these plans. The Company
will adopt SFAS 123 disclosures effective January 1, 1996.

Note 8 - Employee Salary Deferral Plan
- ---------------------------------------

As of January 1, 1990, HemaCare adopted an Employee Salary Deferral
Plan which qualifies under Section 401(K) of the Internal Revenue
Service Code (the "401K Plan"). The 401K Plan covers all employees
who are at least 21 years of age, have one year of service and who
work at least 1,000 hours per year. Eligible employees may
contribute up to 12 percent of their pre-tax salaries, subject to
certain limitations. HemaCare matches 50 percent of the first 5
percent of each participant's contribution on an annual basis with
HemaCare common stock. During 1995, 1994 and 1993, HemaCare issued
16,821 shares ($54,668), 8,105 shares ($46,604) and 5,591 shares
($51,960) of common stock as matching contributions for the 1994,
1993 and 1992 plan years, respectively. HemaCare plans to issue
approximately 12,480 shares in 1996 as matching contributions for the
1995 plan year.

Note 9 - Commitments and Contingencies
- --------------------------------------

On March 11, 1994, the Company was served with a lawsuit filed by a
former employee against the Company and its wholly owned
subsidiary, HBI, in the Superior Court of the State of California,
related to the termination of this employee and seeking relief in
the amount of $550,000. At this stage in the proceedings, neither
management nor counsel are in a position to evaluate the probable
merits of the claim asserted by this former employee. Accordingly, the
resolution of this lawsuit could have a material impact on the Company's
financial condition and results of operations.

In September 1995, the Company entered into a letter of intent to
make royalty payments to certain parties in consideration of certain
commitments to the establishment of Gateway. The definitive agreement
providing for the payment of these royalties has not been completed
due to a dispute with one of the parties. The letter of intent
provides for cash royalties of 20 percent of Gateway's cash flow and
shares of HemaCare common stock with a value equal to the cash
royalty, up to a maximum of 500,000 shares of HemaCare common stock.
Royalty payments commence after the Company recovers its initial
investment in Gateway including capital expenditures and operating
deficits and terminate in 2003.
F-12
29
<PAGE>

In November 1995, the Company terminated its license agreement with
Medicorp (Note 2) due to a default by the license holder. The Company
also notified Medicorp that the stock purchase warrants (exercisable for
400,000 shares of HemaCare common stock at $5.50 per share) issued by
the Company to Medicorp had terminated under their terms, due to the
default. Medicorp has denied that it has breached the license agreement
and has alleged that the Company is liable for royalties under the
license agreement of approximately $425,000 and that its warrants remain
outstanding. The Company intends to vigorously defend any legal action
which may result from this dispute.

In February 1996, the Company terminated an agreement with a vendor,
based on an unsatisfactory level of performance of the product. The
vendor is disputing the basis for the termination. The Company
intends to vigorously defend any legal action which may result from
this dispute, and the resolution of this matter is not expected to
have a material impact on the Company s future financial position or
results of operations.

Note 10 - Segment and Related Party Information
- -----------------------------------------------

The Company operates within one industry, blood services and
products. In 1994 and 1993, there were no sales to any single,
unaffiliated customer which exceeded 10 percent of total revenues.
In 1995, sales to one unaffiliated hospital of $1,077,000 accounted
for 10 percent of revenue.

The Company s medical director, Joshua Levy, as part of his private
medical practice in the treatment of his own patients, receives
professional fees from patients, insurers or other third-party payors
for supervising therapeutic hemapheresis procedures at hospitals
where the Company provided such service. Company sales to
unaffiliated customers through this related party medical practice
were approximately $802,000 (7%), $1,043,000 (9%) and $962,000 (8%)
for the years ended December 31, 1995, 1994 and 1993, respectively.

In 1995 and 1994, the Company made a series of personal loans to
Joshua Levy totaling $98,307. The proceeds of these loans were used
to refinance existing debt which was collateralized by HemaCare stock
owned by Dr. Levy. Interest accrued for the years ended December 31,
1995 and 1994 totaled $9,571 and $1,095, respectively. In January
1996, these individual notes were consolidated into a promissory note
which accrues interest at a rate equal to the rate the Company pays
under its line of credit (Note 4), adjusted quarterly. The note is
collateralized by HemaCare stock owned by Dr. Levy. The note
requires four annual installment payments of $15,000 due on January
31 and the balance of the principal and accrued interest is due on
January 31, 2000. The Company received its first annual installment
payment of $15,000 in January 1996.

Note 11 - Discontinued Operations
- ---------------------------------

In November 1995, the Company s Board of Directors decided to
discontinue the operations of HBI, including the research and
development of Immupath and the associated specialty plasma business.
In connection with this decision, the Company wrote off the remaining
book value of HBI s assets ($2,079,138) and provided a reserve for
estimated operating losses ($1,034,787) from the November 30, 1995
measurement date through December 1996, the expected date of
substantial completion of disposal. The operating loss reserve was
estimated based on the best available information. However, actual
operating losses during the disposition period may differ from the
estimate. The Company is actively pursuing a sale of HBI s research
and development and associated specialty plasma business assets.

