=============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
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 August 12, 1999, 7,437,582 shares of Common Stock of the
Registrant were issued and outstanding.
===========================================================================
<PAGE>
INDEX
HEMACARE CORPORATION
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated balance sheets - June 30, 1999 (unaudited) and
December 31, 1998
Consolidated statements of operations - Three and six months
ended June 30, 1999 and 1998 (unaudited)
Consolidated statements of cash flows - Six months ended June
30, 1999 and 1998 (unaudited)
Notes to consolidated financial statements - June 30, 1999
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits
SIGNATURES
2
<PAGE>
Item 1. Financial Statements
- ------- ---------------------
HEMACARE CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................... $ 866,000 $ 1,372,000
Marketable securities............................... 576,000 288,000
Accounts receivable, net of allowance for
doubtful accounts - $439,000 (1999) and
$596,000 (1998)................................... 3,110,000 3,038,000
Product inventories................................. 50,000 87,000
Supplies............................................ 635,000 604,000
Prepaid expenses.................................... 154,000 160,000
Note receivable from officer - current.............. 23,000 24,000
------------- -------------
Total current assets........................... $ 5,414,000 $ 5,573,000
Plant and equipment, net of accumulated
depreciation and amortization of
$1,921,000 (1999) and $1,869,000 (1998)............. 1,188,000 1,289,000
Goodwill, net of amortization of $51,000 (1999) and
$11,000 (1998)....................................... 702,000 742,000
Note receivable from officer - non-current............ 40,000 49,000
Other assets.......................................... 10,000 9,000
------------- -------------
$ 7,354,000 $ 7,662,000
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................... $ 1,177,000 $ 1,414,000
Accrued payroll and payroll taxes................... 786,000 802,000
Accrued professional fees........................... 71,000 173,000
Other accrued expenses.............................. 127,000 418,000
Current portion of obligations under capital leases. 154,000 203,000
Current portion of notes payable.................... 136,000 109,000
Reserve for discontinued operations................. 110,000 110,000
------------- -------------
Total current liabilities..................... 2,561,000 3,229,000
Obligations under capital leases, net
of current portion.................................. 549,000 627,000
Notes payable, net of current portion................. 420,000 491,000
Other long-term liabilities........................... 24,000 24,000
Commitments and contingencies.........................
Shareholders' equity:
Preferred stock, no par value - 5,000,000 shares
authorized, 450,000 issued and outstanding........ 75,000 75,000
Common stock, without par value -
20,000,000 shares authorized,
7,437,582 and 7,281,120 issued and outstanding in
1999 and 1998.................................... 13,649,000 13,584,000
Accumulated deficit................................. (9,924,000) (10,368,000)
------------- -------------
Total shareholders' equity............................ 3,800,000 3,291,000
------------- -------------
$ 7,354,000 $ 7,662,000
============= =============
</TABLE>
The accompanying notes are an integral
part of these consolidated financial statements.
3
<PAGE> 4
HEMACARE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues:
Blood management programs.... $ 2,035,000 $ 852,000 $ 3,573,000 $ 1,703,000
Regional operations
Blood products............. 1,122,000 677,000 2,189,000 1,259,000
Blood services............. 1,837,000 1,314,000 3,685,000 2,799,000
------------- ------------ ------------- -------------
Total revenue............. 4,994,000 2,843,000 9,447,000 5,761,000
Operating costs and expenses:
Blood management programs.... $ 1,747,000 $ 787,000 $ 3,207,000 $ 1,601,000
Regional operations
Blood products............. 816,000 477,000 1,553,000 946,000
Blood services............. 1,430,000 944,000 2,852,000 2,062,000
------------- ------------ ------------- -------------
Total operating costs and
expenses................ 3,993,000 2,208,000 7,612,000 4,609,000
------------- ------------ ------------- -------------
Operating profit........... 1,001,000 635,000 1,835,000 1,152,000
General and administrative
expense...................... 791,000 585,000 1,477,000 1,086,000
Gain on sale of Gateway - - 100,000 -
Community Blood Program......
------------- ------------ ------------- -------------
Income from continuing
operations before income
taxes........................ 210,000 50,000 458,000 66,000
Provision for income taxes...... (9,000) - (14,000) -
------------- ------------ ------------- -------------
Net income................... $ 201,000 $ 50,000 $ 444,000 $ 66,000
============= ============ ============= ==============
Income per shares:
Basic........................ $ 0.03 $ 0.01 $ 0.06 $ 0.01
============= ============ ============= ==============
Diluted...................... $ 0.02 $ 0.01 $ 0.06 $ 0.01
============= ============ ============= ==============
Weighted average shares
outstanding - basic........ 7,392,238 7,281,120 7,336,679 7,239,318
============ =========== ============ =============
Weighted average shares
outstanding - dilutive..... 8,382,023 7,302,852 7,924,092 7,268,926
============= ============ ============= ==============
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
4
<PAGE> 5
HEMACARE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six months ended June 30,
1999 1998
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income................................................... $ 444,000 $ 66,000
Adjustments to reconcile net income to
net cash provided by (used in) operating activities:
Depreciation and amortization............................ 146,000 76,000
Issuance of common stock and options for compensation.... 65,000 6,000
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable............... (72,000) 55,000
(Increase) decrease in inventories, supplies and
prepaid expenses....................................... 13,000 (90,000)
(Increase) in other assets, net.......................... (1,000) -
Decrease in accounts payable, accrued expenses and
other liabilities...................................... (633,000) (96,000)
Other.................................................... - 1,000
------------ ------------
Net cash provided by (used in) operating activities.......... (38,000) 18,000
Cash flows from investing activities:
Decrease in notes receivable from related parties........ 10,000 8,000
Increase in marketable securities........................ (288,000) (213,000)
Purchase of plant and equipment, net..................... (19,000) (4,000)
------------ ------------
Net cash used in investing activities........................ (297,000) (209,000)
Cash flows from financing activities:
Principal payments on line of credit, term loan
and capital leases..................................... (171,000) (63,000)
------------ ------------
Net cash used in financing activities.................... (171,000) (63,000)
------------ ------------
Decrease in cash and cash equivalents.................... (506,000) (254,000)
Cash and cash equivalents at beginning of period......... 1,372,000 1,249,000
------------ ------------
Cash and cash equivalents at end of period............... $ 866,000 $ 995,000
============ ============
Supplemental disclosure:
Interest paid............................................ $ 45,000 $ 14,000
============ ============
Income taxes paid........................................ $ 18,000 $ -
============ ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
5
<PAGE>
HemaCare Corporation
Notes to Consolidated Financial Statements
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. 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 six months ended
June 30, 1999, are not necessarily indicative of the results that
may be expected for the year ending December 31, 1999. Certain
1998 amounts have been reclassified to conform to the 1999
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, 1998.
Coral Blood Services, Inc. ("CBS"), a wholly owned subsidiary of
the Company, was formed in October 1998, for the purpose of
purchasing substantially all of the assets of a company which had
been in the business of supplying blood products and services to
hospitals primarily in the eastern United States. (See Note 2.)
Note 2 - Coral Blood Services
- ------------------------------
In October 1998, the Company purchased, through its wholly owned
subsidiary CBS, substantially all of the assets of Coral
Therapeutics, Inc. ("Coral") from Coral's secured lender. Prior
to the acquisition, Coral provided blood services to major
university, teaching and community hospitals in Maine, New
Hampshire, Massachusetts, Connecticut, New York, North Carolina
and other states. The Company has concluded new contractual
agreements with several former Coral customers; however, the
Company operates under interim agreements with certain former
Coral customers.
Note 3 - Line of Credit and Note Payable
- -----------------------------------------
Line of Credit
The Company maintains a line of credit with a commercial bank
secured by its accounts receivable, inventory and equipment. In
February 1999, the commercial bank increased the Company's line
of credit borrowing limit to $1.2 million, from $700,000, and
converted the $600,000 balance then outstanding on the line of
credit to a four-year term loan.
Under the terms of the credit agreement, the Company may borrow
up to 70% of eligible accounts receivable, up to a maximum of
$1.2 million at an interest rate of prime plus 0.5% and must
maintain certain ratios. The Company was in compliance with all
covenants of its borrowing agreement at June 30,1999, and there
was no balance outstanding under the line of credit. The line of
credit matures in June 2000.
6
<PAGE>
Note Payable
The Company has a term note with a bank, payable in 48 monthly
payments of principal and interest of approximately $15,000
through February 2003. The note bears interest at the prime rate
plus one percent (8.75% at June 30, 1999).
Note 4 - Commitments and Contingencies
- --------------------------------------
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. Apheresis platelet
products obtained from paid donors, including the Company's
Sherman Oaks center's paid donors, are exempted from this law by
a state statute which contains a "sunset" provision. Unless a new
exemption is obtained, the existing exemption will expire under
its sunset provision on December 31, 2001. The Company is
evaluating a number of available options with regard to the
expiration of the exemption. Should the Company be unable to
continue to sell apheresis platelets collected from paid donors,
the Company's revenue and operating profit could be materially
adversely affected.
The State and federal laws set forth antikickback and self-
referral prohibitions and otherwise regulate financial
relationships between blood banks and hospitals, physicians and
other persons who refer business to them. While the Company
believes its present operations comply 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.
Note 5 - Segment and Related Party Information
- ----------------------------------------------
Business Segments
The Company operates in three business segments, each of which
represents a separate business activity. The segments and a
description of their business activities follows:
- - Blood Management Programs ("BMP"). Outsource programs which
provide all or a major portion of the blood banking functions
to a hospital.
- - Blood Products. The collection, manufacture and distribution
of apheresis and whole blood derived products.
- - Blood Services. Therapeutic apheresis and stem cell
collection procedures, autologous interoperative transfusion
and donor testing.
Management uses more than one measure to evaluate segment
performance. However, the dominant measurements are consistent
with the Company's consolidated financial statements, which
present revenue from external customers and pretax income for
each segment.
Related Party Loan
In 1995 and 1994, the Company made a series of personal loans to
Dr. Joshua Levy, then an officer and director of the Company. The
Company received installment payments on these loans in 1997 and
1996. Effective July 31, 1997, the Company entered into an
7
<PAGE>
agreement with Dr. Levy to forgive the remaining balance of Dr.
Levy's loans, including interest accrued at a 10% annual rate,
over a five-year period so long as Dr. Levy remains employed by
the Company.
Note 6 - Gain on Disposition
- ----------------------------
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 Missouri and Illinois. In August 1997, Gateway's operations
were sold.
The Company is entitled to receive a percentage of Gateway's
revenues, as defined, over the five years subsequent to the date
of sale, up to maximum of $422,000. An additional payment of
$100,000 was due when Gateway received a Food and Drug
Administration establishment license. In the first quarter of
1999, the Company realized an additional $100,000 gain on the
disposition as Gateway received its license.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
------------------------------------------------------------
HemaCare's operations include blood management programs ("Blood
Management Programs" or "BMPs") and regional sales of blood
products ("Blood Products") and blood services ("Blood Services").
A HemaCare Blood Management Program allows a hospital to outsource all
or a portion of its blood procurement and donor center management
operations and other blood related activities. Blood Products include
apheresis platelets and whole blood components such as red blood cells
and plasma products. Blood Services include therapeutic apheresis
procedures, stem cell collection and cyropreservation and donor
testing.
In October 1998, the Company, through its subsidiary Coral Blood
Services, Inc. ("CBS"), acquired existing blood products and
services operations in the eastern United States. These consist of
Blood Management Programs and other blood services provided to
hospitals and medical centers. Presently, CBS is providing services to
some of its customers under interim arrangements, while negotiating
new contractual agreements.
