HEMACARE CORP /CA/, 10-K405, 2000-03-30

HEMACARE CORP /CA/
10-K405, 2000-03-30
MISC HEALTH & ALLIED SERVICES, NEC

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K

(Mark one)

/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For fiscal year ended December 31, 1999

/ / 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

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

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days: YES X NO ___

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

As of March 24, 2000, 7,583,107 shares of Common Stock of the Registrant were
issued and outstanding. The aggregate market value of the Common Stock held
by non-affiliates of the Registrant on that date (based upon the closing
price of the Common Stock as reported by the OTC Bulletin Board was
approximately,$16,955,267.

Portions of the Registrant's definitive Proxy Statement for its June 15, 2000
Annual Meeting of Shareholders (which has not been filed as of the date of
this filing) are incorporated by reference into Part III. Such proxy shall
be filed with the Securities and Exchange Commission not later than 120 days
after the registrant's fiscal year ended December 31, 1999.

<PAGE> 2

PART I
Item 1. Business.
- ------------------

General
- -------

HemaCare Corporation and its wholly owned subsidiary Coral Blood Services,
Inc. offer a full range of blood services and products to hospitals and
medical centers. HemaCare Corporation and its wholly owned subsidiaries are
collectively referred to herein as "HemaCare" or the "Company", and Coral
Blood Services, Inc. is referred to as "CBS." HemaCare is licensed by the
Food and Drug Administration ("FDA"), which regulates the blood industry,
and accredited by the American Association Blood Banks ("AABB"). The
Company has been providing blood services and products in Southern California
since 1979. In October 1998, Coral Blood Services, Inc. was formed to
acquire blood products and services operations in the eastern United States.
The Company now has operations in 12 states.

During the last decade, hospitals have experienced increasing cost containment
pressures. As a result, these institutions are continuously looking for ways
of providing more cost-effective health services. HemaCare has responded to
this need by developing customized blood services programs designed to meet
the specific requirements of each individual hospital customer.

The Company's customers include university teaching hospitals, medical centers
and regional hospitals located in California, Connecticut, Massachusetts,
Maine, New Hampshire, New Jersey, New York, North Carolina, Rhode Island,
Tennessee and West Virginia. Products and services are provided to these
customers under contractual agreements. Each customer selects the products
and services provided by the Company which best meet its needs, including:

- - Product procurement (apheresis platelets and plasma and whole
blood derived components).

- - Therapeutic apheresis (plasma exchange, cell depletion and
immunadsorption procedures).

- - Stem cell collection and cryopreservation.

- - Interoperative autologous transfusion.

- - Donor center management.

- - Donor sample testing.

- - Blood management consulting.

- - Research and clinical trial protocols.

Several of the Company's customers have elected to outsource some
or all of their blood services to the Company in a blood management program
arrangement as described below under the caption "Blood Management Programs."

The Company's corporate headquarters are located in Sherman Oaks,
California, north of downtown Los Angeles. This location also serves as the
regional office for Southern California operations. Other regional offices
are located in Portland, Maine, Yonkers, New York and Chapel Hill, North
Carolina.

The HemaCare scientific advisory board, established in 1997, provides input
and counsel to the Company's board of directors and management on technical
and regulatory matters as well as participating in periodic management
meetings. Chaired by Joshua Levy, MD, the advisory board is comprised of
nationally recognized experts in the fields of blood banking, apheresis
technology and application, and regulatory compliance.

Certain medical terms included in the following discussions are
further explained in a glossary located at the end of this Item 1.

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Blood Management Programs
- -------------------------

A HemaCare Blood Management Program ("BMP") is an arrangement in
which a hospital outsources some or all of its blood procurement and donor
center management functions to HemaCare while retaining the convenience and
efficiencies of an in-house program.

In a BMP arrangement, HemaCare supplies the BMP customer with blood products
from collections at the customer's donation center or from collections at
other HemaCare donation sites or products purchased by HemaCare from
outside suppliers. HemaCare establishes and operates a blood donation center
under the name of the sponsoring BMP hospital. Typically, the center is
staffed, operated and managed by the Company which is also responsible
for regulatory compliance. A BMP aligns the interests of the Company and
its hospital customer, providing the customer with a "partner" in achieving
its financial, regulatory compliance and patient service goals.

Dartmouth-Hitchcock Medical Center

Dartmouth-Hitchcock Medical Center ("DHMC") outsources its
apheresis platelet and plasma collections, autologous and directed donation
collection services, therapeutic apheresis and stem cell collection services
and blood related research support in a BMP arrangement. Located in Lebanon,
New Hampshire, DHMC, a 430 bed hospital, is affiliated with Dartmouth College
and is the teaching hospital for Dartmouth College Medical School. DHMC is a
major research center and serves as the tertiary care center for New
Hampshire and adjacent areas of Vermont. The Company collects apheresis
products for the hospital and provides autologous and directed donations
services and conducts a donor-retested plasma program. Therapeutic apheresis
and stem cell collection services are provided in the hospital-based donor
room or at the patient's bedside, as directed by the responsible physician.
The Company's current BMP agreement with DHMC extends through October 2001.

Maine Medical Center

Located in Portland, Maine, the Maine Medical Center ("MMC"), a 600 bed
teaching hospital, is the largest medical center in northern New England.
In 1994, MMC elected to outsource its apheresis platelet collections and, in
1997, added therapeutic apheresis functions and stem cell collections to its
BMP arrangement. The Company provides substantially all of the apheresis
platelets used by MMC from products collected at its donor facility in
Portland and on mobile platelet drives conducted in the greater Portland area.
Mobile therapeutic apheresis and stem cell collection services are provided
to MMC's patients and physicians by specially trained registered nurses. In
addition, the Company offers low density lipoprotein ("LDL") therapeutic
services to patients with extremely high blood cholesterol levels who are
resistant to dietary and drug treatments. Although this contract recently
expired, the Company continues to provide services in accordance with the
terms of the most recent contract until the terms of a new contract are
finalized.

St. Vincent Hospital at Worcester Medical Center

Located in Worcester, Massachusetts, St. Vincent Hospital at Worcester
Medical Center ("St. Vincent") is a 300-bed tertiary and acute care
hospital serving central Massachusetts. In March 1998, St. Vincent outsourced
its entire blood procurement and donor room function on an exclusive basis.
Services provided by the Company to St. Vincent include procurement of
blood products, whole blood and apheresis platelet collections, autologous
and directed donations services and therapeutic apheresis services. An
integral part of these services is the operation of a donor room located in
St. Vincent hospital. This facility provides a convenient location for
patients and their families to donate blood.

University of North Carolina

The University of North Carolina's BMP arrangement designates the
Company as the primary provider of apheresis products to the UNC Hospitals
in Chapel Hill, North Carolina ("UNC").

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The Company collects these products in its hospital-based donor room and on
mobile blood drives. The 660-bed UNC facility is the teaching hospital for
the University of North Carolina School of Medicine and is an active blood-
banking research institution. The Company's BMP arrangement extends through
January 31, 2002.

University of Southern California

The University of Southern California ("USC") BMP agreement established
HemaCare as the primary provider of blood products and services to the
patients and physicians of USC/Norris Comprehensive Cancer Center and
Hospital and USC University Hospital. Together these hospitals comprise
a 340 bed tertiary care and research center. An integral part of the USC
program is a blood donation center located on the USC Health Sciences Campus.
In addition, the Company provides mobile therapeutic apheresis and stem cell
collection services to USC. The BMP agreement is in effect until March 2002.

University of California, Irvine Medical Center

Located in Orange County, California, the University of California, Irvine
Medical Center (UCI) outsources its apheresis platelet collections,
autologous and directed donation collection services and therapeutic
apheresis in a BMP arrangement that began in June, 1999. UCI is a 462 bed
tertiary facility and is the teaching hospital for the University of
California, Irvine Medical School The Company collects these blood products
in a donor room located in the hospital and on mobile blood drives. This BMP
agreement is in effect until February 28, 2002.

Long Beach Memorial Medical Center

On February 14, 2000, the Company entered into a partnership agreement to
manage the blood collection activities for Long Beach Memorial Medical Center
("LBMMC"). LBMMC is a 726-bed major tertiary teaching hospital facility
located in Southern Los Angeles County. It is the flagship medical center
in the Memorial Care System, which includes four other hospitals. Under the
agreement, HemaCare is responsible for management of LBMMC's existing
programs for blood collection and for expanding those programs to include
mobile blood drives in the greater Long Beach community. Additionally,
HemaCare is responsible for providing therapeutic apheresis services
to patients requiring this medical treatment.

Presbyterian Intercommunity Hospital

HemaCare entered into a partnership agreement to manage the comprehensive
blood collection activities for Presbyterian Intercommunity Hospital ("PIH")
beginning May 1, 2000. PIH is a 339-bed community medical center located in
Whittier, California. Under this agreement, HemaCare will be responsible for
management of PIH's existing blood collection programs, and for expanding
those programs to include mobile blood drives in the greater Whittier
and Los Angeles areas. In addition, HemaCare will be responsible for
providing therapeutic apheresis services to patients requiring this medical
treatment.

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

General

The Company sells single donor apheresis platelet products ("apheresis
platelets" or "platelets"), apheresis plasma and whole blood derived
components ("components") such as red blood cells and fresh frozen plasma
to more than 100 hospital customers.

Single Donor Apheresis Platelets

The Company collects single donor platelets, using automated blood
separation technology, at its Sherman Oaks, California location, each of
the BMP locations and at two sponsoring hospitals in the metropolitan New
York area.

Platelets are sold to hospitals for transfusion into cancer patients
undergoing chemotherapy, patients undergoing major surgery such as open
heart surgery or transplant procedures, and trauma or other conditions
associated with massive blood loss.

Platelet apheresis technology involves the use of a cell separator
operated by a trained clinician. The procedure removes blood from a donor
through a needle in one arm, pumping the blood through the cell separator
where the desired platelet component is retained and returning the blood,
including the red cells, to the donor. The procedure typically requires one
to three hours and may be done up to 24 times per year, since platelets
regenerate within 48 hours. Temperature control and constant movement (using
a rotator) maintain the platelets' viability for five days. When necessary
to meet its customers' needs, the Company also purchases platelet products
for resale. Such platelet suppliers are FDA licensed and accredited by the
AABB. Approximately 4% of platelets sold by the Company in 1999 were
purchased from outside suppliers.

In order to attract and retain qualified donors at its Sherman Oaks,
California location, the Company reimburses these donors for their time and

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commitment. As a result, the Company has developed a select group of repeat
donors who are tested regularly in connection with their frequent donations.
Cash reimbursement to donors is variable, based on the number and frequency
of donations, and includes a bonus program. Most southern California platelet
products are obtained from paid donations made at the Company's Sherman Oaks
location. Platelet donors who are compensated must pass the Company's
stringent donor screening standards, which include a pre-donation and annual
physical examination by a physician. Volunteer and compensated donors are
subject to a prescreening interview before each donation, and all platelet
donations are subject to infectious disease testing. After collection, the
platelets are tested, labeled and delivered to hospital customers. The
Company also recruits non-cash compensated donors for its BMP donor centers
and hospital sponsored collection programs.

In 1999, $3,500,000 of the Company's revenues resulted from the sale of
platelets obtained from paid donors. Unless extended, the law enabling
HemaCare to sell apheresis platelets obtained from paid donors in California
will expire in December 2001. The loss of revenues from this program would
have a material adverse affect on the Company's revenue and net income.
In February 2000, proposed legislation (AB 2714) sponsored by the Company, was
introduced in the California Legislature. If enacted, this legislation will
make permanent the provisions of current California law enabling the
Company to sell platelet products obtained from paid donors.

There can be no assurances that AB 2714 will be passed by the legislature
and enacted into law. However, the Company believes that its twenty-one
year history of providing platelets to hospitals and patients (without a
single adverse patient health outcome) and its excellent regulatory
compliance record strongly support the passage of AB 2714 (see "Risk Factors").

Component Blood Products

HemaCare provides whole blood derived component products such as red blood
cells, fresh frozen plasma and cryoprecipitate to its non-BMP customers.
Most of these products are purchased by the Company. All purchased product
is obtained from blood centers located in the United States. All such
suppliers are FDA licensed and accredited by the AABB.

Blood Services General

The Company provides therapeutic apheresis, interoperative autologous
transfusion and donor testing services. Since its inception, the Company has
performed more than 43,200 therapeutic apheresis procedures in the treatment
of more than 27 diseases. The Company now provides these services in 11
states on the east and west coasts of the United States.

Therapeutic Apheresis

Therapeutic apheresis ("therapeutics" or "therapeutic services") is a
technique for removing harmful components from a patient's blood and is used
in the treatment of autoimmune diseases and other disorders. Therapeutic
services are provided upon the request of a hospital, which has received an
order from a patient's physician. Therapeutic treatments are administered
using mobile units operated at the patient's bedside or in a hospital
outpatient setting. The mobile therapeutics equipment includes a state-of-
the-art blood cell separator and the disposables and supplies needed to
perform the procedure. Treatments are administered by trained, nurse-
specialists, acting in accordance with documented operating procedures and
quality assurance protocols based on guidelines developed by the AABB and
the Joint Commission on Accreditation of Healthcare Organizations ("JCAHO"),
under the supervision of a specially trained physician.

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

Plasma Exchange and Cell Depletion

The primary blood services provided by the Company, accounting for
95% of therapeutics procedures in 1999, were plasma exchange and cell
depletion therapy. These procedures involve removing harmful substances
from a patient's blood, using automated blood separation equipment. As the
patient's blood flows through the cell separator, abnormal or excess proteins
or components associated with the disease being treated are selectively
removed. The remaining blood components are returned to the patient.

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Most treatments involve the removal of two to four liters of
abnormal plasma or certain cellular components. Replacement fluids, most
commonly albumin, are used to maintain the patient's blood volume.

Patients suffering from diseases such as multiple myeloma, polyneuropathy,
leukemia, systemic lupus erythematosus, scleroderma, hyperviscosity syndrome,
thrombocytosis, myasthenia gravis and Guillain-Barre syndrome may benefit
from therapeutic apheresis treatments. A patient may require from four
to twenty treatments over a period of time ranging from a few days to
several months. Each treatment may last from two to four hours.

