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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A-2
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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
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 ___
As of November 13, 1996, 7,177,515 shares of Common Stock of the
Registrant were issued and outstanding.
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<PAGE>
INDEX
HEMACARE CORPORATION
The undersigned registrant hereby amends the following items,
financial statements, exhibits or other portions of its Quarterly
Report for the fiscal quarter ended September 30, 1996 on Form 10-Q as
set forth in the pages attached hereto:
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
PART II. OTHER INFORMATION
Item 6. Exhibits
This amendment is being made to properly disclose the effects of
restating previously filed information.
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this amendment to be signed on its
behalf by the undersigned, thereunto duly authorized.
Date February 13, 1997 HEMACARE CORPORATION
-----------------
By: /s/ Sharon C. Kaiser
-------------------------
Sharon C. Kaiser, Vice
President, Finance and
Chief Financial Officer
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
HEMACARE CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
<S> <C> <C>
September 30, December 31,
1996 1995
As Restated
------------- --------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 1,369,000 $ 997,000
Accounts receivable, net of
allowance for doubtful
accounts - $88,000 (1996) and
$95,000 (1995) 1,690,000 1,627,000
Product inventories 142,000 141,000
Supplies 297,000 328,000
Prepaid expenses 199,000 117,000
Note receivable from officer
- current 15,000 15,000
------------- -------------
Total current assets 3,712,000 3,225,000
Plant and equipment, net of
accumulated depreciation and
amortization of $1,788,000 (1996)
and $1,513,000 (1995) 870,000 1,051,000
Note receivable from officer
- non-current 86,000 94,000
Other assets 98,000 87,000
------------- -------------
$ 4,766,000 $ 4,457,000
============= =============
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 721,000 $ 473,000
Accrued blood purchases 230,000 252,000
Accrued payroll and payroll taxes 247,000 310,000
Other accrued expenses 227,000 239,000
Current obligations under capital
leases 234,000 209,000
Reserve for discontinued
operations - current 345,000 336,000
------------- -------------
Total current liabilities 2,004,000 1,819,000
Obligations under capital leases,
net of current portion 557,000 649,000
Other accrued expenses - long-term 187,000 163,000
Reserve for discontinued operations
- non-current - 600,000
Commitments and contingencies
Shareholders' equity:
Common stock, without par value -
20,000,000 shares authorized,
7,176,683 and 5,911,285 issued
and outstanding in 1996 and 1995,
respectively 13,468,000 12,179,000
Accumulated deficit (11,450,000) (10,953,000)
------------- -------------
Total shareholders' equity 2,018,000 1,226,000
============= =============
$ 4,766,000 $ 4,457,000
============ =============
</TABLE>
3
See Notes to Consolidated Financial Statements.
<PAGE>
HEMACARE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Three months ended September 30, Nine months ended September 30,
1996 1995 1996 1995
As Restated As Restated
Revenues: -------------- -------------- ------------- ---------------
Blood products $ 1,645,000 $ 1,752,000 $ 5,041,000 $ 5,103,000
Blood services 981,000 963,000 3,073,000 2,821,000
------------- ------------- ------------- -------------
Total revenues 2,626,000 2,715,000 8,114,000 7,924,000
Operating costs and expenses:
Blood products 1,621,000 1,318,000 5,282,000 3,887,000
Blood services 641,000 638,000 2,132,000 1,966,000
------------- ------------- ------------- -------------
Total operating costs
and expenses 2,262,000 1,956,000 7,414,000 5,853,000
------------- ------------- ------------- -------------
Operating profit 364,000 759,000 700,000 2,071,000
General and administrative
expense 529,000 499,000 1,759,000 1,461,000
Interest expense 7,000 3,000 39,000 5,000
------------- ------------- ------------- -------------
Income (loss) from continuing
operations before income
taxes (172,000) 257,000 (1,098,000) 605,000
Provision for income taxes - - - -
Discontinued Operations:
Loss from discontinued
operations - (232,000) - (767,000)
Gain on disposal of discontinued
operations 600,000 - 600,000 -
------------- ------------- ------------- -------------
Net income (loss) $ 428,000 $ 25,000 $ (498,000) $ (162,000)
============= ============= ============= ==============
Per share amounts:
Income (loss) from
continuing operations $ (0.02) $ 0.04 $ (0.17) $ 0.11
Discontinued Operations:
Loss from discontinued
operations - (0.04) - (0.14)
Gain on disposal of
discontinued operations 0.09 - 0.09 -
------------- ------------- ------------- -------------
Net income (loss) $ 0.07 $ 0.00 $ (0.08) $ (0.03)
============= ============= ============= =============
Weighted average common and
common equivalent shares
outstanding 6,384,838 6,020,684 6,477,203 5,622,215
============= ============= ============= =============
</TABLE>
4
See Notes to Consolidated Financial Statements.