In June 1999, the Company commenced a Blood Management Program with
the University of California at Irvine ("UCI"). The Company now
operates six blood management programs. In addition to the UCI
program, the Company operates the University of Southern California
("USC") program, initiated in 1996, in Southern California and four
East Coast programs. The East Coast programs are Dartmouth-Hitchcock
Medical Center ("DHMC"), Maine Medical Center ("MMC"), St. Vincent
Hospital ("St. Vincent") and University of North Carolina ("UNC").
Prior to October 1998, Coral Therapeutics, Inc. operated these
programs.
8
<PAGE>
The Gateway Community Blood Program ("Gateway") located in St.
Louis, Missouri, and the Citrus Valley Health Partners ("Citrus
Valley") Blood Management Program, initiated in 1995 and 1996, failed
to meet the Company's profitability criteria. Gateway was sold in
August 1997, and the Citrus Valley contract was terminated in July
1998.
All comparisons within the following discussions are to the comparable
periods of the previous year.
Revenues, Operating Profit and Net Income
- -----------------------------------------
Total revenues increased 76% ($2,151,000) in the three-month and 64%
($3,686,000) in the six-month periods of 1999. Operating profit
increased by 58% ($366,000) in the three-month and 59% ($683,000) in
the six-month periods of 1999. Net income increased by 302%
($151,000) in the three-month and 527% ($378,000) for the six months
ended June 30, 1999. In both periods, the increases were due to the
addition of the CBS operations and to higher California Blood Products
revenue, partially offset by lower California BMP and Blood Services
revenue. In addition, the Company realized a $100,000 gain on the
sale of Gateway, in the first half of 1999.
Blood Management Programs
Revenue increased 139% ($1,183,000) in the second quarter and 110%
($1,870,000) in the first half of 1999. BMP operating profit increased
by 343% ($233,000) in the second quarter and increased by 259%
($264,000) during the six months ended June 30, 1999. The revenue
increases were due to the addition of the CBS operations and the UCI
BMP, partially offset by the termination of the Citrus Valley contact.
The increase in operating profit resulted from the addition of the UCI
BMP, improved profitability of CBS BMP operations and the termination
of the Citrus Valley contract.
Blood Products
Blood Products revenues increased 66% ($445,000) in the second quarter
and 74% ($930,000) in the first half of 1999. The operating profit on
Blood Products sales increased by 53% ($106,000) in the second quarter
and increased by 103% ($323,000) during the six months ended June 30,
1999. These increases were the result of higher volume apheresis
platelet sales in California, partially offset by a decrease in the
average price per apheresis platelet product sold and by lower whole-
blood component sales volumes and prices.
Blood Services
Blood Services revenues increased 40% ($523,000) in the second quarter
and 32% ($886,000) in the first six months of 1999. Blood services
operating profit increased by 10% ($37,000) in the second quarter and
increased by 13% ($96,000) in the first half of 1999. The increases
resulted from the addition of CBS operations, partially offset by
decreases in California-based revenue. In California, the volume of
albumin sales and the average price per therapeutic apheresis
procedure both decreased in 1999. When the Company is able to obtain
an excess supply of albumin, a protein replacement fluid used in
certain therapeutic procedures, at a favorable price, it is offered
for sale to non-hospital customers. There was no excess albumin for
sale in 1999. The decrease in the average price per California
therapeutic procedure was due primarily to lower average usage of
albumin.
9
<PAGE>
Gain on Disposition
As a part of the terms of the sale of Gateway's operations, the
Company was entitled to receive a payment of $100,000 when Gateway
received a Food and Drug Administration establishment license. In the
first quarter of 1999, the Company realized an additional $100,000
gain on the disposition as Gateway received its license.
General and Administrative Expense
General and administrative expense increased 35% ($205,000) in the
second quarter and 36% ($390,000) in the first half of 1999. The
increase in general and administrative expenses is consistent with the
additional overhead costs required to support CBS operations. As a
percentage of revenue, general and administrative expenses decreased
to 16% during the three and six-month periods ended June 30, 1999,
compared to 21% and 19% during the same periods of 1998.
Liquidity and Capital Resources
At June 30, 1999, the Company had cash and cash equivalents and
marketable securities of $1,442,000 and working capital of $2,853,000.
The Company has a $1,200,000 line of credit with a commercial bank
which is in effect through June 1, 2000. Under the terms of the credit
line agreement, the Company may borrow up to 70% of eligible accounts
receivable, up to a maximum of $1,200,000, and must maintain certain
financial ratios. The Company was in compliance with all covenants of
its borrowing agreement at June 30, 1999, and there were no borrowings
outstanding on the line of credit at that date.
The Company also has a term note with a bank of $600,000, payable in
48 monthly payments of principal and interest of approximately $15,000
through February 2003. The note bears interest at the prime rate plus
one percent, (8.75% as of June 30, 1999). The term note is cross
collateralized with the Company's line of credit.
The Company has concluded new contractual agreements with several East
Coast customers; however, the Company still operates under interim
arrangements with certain East Coast customers. The Company expects
to enter contractual agreements with most of these customers.
However, there can be no assurance that satisfactory contracts can be
negotiated with all major customers, and the loss of one or more major
customers could have an adverse affect on the Company's revenue and
operating profit.
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. Apheresis platelet products
obtained from paid donors, including the Company's Sherman Oaks
center's paid donors, are exempted from this law by a state statute
which contains a "sunset" provision. Unless a new exemption is
obtained, the existing exemption will expire under its sunset
provision on December 31, 2001. The Company is evaluating a number of
alternatives with regard to continuing its California based apheresis
platelet business after the year 2001. However, there can be no
assurance that these initiatives will be successful. Should the
Company be unable to continue to sell apheresis platelets collected
from paid donors, the Company's revenue and operating profit could be
materially adversely affected.
10
<PAGE>
Joshua Levy, M.D., medical director of the Company and a shareholder,
treats patients through his private practice, who require therapeutic
services. Amendments to the Federal self-referral laws and related
regulations which became effective in 1995 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 represented approximately 2% ($295,000)
of the Company's 1998 revenues. New regulations which have been
proposed but not yet issued may provide an exemption for therapeutic
apheresis services. If the new regulations do not provide an exemption
for therapeutic apheresis services, the Company could lose the revenue
from its services for Dr. Levy's Medicare and MediCal patients.
The Company anticipates that cash flow from profitable operations,
collection of the accounts receivable purchased from Coral, borrowing
available from its bank line of credit and its cash and investments on
hand will be sufficient to provide funding for its existing needs
during the next twelve months.
Year 2000 Disclosure
The Company has developed and is implementing a comprehensive program
to address year 2000 issues. The program considers the effect of the
Year 2000 on the Company's internal systems, customers, products and
services, production systems, and suppliers and other critical
business partners. Implementation of the Company's plan is
substantially complete, and the Company believes that all identified
potential Year 2000 issues have been effectively resolved. The cost to
identify and resolve Year 2000 issues was not material to the
Company's financial results and has been expensed as incurred.
Management does not believe that there will be a significant
disruption to the Company's business due to Year 2000 issues. However,
the Company has begun contingency planning to address any situations
which may arise in which the planning of the Company or third parties
prove to be inadequate, and where practical alternatives are
available. There can be no assurance that the Company's Year 2000
program or the programs of critical business partners will be
successful, and failure could have a material adverse affect on the
Company's business and results of operations.
Factors Affecting Forward-Looking Information
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" from liability for forward-looking statements. Certain
information included in this Form 10-Q and other materials filed or to
be filed by the Company with the Securities and Exchange Commission
(as well as information included in oral statements or other written
statements made or to be made by or on behalf of the Company) are
forward-looking, such as statements relating to operational and
financing plans, competition, the effects of discontinued operations,
the effect of state and Federal regulation and demand for the
Company's products and services. Such forward-looking statements
involve important risks and uncertainties, many of which will be
beyond the control of the Company. These risks and uncertainties could
significantly affect anticipated results in the future, both short-
term and long-term, and accordingly, such results may differ from
those expressed in forward-looking statements made by or on behalf of
the Company. These risks and uncertainties include, but are not
limited to, those relating to the ability of the Company to expand its
operations, obtain additional financing, to repay existing debt, to
retain existing customers and obtain new customers, to retain the
former customers of Coral, to improve the profitability of the
Company's other operations, the effects of the Year 2000 and to comply
with the covenants under its bank line of credit. Each of these risks
and uncertainties as well as others are discussed in greater detail in
11
<PAGE>
the preceding paragraphs of this Management's Discussion and Analysis
of Financial Condition and Results of Operations and in the Company's
Annual Report on Form 10-K for the year ended December 31, 1998.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
See disclosure in Form 10-K for the year ended December
31, 1998.
Item 4. Submission of Matters to a Vote of Security Holders
a. The Company's Annual Meeting of Shareholders (the
"Meeting") held on June 17, 1999 was adjourned and
reconvened on July 29, 1999.
b. The following table shows the tabulation of votes for
all matters put to vote at the Meeting.
<TABLE>
<CAPTION>
Against/ Broker
Matters Put to Vote For Withheld Abstain Non-Votes
- -------------------------- ----------- ---------- ----------- ---------
<C> <C> <C> <C> <C>
1. Proposal to Amend
bylaws to provide a
range in the
number of authorized
directors of the
Company of five to
nine directors.......... 3,886,108 112,420 727,176 1,451,707
2. Election of Five
Directors
Alan C. Darlington...... 5,434,305 743,106
Charles R. Schwab, Jr... 5,434,305 743,106
Julien L. Steffenhagen.. 5,434,305 743,106
William D. Nicely....... 5,434,305 743,106
Robert L. Johnson....... 5,434,305 743,106
3. Proposal to amend
Restated Articles of
Incorporation to
change the name of
the Company to
Comprehensive Blood
Services................ 5,157,168 83,605 936,638
12
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
- ------------------------------------------
a. Exhibits
4.1 Loan Agreement the Registrant and Bank Leumi USA,
dated June 1, 1999
11 Net Income (Loss) per Common and Common Equivalent
Share
27 Financial Data Schedule for the Quarter Ended June
30, 1999.
b. The Company did not file any reports on Form 8-K during
the three months ended June 30, 1999.
SIGNATURES
Pursuant to the requirements 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.
Date August 16, 1999 HEMACARE CORPORATION
----------------------------
(Registrant)
/s/ David Fractor
-----------------------------
David Fractor, Chief Financial
Officer
13
<PAGE>
INDEX TO EXHIBITS
</TABLE>
<TABLE>
<CAPTION>
<C> <C> <C>
Method of Filing
------------------
4.1 Loan Agreement between the Registrant and Bank
Leumi USA,dated June 1, 1999 Filed herewith
electronically
11 Net Income (Loss) per Common and Common
Equivalent Share................................ Filed herewith
electronically
27 Financial Data Schedule for the quarter ended
June 30, 1999................................... Filed herewith
electronically
</TABLE>
14
<PAGE>
[LOGO]
BANK LEUMI USA
- -------------------------
- -------------------------
- -------------------------
Member FDIC
<TABLE>
<CAPTION>
LOAN AGREEMENT
- ---------------------------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO CALL COLLATERAL ACCOUNT OFFICER INITIALS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$1,200,000.00 06-01-1999 05-30-2000 1-1 04A0 030 xxxxxxxxxx KXA
- ---------------------------------------------------------------------------------------------------------
References in the shaded area are for lender's use only and do not limit the applicability of this
document to any particular loan or item.