F-13
30

The net losses of the research and development and associated
speciality plasma operations prior to December 1, 1995 are included
in the consolidated statements of operations as a loss from
discontinued operations. Revenues from such operations were $159,732
for the eleven months ended November 30, 1995, and $202,941 and
$239,695 for the years ended December 31, 1994 and 1993,
respectively. Net loss from discontinued operations for the month of
December 1995 was $98,400.

The loss on the disposition of HBI s operations has been accounted
for as discontinued operations, and prior years financial statements
have been restated to reflect the discontinuation of these
operations.

Note 12 - Subsequent Event
- --------------------------

The University of Southern California Blood Center (USC Blood
Center), a full-service blood donation and services facility, opened
in February 1996. The USC Blood Center facility is leased from USC
and is staffed and operated by HemaCare under its Food and Drug
Administration ("FDA") license. Located on the USC Health Sciences
Campus in Los Angeles, California, the center provides services to
the USC/Norris Comprehensive Cancer Center and Hospital and the USC
University Hospital (the "USC Hospitals"). The USC Hospitals have
agreed that HemaCare will be their primary provider of blood products
and therapeutic services. Pathologists on the USC medical faculty
provide medical direction services for the USC Blood Center as
consultants to the Company.

F-14
31
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE

To the Shareholders and Board of Directors of HemaCare Corporation:

We have audited in accordance with generally accepted auditing
standards, the consolidated financial statements included in HemaCare
Corporation's annual report to shareholders included in this Form 10-K,
and have issued our report thereon dated March 7, 1996. Our audit
was made for the purpose of forming an opinion on those statements
taken as a whole. The schedule listed in the index of consolidated financial
statements is the responsibility of the Company's management and is
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic consolidated
financial statements. This schedule has been subjected to the
auditing procedures applied in the audit of the basic consolidated
financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein
in relation to the basic consolidated financial statements taken as
a whole.

/s/ Arthur Andersen LLP
--------------------
ARTHUR ANDERSEN LLP

Los Angeles, California
March 7, 1996

S-1
32
<PAGE>

HEMACARE CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

For The Years Ended December 31, 1995, 1994 and 1993

</TABLE>
<TABLE>
<CAPTION>

Additions
----------------------------
Balance at Charged to Charged Balance
beginning costs and to other at end of
Description of period expenses accounts Write-offs period
- ------------------------ ---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Year ended December 31,
1995 - Allowance for
uncollectible accounts $ 141,243 $ 29,015 $ -- $ 75,769 $ 94,489

Year ended December 31,
1994 - Allowance for
uncollectible accounts $ 167,184 $(22,811)(1) $ (1,437)(2) $ 1,693 $ 141,243

Year ended December 31,
1993 - Allowance for
uncollectible accounts $ 289,229 $ 43,065 $ -- $ 165,110(3) $ 167,184
</TABLE>

1) Includes a net reduction in the reserve of $84,282 based on the year
ending aging at December 31, 1994.

2) Amount charged to other accounts in 1994 consisted of $1,437 for
collection for accounts written off in prior years.

3) Write-off amounts for 1993 included $53,424 related to continuing
operations and $111,686 related to discontinued operations.

S-2
33
<PAGE>

INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Sequential
Page Number
<S> <C> <C>
3.1 Restated Articles of Incorporation of the Registrant......... 36

3.2 Bylaws of the Registrant--incorporated by reference to
Exhibit 3.2 to Form 10-K of the Registrant for the year
ended December 31, 1992......................................

4.2 Warrant Agreement between the Registrant and Huss Kealy
Sinclair dated May 7, 1993--incorporated by reference
to Registration Statement on Form S-3 of the Registrant
(File No. 33-44869)..........................................

4.4 Offshore Securities Subscription Agreement between the
Registrant and Tesoma Overseas, Inc., dated April 8, 1994
--incorporated by reference to Exhibit 4.1 to Form 10-Q of
the Registrant for the quarter ended March 31, 1994..........

4.6 Amendment to Warrant Agreement between the Registrant and
Torrey Pines Securities dated April 3, 1995--incorporated by
reference to Exhibit 4.1 to Form 10-Q of the Registrant for
the quarter ended March 31, 1995.............................

4.7 Warrant Agreement between the Registrant and M.A. Levy and
Associates dated March 1, 1995--incorporated by reference to
Exhibit 4.7 to Form 10-K of the Registrant for the year ended
December 31, 1994............................................

4.8 Form of Warrant Agreement between the Registrant and Tesoma
Overseas, Inc. dated February 9, 1995--incorporated by
reference to Exhibit 4.8 to Form 10-K of the Registrant for
the year ended December 31, 1994.............................

10.1* 1986 Employee Stock Option Plan, as amended and restated
through October 1994--incorporated by reference to Exhibit
10.4 to Form 10-Q of the Registrant for the quarter ended
September 30, 1994...........................................

10.2 Lease dated July 10, 1986 between the Registrant and
Addison Place Partners--incorporated by reference
to Registration Statement on Form S-18 of the Registrant
(File No. 33-8513-LA)........................................