In late 1996, a shortage of albumin arose when a major U.S. manufacturer was
required by regulatory agencies to temporarily cease operations. As a result,
the price of albumin more than doubled during 1997. During 1998 and most of
1999, albumin remained in short supply. During the second half of 1999, the
supply of albumin increased and prices declined. The price the Company
charges to customers for albumin increased in 1997 and 1998, although it was
unable to recover the full amount of the cost increase. With the easing of
albumin pricing in 1999, the Company was able to recover substantially all
of the remaining price increase.

Immunoadsorption

Since 1988, the Company has provided a therapeutic treatment which uses an
in-line immunoadsorption column to modify patient's immune response. During
immunoadsorption column therapy, blood is drawn from one arm of the patient,
plasma and blood cells are separated, the plasma is filtered through the
column to remove unwanted circulating immune complexes and immunoglobulin
from the plasma. The plasma is then recombined with the red blood cells and
returned to the patient's other arm.

Immunoadsorption column therapy has been approved by the FDA for the
treatment of ITP, an immune-mediated bleeding disorder since December 1997.

In 1999, the FDA approved this procedure for the treatment of moderate to
severe rheumatoid arthritis ("RA"). RA is a potentially crippling autoimmune
disease that is estimated to affect approximately 2.5 million people in the
United States. In RA, the body's immune system inappropriately makes
antibodies, called rheumatoid factors, that collect in the joints and
surrounding soft tissue causing inflammation and tissue damage. Joints,
typically those in the hand, become painful and swollen, lose movement and
become deformed. These individuals not only suffer a significantly reduced
quality of life, but also a shortened life expectancy.

This application may significantly increase the demand for immunadsorption
column procedures. The typical RA patient treatment involves a series
of twelve treatments in a three-month period. Approximately 50% of the
treated patients experience a significant decrease in symptoms and are able
to function without medication for a period of approximately one year.

Stem Cell Rescue and Cryopreservation

Since 1990, the Company has been providing peripheral stem cell collection
services in California. In this application, stem cells (those cells which
mature into all the different cellular components of blood) are collected
from a cancer patient using apheresis technology. The patient then
receives a series of intensive chemotherapy treatments followed by reinfusion
of the patient's own stem cells. From 1994 to 1999 the Company added
cryopreservation (processing, freezing and short-term storage of stem cells)
to cell collection to provide a full-service program to community hospitals
which are not able to establish their own in-house capabilities in the
early development of this technology. The Company's cryopreservation
capacity was underutilized as third arty payers were reluctant to reimburse
community hospitals for this procedure. Consequently, the Company decided
in 1999 to continue the collection of stem cells and to outsource the
cryopreservation activities.

Joshua Levy, M.D., a shareholder, founder and medical director of the
Company, through his private practice, treats patients who require
therapeutic services. The Company's ability to provide these services may
be limited by Federal self-referral laws and regulations. (See "Government
Regulation.")

Interoperative Autologous Transfusion

Interoperative autologous transfusions ("IAT") services offer an alternative
to allogeneic transfusion, providing important benefits to the patient. The
Company offers IAT services primarily in California and West Virginia.

An IAT procedure involves recovery of blood lost during surgery, cleaning of
this blood and reinfusion of the recovered blood into the surgery patient.
IAT may eliminate the risk of alloimmunizaton, hepatitis and AIDS from
transfused blood.

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The Company provides IAT services using standard operating procedures designed
to insure strict adherence to the highest quality standards. HemaCare's IAT
procedures are based on guidelines developed by the AABB and the JCAHO and
comply with the requirements of applicable Federal and state regulatory
agencies.

Discontinued Operations

From 1990 through 1995, the Company, through its wholly owned subsidiary
HemaBiologics, Inc., conducted research and development activities relating
to Immupath, an anti-HIV hyperimmune plasma product. In November 1995, the
Company decided to terminate these research and development activities. As a
result of this decision, the Company established a $1 million reserve for
losses during the disposal period, including $600,000 for a contingent
liability related to a dispute with Medicorp, Inc. ("Medicorp"), a licensor
of the research product. In July 1996, the Medicorp dispute was settled
without any payment by the Company. As a result, the Company recognized a
$600,000 gain on disposal of discontinued operations in the third quarter
of 1996.

In June 1996, the Company agreed to sell most of its research and development
assets, including its FDA plasma licenses and a plasma collection center for
which the Company received cash and a promissory note, collateralized by
certain of the assets sold. The note was repaid in March 1997, resulting in
a gain of $120,000 on disposal of discontinued operations in the first
quarter of 1997.

During the wind down of the research and development operations, the Company
manufactured a supply of Immupath sufficient for the patients still receiving
treatment for a limited period of time. There are currently two patients
receiving Immupath treatments. In the fourth quarter of 1997, the Company
reviewed and revised its estimate of the remaining costs of discontinued
operations, including the costs to treat remaining patients and the other
continuing liabilities of the discontinued operations, and recognized an
additional gain on disposal of $173,000. The Company does not expect
discontinued operations to have a material impact on its future operating
performance.

Sales to Major Customers
- ------------------------

Sales of products and services to USC/Norris Comprehensive Cancer Center and
Hospital and USC University Hospital (the "USC Hospitals") comprised 12%,
16% and 18% of the Company's revenues in 1999, 1998 and 1997, respectively.
Although the USC Hospitals are not under common ownership, the Company's
agreements with these hospitals are interrelated. Loss of sales to the USC
Hospitals could have a material, adverse impact on the Company's net income.
The Citrus Valley Health Partners Hospitals accounted for approximately 13%
of the Company's total 1997 sales.

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

General

The Company competes on the basis of its responsiveness to customer needs,
value-based pricing and the high quality of its services and products. The
Company's competitors are generally not for profit entities including the
American Red Cross ("ARC"), and regional and community blood banks. Many of
these competitors have greater financial, technical and personnel resources
than the Company, and additional companies may enter the field, thus
increasing competition.

In Southern California, the Los Angeles Region Blood Service of the American
Red Cross (the "Los Angeles ARC") employed pricing practices which the
Company alleged were in violation of antitrust laws. These pricing practices
may have compelled Los Angeles ARC customers to purchase certain blood
products from the ARC at higher prices than those offered by the Company,
unfairly limiting the Company's ability to market its products in this region.
In December 1995, the Company filed an antitrust and unfair competition
complaint against the ARC with the United States District Court in the
Central District of California to recover damages and secure injunctive

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relief. In June 1997, this suit was settled. Although the terms of the
settlement are confidential, the Company believes that the settlement has
improved its ability to obtain and retain blood product customers.

Competition among apheresis platelet suppliers intensified during 1999. In
response to the increased competition, the Company decreased its platelet
prices to certain customers. The Company expects the market for apheresis
platelets to remain competitive in the foreseeable future.

The Company has developed several blood product and service programs in
response to the needs of its customers. These include a depot system and its
BMP outsourcing program. The Company believes that its strategy of offering
blood product and service programs tailored to the requirements of individual
customers favorably differentiates it from other suppliers of blood products
and services and that outsourcing programs provide opportunities for expansion
of the Company's businesses. Management consistently reevaluates and revises
its outsourcing programs to meet customer demand. However, there can be no
assurance that others will not successfully introduce similar programs that
will compete with those of the Company. In addition, further growth may require
that the Company obtain additional financing or partner with other blood
product and service providers. Accordingly, there can be no assurance that
the Company will be successful in marketing outsourcing programs or that,
if successful, it will be able to obtain the funds necessary to finance
such programs. Presently, HemaCare is unaware of any competitors to its BMP
outsourcing programs.

Blood Products

The primary competitor for the Company's single donor platelet and whole blood
component business is the ARC. Community and hospital-based blood banks also
compete with HemaCare to a lesser extent. Key competitive factors in the
industry include price, responsive service and quality of product.

Blood Services

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

Marketing
- ---------

HemaCare markets its products and services as components of custom-tailored
programs developed to meet the needs of specific customers. The BMP is the
most recent application of this marketing strategy. The Company uses a
depot system for distributing its blood products to BMP and other large
volume customers which enhances convenience and product availability. The
depot system provides the customer with an on-site inventory of blood
products stocked by the Company under a standing order. Other marketing
tools include a combination of medical education, technical and tradeshow
presentations, advertising and promotional programs, in-person sales and
other marketing programs directed to selected physicians, hospitals and donor
groups.

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

At March 14, 2000, the Company had approximately 92 full-time and 86 part-time
employees. Most of the Company's professional and management personnel
possess prior experience in hospitals, medical service companies or blood
banks.

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

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Supplies
- --------

The Company maintains relationships with numerous suppliers who provide cell
separator equipment, disposables, supplies, replacement fluids, testing
services and blood products. Generally, the Company has not experienced
difficulty in obtaining most of its equipment and supplies from its sources.
However, if there were material changes in the sources of its supplies, the
Company's operations could be adversely affected.

Since late 1996, the Company has experienced difficulty in obtaining red
blood cell products from suppliers, and the cost of products obtained has
increased. Industry data indicates that HemaCare's experience reflects a
nationwide decrease in the availability of red blood cell products.
According to the National Blood Data Resource Center, collections of whole
blood units decreased by 6% between 1994 and 1997, while blood transfusions
increased slightly. A shortage in the supply of red blood cell products
could increase hospital demand for the Company's BMP donor centers.

One BMP arrangement includes a fixed price for red blood cells thereby
shifting the price risk to the Company. In this instance, if the Company
is unable to manufacture or purchase red blood cells at costs that are less
than the contract customer price, the Company's profitability would be
adversely affected.

The Company relies on blood donors to provide the platelets and whole blood
required to produce the blood products manufactured and sold by the Company.
The Company, unlike the ARC and most community blood banks, compensates
platelet donors who donate at its Sherman Oaks facility thereby enhancing its
ability to retain a pool of qualified repeat platelet donors. Sales of
apheresis platelets from paid donors may be prohibited by California law
after December 2001 (See "Government Regulation" and "Risk Factors").
Platelet and whole blood donors at the Company's BMP donor centers are not
given cash compensation by the Company. The Company competes directly with
the ARC and other blood banks in recruiting its volunteer donors. The growth
of the Company's manufactured blood products business is dependent on the
Company's ability to attract, screen and retain qualified compensated and
non-compensated donors.

Albumin is the most commonly used replacement fluid in therapeutic apheresis
procedures. In late 1996, a shortage of albumin arose when a major U.S.
manufacturer was required by regulatory agencies to temporarily cease
operations. As a result of the shortage, the price of albumin to HemaCare
more than doubled. During 1999, the supply of albumin increased and prices
declined.

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

Providers of blood products and services are regulated by the FDA and state
licensing authorities, as well as being subject to accreditation by the AABB.
An FDA Establishment License allows the license holder to sell licensed
products across state lines. In contrast, an FDA registration permits sales
of blood products only within a state.

Most of the products produced at the Company's Sherman Oaks location are
licensed for interstate distribution under the Company's FDA Establishment
License. In 1998, the Company's Maine center operated under the FDA
registration of Maine Medical Center. Effective January 1999, the Company's
Maine center is authorized to distribute products intrastate under its own
FDA registration. Other east coast centers operate under the FDA registration
of the sponsoring hospital, and accordingly, may only distribute products
collected as directed by the sponsoring hospital and not on an interstate
basis. It is the Company's intention to extend its FDA licensure to certain
CBS locations. In December 1999, the Company's Maine center applied for an
FDA Establishment License to sell its products across state lines.

In response to the potential dangers of blood borne infections such as
hepatitis and HIV, the FDA now requires that blood products be manufactured
in accordance with Current Good Manufacturing Practices which have long been
applied to the manufacturing of pharmaceuticals. HemaCare has maintained a
near perfect regulatory record for 21 years. This record, along with its
licenses and accreditations, are critical to the Company's ability to attract
and retain customers who want to decrease their regulatory compliance burden
by outsourcing all or a portion of their blood-related activities.

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The Company's laboratory is licensed and accredited to perform various tests
required by the FDA and State of California to ensure the purity, potency and
quality of the blood products that it sells in California. Prior to June 1999,
this lab tested California based blood collections. The Company determined
that it was more cost effective to outsource this activity. Accordingly,
the Company ceased in-house testing in July 1999, and engaged outside
laboratories. All blood donations tested by outside laboratories are
performed on a contract basis. These laboratories are FDA licensed and the
Company regularly audits their operations to assure compliance with stated
standards.

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, have been exempted from this
law by a series of state statutes the latest of which passed in late 1994.
Unless a new exemption is obtained, the existing exemption will expire under
its sunset provision on December 31, 2001, which could have a material
adverse effect on the Company's revenue and net income.

In February 2000, AB 2714, sponsored by the Company, was introduced in the
California Legislature. If enacted, this bill would make permanent the
current provisions of California law allowing payment of apheresis
platelet donors. The Company believes that its twenty-one year history of
providing platelets to hospitals and patients (without a single adverse
patient health outcome) and its excellent regulatory compliance record
strongly support the passage of AB 2714. However, there can be no assurances
that AB 2714 will be passed by the legislature and enacted into law.
Historically, legislation permitting the payment of apheresis platelet
donors has been opposed by the not for profit blood centers operating
in California which rely exclusively on uncompensated blood product donors.
It is anticipated that such blood centers, which compete with the Company,
will oppose the passage of AB 2714.

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.

Joshua Levy, M.D., medical director of the Company and a shareholder, through
his private practice, treats patients who require therapeutic services. Sales
by the Company to unaffiliated hospital customers for therapeutic
services provided to Dr. Levy's patients amounted to approximately 3%
($481,000), 4% ($589,000) and 5% ($584,000) of the Company's total revenues
for 1999, 1998 and 1997, respectively. There are no agreements between Dr.
Levy, or the Company, and the Company's hospital customers that require the
hospitals to select HemaCare to provide therapeutic services to the hospital's
patients. Health care reform is continuously under consideration by
lawmakers, and it is not certain as to what changes may be made in the
future regarding health care policies. However, policies regarding
reimbursement, health insurance and managed competition may materially
impact the Company's operations.

Professional and Product Liability Insurance
- --------------------------------------------

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

<PAGE> 12

Glossary
- --------

Albumin - A protein based fluid derived from human plasma, commonly used to
replace the plasma removed in a plasma exchange therapeutic apheresis
procedure.

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

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

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

Components - The products manufactured from whole blood donations,
including red blood cells, fresh frozen plasma and cryoprecipitate.

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

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

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

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

Platelets - One of the cellular components of blood involved in
the blood clotting process.

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

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

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

Risk Factors
- ------------

If the Company is unable to compensate donors beyond December 2001, or has
not developed a suitable volunteer donor base, then revenues and income may
be adversely affected.