- ---------------------------------------------------------------------------------------------------------
</TABLE>
BORROWER: HEMACARE CORPORATION LENDER: BANK LEUMI LE-ISRAEL, B.M.
4954 VAN NUYS BLVD., #201 8383 WILSHIRE BLVD. STE. 400
SHERMAN OAKS, CA 91403 BEVERLY HILLS, CA 90211
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THIS LOAN AGREEMENT BETWEEN HEMACARE CORPORATION ("BORROWER") AND BANK LEUMI
LE-ISRAEL, B.M. ("LENDER") IS MADE AND EXECUTED ON THE FOLLOWING TERMS AND
CONDITIONS. BORROWER HAS RECEIVED PRIOR COMMERCIAL LOANS FROM LENDER OR HAS
APPLIED TO LENDER FOR A COMMERCIAL LOAN OR LOANS AND OTHER FINANCIAL
ACCOMMODATIONS, INCLUDING THOSE WHICH MAY BE DESCRIBED ON ANY EXHIBIT OR
SCHEDULE ATTACHED TO THIS AGREEMENT. ALL SUCH LOANS AND FINANCIAL
ACCOMMODATIONS, TOGETHER WITH ALL FUTURE LOANS AND FINANCIAL ACCOMMODATIONS
FROM LENDER TO BORROWER, ARE REFERRED TO IN THIS AGREEMENT INDIVIDUALLY AS
THE "LOAN" AND COLLECTIVELY AS THE "LOANS." BORROWER UNDERSTANDS AND AGREES
THAT: (A) IN GRANTING, RENEWING, OR EXTENDING ANY LOAN, LENDER IS RELYING
UPON BORROWER'S REPRESENTATIONS, WARRANTIES, AND AGREEMENTS, AS SET FORTH IN
THIS AGREEMENT; (B) THE GRANTING, RENEWING, OR EXTENDING OF ANY LOAN BY
LENDER AT ALL TIMES SHALL BE SUBJECT TO LENDER'S SOLE JUDGMENT AND
DISCRETION; AND (C) ALL SUCH LOANS SHALL BE AND SHALL REMAIN SUBJECT TO THE
FOLLOWING TERMS AND CONDITIONS OF THIS AGREEMENT.
TERM. This Agreement shall be effective as of JUNE 1, 1999, and shall
continue thereafter until all Indebtedness of Borrower to Lender has been
performed in full or until May 30, 2000, whichever is later.
DEFINITIONS. The following words shall have the following meanings
when used in this Agreement. Terms not otherwise defined in this
Agreement shall have the meanings attributed to such terms in the
Uniform Commercial Code. All references to dollar amounts shall mean
amounts in lawful money of the United States of America.
AGREEMENT. The word "Agreement" means this Loan Agreement, as this
Loan Agreement may be amended or modified from time to time, together
with all exhibits and schedules attached to this Loan Agreement from
time to time.
ACCOUNT. The word "Account" means a trade account, account receivable,
or other right to payment for goods sold or services rendered owing to
Borrower (or to a third party grantor acceptable to Lender).
ACCOUNT DEBTOR. The words "Account Debtor" mean the person or entity
obligated upon an Account.
ADVANCE. The word "Advance" means a disbursement of Loan funds under
this Agreement.
BORROWER. The word "Borrower" means HEMACARE CORPORATION. The word
"Borrower" also includes, as applicable, all subsidiaries and affiliates of
Borrower as provided below in the paragraph titled "Subsidiaries and
Affiliates."
BORROWING BASE. The words "Borrowing Base" mean: (a) $1,200,000 or (b)
the sum of Seventy percent (70.000%) of Eligible Accounts. Lender may,
in its discretion, from time to time, upon not less than five (5) days
prior notice to Borrower, reduce the Borrowing Base to the extent that
Lender determines in good faith that:(a) the dilution with respect to the
Accounts for any period (based on the ratio of (i) the aggregate amount
of reductions in Accounts other than as a result of payments in cash to
(ii) the aggregate amount of total sales) has increased in any material
respect or may be reasonably anticipated to increase in any material
respect above historical levels, or (b) the general creditworthiness of
Account Debtors has declined.
BUSINESS DAY. The words "Business Day" mean a day on which commercial
banks are open for business in the State of California.
CERCLA. The word "CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended.
CASH FLOW. The words "Cash Flow" mean net income after taxes, and exclusive
of extraordinary gains and income, plus depreciation and amortization.
COLLATERAL. The word "Collateral" means and includes without limitation
all property and assets granted as collateral security for a Loan,
whether real or personal property, whether granted directly or
indirectly, whether granted now or in the future, and whether granted in
the form of a security interest, mortgage, deed of trust, assignment,
pledge, chattel mortgage, chattel trust, factor's lien, equipment trust,
conditional sale, trust receipt, lien, charge, lien or title retention
contract, lease or consignment intended as a security device, or any
other security or lien interest whatsoever, whether created by law,
contract, or otherwise. The word "Collateral" includes without
limitation all collateral described below in the section titled
"COLLATERAL."
DEBT. The word "Debt" means all of Borrower's liabilities excluding
Subordinated Debt.
ELIGIBLE ACCOUNTS. The words "Eligible Accounts" mean, at any time, all
of Borrower's Accounts which contain selling terms and conditions
acceptable to Lender. The net amount of any Eligible Account against
which Borrower may borrow shall exclude all returns, discounts, credits,
and offsets of any nature. Unless otherwise agreed to by Lender in
writing, Eligible Accounts do not include:
(a) Accounts with respect to which the Account Debtor is an officer, an
employee or agent of Borrower.
(b) Accounts with respect to which the Account Debtor is a subsidiary
of, or affiliated with or related to Borrower or its shareholders,
officers, or directors.
(c) Accounts with respect to which goods are placed on consignment,
guaranteed sale, or other terms by reason of which the payment by the
Account Debtor may be conditional.
(d) Accounts with respect to which Borrower is or may become liable
to the Account Debtor for goods sold or services rendered by the
Account Debtor to Borrower.
(e) Accounts which are subject to dispute, counterclaim, or setoff.
(f) Accounts with respect to which the goods have not been shipped or
delivered, or the services have not been rendered, to the Account
Debtor.
(g) Accounts with respect to which Lender, in its sole discretion,
deems the creditworthiness or financial condition of the Account
Debtor to be unsatisfactory.
(h) Accounts of any Account Debtor who has filed or has had filed
against it a petition in bankruptcy or an application for relief under
any provision of any state or federal bankruptcy, insolvency, or
debtor-in-relief acts; or who has had appointed a trustee,
custodian, or receiver for the assets of such Account Debtor; or who
has made an assignment for the benefit of creditors or has become
insolvent or fails generally to pay its debts (including its payrolls)
as such debts become due.
(i) Accounts with respect to which the Account Debtor is the United
States government or any department or agency of the United States.
(j) Accounts which have not been paid in full within 90 DAYS from the
invoice date. The entire balance of any Account of any single Account
debtor will be ineligible whenever the portion of 1he Account which has
not been paid within 90 DAYS from the invoice date is in excess of
25.000% of the total amount outstanding on the Account.
(k) That portion of Accounts due from an Account Debtor which are in
excess of 10.000% of the Debtor's aggregate dollar amount of all
outstanding Accounts.
ERISA. The word "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
EVENT OF DEFAULT. The words "Event of Default" mean and include
without limitation any of the Events of Default set forth below in the
section titled "EVENTS OF DEFAULT."
EXPIRATION DATE. The words "Expiration Date" mean the earlier of May
30, 2000 or the date of termination of Lender's commitment to lend under
this Agreement.
GRANTOR. The word "Grantor" means and includes without limitation
each and all of the persons or entities granting a Security Interest
in any Collateral for the Indebtedness, including without limitation
all Borrowers granting such a Security Interest.
GUARANTOR. The word "Guarantor" means and includes without limitation
each and all of the guarantors, sureties, and accommodation parties in
connection with any Indebtedness.
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06-01-1999 LOAN AGREEMENT Page 2
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INDEBTEDNESS. The word "Indebtedness" means and includes without
limitation all Loans, together with all other obligations, debts and
liabilities of Borrower to Lender, or any one or more of them, as well
as all claims by Lender against Borrower, or any one or more of them;
whether now or hereafter existing, voluntary or involuntary, due or
not due, absolute or contingent, liquidated or unliquidated; whether
Borrower may be liable individually or jointly with others; whether
Borrower may be obligated as a guarantor, surety, or otherwise;
whether recovery upon such Indebtedness may be or hereafter may
become barred by any statute of limitations; and whether such
Indebtedness may be or hereafter may become otherwise unenforceable.
LENDER. The word "Lender" means BANK LEUMI LE-ISRAEL, B.M., its
successors and assigns.
LETTER OF CREDIT. The words "Letter of Credit" mean a letter of credit
issued by Lender on behalf of Borrower as described below in the section
entitled "Letter of Credit Facility."
LINE OF CREDIT. The words "Line of Credit" mean the credit facility
described in the Section titled "LINE OF CREDIT" below.
LIQUID ASSETS. The words "Liquid Assets" mean Borrower's cash on
hand plus Borrower's readily marketable securities.
LOAN. The word "Loan" or "Loans" means and includes without
limitation any and all commercial loans and financial accommodations
from Lender to Borrower, whether now or hereafter existing, and
however evidenced, including without limitation those loans and
financial accommodations described herein or described on any exhibit
or schedule attached to this Agreement from time to time.
NOTE. The word "Note" means and includes without limitation
Borrower's promissory note or notes, if any, evidencing Borrower's
Loan obligations in favor of Lender, as well as any substitute,
replacement or refinancing note or notes therefor.
PERMITTED LIENS. The words "Permitted Liens" mean: (a) liens and
security interests securing Indebtedness owed by Borrower to Lender;
(b) liens for taxes, assessments, or similar charges either not yet
due or being contested in good faith; (c) liens of materialmen,
mechanics, warehousemen, or carriers, or other like liens arising in
the ordinary course of business and securing obligations which are not
yet delinquent; (d) purchase money liens or purchase money security
interests upon or in any property acquired or held by Borrower in the
ordinary course of business to secure indebtedness outstanding on the
date of this Agreement or permitted to be incurred under the paragraph
of this Agreement titled "Indebtedness and Liens"; (e) liens and
security interests which, as of the date of this Agreement, have been
disclosed to and approved by the Lender in writing; and (f) those
liens and security interests which in the aggregate constitute an
immaterial and insignificant monetary amount with respect to the net
value of Borrower's assets.
RELATED DOCUMENTS. The words "Related Documents" mean and include
without limitation all promissory notes, credit agreements, loan
agreements, environmental agreements, guaranties, security agreements,
mortgages, deeds of trust, and all other instruments, agreements and
documents, whether now or hereafter existing, executed in connection
with the Indebtedness.
SECURITY AGREEMENT. The words "Security Agreement" mean and include
without limitation any agreements, promises, covenants, arrangements,
understandings or other agreements, whether created by law, contract,
or otherwise, evidencing, governing, representing, or creating a
Security Interest.
SCURITY INTEREST. The words "Security Interest" mean and include
wthout limitation any type of collateral security, whether in the
form of a lien, charge, mortgage, deed of trust, assignment, pledge,
chattel mortgage, chattel trust, factor's lien, equipment trust,
conditional sale, trust receipt, lien or title retention contract,
lease or consignment intended as a security device, or any other
security or lien interest whatsoever, whether created by law,
contract, or otherwise.
SARA. The word "SARA" means the Superfund Amendments and
Reauthorization Act of 1986 as now or hereafter amended.
