==========================================================================
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 September 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 November 11, 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 - September 30, 1999 (unaudited)
and December 31, 1998
Consolidated statements of operations - Three and nine months
ended September 30, 1999 and 1998 (unaudited)
Consolidated statements of cash flows - Nine months ended
September 30, 1999 and 1998 (unaudited)
Notes to consolidated financial statements - September 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 6. Exhibits
SIGNATURES
2
<PAGE> 3
Item 1. Financial Statements
- ------- ---------------------
HEMACARE CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................... $ 1,445,000 $ 1,372,000
Marketable securities............................... 486,000 288,000
Accounts receivable, net of allowance for
doubtful accounts - $439,000 (1999) and
$596,000 (1998)................................... 2,863,000 3,038,000
Product inventories................................. 66,000 87,000
Supplies............................................ 615,000 604,000
Prepaid expenses.................................... 208,000 160,000
Note receivable from related party - current........ 23,000 24,000
------------- -------------
Total current assets........................... 5,706,000 5,573,000
Plant and equipment, net of accumulated
depreciation and amortization of
$1,991,000 (1999) and $1,869,000 (1998)............. 1,243,000 1,289,000
Goodwill, net of amortization of $70,000 (1999) and
$11,000 (1998)....................................... 683,000 742,000
Note receivable from related party - non-current...... 35,000 49,000
Other assets.......................................... 12,000 9,000
------------- -------------
$ 7,679,000 $ 7,662,000
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................... $ 1,255,000 $ 1,414,000
Accrued payroll and payroll taxes................... 614,000 802,000
Accrued professional fees........................... 86,000 173,000
Other accrued expenses.............................. 226,000 418,000
Current obligations under capital leases............ 179,000 203,000
Current notes payable............................... 136,000 109,000
Reserve for discontinued operations................. 110,000 110,000
------------- -------------
Total current liabilities..................... 2,606,000 3,229,000
Obligations under capital leases, net
of current portion.................................. 595,000 627,000
Notes payable, net of current portion................. 387,000 491,000
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................................. (9,657,000) (10,368,000)
------------- -------------
Total shareholders' equity............................ 4,067,000 3,291,000
------------- -------------
$ 7,679,000 $ 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 Sept.30, Nine Months Ended Sept. 30,
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues:
Blood management programs.... $ 2,032,000 $ 587,000 $ 5,605,000 $ 2,291,000
Regional operations:
Blood products............. 1,006,000 1,075,000 3,195,000 2,335,000
Blood services............. 1,794,000 1,005,000 5,479,000 3,805,000
------------- ------------ ------------- -------------
Total revenue............. 4,832,000 2,667,000 14,279,000 8,431,000
Operating costs and expenses:
Blood management programs.... 1,725,000 465,000 4,932,000 2,067,000
Regional operations:
Blood products............. 748,000 676,000 2,301,000 1,622,000
Blood services............. 1,307,000 661,000 4,159,000 2,723,000
------------- ------------ ------------- -------------
Total operating costs and
expenses................ 3,780,000 1,802,000 11,392,000 6,412,000
------------- ------------ ------------- -------------
Operating profit........... 1,052,000 865,000 2,887,000 2,019,000
General and administrative
expense...................... 771,000 608,000 2,244,000 1,694,000
Gain on sale of Gateway
Community Blood Program...... - - 100,000 -
------------- ------------ ------------- -------------
Income from continuing
operations before income
taxes........................ 281,000 257,000 743,000 325,000
Provision for income taxes...... 14,000 - 28,000 -
------------- ------------ ------------- -------------
Net income................... $ 267,000 $ 257,000 $ 715,000 $ 325,000
============= ============ ============= ==============
Income per share:
Basic........................ $ 0.04 $ 0.04 $ 0.10 $ 0.05
============= ============ ============= ==============
Diluted...................... $ 0.03 $ 0.04 $ 0.09 $ 0.05
============= ============ ============= ==============
Weighted average shares
outstanding - basic........ 7,437,582 7,281,120 7,359,351 7,194,113
============ =========== ============ =============
Weighted average shares
outstanding - dilutive..... 8,363,532 7,281,120 8,018,390 7,194,382
============= ============ ============= ==============
</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>
Nine months ended Sept. 30,
1999 1998