If the Company is unable to renew its BMP contracts when they expire, then
revenue and profits will be adversely affected.

Our competitors, many of whom have substantially greater financial resources,
could continue or expand the pricing competitiveness in the apheresis
platelet markets. Such competition may result in a decline in profit
margins and profitability.

Therapeutic apheresis is one of many available alternative treatments. New
treatments could reduce the need for this procedure or existing treatments
could increase in popularity thereby reducing demand for this service.

If the Company were to lose its FDA licensure or other Federal or
state certifications, its ability to provide services to its customers
would be adversely affected.

The Company believes that it is the only provider of BMP outsourcing programs.
In the event that competition materializes, then the Company's ability to
expand this program may be limited.

In the event that there is another shortage of albumin, the Company's
ability to provide this product to its customers would be adversely affected.

12
<PAGE> 13

Item 2. Properties.
- --------------------

The Company occupies a 12,000-square foot facility in Sherman Oaks,
California, where it maintains its corporate office and operates a platelet
apheresis center, a blood bank laboratory, a manufacturing facility for whole
blood components and a distribution center. On August 1, 1998, the lease on
this space was extended for a four-year period ending October 31, 2002.

The USC Blood Donor Center occupies a 1,600 square foot facility located in
Los Angeles, California, under a lease with a rolling one-year term. The
Citrus Valley Blood Donor Center, which was closed in July 1998, occupied a
2,300 square foot facility located in Covina, California. Under its terms,
the Citrus Valley Center lease expires in April 2003, however, HemaCare may
terminate this lease any time after April 2000, under certain circumstances.
Additionally, the University of Irvine Blood Donor Center occupies a 1,200
square foot facility located in the hospital under the terms of the related
BMP agreement.

The Company assumed several existing leases in connection with its purchase
of certain assets of Coral Therapeutics, Inc.("Coral") from Coral's secured
lender. The Company occupies a 1,278 square foot office space in Yonkers,
New York, which expires August 31, 2001. The St. Vincent BMP Donor Center
occupies an 879 square foot facility located in St. Vincent Hospital in
Worcester, Massachusetts under the terms of the related BMP agreement.
The UNC Blood Donor Center is located in a 1,200 square foot facility in
the UNC Hospitals. The lease on this space is concurrent with the term
of the BMP agreement.

The Maine Medical Center occupies a 3,600 square foot donor center in
Scarborough, Maine. The lease expires October 31, 2004.

Item 3. Legal Proceedings.
- ---------------------------

In December 1995, HemaCare filed with the United States District
Court in the Central District of California an antitrust and unfair
competition complaint to recover damages and secure injunctive relief
against the ARC in connection with ARC pricing practices in Southern
California. The Company believed that these pricing practices may have
compelled Southern California ARC customers to purchase certain blood
products from the ARC at prices higher than those offered by the Company.
In June 1997, this suit was settled. Although the terms of the settlement
are confidential, the Company believes that the settlement may ultimately
improve its ability to obtain and retain blood product customers.

The Company is also party to various actions and proceedings incidental
to its normal business operations. The Company believes the outcome of such
litigation and proceedings, individually and in the aggregate, will not have
a material adverse effect on the business and financial condition of the
Company.

Item 4. Submission of Matters to a Vote of Security Holders.
- -------------------------------------------------------------

None.

PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
- -------------------------------------------------------------------------------

Market for Common Stock

Effective November 2, 1998, the Company's common stock became quoted on the
OTC Bulletin Board under the symbol HEMA. Prior to that date, the Company's
common stock was listed on the Nasdaq Small Cap Market ("Nasdaq") under
the same symbol.

The following table sets forth the range of high and low closing bid prices
of the Common Stock, as reported by the OTC Bulletin Board, for the quarters
ended March 31, June 30, September 30 and December 31, 1999 and 1998. These
prices reflect inter-dealer quotations, without retail markups, markdowns
or commissions, and do not necessarily represent actual transactions.

<TABLE>
<CAPTION> 1999 1998
Quarter ended High Low High Low
- -------------- ----- ---- ----- ----
<S> <C> <C> <C> <C>
March 31 $0.70 $0.31 $0.78 $0.38
June 30 $1.44 $0.63 $0.88 $0.38
September 30 $1.28 $0.81 $0.53 $0.28
December 31 $0.81 $0.63 $0.81 $0.13

</TABLE>

No cash dividends had been paid as of March 1, 2000. The Company
does not anticipate paying cash dividends in the foreseeable future. As of
March 1, 2000, there were approximately 311 holders of record of the
Company's Common Stock.

<PAGE> 15

On October 22, 1998, the Company issued 450,000 shares of its Series B
Senior Convertible Preferred Stock ("Series B Preferred") to Comdisco,
Inc. ("Comdisco") in connection with the purchase, from Comdisco, of the
assets of Coral. The Series B Preferred shares are convertible into 500,000
shares of HemaCare Common Stock, at the option of the holder, after one year
from the date of issue, without payment of further consideration. In addition,
as a part of the asset purchase, HemaCare (i) has entered into non-competition
agreements with certain former managers of Coral pursuant to which the
Company issued 60,000 common shares and warrants to purchase 90,000 shares
of Common Stock at an exercise price of $0.90 per share and (ii) issued
warrants for 35,000 shares of Common stock at an exercise price of $0.31 per
share to consultants who assisted in the acquisition. The warrants will
expire in October 2003. The Company has relied on Section 4(2) of the
Securities Act of 1933, as amended, and/or Regulation D thereunder, in
connection with the issuance of these securities.

Item 6. Selected Financial Data.
- ---------------------------------

The following selected financial data should be read in conjunction with the
other information and financial statements, including the notes thereto,
appearing elsewhere herein.

Years Ended December 31,
(In Thousands, except Per Share Data)
1999 1998 1997 1996 1995
------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Revenues $19,021 $13,124 $11,101 $10,921 $10,783
Operating profit 4,026 3,122 1,907 1,234 2,559
Income (loss) from continuing
operations 1,057 745 37 (1,090) 480

Loss from discontinued operations - - - - (902)
Gain (loss) on disposal of
discontinued operations - - 293 600 (3,114)
Net income (loss) $ 1,057 $ 745 $ 330 $ (490) (3,536)

Basic per Share Amounts:
- ------------------------

Income (loss) from continuing
operations $ 0.14 $ 0.10 $ 0.01 $ (0.17) $ 0.08

Income (loss) from discontinued
operations - - 0.04 0.09 (0.70)
-------- -------- -------- -------- --------

Net income (loss) $ 0.14 $ 0.10 $ 0.05 $ (0.08) $ (0.62)
======== ======== ======== ======== ========
Diluted Per Share Amounts:
- --------------------------

Income (loss) from continuing
operations $ 0.13 $ 0.10 $ 0.01 $ (0.17) $ 0.08

Income (loss) from discontinued
operations - - 0.04 0.09 (0.69)
-------- -------- -------- -------- --------

Net income (loss) $ 0.13 $ 0.10 $ 0.05 $ (0.08) $ (0.61)
======== ======== ======== ======== ========

Total assets $ 7,574 $ 7,662 $ 4,384 $ 4,776 $ 4,456
Long-term debt and capital
lease obligations, net of
current portion 541 1,118 209 503 649
Shareholders' equity 4,440 3,291 2,402 2,023 1,226

</TABLE>

15
<PAGE> 16

Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
- -------------------------------------------------------------------------

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

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 operations are primarily comprised 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 the east coast programs.

In late 1995, the Company initiated the Gateway Community Blood Program
("Gateway") located in St. Louis, Missouri, and in October 1996 the Citrus
Valley Health Partners ("Citrus Valley") Blood Management Program located
in southern California, commenced. Both the Gateway and Citrus Valley BMPs
failed to meet the Company's profitability criteria. Gateway was sold in
August 1997, and the Citrus Valley contract was terminated in July 1998.

Revenues, Operating Profit and Net Income
- -----------------------------------------

Total revenues increased 45% ($5,897,000) in 1999. The increase was due to
CBS, which began operations in October 1998. This was partially offset
by slightly lower California revenues ($189,000) from existing business
lines. Operating profit increased by 29% ($904,000) in 1999, and net income
increased by 42% ($312,000). The increases in operating profit and net
income were primarily attributed to CBS.

Total revenues increased 18% ($2,023,000) in 1998. The CBS acquisition
contributed $1,366,000 of the increase. The remainder of the increase was
due to higher demand for California based blood services and products offset
by a decrease in BMP revenue. Net income increased by 125% ($415,000)
as a result of improved performance of the BMP's and a change in product mix
from low volume whole blood components to apheresis platelets.

Blood Management Programs
- -------------------------

BMP revenue increased by 118% ($4,235,000) in 1999 after decreasing by
$513,000 in 1998. The increase in 1999 revenue is attributable to the
Coral acquisition in October 1998 and an expansion of California based
BMP's. CBS reported revenue of $3,836,000 for the full year of 1999
compared to $771,000 for the two months of 1998. Additionally, the
BMP at UCI, which opened in June 1999 ($1,017,000), was partially offset
by the termination of the Citrus Valley contract in July 1998. The 1998
decrease was due primarily to the disposition of Gateway ($587,000) and
termination of the Citrus Valley contract ($703,000), partially offset by
the addition of the CBS BMPs ($771,000). Citrus Valley was terminated
because it failed to meet the Company's profitability criteria.

BMP operating profits increased by 236% ($737,000) in 1999. CBS operations
contributed $441,000 of this increase. Additionally, the UCI BMP contributed
operating profits of $319,000.

16
<PAGE> 17

The USC operating profit declined by 29% ($95,000) in 1999 as the number
of donations during the first half of the year declined at a rate faster
than expenses were reduced. During the second half of 1999, collections
increased to previous levels. Inefficiencies in the donor center were
partially offset by an increase in demand for apheresis products produced
by the Sherman Oaks operation and sold to the USC hospitals. Additionally,
the Company terminated the Citrus Valley program during 1998 after reporting
a loss of $30,000 for the period from January to June 1998. No losses were
reflected for Citrus Valley in 1999. BMP generated profit of $312,000 in
1998 compared to a loss of $210,000 in 1997. The 1998 operating profit
resulted from improved performance of the USC program and elimination of
operating losses from Gateway and Citrus Valley. Operating profit from
the USC program increased in 1998 due to more efficient donor center
operations and a lower cost of apheresis products produced by the Sherman
Oaks operation and sold to the USC hospitals.

Regional Operations
- -------------------

Blood Products

Blood products revenues increased 14% ($503,000) in 1999, after increasing
by 36% ($941,000) in 1998. The 1999 increase is partially attributable
to CBS ($196,000) and an increase in the volume of apheresis platelet sales
in California. The increase in the volume of platelet sales was offset by
a decline in the average selling price per platelet. The 1998 increase
resulted from an increase in the volume of apheresis platelet sales,
partially offset by a small decrease in the sales price of these products,
and a decrease in the volume of whole blood components sold. The operating
margin on blood product sales decreased to 28% in 1999, from 32% in 1998.
In 1997, the operating profit margin was 27%. Competition among apheresis
platelet suppliers intensified during 1999. In response to the increased
competition, the Company decreased its platelet prices to certain customers.
In 1998, the operating profit margin increase was primarily due to a change
in the product mix whereby the Company sold more high margin apheresis
platelets and less low margin whole blood components. Additionally,
apheresis platelet profit margins increased in 1998 as a result of lower
per unit production costs, partially offset by lower per unit sales prices.

Blood Services

Blood services revenue increased by 19% ($1,159,000) in 1999 and
36% ($1,595,000) in 1998. The increase in 1999 was primarily due to CBS
($2,054,000) which was offset by a decrease in California based regional
blood services ($895,000). The total number of therapeutic apheresis
procedures in California was consistent between 1999 (2,772) and 1998 (2,724);
although in 1999 more procedures were directed to servicing BMP customers
and fewer procedures were directed towards non-BMP customers. Additionally,
during 1998, California based regional blood services obtained an excess
supply of albumin; a protein replacement fluid used certain therapeutic
procedures. This albumin purchase was at a favorable price and was offered
for sale to non-hospital customers. During 1998, the Company sold $306,000
of albumin. There were no sales of albumin to non-hospital customers during
1999. The 1998 increase in revenues resulted form sales of albumin, the
addition of CBS's operations ($565,000) and a higher volume of southern
California therapeutic procedures.

The operating profit margin for blood services decreased by 2% in
1999 and 4% in 1998. The decrease in 1999 reflects CBS's lower operating
margin. In order to compete in certain markets, CBS charges less for
therapeutic apheresis procedures than California based procedures.
California based blood services remained constant at 30% for both years.

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 an FDA
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 Expenses

General and administrative expenses increased by 29% ($687,000) in 1999 and
18% ($356,000) in 1998. The increase in 1999 reflects the additional
overhead costs required to support CBS's operations and includes increases
in personnel, insurance, interest expense on borrowings used to fund the
Coral acquisition and amortization of goodwill. Additionally, officer
compensation, temporary help and other general and administrative expenses
increased during 1999. As a percentage of revenue, general and administrative
expenses decreased to 16% of revenue in 1999 compared to 18% of revenue in
1998. The 1998 increase was due to severance payments and increased legal,
director and consulting fees.

Discontinued Operations

During the wind down of the research and development operations, the Company
manufactured a supply of Immupath sufficient for the patients still receiving
treatment for a limited period of time, and all remaining HIV positive plasma
was disposed of in 1997. There are currently two patients receiving Immupath
treatments. In the fourth quarter of 1997, the Company reviewed and revised
its estimated costs of discontinued operations, including on-going cost of
patient treatment and other continuing liabilities related to discontinued
operations, and recognized an additional gain of $173,000. The Company does
not expect the discontinued operations to have a material impact on its
future operating performance.

Liquidity and Capital Resources

At December 31, 1999, the Company had cash and marketable securities of
$2,268,000. The Company has a line of credit with a commercial bank whereby
the Company may borrow the lesser of 70% of eligible accounts receivable or
$1.2 million. As of December 31, 1999, there were no amounts outstanding on
this line of credit. This credit facility bears interest at prime plus 0.5%
and includes certain financial covenants. The Company was in compliance with
all covenants of its borrowing agreement as of December 31, 1999. Subsequent
to year-end the Company obtained a letter of intent from a new bank. Under
the terms of the new agreement the Company may borrow the lesser of 75% of
eligible accounts receivable or $2 million at an interest rate of prime plus
0.25%. Additionally, the bank will provide a secondary line for qualifying
capital expenditures. This line has a maximum availability of $350,000 and
will be converted into a term-loan at the end of each year. These credit
facilities are subject to the bank completing its due diligence.