10.3 Amendment No. 1 to Lease between the Registrant and
Addison Place Partners dated March 30, 1993--incorporated
by reference to Exhibit 10.3 to Form 10-K of the Registrant
for the year ended December 31, 1994.........................
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
Sequential
Page Number
-----------
<S> <C> <C>

10.4* Employment Agreement between Harold I. Lieberman and the
Registrant, dated September 19, 1988 -- incorporated by
reference to Exhibit 10.4 to Form 10-K of the Registrant
for the year ended December 31, 1994.........................

10.5* Amendment to Employment Agreement between the Registrant
and Harold I. Lieberman, dated September 19, 1989
--incorporated by reference to Exhibit 10.5 to Form 10-K
of the Registrant for the year ended December 31, 1994........

10.7 Revolving Credit Agreement between the Registrant and
Bank Leumi Le-Israel, B.M., dated April 30, 1995 and
related security agreements--incorporated by reference
to Exhibit 10.1 to Form 10-Q of the Registrant for the
quarter ending March 31, 1995.................................

10.8 Computer System Acquisition Agreement between the
Registrant and EtCom Canada, Inc. dated May 17,
1994--incorporated by reference to Exhibit 10.4 to Form
10-Q of the Registrant for the quarter ended June 30, 1994....

10.9 Disclosure and License Agreement for Blood Derived
Therapeutic Products between HemaBiologics, Inc., a
wholly owned subsidiary of the Registrant, and The New York
Blood Center dated November 1, 1994--incorporated by
reference to Exhibit 10.9 to Form 10-K of the Registrant
for the year ended December 31, 1994..........................

10.10 Promissory Note to HemaBiologics, Inc., a wholly owned
subsidiary of the Registrant, from Joshua Levy dated
January 1, 1996............................................... 40

10.11 Pledge Agreement between HemaBiologics, Inc., a wholly owned
subsidiary of the Registrant, and Joshua Levy dated January
1, 1996....................................................... 42

11 Computation of earnings (loss) per common equivalent share.... 48

21 Subsidiaries of the Registrant................................ 49

23 Consent of Arthur Andersen LLP................................ 50

27 Financial Data Schedule....................................... 51
</TABLE>

* Denotes a management contract or compensatory plan or arrangement.

35
<PAGE>

EXHIBIT 3.1
A472947
ENDORSED FILED
In the office of the
Secretary of State
of the State of California
MARCH 7, 1996

/s/ Bill Jones
--------------------------
Bill Jones, Secretary of State
RESTATED
ARTICLES OF INCORPORATION
OF
HEMACARE CORPORATION

Hal I. Lieberman and JoAnn Stover certify that:

1. They are the president and the secretary, respectively, of HEMACARE
CORPORATION, a California corporation.

2. The articles of incorporation of this corporation are restated to
read as follows:

Article One

The name of this corporation is HEMACARE CORPORATION.

Article Two

The purpose of the corporation is to engage in any lawful act or
activity for which a corporation may be organized under the
General Corporation Law of California other than the banking
business, the trust business or the practice of a profession
permitted to be incorporated by the California Corporations Code.

Article Three

The total number of shares of all classes of stock which the
corporation shall have authority to issue is 25,000,000, consisting
of (i) 20,000,000 shares of common stock ("Common Stock"),
and (ii) 5,000,000 shares of preferred stock ("Preferred Stock").

The board of directors is hereby expressly authorized, by
resolution or resolutions, to provide out of the unissued shares of
Preferred Stock, for series of Preferred Stock. Before any shares
of any such series are issued the board of directors shall fix, and
hereby is expressly empowered to fix, by resolution or resolutions,
the following provisions of the shares thereof:

(a) the designation of such series and the number of
shares to constitute such series;

(b) whether the shares of such series shall have voting
rights, in addition to any voting rights provided by law, and, if
so,the terms of such voting rights, which may be general or limited;

36
<PAGE>
(c) the dividends, if any, payable on such series,
whether any such dividends shall be cumulative, and, if so, from
what dates, the conditions and dates upon which such dividends
shall be payable, the preference or relation which such dividends
shall bear to the dividends payable on any shares of stock of any
other class or any other series of this class;

(d) whether the shares of such series shall be subject
to redemption by the corporation, and, if so, the times, prices and
other conditions of such redemption;

(e) the amount or amounts payable upon shares of
such series upon, and the rights of the holders of such series in,
the voluntary liquidation, dissolution or winding up, or upon any
distribution of the assets, of the corporation;

(f) whether the shares of such series shall be subject
to the operation of a retirement or sinking fund and, if so, the
extent to and manner in which any such retirement or sinking fund
shall be applied to the purchase or redemption of the shares or
such series for retirement or other corporate purposes and the
terms and provisions relative to the operation thereof;

(g) whether the shares of such series shall be
convertible into, or exchangeable for, shares of stock of any other
class or any other series of this class or any other securities and,
if so, the price or prices or the rate or rates of conversion or
exchange and the method, if any, of adjusting the same, and any
other terms and conditions of conversion or exchange;

(h) the limitations and restrictions, if any, to be
effective while any shares of such series are outstanding upon the
payment of dividends or the making of other distributions on, and
upon the purchase, redemption or other acquisition by the
corporation of, the Common Stock or shares of stock of any other
class or any other series of this class;

(i) the conditions or restrictions, if any, upon the
creation of indebtedness of the corporation or upon the issue of
any additional stock, including additional shares of such series or
of any other series of this class or of any other class; and

(j) any other powers, preferences and relative
participating, optional and other special rights, and any
qualifications, limitations and restrictions thereof.