SUBORDINATED DEBT. The words "Subordinated Debt" mean indebtedness
and liabilities of Borrower which have been subordinated by written
agreement to indebtedness owed by Borrower to Lender in form and
substance acceptable to Lender.
TANGIBLE NET WORTH. The words "Tangible Net Worth" mean Borrower's
total assets excluding all intangible assets (i.e., goodwill,
trademarks, patents, copyrights, organizational expenses, and
similar intangible items, but including leaseholds and leasehold
improvements) less total Debt.
WORKING CAPITAL. The words "Working Capital" mean Borrower's current
assets, excluding prepaid expenses, less Borrower's current
liabilities.
LINE OF CREDIT. Lender agrees to make Advances to Borrower from time to time
from the date of this Agreement to the Expiration Date, provided the aggregate
amount of such Advances outstanding at any time does not exceed the Borrowing
Base. Within the foregoing limits, Borrower may borrow, partially or wholly
prepay, and reborrow under this Agreement as follows.
CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation to make any
Advance to or for the account of Borrower under this Agreement is
subject to the following conditions precedent, with all documents,
instruments, opinions, reports, and other items required under this
Agreement to be in form and substance satisfactory to Lender:
(a) Lender shall have received evidence that this Agreement and
all Related Documents have been duly authorized, executed, and
delivered by Borrower to Lender.
(b) Lender shall have received such opinions of counsel,
supplemental opinions, and documents as Lender may request.
(c) The security interests in the Collateral shall have been
duly authorized, created, and perfected with first lien priority
and shall be in full force and effect.
(d) All guaranties required by Lender for the Line of Credit
shall have been executed by each Guarantor, delivered to Lender,
and be in full force and effect.
(e) Lender, at its option and for its sole benefit, shall have
conducted an audit of Borrower's Accounts, Inventory, Equipment
books, records, and operations, and Lender shall be satisfied as
to their condition.
(f) Borrower shall have paid to Lender all fees, costs, and
expenses specified in this Agreement and the Related Documents
as are then due and payable.
(g) There shall not exist at the time of any Advance a condition
which would constitute an Event of Default under this Agreement,
and Borrower shall have delivered to Lender the compliance
certificate called for in the paragraph below titled "Compliance
Certificate."
MAKING LOAN ADVANCES. Advances under the Line of Credit may be
requested either orally or in writing subject to the limitations set
forth below. Lender may, but need not, require that all oral requests
be confirmed in writing. Each Advance shall be conclusively deemed to
have been made at the request of and for the benefit of Borrower (a)
when credited to any deposit account of Borrower maintained with
Lender or (b) when advanced in accordance with the instructions of an
authorized person. Lender, at its option, may set a cutoff time,
after which all requests for Advances will be treated as having been
requested on the next succeeding Business Day. Under no circumstances
shall Lender be required to make any Advance in an amount less than
$5,000.00.
MANDATORY LOAN REPAYMENTS. If at any time the aggregate principal
amount of the outstanding Advances shall exceed the applicable
Borrowing Base, Borrower, immediately upon written or oral notice from
Lender, shall pay to Lender an amount equal to the difference between
the outstanding principal balance of the Advances and the Borrowing
Base. On the Expiration Date, Borrower shall pay to Lender in full
the aggregate unpaid principal amount of all Advances then outstanding
and all accrued unpaid interest, together with all other applicable
fees, costs and charges, if any, not yet paid.
LOAN ACCOUNT. Lender shall maintain on its books a record of account
in which Lender shall make entries for each Advance and such other
debits and credits as shall be appropriate in connection with the
credit facility. Lender shall provide Borrower with periodic
statements of Borrower's account, which statements shall be considered
to be correct and conclusively binding on Borrower unless Borrower
notifies Lender to the contrary within thirty (30) days after
Borrower's receipt of any such statement which Borrower deems to be
incorrect.
COLLATERAL. To secure payment of the Line of Credit and performance of all
other Loans, obligations and duties owed by Borrower to Lender, Borrower (and
others, if required) shall grant to Lender Security Interests in such
property and assets as Lender may require (the "Collateral"). Lender's
Security Interests in the Collateral shall be continuing liens and shall
include the proceeds and products of the Collateral, including without
limitation the proceeds of any Insurance. With respect to the Collateral,
Borrower agrees and represents and warrants to Lender:
PERFECTION OF SECURITY INTERESTS. Borrower agrees to execute such
financing statements and to take whatever other actions are requested
by Lender to perfect and continue Lender's Security Interests in the
Collateral. Upon request of Lender, Borrower will deliver to Lender
any and all of the documents evidencing or constituting the
Collateral, and Borrower will note Lender's interest upon any and all
chattel paper if not delivered to Lender for possession by Lender.
Contemporaneous with the execution of this Agreement, Borrower will
execute one or more UCC financing statements and any similar
statements as may be required by applicable law, and will file such
financing statements and all such similar statements in the
appropriate location or locations. Borrower hereby appoints Lender as
its irrevocable attorney-in-fact for the purpose of executing any
documents necessary to perfect or to continue any Security Interest.
Lender may at any time, and without further authorization from
Borrower, file a carbon, photograph, facsimile, or other reproduction
of any financing statement for use as a financing statement.
Borrower will reimburse Lender for all expenses for the perfection,
termination, and the continuation of the perfection of Lender's
security interest in the Collateral. Borrower promptly will notify
Lender of any change in Borrower's name including any change to the
assumed business names of Borrower. Borrower also promptly will
notify Lender of any change in Borrower's Social Security Number or
Employer Identification Number. Borrower further agrees to notify
Lender in writing prior to any change in address or location
of Borrower's principal governance office or should Borrower merge or
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06-01-1999 LOAN AGREEMENT Page 3
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consolidate with any other entity.
COLLATERAL RECORDS. Borrower does now, and at all times hereafter
shall, keep correct and accurate records of the Collateral, all of
which records shall be available to Lender or Lender's representative
upon demand for inspection and copying at any reasonable time. With
respect to the Accounts, Borrower agrees to keep and maintain such
records as Lender may require, including without limitation
information concerning Eligible Accounts and Account balances and
agings. With respect to the Inventory, Borrower agrees to keep and
maintain such records as Lender may require, including without
limitation information concerning Eligible Inventory and records
itemizing and describing the kind, type, quality, and quantity of
Inventory, Borrower's Inventory costs and selling prices, and the
daily withdrawals and additions to Inventory. With respect to the
Equipment, Borrower agrees to keep and maintain such records as Lender
may require, including without limitation information concerning
Eligible Equipment and records itemizing and describing the kind,
type, quality, and quantity of Equipment, Borrower's Equipment costs,
and the daily withdrawals and additions to Equipment. The following
is an accurate and complete list of all locations at which Borrower
keeps or maintains business records concering Borrower's Accounts,
Inventory and Equipment: 4954 VAN NUYS BOULEVARD, #201, SHERMAN
OAKS, CA 91403.
COLLATERAL SCHEDULES. Concurrently with the execution and delivery of
this Agreement, Borrower shall execute and deliver to Lender schedules
of Accounts, Inventory and Equipment and schedules of Eligible
Accounts, Eligible Inventory and Eligible Equipment, in form and
substance satisfactory to the Lender. Thereafter Supplemental
schedules shall be delivered according to the following schedule:
SUBMISSION OF MONTHLY ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE AGINGS
WITHIN FIFTEEN (15) DAYS OF THE FOLLOWING MONTH.
REPRESENTATIONS AND WARRANTIES CONCERNING ACCOUNTS. With respect to
the Accounts, Borrower represents and warrants to Lender: (a) Each
Account represented by Borrower to be an Eligible Account for purposes
of this Agreement conforms to the requirements of the definition of an
Eligible Account; (b) All Account information listed on schedules
delivered to Lender will be true and correct, subject to immaterial
variance; and (c) Lender, its assigns, or agents shall have the right
at any time and at Borrower's expense to inspect, examine, and audit
Borrower's records and to confirm with Account Debtors the accuracy of
such Accounts.
REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as
of the date of this Agreement, as of the date of each disbursement of Loan
proceeds, as of the date of any renewal, extension or modification of any Loan,
and at all times any Indebtedness exists:
ORGANIZATION. Borrower is a corporation which is duly organized,
validly existing, and in good standing under the laws of the State of
California and is validly existing and in good standing in all states
in which Borrower is doing business. Borrower has the full power and
authority to own its properties and to transact the businesses in
which it is presently engaged or presently proposes to engage.
Borrower also is duly qualified as a foreign corporation and is in
good standing in all states in which the failure to so qualify would
have a material adverse effect on its businesses or financial
condition.
AUTHORIZATION. The execution, delivery, and performance of this
Agreement and all Related Documents by Borrower, to the extent to be
executed, delivered or performed by Borrower, have been duly
authorized by all necessary action by Borrower; do not require the
consent or approval of any other person, regulatory authority or
governmental body; and do not conflict with, result in a violation of,
or constitute a default under (a) any provision of its articles of
incorporation or organization, or bylaws, or any agreement or other
instrument binding upon Borrower or (b) any law, governmental
regulation, court decree, or order applicable to Borrower.
FINANCIAL INFORMATION. Each financial statement of Borrower supplied
to Lender truly and completely disclosed Borrower's financial
condition as of the date of the statement, and there has been no
material adverse change in Borrower's financial condition subsequent
to the date of the most recent financial statement supplied to Lender.
Borrower has no material contingent obligations except as disclosed in
such financial statements.
LEGAL EFFECT. This Agreement constitutes, and any instrument or
agreement required hereunder to be given by Borrower when delivered
will constitute, legal, valid and binding obligations of Borrower
enforceable against Borrower in accordance with their respective
terms.
PROPERTIES. Except for Permitted Liens, Borrower owns and has good
title to all of Borrower's properties free and clear of all Security
Interests, and has not executed any security documents or financing
statements relating to such properties. All of Borrower's properties
are titled in Borrower's legal name, and Borrower has not used, or
filed a financing statement under, any other name for at least the
last five (5) years.
HAZARDOUS SUBSTANCES. The terms "hazardous waste," "hazardous
substance," "disposal," "release," and "threatened release," as used
in this Agreement, shall have the same meanings as set forth in the
"CERCLA," "SARA," the Hazardous Materials Transportation Act, 49
U.S.C. Section 1801, et seq., the Resource Conservation and Recovery
Act, 42 U.S.C. Section 6901, et seq., Chapters 6.5 through 7.7 of
Division 20 of the California Health and Safety Code, Section 25100,
et seq., or other applicable state or Federal laws, rules, or
regulations adopted pursuant to any of the foregoing. Except as
disclosed to and acknowledged by Lender in writing, Borrower
represents and warrants that: (a) During the period of Borrower's
ownership of the properties, there has been no use, generation,
manufacture, storage, treatment, disposal, release or threatened
release of any hazardous waste or substance by any person on, under,
about or from any of the properties. (b) Borrower has no knowledge of,
or reason to believe that there has been (i) any use, generation,
manufacture, storage, treatment, disposal, release, or threatened
release of any hazardous waste or substance on, under, about or from
the properties by any prior owners or occupants of any of the
properties, or (ii) any actual or threatened litigation or claims of
any kind by any person relating to such matters. (c) Neither
Borrower nor any tenant, contractor, agent or other authorized user of
any of the properties shall use, generate, manufacture, store, treat,
dispose of, or release any hazardous waste or substance on, under,
about or from any of the properties; and any such activity shall be
conducted in compliance with all applicable federal, state, and local
laws, regulations, and ordinances, including without limitation those
laws, regulations and ordinances described above. Borrower authorizes
Lender and its agents to enter upon the properties to make such
inspections and tests as Lender may deem appropriate to determine
compliance of the properties with this section of the Agreement. Any
inspections or tests made by Lender shall be at Borrower's expense and
for Lender's purposes only and shall not be construed to create any
responsibility or liability on the part of Lender to Borrower or to
any other person. The representations and warranties contained herein
are based on Borrower's due diligence in investigating the properties
for hazardous waste and hazardous substances. Borrower hereby (a)
releases and waives any future claims against Lender for indemnity or
contribution in the event Borrower becomes liable for cleanup or
other costs under any such laws, and (b) agrees to indemnify and hold
harmless Lender against any and all claims, losses, liabilities,
damages, penalties, and expenses which Lender may directly or
indirectly sustain or suffer resulting from a breach of this section
of the Agreement or as a consequence of any use, generation,
manufacture, storage, disposal, release or threatened release
occurring prior to Borrower's ownership or interest in the properties,
whether or not the same was or should have been known to Borrower.