The Company anticipates that positive cash flow from its operations, cash and
investments on hand and borrowing from its bank line of credit will be
sufficient to provide funding for its needs during the next 12 months,
including (i) expansion of BMP's and regional products and services, (ii)
the remaining costs of its discontinued operations and (iii) other working
capital requirements, including capital and operating lease commitments.

Effective November 2, 1998, the Company's common stock is quoted on the OTC
Bulletin Board. Prior to that date, the Company's common stock was listed on
the Nasdaq Small Cap Market ("Nasdaq"). Issuers listed on the Nasdaq SmallCap
Market are required to maintain a minimum bid price of $1.00, and the Company's
Common Stock was trading below the minimum price in excess of the period
prescribed by Nasdaq rules. On October 29, 1998, the Company's stock was
delisted from Nasdaq SmallCap. Although the Company's Common Stock is quoted
on the OTC Bulletin Board, the Nasdaq delisting may impair the liquidity of
the Company's Common Stock and the Company's ability to raise capital. In
order to be listed on the Nasdaq SmallCap, the price of the Company's stock
must reach $4.00.

18
<PAGE> 19

All of the Company's operations are profitable and cash flow is positive. The
Company periodically evaluates the profitability and viability of each of its
operating units. As the result of such an evaluation, the Company sold
Gateway's unprofitable St. Louis-based operations in August 1997 and
terminated the Citrus Valley BMP in July 1998.

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, have been
exempted from this law by a series of state statutes the latest of which
passed in late 1994. Unless a new exemption is obtained, the existing
exemption will expire under its sunset provision on December 31, 2001, which
could have a material adverse effect on the Company's revenue and
net income.

In February 2000, AB 2714, sponsored by the Company, was introduced in the
California Legislature. If enacted, this bill would make permanent the
current provisions of California law allowing payment of apheresis platelet
donors. The Company believes that its twenty-one year history of providing
platelets to hospitals and patients (without a single adverse patient health
outcome) and its excellent regulatory compliance record strongly support
the passage of AB 2714. However, there are no assurances that AB 2714 will
be passed by the legislature and enacted into law. Historically, legislation
permitting the payment of apheresis platelet donors has been opposed by
the not for profit blood centers operating in California which rely
exclusively on uncompensated blood product donors. It is anticipated that
such blood centers, which compete with the Company will oppose AB2714. See
"Government Regulation" and "Risk Factors."

Year 2000 Disclosure
- --------------------

To date, the Company has not experienced any major systems failures or other
adverse consequences due to Year 2000 noncompliance. While the possibility
still exists for further computer failures, internally or among its customers
and suppliers, management does not expect that these developments, should
they occur, would have a material adverse impact on the financial position,
results of operation or cash flows of the Company.

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-K 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, demand for the Company's products and services, and the
anticipated outcome of contingent claims against the Company. 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 develop and market profitable outsourcing
programs, obtain additional financing, to achieve profitability in certain Blood
Management Programs Centers, to continue its paid donor business, to retain
existing customers, to improve the profitability of the Company's other
operations, to successfully negotiate contracts with its east coast customers,
to expand its operations, to renew and comply with the covenants under its
bank line of credit, to effectively compete against the ARC and other
competitors, and the effects of he Year 2000. 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.

19
<PAGE> 20

Item 8. Financial Statements and Supplementary Data.
- -----------------------------------------------------

The Index to Financial Statements and Schedules appears on page F-1, the
Report of Independent Public Accountants appears on F-2, and the Consolidated
Financial Statements and Notes to Consolidated Financial Statements appear
on pages F-3-16.

Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures.
- -------------------------------------------------------------------------

None.

PART III

Item 10. Directors and Executive Officers of the Registrant.
- -------------------------------------------------------------

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

Item 11. Executive Compensation.
- ---------------------------------

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

Item 12. Security Ownership of Certain Beneficial Owners and Management.
- -------------------------------------------------------------------------

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

Item 13. Certain Relationships and Related Transactions.
- ---------------------------------------------------------

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

PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
- --------------------------------------------------------------------------

The following are filed as part of this Report:

(a) 1. Financial Statements

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

(a) 2. Financial Statement Schedules

The following financial statement schedule is filed herewith:

Schedule II - Valuation and Qualifying Accounts

All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission
are not required under related instructions or are inapplicable, and
therefore have been omitted.

(a) 3. Exhibits

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

2.1 Amended and Restated Asset Purchase Agreement between the
Registrant, HemaBiologics, Inc. (a wholly owned subsidiary
of the Registrant) and Atopix Pharmaceuticals Corporation,
dated June 26, 1996 --incorporated by reference to Exhibit 2.1
to Form 10-Q of the Registrant for the quarter ended June 30,
1996.

20
<PAGE> 21

2.2 Asset Purchase Agreement between the Registrant, Gateway
Community Blood Program and Haemonetics Corporation, dated
August 1, 1997--incorporated by reference to Exhibit 2.1 to
Form 10-Q of the Registrant for the quarter ended September
30, 1997.

3.1 Restated Articles of Incorporation of the Registrant--
incorporated by reference to Exhibit 3.1 to Form 10-K
of the Registrant for the year ended December 31, 1995.

3.2 Bylaws of the Registrant, as amended--incorporated by
reference to Exhibit 3.1 to Form 10-Q of the Registrant
for the quarter ended March 31, 1998.

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

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

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

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

4.5 Warrant Agreement between the Registrant and Joseph T. McDonald
dated November 1, 1996--incorporated by reference to Exhibit
4.9 to Form 10-K of the Registrant for the year ended December
31, 1996.

4.6 Warrant Agreement between the Registrant and Kibel, Green,
Inc., dated March 4, 1999--incorporated by reference to
Exhibit 4.1 to Form 10-Q of the Registrant for the quarter
ended March 31, 1999.

4.7 Warrant Agreement between the Registrant and Stuart Dinney,
dated March 4, 1999--incorporated by reference to Exhibit 4.2
to Form 10-Q of the Registrant for the quarter ended March
31, 1999.

4.8 Warrant Agreement between the Registrant and Lori Terra-
Vassalo, dated March 4, 1999.

4.9 Rights Agreement between the Registrant and U.S. Stock
Transfer Corporation dated March 3, 1998--incorporated
by reference to Exhibit 4 to Form 8-K of the Registrant
dated March 5, 1998.

4.10 Amended Certificate of Determination dated March 18. 1998--
incorporated by reference to Exhibit 4.8 on Form 10-K of the
Registrant for the year ended December 31,1997.

4.11 Certificate of Determination of the Registrant's Series B
Senior Convertible Preferred Stock between the Registrant and
Comdisco Health Care Group dated October 23, 1998--
incorporated by reference to Exhibit 4.1 of Form 8-K of the
Registrant dated November 5, 1998.

4.12 Registration Rights of Shareholders'-- Incorporated by
reference to Exhibit 4.9 to the Current Report on Form 8-K of
the Registrant dated August 19, 1996.

21
<PAGE> 22

4.13 Loan Agreement between the Registrant and Bank Leumi, USA,
dated June 1, 1999--incorporated by reference to Exhibit 4.1
to Form 10-Q of the Registrant for the quarter ended June 30,
1999.

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

10.2 1996 Stock Incentive Plan, as amended, of the Registrant--
incorporated by reference to Exhibit 4.1 to Form 10-Q of the
Registrant for the quarter ended September 30, 1996.

10.3 Office Building Lease dated August 21, 1998 between the
Registrant and Tar Asset Addison Place, L.P.--incorporated by
reference to Exhibit 10.1 to Form 10-Q for the quarter ended
September 30, 1998.

10.4 Revolving Credit Agreement between the Registrant and Bank
Leumi USA, dated February 5, 1999--incorporated by reference
to Exhibit 10.7 of Form 10-K of the Registrant for the year
ended December 31, 1998.

10.5 Promissory Note between the Registrant and Bank Leumi USA,
dated February 5, 1999--incorporated by reference to Exhibit
10.8 of Form 10-K of the Registrant for the year ended
December 31, 1998.

10.6 Promissory Note to HemaBiologics, Inc., a wholly owned
subsidiary of the Registrant, from Joshua Levy dated January
1, 1996 -- incorporated by reference to Exhibit 10.10 to Form
10-K of the Registrant for the year ended December 31, 1995.

10.7 Pledge Agreement between HemaBiologics, Inc., a wholly owned
subsidiary of the Registrant, and Joshua Levy dated January 1,
1996--incorporated by reference to Exhibit 10.11 to Form 10-K
of the Registrant for the year ended December 31, 1995.

10.8 Loan Reimbursement Agreement between HemaBiologics, Inc., a
wholly owned subsidiary of the Registrant, and Joshua Levy
dated January 30, 1998--incorporated by reference to Exhibit
10.10 to Form 10-K of the Registrant for the year ended
December 31, 1998.

10.9 Settlement Agreement between the Registrant and Medicorp,
Inc.--incorporated by reference to Exhibit 10.1 to the Current
Report on Form 8-K of the Registrant dated July 19, 1996.

10.10 Foreclosure Sale Agreement between the Registrant and
Comdisco Health Care Group, Inc dated October 23, 1998--
incorporated by reference to Exhibit 2.1 of Form 8-K of the
Registrant dated November 5, 1998.

10.11 Employment agreement between the Registrant and William
D. Nicely dated May 27, 1998--incorporated by reference to
Form 10-Q for the quarter ended June 30, 1998.

10.12 Services Agreement between the Registrant and Alan C.
Darlington, dated March 10, 1999--incorporated by reference to
Exhibit 10.1 of Form 10-Q of the Registrant for the quarter
ended March 31, 1999.

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

21 Subsidiaries of the Registrant

23 Consent of Arthur Andersen LLP

27 Financial Data Schedule

22
<PAGE> 23

(b) Reports on Form 8-K.

None.

Signatures

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

HEMACARE CORPORATION

Dated: March 29, 2000 \s\ David Fractor
------------------------------
David Fractor, Chief Financial
Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant in the capacities indicated on the 29th day of March 2000.

Signature Title

\s\ Alan C. Darlington
- ----------------------------- Chairman of the Board
Alan C. Darlington

\s\ William D. Nicely Chief Executive Officer and Director
- ----------------------------- (Principal Executive Officer)
William D. Nicely

\s\ David Fractor Vice President Finance, Chief
- ----------------------------- Financial Officer
David Fractor (Principal Financial and Accounting
Officer)

\s\ Charles R. Schwab, Jr. Director
- -----------------------------
Charles R. Schwab, Jr.

\s\ Julian L. Steffenhagen Director
- -----------------------------
Julian L. Steffenhagen

\s\ Robert L. Johnson Director
- -----------------------------
Robert L. Johnson

<PAGE> 24

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

Sequential
Page
Number
-----------

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

Consolidated balance sheets at December 31, 1999 and
December 31, 1998........................................... F-3

For the years ended December 31, 1999, 1998 and 1997:

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

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

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

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

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

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

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

F-1
<PAGE> 25

Report of Independent Public Accountants
- -----------------------------------------

To the Shareholders and Board of Directors of HemaCare Corporation:

We have audited the accompanying consolidated balance sheets of
HemaCare Corporation (a California corporation) and subsidiaries as of
December 31, 1999 and 1998, and the related consolidated statements of
operations, shareholders' equity and cash flows for each of the three years
in the period ended December 31, 1999. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of HemaCare
Corporation and subsidiaries as of December 31, 1999 and 1998, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1999 in conformity with accounting principles
generally accepted in the United States.

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

Los Angeles, California
February 29, 2000
F-2

<PAGE> 26

Part I. Financial Information
- -------------------------------

Item 1. Financial Statements
- -----------------------------

HEMACARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>

December 31, December 31,
1999 1998
------------- ------------
<S> <C> <C>
ASSETS

Current assets:
Cash and cash equivalents.................... $ 1,490,000 $ 1,372,000
Marketable securities........................ 778,000 288,000
Accounts receivable, net of allowance for
doubtful accounts of $256,000 (1999) and
$596,000 (1998)............................. 3,090,000 3,038,000
Product inventories.......................... 91,000 87,000
Supplies..................................... 690,000 604,000
Prepaid expenses............................. 180,000 160,000
Note receivable from related party - current. 22,000 24,000
------------- -------------
Total current assets................ 6,341,000 5,573,000

Plant and equipment, net of accumulated
depreciation and amortization of
$1,920,000 (1999) and $1,869,000 (1998)...... 719,000 1,289,000
Goodwill, net of amortization of
$62,000 (1999) and $11,000 (1998)............ 468,000 742,000
Note receivable from related party -
non-current.................................. 32,000 49,000
Other assets................................... 14,000 9,000
------------- -------------
$ 7,574,000 $ 7,662,000
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
Accounts payable............................. $ 1,305,000 $ 1,414,000
Accrued payroll and payroll taxes............ 530,000 802,000
Accrued professional fees.................... 73,000 173,000
Other accrued expenses....................... 376,000 419,000
Current obligations under capital leases..... 63,000 203,000
Current notes payable........................ 138,000 109,000
Reserve for discontinued operations.......... 81,000 109,000
------------- -------------
Total current liabilities........... 2,566,000 3,229,000

Obligations under capital leases, net
of current portion........................... 188,000 627,000
Notes payable, net of current portion.......... 353,000 491,000
Other long-term liabilities.................... 27,000 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, no par value - 20,000,000
shares authorized, 7,475,082 issued and
outstanding in 1999 and 7,281,120 in 1998.. 13,676,000 13,584,000
Accumulated deficit.......................... (9,311,000) (10,368,000)
------------- -------------
Total shareholders' equity.......... 4,440,000 3,291,000
------------- -------------
$ 7,574,000 $ 7,662,000
============= =============

</TABLE>

The accompanying notes are an integral part of these
consolidated financial statements.
F-3

<PAGE> 27
HEMACARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME

Years ended December 31,
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
Blood management programs......... $ 7,827,000 $ 3,592,000 $ 4,105,000
Regional operations
Blood products.................. 4,033,000 3,530,000 2,589,000
Blood services.................. 7,161,000 6,002,000 4,407,000
------------- ------------- ------------
Total revenue................... 19,021,000 13,124,000 11,101,000