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income................................................... $ 715,000 $ 325,000
Adjustments to reconcile net income to
net cash provided by (used in) operating activities:
Depreciation and amortization............................ 266,000 116,000
Issuance of common stock and options for compensation.... 65,000 13,000
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable............... 175,000 144,000
(Increase) decrease in inventories, supplies and
prepaid expenses....................................... (39,000) 7,000
(Increase) in other assets, net.......................... (3,000) -
(Decrease) in accounts payble, accrued expenses
and other liabilities.................................. (614,000) (146,000)
Proceeds from discontinued operations.................... - 7,000
------------ ------------
Net cash provided by (used in) operating activities.......... 565,000 466,000
Cash flows from investing activities:
Decrease in notes receivable from related parties........ 14,000 12,000
Increase in marketable securities........................ (198,000) (117,000)
Purchase of plant and equipment, net..................... (51,000) (47,000)
------------ ------------
Net cash used in investing activities........................ (235,000) (152,000)
Cash flows from financing activities:
Principal payments on line of credit, term loan
and capital leases..................................... (257,000) (90,000)
------------ ------------
Net cash used in financing activities.................... (257,000) (90,000)
------------ ------------
Increase in cash and cash equivalents.................... 73,000 224,000
Cash and cash equivalents at beginning of period......... 1,372,000 1,249,000
------------ ------------
Cash and cash equivalents at end of period............... $ 1,445,000 $ 1,473,000
============ ============
Supplemental disclosure:
Interest paid............................................ $ 68,000 $ 19,000
============ ============
Income taxes paid........................................ $ 39,000 $ -
============ ============
Items not impacting cash flows:
Increase in capital lease obligations.................... $ 126,000 $ -
============ ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
5
<PAGE> 6
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 three and nine
months ended September 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.
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 entered into contractual
arrangements to provide services to most of the 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 September 30, 1999, and there was no
balance outstanding under the line of credit. The line of credit
matures in June 2000.
6
<PAGE> 7
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
(8.25% as of September 30, 1999) plus one percent.
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.
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 - Business Segments 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
7
<PAGE> 8
1996. Effective July 31, 1997, the Company entered into an
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 a maximum of $422,000. The Company received an
additional payment of $100,000 during the first quarter when
Gateway received a Food and Drug Administration establishment
license. This was accounted for as an additional gain on the
disposition of Gateway.
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 cryopreservation 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.
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.
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.
8
<PAGE> 9
All comparisons within the following discussions are to the comparable
periods of the previous year.
Revenues, Operating Profit and Net Income
- ------------------------------------------
Total revenues increased 81% ($2,165,000) in the three-month and 69%
($5,848,000) in the nine-month periods ended September 30, 1999. CBS
contributed revenues of $2,005,000 in the three-months and $5,670,000 in
the nine-month periods ended September 30, 1999. Operating profit
increased by 22% ($187,000) in the three-month and 43% ($868,000) in the
nine-month periods ended September 30, 1999. CBS contributed operating
profit of $360,000 in the three-months and $728,000 in the nine-months
ended September 30, 1999.
Blood Management Programs
- --------------------------
Revenue increased 246% ($1,445,000) in the three-month and 145%
($3,314,000) in the nine-month periods ended September 30, 1999. CBS's
Blood Management Programs contributed revenues of $1,194,000 in the
three-month and $3,433,000 in the nine-month periods ended September 30,
1999. During the second quarter of 1999, the Company commenced a Blood
Management Program with the University of California at Irvine. This
program contributed third quarter revenues of $336,000 and $522,000 for
the nine-month period ended September 30, 1999.
Operating profit increased 152% ($185,000) in the three-month and 200%
($449,000) in the nine-month periods ended September 30, 1999. During
the third quarter of 1999 CBS contributed operating profits of $195,000.
Additionally, the UCI program contributed operating profits of $98,000.