The provisions of this section of the Agreement, including the obligation
to indemnity, shall survive the payment of the Indebtedness and the
termination or expiration of this Agreement and shall not be affected
by Lender's acquisition of any interest in any of the properties,
whether by foreclosure or otherwise.
LITIGATION AND CLAIMS. No litigation, claim, investigation,
administrative proceeding or similar action (including those for
unpaid taxes) against Borrower is pending or threatened, and no other
event has occurred which may materially adversely affect Borrower's
financial condition or properties, other than litigation, claims, or
other events, if any, that have been disclosed to and acknowledged by
Lender in writing.
TAXES. To the best of Borrower's knowledge, all tax returns and
reports of Borrower that are or were required to be filed, have been
filed, and all taxes, assessments and other governmental charges have
been paid in full, except those presently being or to be contested by
Borrower in good faith in the ordinary course of business and for
which adequate reserves have been provided.
LIEN PRIORITY. Unless otherwise previously disclosed to Lender in
writing, Borrower has not entered into or granted any Security
Agreements, or permitted the filing or attachment of any Security
Interests on or affecting any of the Collateral directly or indirectly
securing repayment of Borrower's Loan and Note, that would be prior or
that may in any way be superior to Lender's Security Interests and
rights in and to such Collateral.
BINDING EFFECT. This Agreement, the Note, all Security Agreements
directly or indirectly securing repayment of Borrower's Loan and Note
and all of the Related Documents are binding upon Borrower as well as
upon Borrower's successors, representatives and assigns, and are
legally enforceable in accordance with their respective terms.
COMMERCIAL PURPOSES. Borrower intends to use the Loan proceeds solely
for business or commercial related purposes.
EMPLOYEE BENEFIT PLANS. Each employee benefit plan as to which
Borrower may have any liability complies in all material respects with
all applicable requirements of law and regulations, and (i) no
Reportable Event nor Prohibited Transaction (as defined in ERISA) has
occurred with respect to any such plan, (ii) Borrower has not
withdrawn from any such plan or initiated steps to do so, (iii) no
steps have been taken to terminate any such plan, and (iv) there are
no unfunded liabilities other than those previously disclosed to
Lender in writing.
LOCATION OF BORROWER'S OFFICES AND RECORDS. Borrower's place of
business, or Borrower's Chief executive office, if Borrower has more
than one place of business, is located at 4954 VAN NUYS BLVD., #201,
SHERMAN OAKS, CA 91403. Unless Borrower has designated otherwise in
writing this location is also the office or offices where Borrower
keeps its records concerning the Collateral.
INFORMATION. All information heretofore or contemporaneously herewith
furnished by Borrower to Lender for the purposes of or in connection
with this Agreement or any transaction contemplated hereby is, and all
information hereafter furnished by or on behalf of Borrower to Lender
will be, true and accurate in every material respect on the date as of
which such information is dated or certified; and none of such
information is or will be incomplete by omitting to state any material
fact necessary to make such information not misleading.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Borrower understands and
agrees that Lender, without independent investigation, is relying upon
the above representations and warranties in extending Loan Advances to
Borrower. Borrower further agrees that the foregoing representations
and warranties shall be continuing in nature and shall remain in full
force and effect until such time as Borrower's Indebtedness shall be
paid in full, or until this Agreement shall be terminated in the
manner provided above, whichever is the last to occur.
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AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, while
this Agreement is in effect, Borrower will:
LITIGATION. Promptly inform lender in writing of (a) all material
adverse changes in Borrower's financial condition, and (b) all
existing and all threatened litigation, claims, investigations,
administrative proceedings or similar actions affecting Borrower or
any Guarantor which could materially affect the financial condition of
Borrower or the financial condition of any Guarantor.
FINANCIAL RECORDS. Maintain its books and records in accordance with
generally accepted accounting principles, applied on a consistent
basis, and permit Lender to examine and audit Borrower's books and
records at all reasonable times.
ADDITIONAL INFORMATION. Furnish such additional information and
statements, lists of assets and liabilities, agings of receivables and
payables, inventory schedules, budgets, forecasts, tax returns, and
other reports with respect to Borrower's financial condition and
business operations as Lender may request from time to time.
FINANCIAL COVENANTS AND RATIOS. Comply with the following covenants
and ratios:
TANGIBLE NET WORTH. Maintain a minimum Tangible Net Worth of
not less than $2,500,000.00.
NET WORTH RATIO. Maintain a ratio of Total Liabilities to
Tangible Net Worth of less than 2.00 to 1.00.
WORKING CAPITAL. Maintain Working Capital in excess of
$1,500,000.00.
CURRENT RATIO. Maintain a ratio of Current Assets to Current
Liabilities in excess of 1.00 to 1.00.
OTHER RATIO. Maintain a ration of"EBITDA", WHICH MEANS FOR ANY
PERIOD, THE SUME OF (A) NET INCOME FOR SUCH PERIOD AND (B) THE
FOLLOWING, TO THE EXTENT DEDUCTED IN DETERMINING SUCH NET INCOME:
(I) DEPRECIATION AND AMORTIZATION, (II) INCOME TAXES, AND (III)
INTEREST EXPENSE DURING FISCAL YEAR 2000 OF 2.50 TO 1.00. Except
as provided above, all computations made to determine compliance
with the requirements contained in this paragraph shall be made
in accordance with generally accepted accounting principles,
applied on a consistent basis, and certified by Borrower as being
true and correct.
INSURANCE. Maintain fire and other risk insurance, public
liability insurance, and such other insurance as Lender may
require with respect to Borrower's properties and operations,
in form, amounts, coverages and with insurance companies
reasonably acceptable to Lender. Borrower, upon request of
Lender, will deliver to Lender from time to time the policies or
certificates of insurance in form satisfactory to Lender,
including stipulations that coverages will not be cancelled or
diminished without at least ten (10) days' prior written notice
to Lender. Each insurance policy also shall include an
endorsement providing that coverage in favor of Lender will not
be impaired in any way by any act, omission or default of
Borrower or any other person. In connection with all policies
covering assets in which Lender holds or is offered a security
interest for the Loans, Borrower will provide Lender with
such loss payable or other endorsements as Lender may require.
INSURANCE REPORTS. Furnish to Lender, upon request of Lender, reports
on each existing insurance policy showing such information as Lender
may reasonably request, including without limitation the following:
(a) the name of the insurer; (b) the risks insured; (c) the amount of
the policy; (d) the properties insured; (e) the then current property
values on the basis of which insurance has been obtained, and the
manner of determining those values; and (f) the expiration date of the
policy. In addition, upon request of Lender (however not more often
than annually), Borrower will have an independent appraiser
satisfactory to Lender determine, as applicable, the actual cash
value or replacement cost of any Collateral. The cost of such
appraisal shall be paid by Borrower.
OTHER AGREEMENTS. Comply with all terms and conditions of all other
agreements, whether now or hereafter existing, between Borrower and
any other party and notify Lender immediately in writing of any
default in connection with any other such agreements.
LOAN PROCEEDS. Use all Loan proceeds solely for Borrower's business
operations, unless specifically consented to the contrary by Lender in
writing.
TAXES, CHARGES AND LIENS. Pay and discharge when due all of its
indebtedness and obligations, including without limitation all
assessments, taxes, governmental charges, levies and liens, of every
kind and nature, imposed upon Borrower or its properties, income, or
profits, prior to the date on which penalties would attach, and all
lawful claims that, if unpaid, might become a lien or charge upon any
of Borrower's properties, income, or profits. Provided however,
Borrower will not be required to pay and discharge any such
assessment, tax, charge, levy, lien or claim so long as (a) the
legality of the same shall be contested in good faith by appropriate
proceedings, and (b) Borrower shall have established on its books
adequate reserves with respect to such contested assessment, tax,
charge, levy, lien, or claim in accordance with generally accepted
accounting practices. Borrower, upon demand of Lender, will furnish
to Lender evidence of payment of the assessments, taxes, charges,
levies, liens and claims and will authorize the appropriate
governmental official to deliver to Lender at any time a written
statement of any assessments, taxes, charges, levies, liens and
claims against Borrower's properties, income, or profits.
PERFORMANCE. Perform and comply with all terms, conditions,
and provisions set forth in this Agreement and in the Related
Documents in a timely manner, and promptly notify Lender if Borrower
learns of the occurrence of any event which constitutes an Event of
Default under this Agreement or under any of the Related Documents.
OPERATIONS. Maintain executive and management personnel with
substantially the same qualifications and experience as the present
executive and management personnel; provide written notice to Lender of any
change in executive and management personnel; conduct its business
affairs in a reasonable and prudent manner and in compliance with all
applicable federal, state and municipal laws, ordinances, rules and
regulations respecting its properties, charters, businesses and
operations, including without limitation, compliance with the
Americans With Disabilities Act and with all minimum funding standards
and other requirements of ERISA and other laws applicable to
Borrower's employee benefit plans.
INSPECTION. Permit employees or agents of Lender at any reasonable
time to inspect any and all Collateral for the Loan or Loans and
Borrower's other properties and to examine or audit Borrower's books,
accounts, and records and to make copies and memoranda of Borrower's
books, accounts, and records. If Borrower now or at any time
hereafter maintains any records (including without limitation computer
generated records and computer software programs for the generation of
such records) in the possession of a third party, Borrower, upon
request of Lender, shall notify such party to permit Lender free
access to such records at all reasonable times and to provide Lender
with copies of any records it may request, all at Borrower's expense.
COMPLIANCE CERTIFICATE. Unless waived in writing by Lender, provide
Lender at least annually and at the time of each disbursement of Loan
proceeds with a certificate executed by Borrower's chief financial
officer, or other officer or person acceptable to Lender, certifying
that the representations and warranties set forth in this Agreement
are true and correct as of the date of the certificate and further
certifying that, as of the date of the certificate, no Event of
Default exists under this Agreement.
ENVIRONMENTAL COMPLIANCE AND REPORTS. Borrower shall comply in all
respects with all environmental protection federal, state and local
laws, statutes, regulations and ordinances; not cause or permit to
exist, as a result of an intentional or unintentional action or
omission on its part or on the part of any third party, on property
owned and/or occupied by Borrower, any environmental activity where
damage may result to the environment, unless such environmental
activity is pursuant to and in compliance with the conditions of a
permit issued by the appropriate federal, state or local governmental
authorities; shall furnish to Lender promptly and in any event within
thirty (30) days after receipt thereof a copy of any notice, summons,
lien, citation, directive, letter or other communication from any
governmental agency or instrumentality concerning any intentional or
unintentional action or omission on Borrower's part in connection
with any environmental activity whether or not there is damage to the
environment and/or other natural resources.