Operating costs and expenses:
Blood management programs......... 6,778,000 3,280,000 4,315,000
Regional operations
Blood products.................. 2,904,000 2,394,000 1,879,000
Blood services.................. 5,313,000 4,328,000 3,000,000
------------- ------------- ------------
Total operating costs and
expenses...................... 14,995,000 10,002,000 9,194,000
------------- ------------ ------------
Operating profit................ 4,026,000 3,122,000 1,907,000

General and administrative expense.. 3,041,000 2,354,000 1,998,000

Gain on sale of Gateway Community
Blood Program..................... 100,000 - 128,000
------------- ------------- ------------
Income from continuing
operations before income taxes.... 1,085,000 768,000 37,000
Provision for income taxes.......... (28,000) (23,000) -
------------- ------------- ------------
Income from continuing
operations........................ 1,057,000 745,000 37,000

Discontinued operations:
Gain from disposal of discontinued
operations........................ - - 293,000
------------- ------------- ------------
Net income...................... $ 1,057,000 $ 745,000 $ 330,000
============= ============= ============
Income per share:
Basic
Income from continuing operations. $ 0.14 $ 0.10 $ 0.01
Income from discontinued
operations...................... - - 0.04
------------- ------------- ------------
Net income...................... $ 0.14 $ 0.10 $ 0.05
============= ============= ============
Diluted
Income from continuing operations. $ 0.13 $ 0.10 $ 0.01
Income from discontinued
operations....................... - - 0.04
------------- ------------- ------------
Net income....................... $ 0.13 $ 0.10 $ 0.05
============= ============= ============

Weighted average shares outstanding
- basic............................ 7,393,000 7,268,000 7,189,000
============= ============= ============

Weighted average shares outstanding
- diluted.......................... 8,158,000 7,373,000 7,205,000
============= ============= ============

</TABLE>

The accompanying notes are an integral part of these
consolidated financial statements.
F-4

<PAGE> 28
HEMACARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

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

Balances at December
31, 1996.......... - $ - 7,177,515 $13,466,000 $(11,443,000) $ 2,023,000

Issuance of common
stock for employee
401(k) and
incentive bonus
plans.............. - - 13,195 41,000 - 41,000
Non-cash
compensation....... - - - 8,000 - 8,000
Net income.......... - - - - 330,000 330,000
------- -------- ---------- ------------ ------------- ------------
Balances at December
31, 1997........... - - 7,190,710 13,515,000 (11,113,000) $ 2,402,000

Issuance of common
stock for employee
401(k) and
incentive bonus
plans.............. - - 90,410 42,000 - 42,000
Issuance of pre-
ferred stock....... 450,000 75,000 - - - 75,000
Non-cash
compensation....... - - - 27,000 - 27,000
Net income.......... - - - - 745,000 745,000
------- -------- ----------- ------------ ------------- ------------
Balances at December
31, 1998........... 450,000 75,000 7,281,120 13,584,000 (10,368,000) $ 3,291,000

Issuance of common
stock for employee
401(k) and
incentive bonus
plans.............. 96,462 44,000 - 44,000
Private placement... - - 97,500 9,000 - 9,000
Non-cash
compensation....... - - - 39,000 - 39,000
Net income.......... - - - - 1,057,000 1,057,000
-------- -------- ----------- ------------ ------------- ------------
Balances at December
31, 1999........... 450,000 $75,000 7,475,082 $13,676,000 $ (9,311,000) $ 4,440,000
======= ======== =========== ============ ============= ============
</TABLE>

The accompanying notes are an integral part of these
consolidated financial statements.

F-5
<PAGE> 29
HEMACARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>

Years ended December 31,
1999 1998 1997
------------ ------------ -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net Income...................................... $ 1,057,000 $ 745,000 $ 330,000
Adjustments to reconcile net income
to net cash provided by operating activities:
Gain on disposal of discontinued operations.. - - (293,000)
Gain on sale of Gateway Community Blood
Program..................................... - - (128,000)
Provision for losses on accounts receivable.. - - 35,000
Depreciation and amortization................ 334,000 175,000 187,000
Non cash compensation........................ 83,000 69,000 50,000

Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable... 131,000 (415,000) 196,000
(Increase) in inventories, supplies
and prepaid expenses........................ (110,000) (203,000) (1,000)
(Increase) decrease in other assets, net..... (10,000) 6,000 41,000
Decrease in accounts payable,
accrued expenses, and other liabilities..... (467,000) (213,000) (185,000)
Proceeds from (expenditures for) discontinued
operations.................................. (28,000) (6,000) 8,000
------------ ------------ ------------
Net cash provided by operating activities.... 990,000 158,000 240,000

Cash flows from investing activities:
Purchase of assets, net of cash acquired........ - (555,000) -
Decrease in note receivable from
related party................................. 19,000 16,000 14,000
(Increase) decrease in marketable securities.... (490,000) 75,000 (52,000)
(Purchase) disposition of plant and equipment,
net........................................... (81,000) (23,000) 46,000
------------ ------------ ------------
Net cash (used in) provided by investing
activities.................................... (552,000) (487,000) 8,000

Cash flows from financing activities:
Borrowings from note payable.................... - 600,000 -
Principal payments on line of credit, net, and
capital leases................................ (320,000) (148,000) (135,000)
------------ ------------ ------------
Net cash (used in) provided by financing
activities.................................... (320,000) 452,000 (135,000)
------------ ------------ ------------

Increase in cash and cash equivalents........... 118,000 123,000 113,000
Cash and cash equivalents at beginning of
period........................................ 1,372,000 1,249,000 1,136,000
------------ ------------ ------------
Cash and cash equivalents at end of period...... 1,490,000 $ 1,372,000 $ 1,249,000
============ ============ ============

Supplemental disclosure:
Interest paid................................... $ 93,000 $ 23,000 $ 51,000
============ ============ ============

Items not impacting cash flow:
Increase in capital lease obligations........... $ 401,000 $ 629,000 $ 38,000
============ ============ ============
Liability for issuance of stock and warrants
with the purchase of assets.................... $ 22,000 $ 22,000 $ -
============ ============ ============
Issuance of preferred stock in the purchase
of assets...................................... $ - $ 75,000 $ -
============ ============ ============

Termination of capital leases................... $ 769,000 $ - $ -
============ ============ ============
</TABLE>

The accompanying notes are an integral part of these
consolidated financial statements.
F-6
<PAGE> 30

HemaCare Corporation
Notes to Consolidated Financial Statements

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

HemaCare Corporation was incorporated in California in 1978, for
the purpose of providing blood products and blood services to hospitals
and medical centers.

Coral Blood Services, Inc., 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 3.)

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.

From 1990 to November 1995, the Company, through its wholly-owned
subsidiary HemaBiologics, Inc. ("HBI"), conducted research and development of
Immupath, an anti-HIV hyperimmune plasma-based product intended to be used
in the treatment of Acquired Immune Deficiency Syndrome ("AIDS"). In
November of 1995, the Company's Board of Directors decided to discontinue
the operations of HBI. (See Note 12.)

HemaCare Corporation and its wholly owned subsidiaries are referred to as
"HemaCare" or the "Company" in the accompanying consolidated financial
statements and notes to consolidated financial statements.

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

Principles of Consolidation: The accompanying consolidated
financial statements include the accounts of the Company and its wholly
owned subsidiaries. All significant intercompany balances and transactions
have been eliminated in consolidation.

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

Cash and Cash Equivalents and Marketable Securities: The Company considers
all highly liquid investments with an original maturity of three months or
less to be cash equivalents. Marketable securities consist of U.S.
government treasury bills and certificates of deposit held at financial
institutions.

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

Revenues and Accounts Receivable: Revenues are recognized upon acceptance of
the of blood products or the performance of blood services. Blood services
revenues consist primarily of mobile therapeutics sales, while blood product
revenues consist primarily of sales of single donor platelets and whole blood
components that are manufactured or purchased and distributed by the Company.
Accounts receivables are reviewed periodically for collectability.

Inventories and Supplies: Inventories consist of Company-manufactured
platelets and whole blood components as well as component blood products

F-7
<PAGE> 31

purchased for resale. Supplies consist primarily of medical supplies for
collecting and manufacturing products and providing therapeutic services.
Inventories are accounted for on a first-in, first-out basis.

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

Goodwill: Goodwill is being amortized on a straight-line basis over ten
years. It is the Company's policy to periodically evaluate goodwill for
recoverability. In the event of a permanent impairment, the goodwill balance
would be reduced to net realizable value, and the write down would be charged
to expense.

Income Taxes: Income taxes are computed under the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income
Taxes". SFAS 109 is an asset and liability approach that requires the
recognition of deferred tax assets and liabilities for the expected future
tax consequences of events that have been recognized in the Company's
financial statements or tax returns. In estimating future tax consequences,
SFAS 109 generally considers all expected future events other than enactments
of changes in the tax law or rates.

Per Share Data: Earnings per shares-basic is computed by dividing net income
by the weighted average shares outstanding. Earnings per share-diluted is
computed by dividing net income by the weighted average number of shares
outstanding including the diluted effect of options, warrants and preferred
stock.

Warrants and options to purchase 863,800, 1,443,300 and 1,289,800 shares of
common stock outstanding at December 31, 1999, 1998 and 1997, respectively,
were not included in the computation of diluted earnings per share because
the exercise price of the warrants and options was greater than the average
market price of the common stock.

Concentration of risk: Sales of products and services to an unaffiliated
hospital group accounted for $2,221,000 (12%) and $2,051,000 (16%) of the
Company's revenues in 1999 and 1998, respectively. In 1997, sales to two
unaffiliated hospital groups accounted for $2,044,000 (18%) and $1,473,000
(13%) of the Company's revenues. At December 31, 1999 and 1998, no customer
accounted for over 10% of the Company's accounts receivable.

Note 3 - Acquisition
- --------------------

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 acquired assets included (i) approximately
$1.6 million in accounts receivable, $600,000 of which were over 90 days
old, (ii) inventory and supplies with a net book value of approximately
$113,000 (iii) fixed assets with a net book value of approximately
$248,000 and (iv) Coral's rights under its hospital contracts. Concurrent
with the closing of the asset purchase, HemaCare extended offers of
employment to most of Coral's employees.

F-8
<PAGE> 32

The acquisition was accounted for as a purchase, and the operations of the
acquired assets are included in the Company's consolidated operations for the
period from the acquisition date (October 23, 1998). The acquisition price of
the assets was $950,000 in cash and 450,000 shares of HemaCare's Series B
senior convertible preferred stock. The Company financed the acquisition by
(i) utilizing existing cash balances, (ii) borrowing $600,000 on its line of
credit and (iii) issuing 450,000 shares of HemaCare Series B senior
convertible preferred stock. In addition, HemaCare has entered into or
expects to enter into non-competition agreements with certain former managers
of Coral pursuant to which HemaCare will make (i) cash payments, (ii) issue
60,000 shares of HemaCare common stock and (iii) issue warrants to purchase
90,000 shares of HemaCare common stock with an exercise price of $0.90 per
share, expiring in October, 2003. In addition, warrants for 35,000 shares
of HemaCare common stock exercisable at $0.31 per share were issued to
consultants who assisted in the acquisition. These warrants will expire in
October 2003.

Note 4 - Plant and Equipment
- ----------------------------

Plant and equipment consists of the following:

December 31,
---------------------------
1999 1998
------------ ------------

Furniture, fixtures and equipment $ 2,444,000 $ 2,969,000
Leasehold improvements 195,000 189,000
------------ ------------
2,639,000 3,158,000
Less accumulated depreciation and
amortization (1,920,000) (1,869,000)
------------ ------------
$ 719,000 $ 1,289,000
============ ============

Equipment with a cost of $401,000 in 1999, $1,369,000 in 1998 and $740,000
in 1997 was financed by capital leases. In 1999, the Company terminated
certain capital leases with a cost of $931,000. In 1997, the Company
disposed of equipment and leasehold improvements with a cost of $347,000,
including $188,000 financed by capital leases, in connection with the sale
of Gateway's operations.

Note 5 - 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. Under the terms of the
agreement, the Company may borrow up to the lesser of $1.2 million or 70%
of eligible accounts receivable at an interest rate of prime plus 0.5% per
annum. The Company must maintain certain financial covenants. As of December
31, 1999, there were no balances outstanding under this line of credit and
the Company was in compliance with all covenants of the borrowing agreement.

F-9
<PAGE> 33

Note Payable

In 1998, the Company entered into 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
(9.5% at December 31, 1999). Minimum future payments under the note at
December 31, 1999 are as follows:

Year ending December 31,

2000 $ 138,000
2001 151,000
2002 167,000
2003 35,000
----------
$ 491,000
==========

The Company incurred $42,000 and $9,000 of interest expense in connection
with the note payable and line of credit agreement in 1999 and 1998,
respectively. No interest expense was incurred in connection with the line
of credit agreement in 1997.

Note 6 - Leases
- ----------------

The Company has entered into several capital leases for equipment. Future
minimum payments are as follows:

Year Ending December 31,

2000 $ 77,000
2001 56,000
2002 25,000
2003 19,000
2004 8,000
Thereafter 94,000
---------
Total minimum lease payments 279,000
Less: Amount representing
interest (28,000)
---------
Present value of minimum
lease payments 251,000
Less current portion (63,000)
---------
$188,000
=========

F-10
<PAGE> 34

The Company leases its facilities and certain equipment under operating
leases which expire through the year 2003. Future minimum rentals under
operating leases are as follows:

Year ending December 31,

2000 $ 392,000
2001 383,000
2002 322,000
2003 65,000
2004 45,000
Thereafter -
----------
$1,207,000
==========

Total rent expense under all operating leases was $463,000, $424,000 and
$600,000 for the years ended December 31, 1999, 1998 and 1997, respectively.

Note 7 - Income Taxes
- ---------------------

The provision for income taxes for the year ended December 31, 1999, was
primarily due to the effects of the alternative minimum tax and states in
which the Company did not have any net operating loss carryforwards ("NOL")
available. The provision, which is all current, consists of $9,000 of federal
income tax expense and $19,000 of state income tax expense.

The tax provision for 1998, which was all current, included $20,000 of
federal income tax expense and $3,000 of state income tax expense. There was
no current or deferred income tax provision for 1997, as the Company utilized
its NOL's. A reconciliation of income tax expense at the statutory rate to
income tax recognized follows.