37
<PAGE>

The powers, preferences and relative participating,
optional and other special rights of each series of Preferred Stock,
and the qualifications, limitations or restrictions thereof, if any,
may differ from those of any and all other series at any time
outstanding. All shares of any one series of Preferred Stock shall
be identical in all respects with all other shares of such series,
except that shares of any one series issued at different times may
differ as to the dates from which dividends thereon shall be
cumulative.

Article Four

Whenever by statute the vote or consent of the shareholders of the
corporation shall be required to authorize or approve a sale, lease,
or exchange of all or substantially all of the corporation's
property or assets or to adopt or approve an agreement of merger or
consolidation of the corporation with or into any other corporation
or to merge any other corporation into the corporation, the vote or
consent of at least sixty-six and two-thirds percent of the
outstanding stock of corporation entitled to vote or consent
thereon shall be required for any such authorization, adoption or
approval. Such affirmative vote or
consent shall be in addition to the vote or consent of the holders
of the stock of the corporation otherwise required by law or any
agreement between the corporation and any national securities
exchange, if applicable. The provisions of this paragraph shall not
apply to any transaction with another corporation, person or entity
if (i) a majority of the outstanding shares of all classes entitled
to vote generally in the election of directors, considered for this
purpose as one class, of such other corporation or entity is owned
of record or beneficially by the corporation and its subsidiaries,
if any, or (ii) prior to the consummation of such transaction, the
board of directors of the corporation either (a) adopts by
unanimous written consent without a meeting a resolution in favor
of the transaction or (b) adopts such resolution at a meeting by
the affirmative vote of at least sixty-six and two-thirds percent
of the directors then in office. Notwithstanding any other
provision of the Articles of Incorporation or the bylaws of the
corporation or any other lesser percentage that may be specified by
law or any agreement between the corporation and any national
securities exchange, if applicable, the vote or consent of at least
sixty-six and two-thirds percent of the outstanding stock of the
corporation entitled to vote shall be required to amend, alter,
change or repeal any of the provisions of this paragraph.

38
<PAGE>

Article Five

(a) Limitation of Directors' Liability. The liability of
the directors of the corporation for monetary damages shall be
eliminated to the fullest extent permissible under California law.

(b) Indemnification of Corporate Agents. The corporation is
authorized to provide, whether by bylaw, agreement or resolution
of the board of directors or shareholders of the corporation, for
the indemnification of agents (as defined in Section 317 of the
California General Corporation Law) of the corporation in excess
of that expressly permitted by such Section 317, for breach of
duty to the corporation and its shareholders to the fullest extent
permissible under California law.

(c) Repeal or Modification. Any repeal or modification of this
Article Five by the shareholders of the corporation shall not
adversely affect any right or protection of a director or agent of
the corporation existing at the time of such repeal or
modification.

3. The foregoing restatement of articles of incorporation has been
duly approved by the board of directors.

4. The foregoing restatement of articles of incorporation did not
require approval by the vote of the shareholders of the corporation
since it does not effect any alteration or amendment of the
articles of incorporation as heretofore amended.

We further declare under penalty of perjury under the laws of the State of
California that the matters set forth in this certificate are true and
correct of our own knowledge.

DATE: March 1, 1996

/s/ Hal I. Lieberman
---------------------------
Hal I. Lieberman, President

/s/ JoAnn Stover
----------------------------
JoAnn Stover, Secretary

EXHIBIT 10.10

PROMISSORY NOTE

$108,973.00 Los Angeles, California
January 1, 1996

FOR VALUE RECEIVED, the undersigned JOSHUA LEVY ("Debtor"), promises to
pay to HEMABIOLOGICS, INC., a California corporation (Holder"), or order, the
principal sum of One Hundred Eight Thousand, Nine Hundred Seventy-Three
and 00/100 Dollars ($108,973.00), together with interest on the unpaid
principal balance of this note, until paid in full initially at the rate of
nine and one-quarter percent (9.25%) per annum. The per annum interest rate
shall be adjusted on the first day of each January, April, July and October
of each year (commencing April 1, 1996) to be equal to one-half percentage
point in excess of the announced per annum prime rate or designated rate of
interest as of each such date for unsecured borrowings to commercial cust-
omers of the financial institution with which HemaCare Corporation maintains
a corporate line of credit facility, or in the absence of any such line of
credit, of Bank of America, N.T. & S.A., but in no event in excess of the
maximum rate of interest permitted by applic able law. Interest shall be
computed on the premise that a year consists of 360 days and that each month
consists of 30 days.