ADDITIONAL ASSURANCES. Make, execute and deliver to Lender such
promissory notes, mortgages, deeds of trust, security agreements,
financing statements, instruments, documents and other agreements as
Lender or its attorneys may reasonably request to evidence and secure
the Loans and to perfect all Security Interests.
RECOVERY OF ADDITIONAL COSTS. If the imposition of or any change in any law,
rule, regulation or guideline, or the interpretation or application of any
thereof by any court or administrative or governmental authority (including any
request or policy not having the force of law) shall impose, modify or make
applicable any taxes (except U.S. federal, state or local income or franchise
taxes imposed on Lender), reserve requirements, capital adequacy requirements or
other obligations which would (a) increase the cost to Lender for extending or
maintaining the credit facilities to which this Agreement relates, (b) reduce
the amounts payable to Lender under this Agreement or the Related Documents, or
(c) reduce the rate of return on Lender's capital as a consequence of Lender's
obligations with respect to the credit facilities to which this Agreement
relates, then Borrower agrees to pay Lender such additional amounts as will
compensate Lender therefor, within five (5) days after Lender's written demand
for such payment, which demand shall be accompanied by an explanation of such
imposition or charge and a calculation in reasonable detail of the additional
amounts payable by Borrower, which explanation and calculations shall be
conclusive in the absence of manifest error.
NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this
Agreement is in effect, Borrower shall not, without the prior written consent of
Lender:
INDEBTEDNESS AND LIENS. (a) Except for trade debt incurred in the
normal course of business and indebtedness to Lender contemplated by
this Agreement, create, incur or assume additional indebtedness for
borrowed money, including capital leases, (b) except as allowed as a
Permitted Lien, sell, transfer, mortgage, assign, pledge, lease, grant
a security interest in, or encumber any of Borrower's assets, or (c) sell
with recourse any of Borrowers accounts, except to Lender.
<PAGE>
06-01-1999 LOAN AGREEMENT PAGE 5
(CONTINUED)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONTINUITY OF OPERATIONS. (a) Engage in any business activities
substantially different than those in which Borrower is presently
engaged, (b) cease operations, liquidate, merge, transfer, acquire or
consolidate with any other entity, change ownership, change its name,
dissolve or transfer or sell Collateral out of the ordinary course of
business, (c) pay any dividends on Borrower's stock (other than
dividends payable in its stock), provided, however that
notwithstanding the foregoing, but only so long as no Event of Default
has occurred and is continuing or would result from the payment of
dividends, if Borrower is a "Subchapter S Corporation" (as defined in
the Internal Revenue Code of 1986, as amended), Borrower may pay cash
dividends on its stock to its shareholders from time to time in
amounts necessary to enable the shareholders to pay income taxes and
make estimated income tax payments to satisfy their liabilities under
federal and state law which arise solely from their status as
Shareholders of a Subchapter S Corporation because of their ownership
of shares of stock of Borrower, or (d) purchase or retire any of
Borrower's outstanding shares or alter or amend Borrower's capital
structure.
LOANS, ACQUISITIONS AND GUARANTIES. (a) Loan, invest in or advance
money or assets, (b) purchase, create or acquire any interest in any
other enterprise or entity, or (c) incur any obligation as surety or
guarantor other than in the ordinary course of business.
CESSATION OF ADVANCES. If lender has made any commitment to make any Loan to
Borrower, whether under this Agreement or under any other agreement, Lender
shall have no obligation to make Loan Advances or to disburse Loan proceeds if:
(a) Borrower or any Guarantor is in default under the terms of this Agreement or
any of the Related Documents or any other agreement that Borrower or any
Guarantor has with Lender; (b) Borrower or any Guarantor becomes insolvent,
files a petition in bankruptcy or similar proceedings, or is adjudged a
bankrupt; (c) there occurs A material adverse change in Borrower's financial
condition, in the financial condition of any Guarantor, or in the value of any
Collateral securing any Loan; (d) any Guarantor seeks, claims or otherwise
attempts to limit, modify or revoke such Guarantor's guaranty of the Loan or any
other loan with Lender; or (e) Lender in good faith deems itself insecure, even
though no Event of Default shall have occurred.
NOTICE OF LITIGATION. Debtor will promptly give notice to Lender in writing of
any proceedings against Debtor involving amounts in excess of $25,000.00 not
fully covered by insurance, any substantial claim or dispute which may exist
between Debtor and any Person, any labor controversy resulting in or threatening
to result in a strike against Debtor, or any proposal by any public authority to
acquire a material portion of the assets or business of Debtor.
NOTICE OF UNINSURED LOSS. Debtor shall give Lender written notice of any
uninsured loss in excess of $25,000.00 in each instance.
ADDITIONAL FINANCIAL COVENANT.
1. Monthly internal financial statements and cash flows within Twenty (20)
days of the following month.
2. Quarterly 10Q statements within forty five (45) days after the close of
each quarter.
3. Fiscal year end Certified Public Accountant audited 10K Financial Statements
due within one hundred twenty days of year end.
REPLACEMENT OF PRIOR LOAN AGREEMENT. This Agreement replaces and supersedes
that certain Loan Agreement, dated as of February 5, 1999, as amended from time
to time, between Borrower and Lender.
YEAR 2000 BORROWER REPRESENTATIONS AND COVENANT. The borrower has (i)
undertaken a sufficient inventory, review and assessment of all areas within
its business and operations that could be adversely affected by the failure of
the borrower to be Year 2000 Compliant on a timely basis, (ii) developed a plan
and timeline for becoming Year 2000 compliant on a timely basis, (iii) to date,
implemented that plan in accordance with that timeline in all material respects
and, (iv) made inquiry of its key suppliers, vendors and customers as to whether
such person(s) will, on a timely basis, be Year 2000 Complaint in all material
respects and on the basis of such inquiry reasonably believes that all such
person(s) will, on a timely basis, be Year 2000 Compliant. "Year 2000
Compliant" shall mean that, in all material respects, all computer and
software related applications shall be able to recognize and perform
properly, date sensitive functions involving dates prior to and after
December 31, 1999.
No later than December 31, 1998, the borrower shall have completed testing
to verify whether all of its computer and software related applications
are Year 2000 Compliant.
The borrower shall take all action necessary to ensure that the borrower
shall be Year 2000 Compliant and that no material adverse change will
arise in the borrower's financial condition as a result of its efforts or
failure to be Year 2000 Compliant.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA and Keogh accounts,
and all trust accounts for which the grant of a security interest would be
prohibited by law. Borrower authorizes Lender, to the extent permitted by
applicable law, to charge or setoff all sums owing on the Indebtedness against
any and all such accounts.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement:
DEFAULT ON INDEBTEDNESS. Failure of Borrower to make any payment when
due on the Loans.
OTHER DEFAULTS. Failure of Borrower or any Grantor to comply with
or to perform when due any other term, obligation, covenant or
condition contained in this Agreement or in any of the Related
Documents, or failure of Borrower to comply with or to perform any
other term, obligation, covenant or condition contained in any other
agreement between Lender and Borrower.
FALSE STATEMENTS. Any warranty, representation or statement made or
furnished to Lender by or on behalf of Borrower or any Grantor under
this Agreement or the Related Documents is false or misleading in any
material respect at the time made or furnished, or becomes false or
misleading at any time thereafter.
DEFECTIVE COLLATERALIZATION. This Agreement or any of the Related
Documents ceases to be in full force and effect (including failure of
any Security Agreement to create a valid and perfected Security
Interest) at any time and for any reason.
INSOLVENCY. The dissolution or termination of Borrower's existence as
a going business, the insolvency of Borrower, the appointment of a
receiver for any part of Borrower's property, any assignment for the
benefit of creditors, any type of creditor workout, or the
commencement of any proceeding under any bankruptcy or insolvency laws
by or against Borrower.
CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Borrower, any
creditor of any Grantor against any collateral securing the
Indebtedness, or by any governmental agency. This includes a
garnishment, attachment, or levy on or of any of Borrowers deposit
accounts with Lender. However, this Event of Default shall not
apply if there is a good faith dispute by Borrower or Grantor, as
the case may be, as to the validity or reasonableness of the claim
which is the basis of the creditor or forfeiture proceeding, and if
Borrower or Grantor gives Lender written notice of the creditor or
forfeiture proceeding and furnishes reserves or a surety bond for
the creditor or forfeiture proceeding satisfactory to Lender.
EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with
respect to any Guarantor of any of the Indebtedness or any Guarantor
dies or becomes incompetent, or revokes or disputes the validity of,
or liability under, any Guaranty of the Indebtedness. Lender, at its
option, may, but shall not be required to, permit the Guarantor's
estate to assume unconditionally the obligations arising under the
guaranty in a manner satisfactory to Lender, and, in doing so, cure
the Event of Default.
CHANGE IN OWNERSHIP. Any change in ownership of twenty-five percent
(25%) or more of the common stock of Borrower.
ADVERSE CHANGE. A material adverse change occurs in Borrower's
financial condition, or Lender believes the prospect of payment or
performance of the Indebtedness is impaired.
INSECURITY. Lender, in good faith, deems itself insecure.
RIGHT TO CURE. If any default, other than a Default on Indebtedness,
is curable and if Borrower or Grantor, as the case may be, has not
been given a notice of a similar default within the preceding twelve
(12) months, it may be cured (and no Event of Default will have
occurred) if Borrower or Grantor, as the case may be, after receiving
written notice from Lender demanding cure of such default: (a) cures
the default within fifteen (15) days; or (b) if the cure requires more
than fifteen (15) days, immediately initiates steps which Lender deems
in Lender's sole discretion to be sufficient to cure the default and
thereafter continues and completes all reasonable and necessary steps
sufficient to produce compliance as soon as reasonably practical.
EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except
where otherwise provided in this Agreement or the Related Documents, all
commitments and obligations of Lender under this Agreement or the Related
Documents or any other agreement immediately will terminate (including any
obligation to make Loan Advances or disbursements), and, at Lender's
option, all Indebtedness immediately will become due and payable, all
without notice of any kind to Borrower, except that in the case of an
Event of Default of the type described in the "Insolvency" subsection
above, such acceleration shall be automatic and not optional. In addition,
Lender shall have all the rights and remedies provided in the Related
Documents or available at law, in equity, or otherwise. Except as may be
prohibited by applicable law, all of Lender's rights and remedies shall be
cumulative and may be exercised singularly or concurrently. Election by
Lender to pursue any remedy shall not exclude pursuit of any other remedy,
and an election to make expenditures or to take action to perform an
obligation of Borrower or of any Grantor shall not affect Lender's right
to declare a default and to exercise its rights and remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a
part of this Agreement:
AMENDMENTS. This Agreement, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as
<PAGE>
06-01-1999 LOAN AGREEMENT PAGE 6
(CONTINUED)
===============================================================================
to the matters set forth in this Agreement. No alteration of or
amendment to this Agreement shall be effective unless given in writing
and signed by the party or parties sought to be charged or bound by
the alteration or amendment.
APPLICABLE LAW. THIS AGREEMENT HAS BEEN DELIVERED TO LENDER AND
ACCEPTED BY LENDER IN THE STATE OF CALIFORNIA. IF THERE IS A
LAWSUIT, BORROWER AGREES UPON LENDER'S REQUEST TO SUBMIT TO THE
JURISDICTION OF THE COURTS OF LOS ANGELES COUNTY, THE STATE OF
CALIFORNIA. LENDER AND BORROWER HEREBY WAIVE THE RIGHT TO ANY JURY
TRIAL IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM BROUGHT BY EITHER
LENDER OR BORROWER AGAINST THE OTHER. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
CALIFORNIA.