The increase in profits from these programs was offset by the USC
program which was less profitable during the three months ended
September 30, 1999, compared to 1998. In addition to normal operating
expenses the USC program incurred certain additional expenses to expand
and develop its ability to collect blood products through mobile blood
drives. These mobile blood drives are expected to occur in future
quarters, although their ultimate success can not be assured. For the
nine-months ended September 30, 1999, CBS contributed $384,000 of
operating profits and the UCI program contributed $139,000 of operating
profits. The increase in profits from these programs was offset by
reduced profitability from the Company's USC program.
Blood Products
- ---------------
Blood Products revenue for the first three-quarters of 1999, increased
by 37% ($860,000). In July 1998, two significant customers began
purchasing apheresis platelets from the Company. Revenues for the first
three-quarters of 1999 include apheresis platelet sales to these
customers whereas there were only minimal sales to these customers in
the first three-quarters of 1998. Additionally, CBS's blood products
contributed revenue of $178,000 for the nine-month period ended
September 30, 1999.
Blood Products revenue decreased by 6% ($69,000) in the third quarter of
1999. In August 1999, the two significant apheresis platelet customers
described above began purchasing products from other sources.
Additionally, competition among apheresis platelet suppliers intensified
during the third quarter of 1999. In response to increased competition,
the Company decreased its platelet prices to certain customers. The
decline in revenue was partially offset by CBS's blood products revenue
of $49,000.
Operating profit decreased by 35% ($141,000) in the three-months ended
September 30, 1999. For the nine-months ended September 30, 1999,
9
<PAGE> 10
operating profit increased by 25% ($181,000). The changes in operating
profits are attributable to the decreases in customer purchases and
increased competition described in the paragraph above. CBS contributed
$6,000 and $36,000 in operating profits for the three-months and nine-
months ended September 30, 1999.
Blood Services
- ---------------
Blood services revenue increased by 79% ($789,000) in the three-month
and 44% ($1,674,000) in the nine-months ended September 30, 1999. CBS
contributed revenues of $776,000 and $2,059,000 respectively. Exclusive
of CBS revenue contribution, revenue in the quarter ended September 30,
1999 was consistent with the prior year. For the nine-months ended
September 30, 1999, revenue exclusive of CBS decreased by $385,000. 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. During the
first six months of 1998, the Company sold approximately $250,000 of
albumin, to non-hospital customers. There was no sale of albumin in
1999.
Operating profit increased by 42% ($143,000) in the three-month period
ended September 30, 1999 and 22% ($238,000) for the nine-months ended
September 30, 1999. CBS contributed operating profits of $159,000 and
$308,000 for the three and nine month periods respectively. Exclusive of
CBS's profit contribution, operating profit in the third quarter of
1999, was consistent with the prior year. For the nine-months ended
September 30, 1999, operating profit from California operations was
negatively affected, as there were no sales of albumin to non-hospital
customers. Additionally, the volume of albumin used during therapeutic
procedures also declined compared to 1998. This was partially offset by
an increase in the number of therapeutic procedures that required the
use of prosorba columns. Prosorba columns are special filters used
during therapeutic apheresis to treat certain blood disorders.
Gain on Disposition
- --------------------
As 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. During the first
quarter of 1999 the Company received this amount and accounted for this
cash receipt as an additional gain on the disposition of Gateway.
General and Administrative Expense
- -----------------------------------
General and administrative expense increased 27% ($163,000) in the third
quarter and 32% ($550,000) for nine-months ended September 30, 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% for both the three and nine-month periods ended September 30, 1999,
compared to 23% and 20% during the same periods of 1998.
Liquidity and Capital Resources
- ---------------------------------
At September 30, 1999, the Company had cash and cash equivalents and
marketable securities of $1,931,000 and working capital of $3,100,000.
As of December 31, 1998, these balances were $1,660,000 and $2,344,000
respectively. The Company has a $1,200,000 line of credit with a
10
<PAGE> 11
commercial bank that is in effect through June 1, 2000. Under the terms
of the credit 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 September 30, 1999, and there
were no borrowings on the line at that date.