1999 1998 1997
---------- --------- ----------
<S> <C> <C> <C>
Income tax expense at statutory
rate........................... $ 369,000 $ 261,000 $ 13,000
State income taxes, net of
Federal benefit................ 65,000 46,000 2,000
(Utilization) of NOL............. (406,000) (284,000) (15,000)
---------- ---------- ----------
Income tax expense............... $ 28,000 $ 23,000 $ -
========== ========== ==========

</TABLE>

The approximate tax effects of temporary differences which gave
rise to significant deferred tax assets and liabilities at December 31,
1999 and 1998, are as follows:

1999 1998
----------- -----------
<S> <C> <C>
Current:
Reserve for doubtful accounts..... $ 175,000 $ 238,000
Accrued expenses and other........ 262,000 323,000
Noncurrent:
Depreciation and amortization..... 240,000 220,000
Deferred research and development
expenses......................... 200,000 200,000
Other............................. 18,000 8,000
Net operating loss carryforwards.. 2,760,000 2,725,000
Tax credit carryforwards.......... 873,000 878,000
------------ ------------
Total deferred assets............. 4,528,000 4,592,000
Valuation allowance............... (4,528,000) (4,592,000)
------------ ------------
$ - $ -
============ ============
</TABLE>

F-11
<PAGE> 35

A valuation allowance is recorded if the weight of available evidence
suggests it is more likely that not that some portion or all of the
deferred tax asset will not be recognized. There is no assurance that the
Company will continue to be profitable in future periods. Accordingly,
a valuation allowance has been recorded for the full amount of the
deferred tax assets in 1999 and 1998.

At December 31, 1999, the Company had net operating loss carryforwards
available for Federal income and state tax purposes of $7,621,000
and $2,148,000, respectively, expiring through 2010.

Acquisitions of common stock which result in changes in equity ownership in
the Company could result in an "ownership change" within the meaning of
Section 382 of the Internal Revenue Code of 1986, as amended (the "Code"),
thereby imposing an annual limitation (the "Section 382 Limitation") on the
Company's ability to utilize its net operating loss carryforwards to reduce
future taxable income. In the event of a Section 382 Limitation, the
Company's utilization of its net operating loss carryforwards would be
restricted.

At December 31, 1999, the Company had Federal income tax credit carryforwards
of approximately $557,000 expiring through 2010, and state tax credit
carryforwards of approximately $316,000 which are not subject to expiration.

Note 8 - Shareholders' Equity
- ------------------------------

Stock Options

In July 1996, the Board of Directors approved and adopted a new stock
incentive plan (the "1996 Plan") which provides for grants of both stock
options and shares of restricted stock. Prior to that date, options were
granted under the Company's 1986 Stock Option Plan, as amended (the "1986
Plan"). A total of 1,400,000 shares may be granted under the terms of the
1996 Plan. The term of the options granted is determined by the Company's
Board of Directors, but in no event may be longer than ten years.
The exercise price of options granted generally is required to be not less
than the fair market value of the common stock on the date of grant. Options
granted to employees must vest at a rate of at least 20% per year. The 1986
Plan expired in July 1996. At December 31, 1999, 38,800 options were out-
standing under this plan.

A one-time grant of options typically is made to each non-employee director
at the time of joining the Board, and, beginning in 1999, an additional
15,000 options are granted annually to non-employee directors. The table
below summarizes transactions in the 1986 Plan and the 1996 Plan (together
the "Plans").

<TABLE>
<CAPTION>
1999 1998 1997
------------------ ---------------- ----------------
Shares Price Shares Price Shares Price
--------- ------ --------- ------ -------- ------
<S> <C> <C> <C> <C> <C> <C>

Outstanding at beginning
of year.................... 923,300 $1.12 495,800 $2.36 185,800 $4.01
Granted...................... 505,000 0.55 535,000 0.67 372,500 1.74
Exercised.................... - - - - - -
Canceled..................... 107,000 2.38 107,500 3.58 62,500 2.78
--------- ----- -------- ----- -------- -----
Outstanding at end of year... 1,321,300 $0.89 923,300 $1.12 495,800 $2.36
========= ===== ======== ===== ======== =====
Exercisable at end of year... 520,800 $1.12 386,300 $1.61 184,550 $3.05
========= ===== ======== ===== ======== =====

</TABLE>
F-12
<PAGE> 36

The following table summarizes the range of exercise price, weighted average
remaining contractual life ("Life") and weighted average exercise price
("Price") for all stock options outstanding as of December 31, 1999:

Options Outstanding Options Exercisable
---------------------------- -------------------
Range of Exercise Price Shares Life Price Shares Price
- ------------------------ --------- -------- ----- -------- -------
<S> <C> <C> <C> <C> <C>
$0.41 to $.75 1,015,000 8.9 years $0.58 317,500 $0.61
$0.76 to $1.50 172,500 9.0 years 1.41 132,500 1.50
$1.51 to $3.50 133,800 8.1 years 2.53 70,800 2.68
--------- ----- ------- -----
1,321,300 $0.89 520,800 $1.12
========= ===== ======= =====
</TABLE>

The Company grants stock options to employees and others in accordance with
the terms of its Plans. Warrants are granted upon the Board of Directors'
approval. The Company has elected to adopt SFAS 123 "Accounting for
Stock-Based Compensation" for disclosure purposes only and applies the
provisions of APB Opinion No. 25. The Company recognized $39,000, $27,000
and $8,000 of compensation expense related to consulting options in 1999,
1998 and 1997, respectively. Had compensation expense for all options
granted been recognized in accordance with SFAS 123, the Company's net
income and net income per share would have been as follows:

<TABLE>
<CAPTION>
Years ended December 31,
1999 1998 1997
----------- ----------- ----------
<S> <C> <C> <C>
Pro forma net income........... $ 870,000 $ 617,000 $ 288,000
Pro forma basic net income
per share..................... $ 0.12 $ 0.08 $ 0.04
Pro forma diluted net income
per share..................... $ 0.11 $ 0.08 $ 0.04

</TABLE>

The above pro forma amounts were calculated by estimating the fair value of
each option or warrant granted on the date of grant using the Black-Scholes
option-pricing model as follows:

Years ended December 31,
1999 1998 1997
------------ ----------- -----------
<S> <C> <C> <C>
Expected life................. 3 Years 3 Years 3 Years
Expected volatility........... 80% 75% 68%
Interest rate................. 5.5% 5.5% 5.0%
Dividend yield................ 0 % 0 % 0 %

</TABLE>

Warrants

At December 31, 1999, 1998 and 1997, the Company had a total of 600,000,
520,000 and 810,000 warrants to purchase common stock outstanding, at
weighted average exercise prices of $4.17, $4.89 and $4.54, respectively.
Of the outstanding warrants, 540,000, 500,000 and 790,000 were exercisable
at weighted average exercise prices of $4.54, $4.96 and $4.65, in 1999, 1998
and 1997, respectively.

At December 31, 1999, 1998 and 1997, 50,000, 70,000 and 70,000 warrants for
consulting services were outstanding, respectively. As of December 31, 1999,
50,000 were exercisable with exercise prices between $3.13 and $3.69 and
expire through June 2002.

In connection with stock sales in 1993 and 1994, the Company issued warrants
to finders. Warrants to purchase 25,000 shares of the Company's stock are
still outstanding at prices ranging from $1.45 and $1.70, expiring through
July 2000.

F-13

<PAGE> 37

In 1993, the Company issued warrants to purchase 400,000 shares of stock at
$5.50 per share in connection with the acquisition of the Immupath license.
(See Note 12.) These options expire in February 2003.

Preferred Stock

In October, 1998 as part of the purchase price of the acquisition of Coral
(see Note 3), 450,000 shares of no par value Senior Convertible Series B
preferred stock ("Series B Preferred") were issued to the seller. The
Series B Preferred is convertible into 500,000 shares of HemaCare common
stock, at the option of the holder at any time after one year from the
date of issuance. The Series B Preferred holders are entitled to
dividends when declared by the Company's Board of Directors and, if
dividends are declared on the Company's common stock, Series B Preferred
holders are entitled to participate in the common stock dividend on an as
converted basis. In the event of liquidation, dissolution or wind up of
the Company, Series B Preferred holders are entitled to a preferential
distribution of $0.90 per share.

Note 9 - Employee Salary Deferral Plan
- ---------------------------------------

HemaCare's Employee Salary Deferral Plan qualifies under Section 401(k) of
the Internal Revenue Service Code (the "401(k) Plan"). Eligible employees
may contribute up to 12 percent of their pre-tax salaries, subject to
certain limitations. HemaCare may elect to match a portion of the employees'
contribution. In 1999, 1998 and 1997, the Company elected to match 50
percent of the of each participant's contribution, up to 5% of the
participants annual salary, with HemaCare common stock.

During 1999, 1998 and 1997, HemaCare issued 96,462 shares ($44,000), 90,410
shares ($42,000) and 13,195 shares ($41,000) of common stock as matching
contributions for the 1998, 1997 and 1996 plan years, respectively.
Subsequent to December 31, 1999, the Board approved the issuance of
approximately 114,275 shares ($75,000) in 2000 as matching
contributions for the 1999 plan year.

Note 10 - 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 series of state statutes passed the latest of which passed in late 1994.
Unless a new exemption is obtained, the existing exemption will expire under
its sunset provision on December 31, 2001, which could have a material
adverse effect on the Company's revenue and net income.

In February 2000, AB 2714, sponsored by the Company, was introduced in the
California Legislature. If enacted, this bill would make permanent the
current provisions of California law allowing payment of apheresis platelet
donors. However, there are no assurances that AB 2714 will be passed by the
legislature and enacted into law. Historically, legislation permitting the
payment of apheresis platelet donors has been opposed by the not for profit
blood centers operating in California which rely exclusively on uncompensated
blood product donors. It is anticipated that such blood centers, which
compete with the Company will oppose AB2714. See "Government Regulation" and
"Risk Factors."

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.

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

The Company entered into a long-term commitment with a vendor to purchase
kits used to produce blood products from blood donors and to provide

F-14
<PAGE> 38

blood services to patients. Under the terms of the agreement, the Company
is obligated to purchase $6,090,000 of kits at established prices through
May 2003.

Note 11 - Segment and Related Party Information
- -----------------------------------------------

Business Segments

The Company operates in three business segments as follows:

- - Blood Management Programs ("BMP"); Outsource programs which
provide all or a major portion of the blood banking functions to a
hospital.

- - Blood Products; 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 measure segment performance.
However, the dominant measurements are consistent with the Company's
consolidated financial statements which present revenue from external
customers and operating profit income for each segment. Supplemental data
are as follows:

BMP Blood Products Blood Services
----------- -------------- --------------
<S> <C> <C> <C>
1999
- ----
Depreciation and amortization $ 142,000 $ 29,000 $ 114,000
Expenditures for fixed assets 11,000 3,000 3,000

1998
- ----
Depreciation and amortization $ 56,000 $ 18,000 $ 52,000
Expenditures for fixed assets 484,000 4,000 388,000

1997
- ----
Depreciation and amortization $ 74,000 $ 18,000 $ 54,000
Expenditures for fixed assets 38,000 - -

</TABLE>

Management evaluates segment performance based primarily on operating income.
Other revenue and expenses are not allocated to the segments. The accounting

policies of the segments are the same as those described in the significant
accounting policies.

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 totaling $98,000. The
proceeds of these loans were used to refinance existing debt that was
collateralized by HemaCare stock owned by Dr. Levy. In January 1996,
these individual notes were consolidated into a promissory note,
collateralized by HemaCare stock owned by Dr. Levy, which accrued
interest at a rate equal to the rate paid by the Company under its line of
credit. The Company received installment payments in accordance with the

F-15
<PAGE> 39

terms of this note of $15,000 in January 1996 and January 1997. Effective
July 31, 1997, the Company entered into an agreement with Dr. Levy that
superceded the 1996 note. Under the terms of this agreement, the Company
agreed to forgive the remaining balance of Dr. Levy's note, including
interest accrued at a 10% annual rate, over a five-year period so long as
Dr. Levy remains employed by the Company.

Note 12 - Discontinued Operations
- ---------------------------------

In November 1995, the Company discontinued the operations of HBI, including
the research and development of Immupath and the associated specialty plasma
business. The reserve established for estimated HBI operating losses during
the period of disposal included a $600,000 contingent liability for the
resolution of the dispute with Medicorp. In July 1996, the dispute was
settled without any payment by the Company, and the Company recognized a
$600,000 gain on disposal of discontinued operations. In June 1996, the
Company agreed to sell substantially all the tangible assets of the
discontinued operations and the FDA source plasma licenses. The sale and
transfer of the licenses was contingent upon obtaining FDA approval that was
received on October 21, 1996. The buyer delivered a promissory note, in
payment of the purchase price for certain tangible assets sold, which is
collateralized by these assets. The note was repaid in March 1997, resulting
in a gain on disposal of $120,000 in the first quarter of 1997.

During the wind down of the research and development operations, the Company
manufactured a supply of Immupath to supply the patients still receiving
treatment for a limited period of time. There are currently two patients
receiving Immupath treatments. In the fourth quarter of 1997, the Company
reviewed and revised its estimate of the remaining costs of discontinued
operations and recognized an additional gain on disposal of $173,000. The
Company does not expect discontinued operations to have a material impact on
future operating results.

F-16
<PAGE> 40

Report of Independent Public Accountants

To the Shareholders and Board of Directors of HemaCare Corporation:

We have audited in accordance with auditing standards generally accepted
in the United States, the consolidated financial statements included in
HemaCare Corporation's annual report to shareholders included in this
Form 10-K, and have issued our report thereon dated February 29, 2000.
Our audit was made for the purpose of forming an opinion on those statements
taken as a whole. The schedule listed in the index of consolidated financial
statements is the responsibility of the Company's management and is presented
for purposes of complying with the Securities and Exchange Commission's rules
and is not part of the basic consolidated financial statements. This schedule
has been subjected to the auditing procedures applied in the audit of the
basic consolidated financial statements and, in our opinion, fairly
states in all material respects the financial data required to be set
forth therein in relation to the basic consolidated financial statements
taken as a whole.

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

Los Angeles, California
February 29, 2000

S-1
<PAGE> 41

HEMACARE CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

For The Years Ended December 31, 1999, 1998 and 1997

Additions

Balance at Charged to Charged to Balance
beginning costs and other at end of
Description of period expenses accounts Write-offs period
- --------------------------- ---------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Year ended December 31,
1999 - Allowance for
uncollectible accounts $ 596,000 $ -- $(183,000)(1) 157,000 $ 256,000

Year ended December 31,
1998 - Allowance for
uncollectible accounts $ 81,000 $ -- $515,000(2) $ -- $ 596,000

Year ended December 31,
1997 - Allowance for
uncollectible accounts $ 47,000 $ 35,000 $ -- $ 1,000 $ 81,000

</TABLE>

1) Represents goodwill adjustment of acquired receivables.
2) Represents allowance for doubtful accounts of acquired assets
at date of acquisition.