CAPTION HEADINGS. Caption headings in this Agreement are for
convenience purposes only and are not to be used to interpret or
define the provisions of this Agreement.
MULTIPLE PARTIES; CORPORATE AUTHORITY. All obligations of Borrower
under this Agreement shall be joint and several, and all references to
Borrower shall mean each and every Borrower. This means that each of
the Borrowers signing below is responsible for ALL obligations in this
Agreement.
CONSENT TO LOAN PARTICIPATION. Borrower agrees and consents to
Lender's sale or transfer, whether now or later, of one or more
participation interests in the Loans to one or more purchasers,
whether related or unrelated to Lender. Lender may provide, without
any limitation whatsoever, to any one or more purchasers, or potential
purchasers, any information or knowledge Lender may have about
Borrower or about any other matter relating to the Loan, and Borrower
hereby waives any rights to privacy it may have with respect to such
matters. Borrower additionally waives any and all notices of sale of
participation interests, as well as all notices of any repurchase of
such participation interests. Borrower also agrees that the
purchasers of any such participation interests will be considered as
the absolute owners of such interests in the Loans and will have all
the rights granted under the participation agreement or agreements
governing the sale of such participation interests. Borrower further
waives all rights of offset or counterclaim that it may have now or
later against Lender or against any purchaser of such a participation
interest and unconditionally agrees that either Lender or such
purchaser may enforce Borrower's obligation under the Loans
irrespective of the failure or insolvency of any holder of any
interest in the Loans. Borrower further agrees that the purchaser of
any such participation interests may enforce its interests
irrespective of any personal claims or defenses that Borrower may have
against Lender.
COSTS AND EXPENSES. Borrower agrees to pay upon demand all of
Lender's expenses, including without limitation attorneys' fees,
incurred in connection with the preparation, execution, enforcement,
modification and collection of this Agreement or in connection with
the Loans made pursuant to this Agreement. Lender may pay someone
else to help collect the Loans and to enforce this Agreement, and
Borrower will pay that amount. This includes, subject to any limits
under applicable law, Lender's attorneys' fees and Lender's legal
expenses, whether or not there is a lawsuit, including attorneys' fees
for bankruptcy proceedings (including efforts to modify or vacate any
automatic stay or injunction), appeals, and any anticipated post-
judgment collection services. Borrower also will pay any court costs,
in addition to all other sums provided by law.
NOTICES. All notices required to be given under this Agreement shall
be given in writing, may be sent by telefacsimilie, and shall be
effective when actually delivered or when deposited with a nationally
recognized overnight courier or deposited in the United States mail,
first class, postage prepaid, addressed to the party to whom the
notice is to be given at the address shown above. Any party may
change its address for notices under this Agreement by giving formal
written notice to the other parties, specifying that the purpose of
the notice is to change the party's address. To the extent permitted
by applicable law, if there is more than one Borrower, notice to any
Borrower will constitute notice to all Borrowers. For notice
purposes, Borrower will keep Lender informed at all times of
Borrower's current address(es).
SEVERABILITY. If a court of competent jurisdiction finds any provision
of this Agreement to be invalid or unenforceable as to any person or
circumstance, such finding shall not render that provision invalid or
unenforceable as to any other persons or circumstances. If feasible,
any such offending provision shall be deemed to be modified to be
within the limits of enforceability or validity; however, if the
offending provision cannot be so modified, it shall be stricken and
all other provisions of this Agreement in all other respects shall
remain valid and enforceable.
SUBSIDIARIES AND AFFILIATES OF BORROWER. To the extent the context of
any provisions of this Agreement makes it appropriate, including
without limitation any representation, warranty or covenant, the word
"Borrower" as used herein shall include all subsidiaries and
affiliates of Borrower. Notwithstanding the foregoing however, under
no circumstances shall this Agreement be construed to require Lender
to make any Loan or other financial accommodation to any subsidiary or
affiliate of Borrower.
SUCCESSORS AND ASSIGNS. All covenants and agreements contained by or
on behalf of Borrower shall bind its successors and assigns and shall
inure to the benefit of Lender, its successors and assigns. Borrower
shall not, however, have the right to assign its rights under this
Agreement or any interest therein, without the prior written consent
of Lender.
SURVIVAL. All warranties, representations, and covenants made by
Borrower In this Agreement or in any certificate or other instrument
delivered by Borrower to Lender under this Agreement shall be
considered to have been relied upon by Lender and will survive the
making of the Loan and delivery to Lender of the Related Documents,
regardless of any investigation made by Lender or on Lender's behalf.
TIME IS OF THE ESSENCE. Time is of the essence in the performance of
this Agreement.
WAIVER. Lender shall not be deemed to have waived any rights under
this Agreement unless such waiver is given in writing and signed by
Lender. No delay or omission on the part of Lender in exercising any
right shall operate as a waiver of such right or any other right. A
waiver by Lender of a provision of this Agreement shall not prejudice
or constitute a waiver of Lender's right otherwise to demand strict
compliance with that provision or any other provision of this
Agreement. No prior waiver by Lender, nor any course of dealing
between Lender and Borrower, or between Lender and any Grantor, shall
constitute a waiver of any of Lender's rights or of any obligations of
Borrower or of any Grantor as to any future transactions. Whenever
the consent of Lender is required under this Agreement, the granting
of such consent by Lender in any instance shall not constitute
continuing consent in subsequent instances where such consent is
required, and in all cases such consent may be granted or withheld in
the sole discretion of Lender.
BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS LOAN
AGREEMENT, AND BORROWER AGREES TO ITS TERMS. THIS AGREEMENT IS DATED
AS OF JUNE 1, 1999.
BORROWER:
HEMACARE CORPORATION
BY: /s/ Sharon C. Kaiser BY: /s/ Williamd D. Nicely
--------------------------- -------------------------
Authorized Officer Authorized Officer
LENDER:
BANK LEUMI LE-ISRAEL, B.M.
BY: /s/
--------------------------
AUTHORIZED OFFICER
<PAGE>
[LOGO]
BANK LEUMI USA
- ---------------------------
- ---------------------------
- ---------------------------
Member FDIC
<TABLE>
<CAPTION>
PROMISSORY NOTE
- ---------------------------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO CALL COLLATERAL ACCOUNT OFFICER INITIALS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$1,200,000.00 06-01-1999 05-30-2000 1-1 04A0 030 xxxxxxxxxx KXA
- ---------------------------------------------------------------------------------------------------------
References in the shaded area are for lender's use only and do not limit the applicability of this
document to any particular loan or item.
- ---------------------------------------------------------------------------------------------------------
</TABLE>
BORROWER: HEMACARE CORPORATION LENDER: BANK LEUMI LE-ISRAEL, B.M.
4954 VAN NUYS BLVD., #201 8383 WILSHIRE BLVD. STE. 400
SHERMAN OAKS, CA 91403 BEVERLY HILLS, CA 90211
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C>
PRINCIPAL AMOUNT: $1,200,000 INITIAL RATE: 8.750% DATE OF NOTE: JUNE 1, 1999
</TABLE>
PROMISE TO PAY. HEMACARE CORPORATION ("BORROWER") PROMISES TO PAY
TO BANK LEUMI USA ("LENDER"), OR ORDER, IN LAWFUL MONEY OF THE
UNITED STATES OF AMERICA, THE PRINCIPAL AMOUNT OF ONE MILLION TWO HUNDRED
THOUSAND & 00/100 DOLLARS ($1,200,000.00), TOGETHER WITH INTEREST ON
THE UNPAID OUTSTANDING PRINCIPAL BALANCE OF EACH ADVANCE. INTEREST SHALL
BE CALCULATED FROM THE DATE OF EACH ADVANCE UNTIL REPAYMENT OF EACH ADVANCE.
PAYMENT. BORROWER WILL PAY THIS LOAN IN ONE PAYMENT OF ALL OUTSTANDING
PRINCIPAL PLUS ALL ACCRUED UNPAID INTEREST ON MAY 30, 2000. IN
ADDITION, BORROWER WILL PAY REGULAR MONTHLY PAYMENTS OF ACCRUED UNPAID
INTEREST BEGINNING JUNE 30, 1999, AND ALL SUBSEQUENT INTEREST PAYMENTS ARE
DUE ON THE SAME DAY OF EACH MONTH AFTER THAT. The annual interest rate
for this Note is computed on a 365/360 basis; that is, by applying
the ratio of the annual interest rate over a year of 360 days,
multiplied by the outstanding principal balance, multiplied by the
actual number of days the principal balance is outstanding.
Borrower will pay Lender at Lender's address shown above or at such
other place as Lender may designate in writing. Unless otherwise
agreed or required by applicable law, payments will be applied first
to accrued unpaid interest, then to principal, and any remaining
amount to any unpaid collections costs and late charges.
VARIABLE INTEREST RATE. The interest rate on this Note is subject
to change from time to time based on changes in an index which is
the reference rate as established by Bank Leumi USA from time to
time as its base rate. (the AIndex@). The Index is not necessarily
the lowest rate charged by Lender on its loans and is set by Lender
in its sole discretion. If the Index becomes unavailable during the
term of this loan, Lender may designate a substitute index after
notifying Borrower. Lender will tell Borrower the current index
rate upon Borrower's request. Borrower understands that Lender may
make loans based on other rates as well. The interest rate change
will not occur more often than each day. THE INDEX CURRENTLY IS
7.750%. THE INTEREST RATE TO BE APPLIED TO THE UNPAID PRINCIPAL
BALANCE OF THIS NOTE WILL BE AT A RATE OF 0.500 PERCENTAGE POINTS
OVER THE INDEX, RESULTING IN AN INITIAL RATE OF 8.250%. NOTICE:
Under no circumstances will the interest rate on this Note be more
than the maximum rate allowed by applicable law.
PREPAYMENT; MINIMUM INTEREST CHARGE. In any event, even upon full
prepayment of this Note, Borrower understands that Lender is
entitled to a MINIMUM INTEREST CHARGE OF $250.00. Other than
Borrower's obligation to pay any minimum interest charge, Borrower
may pay without penalty all or a portion of the amount owed earlier
than it is due. Early payments will not, unless agreed to by the
Lender in writing, relieve Borrower of Borrower's obligation to
continue to make payments under the payment schedule. Rather, they
will reduce the principal balance due.
LATE CHARGE. If a payment is 10 DAYS OF MORE LATE, Borrower will
be charged 3.000% OF THE UNPAID PORTION OF THE REGULARLY SCHEDULED
PAYMENT OF $25.000, WHICHEVER IS GREATER.
DEFAULT. Borrower will be in default if any of the following
happens: (a) Borrower fails to make any payment when due. (b)
Borrower breaks any promise Borrower has made to Lender, or Borrower
fails to comply with or to perform when due any other term,
obligation, covenant, or condition contained in this Note or any
other agreement or loan Borrower has with Lender. (c) Any representation
or statement made or furnished to Lender by Borrower or on Borrower's behalf
is false or misleading in any material respect either now or at the time
made or furnished. (d) Borrower has become insolvent, a receiver is
appointed for any part of Borrower's property. Borrower makes an
assignment for the benefit of creditors, or any proceeding is
commenced either by Borrower or against Borrower under any
bankruptcy or insolvency laws. (e) Any creditor tries to take any
of Borrower's property on or in which Lender has a lien or security
interest. This includes a garnishment of any of Borrower's accounts
with Lender. (f) Any guarantor dies or any of other events
described in this default section occurs with respect to any
guarantor of this Note. (g) A material adverse change occurs in
Borrower's financial condition, or Lender believes the prospect of
payment or performance of the Indebtedness is impaired. (h) Lender
in good faith deems itself insecure.