Principal and interest shall be payable to Holder at:
4954 Van Nuys Boulevard, Sherman Oaks, California 91403, or at such other
place as the holder of this note may designate in writing to Debtor, in
annual installments of Fifteen Thousand and 00/100 Dollars ($15,000.00) due
each January 31, commencing with January 31, 1996, until January 31, 2000, on
which date all principal and accrued interest shall be due and payable. All
payments hereunder shall be applied first to the payment of accrued interest
and the balance to the payment of principal. All payments hereunder shall be
made in lawful currency of the United States of America. This note may be
prepaid in whole or in part at any time without penalty.
If any legal action is required to collect this note, the holder shall
be entitled to collect all reasonable costs and expenses of such action,
including but not limited to reasonable attorneys' fees.
This note is secured by collateral described in that certain Pledge
Agreement, dated the date hereof, between Debtor and Holder (the "Pledge
Agreement"), and this note may be accelerated as provided in the Pledge
Agreement.
The failure of the holder to exercise any option to accelerate this note
as provided herein or in the Pledge Agreement, or to exercise any other option
or remedy available to the holder hereunder, under the Pledge Agreement or
under applicable law, in any one or more instances, or the acceptance by the
holder of partial payments or partial performance, shall not constitute a
waiver of such option or remedy or of any default by Debtor, and all such
options and remedies shall remain continuously in force. Acceleration of
maturity, once claimed hereunder by the holder, may at the holder's option be
rescinded by written acknowledgment to that effect, but the tender and
acceptance of partial payment or partial performance shall not in any way
affect or rescind such acceleration of maturity.

40
<PAGE>

Presentment, diligence, dishonor, notice of dishonor, protest and all
other notices of any kind (except to the extent expressly required by this
note), and, to the fullest extent permitted by law, the right to plead any
applicable statute of limitations as a defense to any demand hereunder, are
hereby waived by all makers, sureties, guarantors and endorsers, and this
waiver shall be binding upon their successors and permitted assigns.
It is the express intent of the parties hereto that Debtor not pay and
the holder of this note not receive, directly or indirectly in any manner
whatsoever, interest in excess of that which may be legally paid by Debtor to
any holder of this note under applicable laws. If, under any circumstances
whatsoever, any such holder shall ever receive anything of value that shall
be deemed excessive interest under applicable laws, such excessive interest
shall be applied to reduce the principal balance hereunder or to any other
principal indebtedness of Debtor to any such holder and not to the payment
of interest, or, if such excessive interest exceeds such unpaid balance of
principal or such other indebtedness, such excess shall be refunded to Debtor.
Any notice to Debtor in connection with this note shall be in writing and
shall be delivered in person or by first class mail, certified or registered,
return receipt requested, postage prepaid, addressed to Debtor in care of
HemaCare Corporation at 4954 Van Nuys Boulevard, Sherman Oaks, California
91423; or to such other address as Debtor may from time to time designate by
notice to the holder of this note. Any notice to the holder of this note in
connection with this note shall be in writing and shall be in person or by
first class mail, certified or registered, return receipt requested, postage
prepaid, addressed to the holder at the address set forth in the second
paragraph of this note; or to such other address as the holder may from time
to time designate by notice to Debtor. Notices sent by certified or
registered mail shall be deemed given at the earlier of the time of its
receipt by the addressee and five (5) days after its mailing, and notices
given in person shall be deemed given upon delivery.
This note shall be governed in all respects by the laws of the State of
California without giving effect to conflict of laws rules or principles.
IN WITNESS WHEREOF, this note has been executed and delivered at Los
Angeles, California, as of the date set forth above.

By: /s/ Joshua Levy
-------------------
Joshua Levy

EXHIBIT 10.11
PLEDGE AGREEMENT

THIS PLEDGE AGREEMENT (this "Agreement") is made and entered into
effective as of the 1st day of January 1996, by and between JOSHUA LEVY
("Pledgor") and HEMABIOLOGICS, INC., a California corporation ("Pledgee").
WHEREAS, Pledgor is indebted to Pledgee for borrowings totaling One
Hundred Eight Thousand, Nine Hundred Seventy-Three and 00/100 Dollars
($108,973.00), as evidenced by a Promissory Note of concurrent date herewith
(the "Note") made and delivered in replacementand cancellation of various
demand notes previously given by Pledgor to Pledgee; and
WHEREAS, as a condition to accepting the Note, Pledgee has demanded that
Pledgor secure his obligations under the Note by the pledge of Forty Thousand
(40,000) shares of the Common Stock of HemaCare Corporation, a California
corporation ("HemaCare"), owned of record and beneficially by Pledgor (the
"Pledged Shares").
NOW, THEREFORE, in consideration of the premises and of the covenants
herein contained, the parties hereto agree as follows:

1. Pledge of Stock.

(a) As security for the full and prompt payment of all amounts due
under the Note and the full and prompt performance of this Agreement
by Pledgor (collectively, the "Secured Obligations"), Pledgor hereby
assigns, transfers, pledges, grants a security interest in and
delivers to Pledgee HemaCare stock certificate(s) number(s) 5074
(1,000 shares), 5094 (5,000 shares), 5095 (5,000 shares), 5096
(5,000 shares), 5107 (10,000 shares), 5108 (10,000 shares) and 6039
(4,000 shares), representing the Pledged Shares, duly endorsed in
blank or accompanied by an executed stock power, together with all
proceeds thereof, additions thereto and replacements and
substitutions therefor, including without limitation any and all
new or substituted or additional shares, other securities, cash or other
properties distributed with respect to the Pledged Shares or other
securities or interests subject to this Agreement whether as a result
of merger, consolidation, dissolution, reorganization, recapital-
ization, stock split, reverse stock split, stock dividend, reclass-
ification, redemption or any other change declared or made in the
capital structure of HemaCare, or otherwise (the "Collateral").
Pledgor hereby consents to Pledgee's presentation of the certificate
representing the Pledged Shares or any other Collateral in respect
thereof to HemaCare, or its transfer agent, for the purpose of
changing the name of the registered owner of the Collateral from
Pledgor to Pledgee, but only upon the occurrence of a Default, as
defined in Section 4.