The Company also has a term note with a bank that had an original
balance of $600,000. As of September 30, 1999, the balance on this note
was $523,000. The note requires monthly payments of principal and
interest of approximately $15,000 through February 2003. The note bears
interest at the prime rate (8.25% as of September 30, 1999) plus one
percent. The note is cross collateralized with the Company's line of
credit.
The Company has entered into new contracts with most of its East Coast
customers. However, the Company still operates under interim
arrangements with certain East Coast customers. The Company expects to
enter into written agreements with most of these customers or may
continue to provide services to these customers without a contract. The
nature of the business is such that customer contracts periodically
expire and require renewals. When contracts expire there is 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.
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 Medi-Cal. It is estimated that revenues from
these patients represented approximately 2% ($295,000) of the Company's
1998 revenues. New regulations that 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 Medi-Cal patients.
The Company anticipates that cash flow from profitable operations,
collection of the accounts receivable purchased from CBS, 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.
11
<PAGE> 12
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 of this program 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 the 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 CBS, 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 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
None
12
<PAGE> 13
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
11 Net Income per Common and Common Equivalent Share
Financial Data Schedule for the Quarter Ended
September 30, 1999
27 Financial Data Schedule for the Quarter Ended September
30, 1999
b. The Company did not file any reports on Form 8-K
during the three months ended September 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: November 15, 1999 HEMACARE CORPORATION
------------------- ---------------------------
(Registrant)
/s/ David Fractor
----------------------------
David Fractor
Chief Financial Officer
13
<PAGE> 14
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Method of Filing
------------------
<S> <C> <C>
11 Net Income (Loss) per Common and Common
Equivalent Share Filed herewith electronically
27 Financial Data Schedule for the quarter
ended September 30,1999 Filed herewith electronically
</TABLE>
14
EXHIBIT 11
HEMACARE CORPORATION
NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
------------ ------------ ------------ ----------
<S> <C> <C> <C> <C>
BASIC
Weighted average common shares used to compute basic
earnings per share................................... 7,437,582 7,281,120 7,359,351 7,194,113
========== ========== ========== ==========
Net income.................................... $ 267,000 $ 257,000 $ 715,000 $ 325,000
========== ========== ========== ==========
Basic net income per share............................. $ 0.04 $ 0.04 $ 0.10 $ 0.05
========== ========== ========== ==========
DILUTED
Weighted average common shares used to compute
basic earnings per share............................. 7,437,582 7,281,120 7,359,351 7,194,113
Dilutive preferred equivalent shares................... 500,000 - 500,000 -
Dilutive common equivalent shares attributable to
stock options (based on average market price)......... 396,457 - 153,644 269
Dilutive common equivalent shares attributable to
warrants (based on average market price).............. 29,493 - 5,395 -
---------- ---------- ---------- ----------
Weighted average common shares and equivalents used
to compute diluted earnings per share................. 8,363,532 7,281,120 8,018,390 7,194,382
========== ========== ========== ==========
Net income.................................... $ 267,000 $ 257,000 $ 715,000 $ 325,000
=========== =========== ========== ==========
Dilutive net income per share.......................... $ 0.03 $ 0.04 $ 0.09 $ 0.05
========== =========== ========== ==========
</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 September 30,
1999 and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 1,445,000
<SECURITIES> 486,000
<RECEIVABLES> 3,302,000
<ALLOWANCES> 439,000
<INVENTORY> 681,000
<CURRENT-ASSETS> 5,706,000
<PP&E> 3,234,000
<DEPRECIATION> 1,991,000
<TOTAL-ASSETS> 7,679,000
<CURRENT-LIABILITIES> 2,606,000
<BONDS> 0
0
75,000
<COMMON> 13,649,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 7,679,000
<SALES> 14,279,000
<TOTAL-REVENUES> 14,279,000
<CGS> 11,392,000
<TOTAL-COSTS> 11,392,000
<OTHER-EXPENSES> 2,176,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 68,000
<INCOME-PRETAX> 743,000
<INCOME-TAX> 28,000
<INCOME-CONTINUING> 715,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 715,000
<EPS-BASIC> .10
<EPS-DILUTED> .09
</TABLE>