<PAGE>
HEMACARE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
Nine months ended September 30,
1996 1995
As Restated
-------------- --------------
Cash flows from operating
activities:
Net loss $ (498,000) $ (162,000)
Adjustments to reconcile net
loss to net cash used in
operating activities:
Depreciation and amortization 265,000 384,000
Provision for losses on
accounts receivable - 1,000
Decrease in reserve for
discontinued operations (600,000) -
Changes in operating assets and
liabilities:
Decrease (increase) in accounts
receivable (63,000) 355,000
Increase in inventories,
supplies and prepaid expenses (52,000) (62,000)
Increase in other assets, net (11,000) (81,000)
Increase (decrease) in accounts
payable and accrued expenses 151,000 (520,000)
Increase (decrease) in other
accrued expenses - long-term 24,000 (13,000)
Reserve for discontinued
operations 9,000 -
------------ ------------
Net cash used in operating
activities (775,000) (98,000)
------------ ------------
Cash flows from investing activities:
Decrease (increase) in note
receivable from officer 8,000 (16,000)
Decrease in short-term investments - 300,000
Sale (purchase) of plant and
equipment, net 8,000 (113,000)
----------- ------------
Net cash provided by investing
activities 16,000 171,000
----------- ------------
Cash flows from financing activities:
Net proceeds from issuance of
common stock 1,289,000 834,000
Principal payments on line of
credit and capital leases (158,000) (299,000)
----------- ------------
Net cash provided by financing
activities 1,131,000 535,000
----------- ------------
Increase (decrease) in cash and
cash equivalents 372,000 608,000
Cash and cash equivalents at
beginning of period 997,000 786,000
----------- ------------
Cash and cash equivalents at end
of period $1,369,000 $ 1,394,000
=========== ============
Supplemental disclosure:
Interest paid $ 60,000 $ 41,000
=========== ============
Items not impacting cash flows:
Increase in capital lease
obligations $ 92,000 $ 167,000
=========== ============
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
HEMACARE CORPORATION
Notes to Consolidated Financial Statements (Unaudited)
Note 1 - Basis of Presentation and General Information
The accompanying unaudited consolidated financial statements of
HemaCare Corporation (the "Company" or "HemaCare") have been prepared
in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q
and Rule 10-01 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been
included. Operating results for the three and nine months ended
September 30, 1996 are not necessarily indicative of the results that
may be expected for the year ending December 31, 1996. Certain 1995
amounts have been reclassified to conform to the 1996 presentation.
For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1995.
From 1990 to November 1995, the Company, through its wholly owned
subsidiary HemaBiologics, Inc. ("HBI"), conducted research and
development of ImmupathTM, an anti-HIV hyperimmune plasma-based
product intended to be used in the treatment of Acquired Immune
Deficiency Syndrome ("AIDS"). In connection with this project, the
Company licensed the rights to the United States patent to
commercialize Immupath from Medicorp, Inc. ("Medicorp"). In November
1995, the Company's Board of Directors decided to discontinue the
operations of HBI. At the time the operations were discontinued, each
party to the license alleged that the other party was in breach of the
agreement. (Notes 2 and 5).
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.
The Company opened its University of Southern California Blood Center
("USC Blood Center"), a full-service blood donation and services
facility, 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 for the three-year period
ending February 1999. Pathologists on the USC medical faculty provide
medical direction services for the USC Blood Center as consultants to
the Company.
6
<PAGE>
Note 2 - 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 and provided a reserve for estimated
operating losses from the November 30, 1995 measurement date through
December 1996, the expected date of substantial completion of
disposal. The loss on the disposition of HBI's operations has been
accounted for as discontinued operations, and prior year financial
statements have been restated to reflect the discontinuation of these
operations. The net loss from such operations for the three months
and nine months ended September 30, 1995 was $232,000 and $767,000,
respectively. For the three-month and nine-month periods ended
September 30, 1996, the Company's reserve for discontinued operations
decreased by $647,000 and increased by $591,000, respectively.
The reserve established for estimated HBI operating losses during the
period of disposal included a $600,000 contingent liability for the
resolution of the dispute with Medicorp. In July 1996, the dispute was
settled without any payment by the Company, and the Company recognized
a $600,000 gain on disposal of discontinued operations. (See Note 5).
In June 1996, the Company signed an amended agreement to sell
substantially all the tangible assets of the discontinued operations
and two of the three remaining FDA source plasma licenses. The sale
and transfer of the licenses was contingent upon obtaining FDA
approval which was received on October 21, 1996. The buyer has
delivered a promissory note in payment of the purchase price for the
tangible assets sold which is collateralized by these assets. However,
the buyer's ability to make payment on the note, which was due
November 2, 1996, is dependent upon the completion of a financing
transaction by the buyer. If, upon completion of the sale transaction,
the remaining reserve exceeds any estimated residual costs of
disposition, the Company will reduce its liabilities by the amount of
the remaining reserve for disposal and increase its net income and
retained earnings in a corresponding amount.