(b) Pledgor shall from time to time make, execute, acknowledge and
deliver all such further documents, instruments and assurances as may
be requested by Pledgee to perfect or preserve the security interest
created by and to carry out the intent of this Agreement, and hereby
authorizes Pledgee to file financing statements and amendments
thereto or any other document relating to all or any part of the
Collateral where desirable in Pledgee's judgment to perfect the
security interest granted herein without the signature of Pledgor
(where permitted by law).

42
<PAGE>

(c) Pledgor shall promptly reimburse Pledgee for any and all sums,
including costs, expenses and reasonable attorneys' fees, which
Pledgee may pay or incur in defending, protecting or enforcing the
pledge and security interest under this Agreement or the priority
thereof, or in enforcing or collecting the Secured Obligations, or in
discharging any prior or subsequent lien or adverse claim against the
Collateral or any part thereof, or by reason of becoming or being made
a party to or intervening in any action or proceeding affecting the
Collateral or the rights of Pledgee therein, all of which actions
Pledgee shall have the right to take.

2. Rights With Respect to Distributions. Pledgee may upon the
occurrence of a Default receive and apply against any amounts due under any
Secured Obligations any dividends or other distributions made with
respect to the Collateral. Any and all other such dividends or other
distributions shall belong to and shall be paid over to Pledgor.

3. Conditional Irrevocable Proxies/Voting Rights.

(a) Pledgor hereby irrevocably appoints Pledgee as Pledgor's proxy
holder with respect to the Pledged Shares and any additional Collateral
in respect thereof with full power and authority to vote such Collateral
and otherwise act with respect to such Collateral on behalf of Pledgor,
provided that this proxy shall only be operative upon the occurrence of
a Default and only for so long as such Default continues. Subject to
Section 2 hereof, so long as there is no Default, Pledgor shall be
entitled to the full ownership rights as the owner of the Collateral,
including, without limitation, the voting and management rights
pertaining thereto.

(b) In the event that Pledgee becomes the registered owner of the
Pledged Shares as contemplated by Section 1 hereof, Pledgee hereby
irrevocably appoints Pledgor as Pledgee's proxy holder with respect to
the Pledged Shares with full power and authority to vote the Pledged
Shares Collateral and otherwise act with respect to the Pledged Shares
on behalf of Pledgee, provided that this proxy shall only be operative
during the period or periods in which there shall be no uncured Default.
In addition, Pledgee shall issue to Pledgor any other proxies demanded by
Pledgor pursuant to Section 705(d) of the California Corporations Code.

(c) The foregoing proxies are each coupled with an interest and
shall be irrevocable in the case of the proxy granted by Pledgor until
the final release of the Collateral pursuant to Section 6 hereof and in
the case of the proxy granted by Pledgee until the termination of
Pledgor's interest in the Collateral.

4. Default. Pledgee may elect to accelerate the entire outstanding
balance of the Note and shall thereupon and thereafter have any or all of the
rights and remedies to which a secured party is entitled in the event of
and after default under the provisions of the California Uniform Commercial
Code - Secured Transactions, as amended and in effect on the date hereof,
upon the occurrence of any of the following (each of which shall be deemed to
be a "Default" for purposes of this Agreement):

(a) The default of Pledgor to satisfy fully any amount due and
payable under any Secured Obligation within ten (10) days after the
due date provided for in the Secured Obligation or in the event of

43
<PAGE>

a breach of any other term of this Agreement that is not cured within
fifteen (15) days after written notice of such breach is given to
Pledgor.

(b) An assignment by Pledgor for the benefit of creditors; a
filing by or against Pledgor of a voluntary or involuntary petition in
bankruptcy; a filing by Pledgor of a petition or an answer seeking for
such person any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any statute, law or
regulation; a filing by Pledgor of an answer or other pleading admitting
or failing to contest the material allegations of a petition filed
against Pledgor in any proceeding of such nature; a seeking of, consent
to or acquiescence in the appointment of a trustee, receiver or
liquidator of Pledgor or of all or any substantial part of Pledgor's
assets or the appointment without Pledgor's consent or acquiescence of
such a trustee, receiver or liquidator; or the insolvency of Pledgor.

Notwithstanding the foregoing, Pledgee shall not have any right to require
the registration or qualification of the Collateral for public offering under
any federal or state securities laws.

5. Application of Proceeds of Sale. The proceeds of sale of any
Collateral sold pursuant to Section 4 hereof shall be applied by Pledgee as
follows:

First: to the payment of the reasonable costs and expenses of such sale,
including the out-of-pocket expenses of Pledgee and the reasonable fees
and out-of-pocket expenses of counsel employed in connection therewith,
and to the payment of all reasonable advances made by Pledgee for the
account of Pledgor hereunder and the payment of all reasonable costs and
expenses incurred by Pledgee in connection with the administration and
enforcement of this Agreement;

Second: to the payment in full of all amounts then due and payable
under the Secured Obligations; and
Third: to the payment to Pledgor of any remaining proceeds.