If any default, other than a default in payment, is curable and if
Borrower has not been given a notice of a breach of the same
provision of this Note within the preceding twelve (12) months, it
may be cured (and no event of default will have occurred) if
Borrower, after receiving written notice from Lender demanding cure
of such default: (a) cures the default within fifteen (15) days: or
(b) if the cure requires more than fifteen (15) days, immediately
initiates steps which Lender deems in Lender's sole discretion to
be sufficient to cure the default and thereafter continues and
completes all reasonable and necessary steps sufficient to product
compliance as soon as reasonably practical.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid
principal balance on this Note and all accrued unpaid interest
immediately due, without notice, and then Borrower will pay that
amount. Upon Borrower's failure to pay all amounts declared due
pursuant to this section, including failure to pay upon final
maturity, Lender, at its option, may also, if permitted under
applicable law, increase the variable interest rate on this Note to
5.500 percentage points over the Index. This includes, subject to any
limits under applicable law, Lender's attorneys' fees and Lender's
legal expenses whether or not there is a lawsuite, including attorneys'
fees and legal expenses for bankruptcy proceedings (including efforts to
modify or vacate any automatic stay or injunction), appeals, and
any anticipated post-judgement collection services. Borrower also will pay
court costs, in addition to all other sums provided by law.
THE NOTE HAS BEEN DELIVERED TO LENDER AND ACCEPTED BY LENDER IN THE STATE
OF CALIFORNIA. IF THERE IS A LAWSUIT, BORROWER AGREES UPON LENDER'S REQUEST
TO SUBMIT TO THE JURISDICTION OF THE COURTS OF LOS ANGELES COUNTY, THE STATE
OF CALIFORNIA. LENDER AND BORROWER HEREBY WAIVE THE RIGHT TO ANY JURY
TRIAL IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM BROUGHT BY EITHER
LENDER OR BORROWER AGAINST THE OTHER. THIS NOTE SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
CALIFORNIA.
RIGHT OF SETOFF. Borrower grants to Lender a contractual security
interest in, and hereby assigns, conveys, delivers, pledges, and
transfers to Lender all Borrower's right, title and interest in and
to, Borrower's accounts with Lender (whether checking, savings, or
some other account), including without limitation all accounts held
jointly with someone else and all accounts Borrower may open in the
future, excluding however all IRA and Keogh accounts, and all trust
accounts for which the grant of a security interest would be
prohibited by law. Borrower authorizes Lender, to the extent
permitted by applicable law, to charge or setoff all sums owing on
this Note against any and all such accounts.
LINE OF CREDIT: This Note evidences a revolving line of credit. Advances
under this Note may be requested either orally or in writing by Borrower
or as provided in this paragraph. Lender may, but need not, require that
all oral requests be confirmed in writing. All communications, instructions,
or directions by telephone or otherwise to Lender are to be directed to
Lender's office shown above. The following party or parties are authorized
as provided in this paragraph to request advances under the line of credit
until Lender receives from Borrower at Lender's address shown above written
notice of revocation of their authority: SHARON KAISER, VICE PRESIDENT /
CHIEF FINANCIAL OFFICER; WILLIAM D. NICELY, CHIEF EXECUTIVE OFFICER; AND
JOANN STOVER, SECRETARY. (MINIMUM OF $5,000 PER REQUEST). Borrower agrees
to be liable for all sums either: (a) advanced in accordance with the
instructions of an authorized person or (b) credited to any of Borrower's
accounts with Lender. The unpaid principal balance owing on this Note at
any time may be evidenced by endorsements on this Note or by Lender's internal
records, including daily computer print-outs. Lender will have no obligation
to advance funds under this Note if: (a) Borrower or any guarantor is in
default under the terms of this Note or any agreement that Borrower or
any guarantor has with Lender, including any agreement made in connection with
the signing of this Note; (b) Borrower or any guarantor ceases doing business
or is insolvent; (c) any guarantor seeks, claims or otherwise attempts to
limit, modify or revoke such guarantee of this Note or any other loan with
Lender; (d) Borrower has applied funds provided pursuant to this Note for
purposes other than those authorized by Lender; or (e) Lender in good
faith deems itself insecure under this Note or any other agreement
between Lender and Borrower.
<PAGE>
06-01-1999 PROMISSORY NOTE PAGE 2
(Continued)
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its
rights or remedies under this Note without losing them. Borrower
and any other person who signs, guarantees or endorses this Note,
to the extent allowed by law, waive any applicable statute of
limitations, presentment, demand for payment, protest and notice of
dishonor. Upon any change in the terms of this Note, and unless
otherwise expressly stated in writing, no party who signs this Note,
whether as maker, guarantor, accommodation maker or endorser, shall
be released from liability. All such parties agree that Lender may
renew or extend (repeatedly and for any length of time) this loan,
or release any party or guarantor or collateral; or impair, fail to
realize upon or perfect Lender's security interest in the
collateral; and take any other action deemed necessary by Lender
without the consent of or notice to anyone. All such parties also
agree that Lender may modify this loan without the consent of or
notice to anyone other than the party with whom the modification is
made.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE
PROVISIONS OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE
PROVISIONS. BORROWER AGREES TO THE TERMS OF THE NOTE AND
ACKNOWLEDGES RECEIPT OF A COMPLETE COPY OF THE NOTE.
BORROWER:
HEMACARE CORPORATION
x /s/ Sharon C. Kaiser x /s/ William D. Nicely
------------------------- ------------------------
Authorized Officer Authorized Officer
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
[LOGO]
BANK LEUMI USA
- ---------------------------
- ---------------------------
- ---------------------------
Member FDIC
<TABLE>
<CAPTION>
DISBURSEMENT REQUEST AND AUTHORIZATION
- ---------------------------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO CALL COLLATERAL ACCOUNT OFFICER INITIALS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$1,200,000.00 06-01-1999 05-30-2000 1-1 04A0 030 xxxxxxxxxx KXA
- ---------------------------------------------------------------------------------------------------------
References in the shaded area are for lender's use only and do not limit the applicability of this
document to any particular loan or item.
- ---------------------------------------------------------------------------------------------------------
</TABLE>
BORROWER: HEMACARE CORPORATION LENDER: BANK LEUMI LE-ISRAEL, B.M.
4954 VAN NUYS BLVD., #201 8383 WILSHIRE BLVD. STE. 400
SHERMAN OAKS, CA 91403 BEVERLY HILLS, CA 90211
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LOAN TYPE. This is a Variable Rate (0.500% over reference rate as
established by Bank Leumi USA from time to time as its base rate.,
making an initial rate of 8.20%), Revolving Line of Credit Loan to
a Corporation for $1,200,000.00 due on June 1, 1999. This is an
unsecured renewal loan.
PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for:
/ / PERSONAL, FAMILY, OR HOUSEHOLD PURPOSES OR PERSONAL INVESTMENT
/x/ BUSINESS (INCLUDING REAL ESTATE INVESTMENT)
SPECIFIC PURPOSE. The specific purpose on this loan is: WORKING CAPITAL
DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan
proceeds will be disbursed until all of Lender's conditions for
making the loan have been satisfied. Please disburse the loan
proceeds of $1,200,000.00 as follows:
AMOUNT PAID ON BORROWER'S ACCOUNT: $1,200,000.00
$1,200,000.00 Payment on Loan #0201660600-1-1 (RNW)
--------------
NOTE PRINCIPAL: $1,200,000.00
CHARGES PAID IN CASE. Borrower has paid or will pay in cash as
agreed the following charges:
PREPAID FINANCE CHARGES PAID IN CASH: $ 0.00
OTHER CHARGES PAID IN CASH: $150.00
$150.00 Documentation Fee
-------
TOTAL CHARGES PAID IN CASH: $150.00
AUTOMATIC PAYMENTS. Borrower hereby authorized Lender automatically
to deduct from Borrower's account numbered xx-xxxxxx the amount of
any loan payment. If the funds in the account are insufficient to
cover any payment, Lender shall not be obligated to advance funds
to cover the payment. At any time and for any reason, Borrower or
Lender may voluntarily terminate automatic Payments.
COSTS AND CHARGES. Debit DDA #xx-xxxxxx for the fees shown above.
FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER
REPRESENTS AND WARRANTS TO LENDER THAT THE INFORMATION PROVIDED
ABOVE IS TRUE AND CORRECT AND THAT THERE HAS BEEN NO MATERIAL
ADVERSE CHANGE IN BORROWER'S FINANCIAL CONDITION AS DISCLOSED IN
BORROWER'S MOST RECENT FINANCIAL STATEMENT TO LENDER. THIS
AUTHORIZATION IS DATED FEBRUARY 5, 1999.
BORROWER:
HEMACARE CORPORATION
x /s/ Sharon C. Kaiser x /s/ William D. Nicely
------------------------- -----------------------
Authorized Officer Authorized Officer
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
HEMACARE CORPORATION
EXHIBIT 11
Net Income (Loss) per Common and Common Equivalent Share
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
BASIC
Weighted average common shares used to
compute basic earnings (loss) per share..... 7,392,238 7,281,120 7,336,679 7,239,318
========== ========== ========== ==========
Net income (loss)............... $ 201,252 $ 50,000 $ 444,252 $ 66,000
========== ========== ========== ==========
Basic net income (loss) per share............ $ 0.03 $ 0.01 $ 0.06 $ 0.01
========== ========== =========== ==========
DILUTED
Weighted average common shares used to
compute basic earnings (loss) per share..... 7,392,238 7,281,120 7,336,679 7,239,318
Dilutive preferred equivalent shares......... 500,000 - 500,000 -
Dilutive common equivalent shares attri-
butable to stock options (based on
average market price)....................... 457,614 21,732 72,394 29,608
Dilutive common equivalent shares attri-
butable to warrants (based on
average market price)....................... 34,785 - 15,379 -
---------- ---------- ---------- ----------
Weighted average common shares and
equivalents used to compute diluted
earnings (loss) per share................... 8,384,637 7,302,852 7,924,452 7,268,926
========== ========== ========== ==========
Net income (loss).......... $ 201,252 $ 50,000 $ 444,252 $ 66,000
========== ========== ========== ==========
Dilutive net income (loss) per share......... $ 0.02 $ 0.01 $ 0.06 $ 0.01
========== ========== ========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from unaudited
financial statements contained in Form 10-Q for the Quarter ending June 30, 1999
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 866,000
<SECURITIES> 576,000
<RECEIVABLES> 3,549,000
<ALLOWANCES> 439,000
<INVENTORY> 685,000
<CURRENT-ASSETS> 5,414,000
<PP&E> 3,109,000
<DEPRECIATION> 1,921,000
<TOTAL-ASSETS> 7,354,000
<CURRENT-LIABILITIES> 2,561,000
<BONDS> 0
0
75,000
<COMMON> 13,649,000
<OTHER-SE> 00
<TOTAL-LIABILITY-AND-EQUITY> 7,354,000
<SALES> 9,447,000
<TOTAL-REVENUES> 9,447,000
<CGS> 7,612,000
<TOTAL-COSTS> 7,612,000
<OTHER-EXPENSES> 1,432,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 45,000
<INCOME-PRETAX> 458,000
<INCOME-TAX> 14,000
<INCOME-CONTINUING> 444,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 444,000
<EPS-BASIC> .06
<EPS-DILUTED> .06
</TABLE>