S-2
<PAGE> 42

Index to Exhibits
<TABLE>
<CAPTION>

Sequential
Page Number
-----------
<S> <C> <C>
2.1 Amended and Restated Asset Purchase Agreement between
the Registrant, HemaBiologics, Inc. (a wholly owned
subsidiary of the Registrant) and Atopix Pharmaceuticals
Corporation, dated June 26, 1996--incorporated by
reference to Exhibit 2.1 to Form 10-Q of the Registrant
for the quarter ended June 30, 1996.......................

2.2 Asset Purchase Agreement between the Registrant, Gateway
Community Blood Program and Haemonetics Corporation, dated
August 1, 1997--incorporated by reference to Exhibit 2.1
to Form 10-K of the Registrant for the quarter ended
September 30, 1997........................................

3.1 Restated Articles of Incorporation of the Registrant--
incorporated by reference to Exhibit 3.1 to Form 10-K of
the Registrant for the year ended December 31, 1995.......

3.2 Bylaws of the Registrant, as amended--incorporated by
reference to Exhibit 3.1 to Form 10-Q of the Registrant
for the quarter ended March 31, 1998......................

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

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

4.5 Warrant Agreement between the Registrant and Joseph T.
McDonald dated November 1, 1996--incorporated by reference
to Exhibit 4.9 to Form 10-K of the Registrant for the year
ended December 31, 1996....................................

4.6 Warrant Agreement between the Registrant and Kibel, Green,
Inc., dated March 4, 1999--incorporated by reference to
Exhibit 4.1 to Form 10-Q of the Registrant for the quarter
ended March 31, 1999.......................................

4.7 Warrant Agreement between the Registrant and Stuart Dinney,
dated March 4, 1999--incorporated by reference to Exhibit
4.2 to Form 10-Q of the Registrant for the quarter ended
March 31, 1999.............................................

<PAGE> 43

4.8 Warrant Agreement between the Registrant and Lori Terra-
Vasslo, dated March 4, 1999................................ Filed herewith
Electronically

4.9 Rights Agreement between the Registrant and U.S. Stock
Transfer Corporation dated March 3, 1998--incorporated
by reference to Exhibit 4 to Form 8-K of the Registrant
dated March 5, 1998.......................................

4.10 Amended Certificate of Determination, dated March 18,
1998--incorporated by reference to Exhibit 4.8 on Form
10-K for the Registrant for the year ended December 31,
1997.....................................................

4.11 Certificate of Determination of the Registrant's Series B
Senior Convertible Preferred Stock between the Registrant
and Comdisco Health Care Group dated October 23, 1998--
incorporated by reference to Exhibit 4.1 of Form 8-K
of The Registrant dated November 5, 1998.................

4.12 Registration Rights of Shareholders'--Incorporated by
reference to Exhibit 4.9 To the Current Report on Form
8-K of the Registrant dated August 19, 1996..............

4.13 Loan Agreement between the Registrant and Bank Leumi, USA,
dated June 1, 1999--incorporated by reference to Exhibit
4.1 to Form 10-Q of the Registrant for the quarter ended
June 30, 1999............................................

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

10.2 1996 Stock Incentive Plan of the Registrant, as amended--
incorporated by reference to Exhibit 4.1 to Form 10-Q of
the Registrant for the quarter ended September 30, 1996....

10.3 Office Building Lease dated August 21, 1998 between the
Registrant and Tar Addison Place, LP--incorporated by
reference to Exhibit 10.1 to Form 10-Q of the Registrant
for the quarter ended September 30, 1998...................

10.4 Revolving Credit Agreement between the Registrant and Bank
Leumi USA, dated February 5, 1999--incorporated by
reference to Exhibit 10.7 of Form 10-K of the Registrant
for the year ended December 31, 1998.......................

10.5 Promissory Note between the Registrant and Bank Leumi USA,
dated February 5, 1999--incorporated by reference to
Exhibit 10.8 of Form 10-K of the Registrant for the year
ended December 31, 1998...................................

10.6 Promissory Note to HemaBiologics, Inc., a wholly owned
subsidiary of the Registrant, from Joshua Levy dated
January 1, 1996--incorporated by reference to Exhibit
10.10 to Form 10-K of the Registrant for the year ended
December 31, 1995 ........................................

<PAGE> 44

10.7 Pledge Agreement between HemaBiologics, Inc., a wholly owned
subsidiary of the Registrant, and Joshua Levy dated January
1, 1996--incorporated by reference to Exhibit 10.11 to
Form 10-K of the Registrant for the year ended December
31, 1995...................................................

10.8 Loan Reimbursement Agreement between HemaBiologics, Inc., a
wholly owned Subsidiary of the Registrant, and Joshua Levy
dated January 30,1998--incorporated by reference to Exhibit
10.10 of Form 10-K of the Registrant for the year ended
December 31,1998...........................................

10.9 Settlement Agreement between the Registrant and Medicorp
Inc.--incorporated by reference to Exhibit 10.1 to Form 8-K
of the Registrant dated July 19, 1996 ......................

10.10 Foreclosure Sale Agreement between the Registrant and
Comdisco Health Care Group, Inc., dated October 23, 1998
--incorporated by reference to Exhibit 2.1 of Form 8-K of
the Registrant dated November 5, 1998.......................

10.11 Employment Agreement between the Registrant and William
D. Nicely, dated May 27, 1998--incorporated by reference
to Form 10-Q for the quarter ended June 30, 1998............

10.12 Services Agreement between the Registrant and Alan C.
Darlington, dated March 10, 1999--incorporated by reference
to Exhibit 10.1 of Form 10-Q of the Registrant for the
quarter ended March 31, 1999................................

11 Computation of earnings (loss) per common equivalent share..Filed herewith
Electronically

21 Subsidiaries of the Registrant............................. Filed herewith
Electronically

23 Consent of Arthur Andersen LLP............................. Filed herewith
Electronically

27 Financial Data Schedule.................................... Filed herewith
Electronically
</TABLE>

EXHIBIT 4.8

WARRANT AGREEMENT

THIS WARRANT AGREEMENT (this "Agreement") is made and entered
into as of the 4 day of March, 1999 by and between LORI TERRA-VASSALO
(the "Warrantholder") and HEMACARE CORPORATION, a California corporation
(the "Company").

WHEREAS, the Warrantholder and the Company are parties to that
certain Noncompetition Agreement dated as of December 30, 1998 (the
"Noncompetition Agreement"), pursuant to which Warrantholder is to
receive a warrant to purchase 30,000 shares of the common stock of the
Company ("Common Stock"), without par value (the "Common Stock"),
subject to vesting as provided herein.

NOW, THEREFORE, in consideration of the foregoing, and for the
purpose of defining the terms and provisions of such warrants, and the
respective rights and obligations of the parties with respect thereto,
the Company and the Warrantholder hereby agree as follows:

Section 1. Form of Warrants; Limitations on Transferability.
1.1 Form and Registration. A Warrant certificate in the form
as set forth in Exhibit A attached hereto, shall be issued to the
Warrantholder upon the execution and delivery of this Agreement by the
Company and the Warrantholder. The Warrant certificate shall be
executed on behalf of the Company by its President or by a Vice
President, and attested to by its Secretary or an Assistant Secretary.

A Warrant certificate bearing the signature of an individual
who was at any time the proper officer of the Company shall bind the
Company, notwithstanding that such individual shall have ceased to hold
such office prior to the delivery of such Warrant certificate or did not
hold such office on the date of this Agreement.

The Warrant certificate shall be dated as of the date of
signature thereof by the Company either upon initial issuance or upon
division, exchange, substitution or transfer.

Each Warrant certificate shall be numbered and shall be
registered on the books of the Company when issued.

1.2 Transfer. The Warrants shall be transferable only on the
books of the Company maintained at its principal office in Sherman Oaks,
California, or wherever its principal office may then be located, upon
delivery thereof duly endorsed by the Warrantholder or by its duly
authorized attorney or representative, accompanied by proper evidence of
succession, assignment or authority to transfer. Upon any registration
of a valid and proper transfer, the Company shall execute and deliver a
new Warrant certificate to the person entitled thereto.

1.3 Limitations on Transfer of the Warrants. The
Warrantholder agrees that prior to making any transfer or disposition of
the Warrants or the shares purchasable upon exercise of the Warrants
(the ?Shares?) or any interest therein, the Warrantholder shall give
written notice to the Company describing briefly the manner in which any
such proposed transfer or disposition is to be made together with an
opinion of counsel, in form and substance satisfactory to the Company,
to the effect that: (i) a registration statement or other notification
or post-effective amendment thereto (hereinafter collectively a
?Registration Statement?) under the Securities Act of 1933, as amended
(the "Act") is not required with respect to such transfer or disposition
or that such a Registration Statement has been filed with, and declared
effective, if necessary, by, the Securities and Exchange Commission (the
"Commission"), or (ii) all requirements under any federal, state or
foreign securities laws have been satisfied or fulfilled such as to
permit the proposed transfer or disposition lawfully pursuant to all
such laws. Except as provided in Section 11 hereof, the Company shall
not be required to cause the Warrants or the Shares to be registered
under any securities laws. The Company will, however, respond to
reasonable requests from the Warrantholder for assistance in connection
with the perfection or qualification of any exemption from registration
under applicable securities laws; provided that the Warrantholder pays
or reimburses the Company for its costs and expenses incurred in
connection therewith. Unless the context indicates otherwise, the term
"Warrantholder" shall include any transferee or transferees of the
Warrants, and the term ?Warrants? shall include any and all warrants
outstanding pursuant to this Agreement, including those evidenced by a
certificate or certificates issued upon division, exchange, substitution
or transfer pursuant to this Agreement.

1.4 Legend on Shares and Warrants. Warrantholder hereby
represents and warrants to the Company that (i) Warrantholder
understands that the offering and sale of the Warrants and the shares
purchasable upon exercise thereof have not been, and will not be,
registered under the Act or under any state securities laws, and are
being offered and sold in reliance upon federal and state exemptions for
transactions not involving any public offering, and that, as such, the
Warrants and the shares purchasable upon exercise thereof will not be
freely transferable, that certificates representing the Securities will
bear restrictive legends under applicable federal and state securities
laws as provided below and shall be subject to stops on transfer. Each
certificate for Warrants or Shares issued upon exercise of the Warrants
shall bear the following legend, unless, at the time of exercise, such
Shares or Warrants are subject to a currently effective Registration
Statement under the Act and, if required, are subject to a currently
effective qualification or registration under any applicable securities
laws of any other jurisdiction:

THE SALE, TRANSFER, ASSIGNMENT, PLEDGE OR HYPOTHECATION
OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAS NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE
OR FOREIGN JURISDICTION. THESE SECURITIES MAY NOT BE
SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED
UNLESS SUCH TRANSACTION IS DULY REGISTERED UNDER THE ACT
AND ALL OTHER APPLICABLE SECURITIES LAWS OR UNLESS SUCH
TRANSFER IS EXEMPT FROM THE REGISTRATION PROVISIONS OF
THE ACT AND ALL OTHER APPLICABLE SECURITIES LAWS.

THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO RESTRICTIONS ON TRANSFER UNDER A WARRANT
AGREEMENT DATED AS OF MARCH 4, 1999, A COPY OF WHICH IS
ON FILE AT THE PRINCIPAL OFFICE OF THE ISSUER.

Any certificate issued at any time in exchange or substitution
for any certificate bearing such legends (except a new certificate
issued upon completion of a registered distribution as provided above)
shall also bear the above legends unless, in the opinion of the
Company's counsel, the securities represented thereby need no longer be
subject to such restrictions.

1.5 The Warrantholder hereby represents and warrants that it
(i) is acquiring the Warrants for its own account for investment
purposes only and not with a view to or for sale in connection with a
distribution of the Warrants or the Shares; (ii) has relied on its own
business and financial knowledge and experience in making the decision
to invest in the Warrants; and (iii) has sufficient knowledge and
experience in business and financial matters to enable it to use the
information made available to it about the Company (including the
Company's periodic and other filings with the Securities and Exchange
Commission) to evaluate the merits and risks of an investment in the
Warrants and to make an informed investment decision with respect
thereto.

Section 2. Exchange of Warrant Certificate.

Any Warrant certificate may be divided, combined or exchanged
for another certificate or certificates entitling the Warrantholder to
purchase a like aggregate number of Shares as the certificate or
certificates surrendered then entitled such Warrantholder to purchase.
Any Warrantholder desiring to divide, combine or exchange a Warrant
certificate shall make such request in writing delivered to the Company,
and shall surrender, properly endorsed, with signatures guaranteed, the
certificate evidencing the Warrant to be so exchanged. Thereupon, the
Company shall execute and deliver to the person entitled thereto a new
Warrant certificate as so requested.

Section 3. Term of Warrants; Exercise of Warrants.

Subject to the terms of this Agreement, the Warrantholder
shall have the right, at any time during the period commencing at 9:00
a.m., Pacific time, on the applicable Vesting Date (as defined in
Section 7.1 below), and ending at 5:00 p.m., Pacific time, on October
23, 2003 (unless earlier terminated in accordance herewith), to purchase
from the Company (and the Company shall issue and sell to such
Warrantholder) any or all of the number of Shares underlying the
Warrants which have vested as provided in Section 7.1 below, upon
surrender to the Company at its principal office, or upon surrender to
any transfer agent designated by the Company for such purposes, of the
certificate evidencing the Warrants to be exercised, together with the
purchase form attached thereto duly filled in and signed, with
signatures guaranteed, and upon payment to the Company of the per share
purchase price of $0.90 (the "Warrant Price"), subject to adjustment as
provided in Section 8, for the number of Shares in respect of which such
Warrant is then exercised, but in no event for less than 500 Shares
(unless less than an aggregate of 500 Shares are then purchasable under
all outstanding Warrants held by a Warrantholder). Payment of the
aggregate Warrant Price shall be made in cash or by cashiers or
certified check or bank draft. In lieu of such payment, Warrantholder
shall be entitled to receive, without the payment by the Warrantholder
of any additional consideration, shares of Common Stock equal to the
value of this Warrant or any portion hereof by the surrender of this
Warrant or such portion to the company, with the net issue election
notice attached hereto as Exhibit B duly executed, at the principal
office of the Company. Thereupon, the Company shall issue to the
Warrantholder such number of fully paid and nonassessable shares of
Common Stock as is computed using the following formula:

Where: X= the number of shares of Common Stock to be
issued to the Warrant holder.