6. Final Release of Collateral. Upon the satisfaction in full of the
Secured Obligations, all right, title and interest in and to the Collateral
shall completely revest in Pledgor, and Pledgee shall execute and deliver all
documents and instruments necessary to accomplish such revesting.

7. Representations and Warranties. Pledgor hereby represents and
warrants that:

(a) Ownership of Collateral. Pledgor is the legal and equitable
owner of the Collateral, free and clear of all liens, charges,
encumbrances and security interests of every kind and nature, except for
any community property interest of the spouse, if any, of Pledgor.

(b) Authority to Pledge. Pledgor has the right and power to
pledge the Collateral in the manner hereby done or contemplated.

(c) Governmental Approval. No consent or approval of any
governmental body or regulatory authority is necessary to the validity
of the rights created hereunder.

44
<PAGE>

(d) Validity of Security Interest. This Agreement constitutes a
good, valid and subsisting security interest in all of the Collateral
for the full amount of the Secured Obligations.

8. Consent of Spouse; Further Assurances. Pledgor shall promptly
cause his spouse to execute a Consent of Spouse in the form attached to this
Agreement and deliver such executed Consent to Pledgee. Upon demand,
Pledgor shall execute and deliver to Pledgee such instruments and documents
as Pledgee may deem reasonably necessary or advisable to confirm or perfect
the rights of Pledgee under this Agreement and Pledgee's interest in the
Collateral. Pledgor shall take all necessary and reasonable action to
preserve and protect the security interest created hereby as a first lien and
encumbrance upon the Collateral.

9. Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the heirs, legal representatives, successors and permitted
assigns of each of the parties hereto.

10. Entire Agreement. This Agreement, together with the Secured
Obligations, represents the entire understanding between the parties hereto
with respect to the subject matter hereof, and supersedes all prior
agreements, understandings, discussions and negotiations. This Agreement
may not be amended, supplemented or otherwise modified except in a
writing signed by the parties hereto.

11. Counterparts. This Agreement may be executed simultaneously, in
two or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.

12. Headings; Gender; Number. The headings of the Sections herein are
inserted for convenience of reference only and are not intended to be a
part of, or to affect the meaning or interpretation of, this Agreement.
In this Agreement, unless the context requires otherwise, the masculine,
feminine and neuter genders and the singular and plural numbers include
one another.

13. No Waiver. Any forbearance or failure or delay by Pledgee in
exercising any right, power or remedy hereunder shall not be deemed to be a
waiver of such right, power or remedy, and any single or partial exercise of
any right, power or remedy shall not preclude the further exercise thereof.

14. Applicable Law. This agreement shall be governed, construed and
interpreted in accordance with the laws of the State of California without
giving effect to conflict of laws rules or principles.

15. Attorneys' Fees. If any litigation or any other proceeding is
commenced in connection with or related to this Agreement, the losing party
or parties shall pay the reasonable expenses, including without limitation
the attorneys' fees and expenses of investigation, of the prevailing
party or parties.

16. Severability. If any one or more of the provisions of this
Agreement shall be held to be invalid, illegal or unenforceable, the validity,
legality or enforceability of the remaining provisions of this Agreement
shall not be affected thereby. To the extent permitted by applicable

45
<PAGE>

law, each party waives any provision of law that renders or would render
any provision of this Agreement invalid, illegal or unenforceable.

17. Notices. All notices and other communications required or
permitted to be given pursuant to this Agreement shall be in writing and
shall be personally delivered or sent first class mail, registered or
certified, postage prepaid, to the appropriate party or parties at their
respective addresses set forth in the Note. Notices and other communications
shall be deemed delivered, in the case of personal delivery, on the date of
their receipt at the address specified for delivery of such notices, and,
in the case of delivery by mail, five (5) days after being placed in the
mail, unless otherwise specified herein. Any party may change its
address for the giving of notices and other communications by notice
given in accordance with this paragraph.

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the date first above written.

PLEDGOR:

/s/ Joshua Levy
--------------------
Joshua Levy

PLEDGEE:

HEMABIOLOGICS, INC.

By: /s/ Hal I. Lieberman
-----------------------
Hal I. Lieberman, President
Signature and Title

46
<PAGE>

CONSENT OF SPOUSE

The undersigned has read the foregoing Pledge Agreement (the "Agreement")
and is aware of and understands its terms and conditions, including the
restrictions it imposes on shares of Common Stock of HemaCare Corporation
("HemaCare") owned by Joshua Levy, including her community interest therein,
if any. The undersigned further acknowledges, understands and agrees to
comply fully with the provisions of the Agreement, and further directs the
executors of her will or the administrators of her estate or her other
representatives to take all actions necessary or appropriate to give effect
to the provisions of the Agreement. The undersigned hereby consents and
agrees to execute and deliver such instruments and documents and to do such
other acts as may be necessary or appropriate to carry out the provisions of
this Consent and the Agreement. The undersigned has been given full access
and disclosure of all facts surrounding the Agreement and HemaCare, has had
full and ample opportunity to receive independent advice with respect to her
entering into this Consent, is freely and voluntarily entering into this
Consent, and acknowledges that to the extent required the undersigned has
received notice under California Family Code 1100.