Note 3 - Line of Credit
Since August 1991, the Company has maintained a line of credit with a
commercial bank secured by its accounts receivable, inventory and
equipment. The credit line is in effect through April 30, 1997. Under
the terms of the credit line agreement, as amended, the Company may
borrow up to 70% of eligible accounts receivable, up to a maximum of
$700,000 and must maintain certain ratios, including working capital,
as defined, of $500,000 and a tangible net worth of not less than $1.2
million prior to March 31, 1997 and not less than $1.8 million
thereafter. The Company was in compliance with all covenants of its
borrowing agreement, as amended, at September 30, 1996. Interest on
credit line borrowings is at the lender's prime rate (8.25% at
September 30, 1996) plus one-half of a percentage point. As of
September 30, 1996, there was no balance outstanding under the line of
credit.
7
<PAGE>
Note 4 - Shareholders' Equity
In August 1996, the Company completed a $1.2 million private placement
of 1.2 million shares of its common stock.
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 prior to December 31, 1996. The Company does not expect
the adoption of SFAS 123 to materially impact the Company's financial
position or its results of operations.
Note 5 - 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. A trial date has been set for October 29, 1997; however, 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 conditions and
results of operations.
In November 1995, the Company terminated its license agreement with
Medicorp (Note 1) due to an alleged 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 denied that it had breached the
license agreement and alleged that the Company was liable for
royalties of approximately $425,000 under the license agreement and
that its warrants remained outstanding. On July 19, 1996, the Company
and Medicorp Inc. entered into a settlement agreement and mutual
release resolving all disputes between them related to their February
1993 license agreement. In the Medicorp settlement agreement, the
parties agreed (i) to terminate the license agreement, (ii) to
mutually release each other from all prior monetary and other breaches
of the license agreement, (iii) that the Medicorp warrants would
remain outstanding and exercisable and (iv) that the Company would
grant a nonexclusive royalty-free license to Medicorp to certain
research data and other documentation associated with the Immupath
project.
Note 6 - Related Party Information
In 1995 and 1994, the Company made a series of personal loans to
Joshua Levy, then an officer and director of the Company, totaling
$98,307. The proceeds of these loans were used to refinance existing
debt which was collateralized by HemaCare stock owned by Dr. Levy. In
January 1996, these individual notes were consolidated into a
promissory note, collateralized by HemaCare stock owned by Dr. Levy,
which accrues interest at a rate equal to the rate the Company pays
under its line of credit (Note 3), adjusted quarterly. Interest
8
<PAGE>
accrued related to the loans made to Dr. Levy was $2,154 for the three
months and $6,392 for the nine months ended September 30, 1996 and
$2,445 for the three months and $7,092 for the nine months ended
September 30, 1995, respectively. The note requires four annual
installment payments of $15,000 due on January 31, with the balance of
the principal and accrued interest due on January 31, 2000. The
Company received its first annual installment payment of $15,000 in
January 1996.
Note 7 - Recent Auditing Pronouncement
In the first quarter of 1996, the Company adopted Statement of
Financial Auditing Standards No. 121 "Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets to be Disposed Of"
("SFAS 121"). The adoption of SFAS 121 did not impact the Company's
financial position or its results of operations.
Note 8 - Restatement
The accompanying unaudited consolidated financial statements and notes to
financial statements of the Company have been restated to reflect the
settlement of a dispute with a license holder in July 1996 (See Note 2)
and an adjustment of materials inventory related to a prior period. The
effect of these events were not previously recognized in the Company's
September 30, 1996 unaudited consolidated financial statements. These
corrections increased net income by $600,000 and $553,000 and increased
net income per share by $.10 and $.08 per share for the three and nine
months periods ended September 30, 1996, respectively.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
27 Financial Data Schedule for the Quarter Ending
September 30, 1996.
9
<PAGE>
Index to Exhibits
<TABLE>
<CAPTION>
<S> <C> <C>
Method of Filing
----------------
27 Financial Data Schedule for the quarter
ending September 30, 1996.............. Filed herewith electronically
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<LEGEND>
This schedule contains summary financial information extracted from unaudited
financial statements contained in Form 10-Q for the quarter ending September
30,1996 and is qualified in its entirety to such financial statements.
[/LEGEND]
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,368,670
<SECURITIES> 0
<RECEIVABLES> 1,777,764
<ALLOWANCES> 87,858
<INVENTORY> 141,654
<CURRENT-ASSETS> 3,712,002
<PP&E> 2,657,710
<DEPRECIATION> 1,787,570
<TOTAL-ASSETS> 4,765,515
<CURRENT-LIABILITIES> 2,003,532
<BONDS> 0
0
0
<COMMON> 13,468,200
<OTHER-SE> (11,450,177)
<TOTAL-LIABILITY-AND-EQUITY> 4,765,515
<SALES> 2,625,725
<TOTAL-REVENUES> 2,625,725
<CGS> 2,261,726
<TOTAL-COSTS> 2,261,726
<OTHER-EXPENSES> 529,077
<LOSS-PROVISION> 87,858
<INTEREST-EXPENSE> 13,604
<INCOME-PRETAX> (171,636)
<INCOME-TAX> 0
<INCOME-CONTINUING> (171,636)
<DISCONTINUED> 600,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 428,364
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