Dated:

/s/ Doris Levy
---------------------
Doris Levy

/s/ Linda McDermott
- ----------------------
Witness

HEMACARE CORPORATION
EXHIBIT 11

Net Income (Loss) per Common and Common Equivalent Share
--------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended December 31,
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
INCOME(LOSS)
------------
Income from continuing
operations................. $ 479,755 $ 676,337 $ 763,698
Discontinued operations:
Loss from discontinued
operations................ (901,706) (2,963,742) (3,309,466)
Loss on disposal of
discontinued operations,
including provision of
$1,034,787 for operating
losses during phase-out
period.................... (3,113,925) -- --
------------ ------------ ------------
Net loss..................... $(3,535,876) $(2,287,405) $(2,545,768)
============ ============ ============

PRIMARY
-------
Weighted average number of
shares outstanding........... 5,692,920 5,060,777 4,618,670
Dilutive common equivalent
shares attributable
to stock options (based on
average market price)........ 122,057 169,893 210,638
Dilutive common equivalent
shares attributable
to warrants (based on average
market price)................ 29,290 10,123 50,363
------------ ------------ ------------
Total common and common
equivalent shares - primary... 5,844,267 5,240,793 4,879,671
============ ============ ============

Primary income (loss) per share
based on common and common
equivalent shares - primary:
Income from continuing
operations.................... $ 0.08 $ 0.13 $ 0.16
Discontinued operations:
Loss from discontinued
operations.................. (0.15) (0.57) (0.68)
Loss on disposal of
discontinued operations,
including provision for
operating losses during
phase-out period............ (0.53) -- --
------------ ----------- ------------
Net loss....................... $ (0.60) $ (0.44) $ (0.52)
============ =========== ============

FULLY DILUTED
-------------
Common and common equivalent
shares used in calculating
primary earnings per share... 5,844,267 5,240,793 4,879,671
Dilutive common equivalent
shares attributable
to stock options (based on
higher ending or
average market price)........ 7,963 1,576 14,201
Dilutive common equivalent
shares attributable
to warrants (based on higher
ending or average
market price)................ 9,787 3,111 4,996
------------ ----------- ------------
Total common and common
equivalent shares -
fully diluted................ 5,862,017 5,245,480 4,898,868
============ =========== ============

Fully diluted income (loss)
per share based on common
and common equivalent shares
- fully diluted:
Income from continuing
operations.................. $ 0.08 $ 0.13 $ 0.16
Discontinued operations:
Loss from discontinued
operations................ (0.15) (0.57) (0.68)
Loss on disposal of
discontinued operations,
including provision for
operating losses
during phase-out period... (0.53) -- --
------------ ---------- ------------
Net loss..................... $ (0.60) $ (0.44) $ (0.52)
============ ========== ============
</TABLE>

EXHIBIT 21

SUBSIDIARIES OF THE REGISTRANT

HemaBiologics, Inc., a California corporation

Gateway Community Blood Program, Inc., a Missouri corporation,
which does business as Gateway Community Blood Program

EXHIBIT 23

Consent of Independent Public Accountants
-----------------------------------------

As independent public accountants, we hereby consent to the incorporation
of our reports included in this Form 10-K, into the Company's previously
filed Registration Statements on Form S-8 File No. 33-30991, File
No. 33-52622 and 33-60101 and on Form S-3 File No. 33-44869.

/s/ Arthur Andersen LLP
------------------------
ARTHUR ANDERSEN LLP

Los Angeles, California
March 28, 1996

<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from audited
financial statements contained in Form 10-K for the Quarter ending December 31,
1995 and is qualified in its entirety by reference to such financial statements.
</LEGEND>

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 996,608
<SECURITIES> 0
<RECEIVABLES> 1,721,412
<ALLOWANCES> 94,489
<INVENTORY> 468,589
<CURRENT-ASSETS> 3,223,994
<PP&E> 2,564,019
<DEPRECIATION> 1,513,443
<TOTAL-ASSETS> 4,455,656
<CURRENT-LIABILITIES> 1,841,917
<BONDS> 0
0
0
<COMMON> 12,179,302
<OTHER-SE> (10,952,612)
<TOTAL-LIABILITY-AND-EQUITY> 4,455,656
<SALES> 10,782,884
<TOTAL-REVENUES> 10,782,884
<CGS> 8,075,568
<TOTAL-COSTS> 8,075,568
<OTHER-EXPENSES> 2,225,453
<LOSS-PROVISION> 29,015
<INTEREST-EXPENSE> 47,463
<INCOME-PRETAX> 479,755
<INCOME-TAX> 0
<INCOME-CONTINUING> 479,755
<DISCONTINUED> (4,015,631)<F1>
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,535,876)
<EPS-PRIMARY> (0.60)
<EPS-DILUTED> (0.60)
<FN>
<F1>Discontinued includes $901,706 from discontinued operations and $3,113,925 from
loss on disposal of discontinued operations. Additional information with respect
discontinued operations is contained in Note 11 in Notes to Consolidated Financial
Statements.
</FN>

</TABLE>