Y= the number of shares of Common Stock covered
by this Warrant in respect of which the net
issue election is made.

A= the fair market value of one share of Common
stock, as determined below, as at the time the
net issue election is made.

B= the Exercise Price in effect under this
Warrant at the time the net issue election is
made.

For purpose of this Section, fair market value of one share of
Common Stock as of a particular date shall mean the closing price of the
Company's Common Stock on the OTC Bulletin Board or other quotation
medium or stock exchange or which the Common Stock is quoted or listed
on the day notice of exercise is provided to the Company as provided
above. If the Common Stock is not so quoted or listed as provided
above, then the fair market value of one share of Common Stock shall be
determined by the Board of Directors of the Company in good faith, which
determination shall be conclusive and binding on the Warrantholder.

Upon such surrender of the Warrants and payment of such
Warrant Price as aforesaid, the Company shall issue and cause to be
delivered with all reasonable dispatch to or upon the written order of
the Warrantholder and in the name of the Warrantholder a certificate or
certificates for the number of full Shares so purchased upon the
exercise of the Warrant, together with cash, as provided in Section 9
hereof, in respect of any fractional Shares otherwise issuable upon such
surrender. Such certificate or certificates shall be deemed to have
been issued and the Warrantholder shall be deemed to have become a
holder of record of such securities as of the date of surrender of the
Warrants and payment of the Warrant Price, as aforesaid, notwithstanding
that the certificate or certificates representing such securities shall
not actually have been delivered or that the stock transfer book of the
Company shall then be closed. The Warrants shall be exercisable, at the
election of the Warrantholder, either in full or from time to time in
part and, in the event that a certificate evidencing the Warrants is
exercised in respect of less than all of the Shares specified therein at
any time prior to the termination date, a new certificate evidencing the
remaining portion of the Warrants will be issued by the Company.

Upon the exercise of a Warrant at a time when there is not in
effect under the Act a registration statement relating to the Shares
issuable upon exercise thereof and available for delivery to the
Warrantholder a prospectus meeting the requirements of Section 10(a)(3)
of the Act, the Warrantholder shall represent and warrant in writing to
the Company that the Shares purchased are being acquired for investment
and not with a view to the distribution thereof. No Shares shall be
issuable upon the exercise of any Warrant unless and until any then
applicable requirements of the Securities and Exchange Commission, the
California Corporations Commissioner, or other regulatory agencies
having jurisdiction, and of any exchanges upon which common stock of the
Company may be listed, shall have been complied with in full.

Section 4. Payment of Taxes.

The Company will pay all United States documentary stamp
taxes, if any, attributable to the initial issuance of the Shares
issuable upon the exercise of the Warrants; provided, however, the
Company shall not be required to pay any foreign documentary stamp taxes
or tax which may be payable in respect of any transfer involved in the
issuance or delivery of any certificates for shares of Common Stock in a
name other than that of the registered holder of Warrants in respect of
which such shares are issued, and in such case neither the Company nor
the Warrant Agent shall be required to issue or deliver any certificate
for shares of Common Stock or any Warrant certificate until the person
requesting the same has paid to the Company the amount of such tax or
has established to the Company's satisfaction that such tax has been
paid.

Section 5. Mutilated or Missing Warrants.

In case the certificate or certificates evidencing the
Warrants shall be mutilated, lost, stolen or destroyed, the Company may
at its discretion, at the request of the Warrantholder, issue and
deliver in exchange and substitution for and upon cancellation of the
mutilated certificate or certificates, or in lieu of and substitution
for the certificate or certificates lost, stolen or destroyed, a new
Warrant certificate or certificates of like tenor and representing an
equivalent right or interest, but only upon receipt of evidence
satisfactory to the Company of such loss, theft or destruction of such
Warrant certificate and a bond of indemnity, if requested, also
satisfactory in form and amount at the applicant's cost. Applicants for
such substitute Warrant certificates shall also comply with such other
reasonable regulations and pay such other reasonable charges as the
Company may prescribe.

Section 6. Reservation of Shares.

There has been reserved, and the Company shall at all times
keep reserved so long as the Warrants remain outstanding, out of its
authorized Common Stock, such number of shares of Common Stock as shall
be subject to purchase under the Warrants. Every transfer agent for the
Common Stock issuable upon the exercise of the Warrants will be
irrevocably authorized and directed at all times to reserve such number
of authorized and unissued shares as shall be requisite for such
purpose. The Company will keep a copy of this Agreement on file with
every transfer agent for the Common Stock issuable upon the exercise of
the Warrants. The Company will supply every such transfer agent with
duly executed stock and other certificates, as appropriate, for such
purpose and will provide or otherwise make available any cash which may
be payable as provided in Section 9 hereof.

Section 7. Vesting Date; Early Termination.

7.1 The applicable "Vesting Date" of the Warrants shall be
the earliest to occur of (i) the following vesting dates:
Number of Shares Vesting Date
10,000 April 1, 1999
10,000 July 1, 1999
10,000 October 1, 1999

(ii) the sale of all or substantially all the assets of the Company and
(iii) the 15th day prior to the date fixed as the record date or the date
of closing the stock transfer books of the Company for the determination
of the stockholders entitled to any rights to receive merger
consideration or other rights in connection with any proposed merger or
consolidation of the Company with respect to which the Company would not
be the surviving entity.

7.2 Notwithstanding any other provision of this Agreement to
the contrary, the Warrants shall immediately terminate and shall not be
or become exercisable upon (a) the breach by Warrantholder of any
provision of the Noncompetition Agreement, or (b) the termination of
Warrantholder's employment with the company for Cause (as defined
below). Cause shall mean (i) the conviction of a felony in a court of
law, (ii) a material breach of fiduciary duty owed to the Company, or
(iii) gross neglect of duties by the Warrantholder.

Section 8. Adjustments.

The number and kind of securities purchasable upon the
exercise of the Warrants and the Warrant Price shall be subject to
adjustment from time to time upon the happening of certain events, as
follows:

8.1 Adjustments. The number of Shares purchasable upon the
exercise of the Warrants shall be subject to adjustment as follows:

(a) In case the Company shall (i) pay a dividend in
Common Stock or make a distribution in Common Stock, (ii) subdivide
its outstanding Common Stock, (iii) combine its outstanding Common
Stock into a smaller number of shares of Common Stock, or (iv)
issue, by reclassification of its Common Stock, other securities of
the Company, the number of Shares purchasable upon exercise of the
Warrants immediately prior thereto shall be adjusted so that the
Warrantholder shall be entitled to receive the kind and number of
Shares or other securities of the Company which the Warrantholder
would have owned or would have been entitled to receive immediately
after the happening of any of the events described above, had the
Warrants been exercised immediately prior to the happening of such
event or any record date with respect thereto. Any adjustment made
pursuant to this subsection 8.1(a) shall become effective
immediately after the effective date of such event retroactive to
the record date, if any, for such event.

(b) No adjustment in the number of Shares purchasable
pursuant to the Warrants shall be required unless such adjustment
would require an increase or decrease of at least one percent in
the number of Shares then purchasable upon the exercise of the
Warrants; provided, however, that any adjustments which by reason
of this subsection 8.1(b) are not required to be made immediately
shall be carried forward and taken into account in any subsequent
adjustment.

(c) Whenever the number of shares of Common Stock
purchasable upon the exercise of a Warrant is adjusted as herein
provided, the Warrant Price payable upon exercise of the Warrant
shall be adjusted by multiplying such Warrant Price by a fraction,
the numerator of which shall be the number of shares of Common
Stock purchasable upon the exercise of such Warrant immediately
prior to such adjustment, and the denominator of which shall be the
number of Shares of Common Stock so purchasable immediately
thereafter.

(d) Whenever the number of Shares purchasable upon the
exercise of the Warrants is adjusted as herein provided, the
Company shall cause to be promptly mailed to the Warrantholder by
certified or registered mail, return receipt requested, postage
prepaid, notice of such adjustment and a certificate of the chief
financial officer of the Company setting forth the number of Shares
purchasable upon the exercise of the Warrants after such
adjustment, a brief statement of the facts requiring such
adjustment and the computation by which such adjustment was made.

(e) For the purpose of this subsection 8.1, the term
"Common Stock" shall mean the class of stock designated as the
Common Stock of the Company at the date of this Agreement. In the
event that at any time, as a result of an adjustment made pursuant
to this Section 8, the Warrantholder shall become entitled to
purchase any securities of the Company other than Common Stock, (i)
if the Warrantholder's right to purchase is on any other basis than
that available to all holders of the Company's Common Stock, the
Company shall obtain an opinion of an independent investment
banking firm valuing such other securities and (ii) thereafter the
number of such other securities so purchasable upon exercise of the
Warrants shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Shares contained in this Section 8.

8.2 No Adjustment for Dividends. Except as provided in
subsection 8.1, no adjustment in respect of any dividends or
distributions out of earnings shall be made during the term of the
Warrants or upon the exercise of the Warrants. Subject to any
requirements of California corporate laws and regulations, applicable
federal and state securities laws and regulations and any securities
exchanges or over-the-counter markets upon which the Common Stock is
listed or qualified for trading enacted or adopted after the date of
this Agreement, the record date for the payment of any dividend or
distribution out of earnings made while any of the Warrants are
outstanding shall be not less than thirty (30) days after the public
announcement of the declaration of such dividend or distribution.

8.3 Preservation of Purchase Rights upon Merger or
Consolidation. In case of any consolidation of the Company with or
merger of the Company into another corporation or in case of any sale or
conveyance to another corporation of the property, assets or business of
the Company as an entirety or substantially as an entirety, the Company
or such successor or purchasing corporation, as the case may be, shall
execute with the Warrantholder an agreement that the Warrantholder shall
have the right thereafter upon payment of the Warrant Price in effect
immediately prior to such action to purchase, upon exercise of the
Warrants, the kind and amount of shares and other securities and
property which it would have owned or have been entitled to receive
after the happening of such consolidation, merger, sale or conveyance
had the Warrants been exercised immediately prior to such action. In
the event of a triangular merger in which the Company is the surviving
corporation, the right to purchase Shares under the Warrants shall
terminate on the date of such merger and thereupon the Warrants shall
become null and void, but only if the controlling corporation shall
agree to substitute for the Warrants its warrant which entitles the
holder thereof to purchase upon its exercise the kind and amount of
shares and other securities and property which it would have owned or
been entitled to receive had the Warrants been exercised immediately
prior to such merger. Any such agreements referred to in this
subsection 8.3 shall provide for adjustments, which shall be as nearly
equivalent as may be practicable to the adjustments provided for in
Section 8 hereof. The provisions of this subsection 8.3 shall similarly
apply to successive consolidations, mergers, sales or conveyances.

8.4 Independent Public Accountants. The Company may
retain a firm of independent public accountants of recognized national
standing (which may be any such firm regularly employed by the Company)
to make any computation required under this Section 8, and a certificate
signed by such firm shall be presumptive evidence of the correctness of
any computation made under this Section 8.

8.5 Statement on Warrant Certificates. Irrespective of
any adjustments in the number of securities issuable upon exercise of
Warrants, Warrant certificates theretofore or thereafter issued may
continue to express the same number of securities as are stated in the
similar Warrant certificates initially issuable pursuant to this
Agreement. However, the Company may, at any time in its sole discretion
(which shall be conclusive), make any change in the form of Warrant
certificate that it may deem appropriate and that does not affect the
substance thereof; and any Warrant certificate thereafter issued,
whether upon registration of transfer of, or in exchange or substitution
for, an outstanding Warrant certificate, may be in the form so changed.

Section 9. Fractional Interests.

The Company shall not be required to issue fractional Shares
on the exercise of the Warrants. If any fraction of a Share would,
except for the provisions of this Section 9, be issuable on the exercise
of the Warrants (or specified portion thereof), the Company shall pay an
amount in cash equal to the then Current Market Price multiplied by such
fraction. For purposes of this Agreement, the term "Current Market
Price" shall mean (i) if the Common Stock is traded in the over-the-
counter market and not in the Nasdaq National Market System nor on any
national securities exchange, the average of the per share closing bid
prices of the Common Stock on the 30 consecutive trading days
immediately preceding the date in question, as reported by Nasdaq or an
equivalent generally accepted reporting service, or (ii) if the Common
Stock is traded in the Nasdaq National Market System or on a national
securities exchange, the average for the 30 consecutive trading days
immediately preceding the date in question of the daily per share
closing prices of the Common Stock in the Nasdaq National Market System
or on the principal stock exchange on which it is listed, as the case
may be. For purposes of clause (i) above, if trading in the Common
Stock is not reported by Nasdaq, the bid price referred to in said
clause shall be the lowest bid price as reported in the "pink sheets"
published by National Quotation Bureau, Incorporated. The closing price
referred to in clause (ii) above shall be the last reported sale price
or, in case no such reported sale takes place on such day, the average
of the reported closing bid and asked prices, in either case in the
Nasdaq National Market System or on the national securities exchange on
which the Common Stock is then listed.

Section 10. No Rights as Shareholder; Notices to Warrantholder.

Nothing contained in this Agreement or in the Warrants shall
be construed as conferring upon the Warrantholder any rights as a
stockholder of the Company, including the right to vote, receive
dividends, consent or receive notices as a stockholder in respect of any
meeting of stockholders for the election of directors of the Company or
any other matter. If, however, at any time following the Vesting Date
and prior to the expiration of the Warrants and prior to their exercise,
any one or more of the following events shall occur:

(a) any action which would require an adjustment
pursuant to Section 8.1 or 8.3;

(b) the Company shall make a declaration for the payment
of any other dividend or the making of any other distribution upon
the Common Stock;

(c) the Company shall make an offer to the holders of
Common Stock for the subscription or purchase by them any share of
any class or any other rights;

(d) the capital reorganization of the Company or the
reclassification of the capital stock of the Company; or

(e) the consolidation or merger of the Company with or
into another entity, the sale of all or substantially all of the
assets of the Company or the voluntary or involuntary dissolution,
liquidation or winding up of the Company;

then the Company shall give notice in writing of such event to the
Warrantholder, as provided in Section 12 hereof, at least 20 days prior
to the date fixed as a record date or the date of closing the transfer
books for the determination of the stockholders entitled to any relevant
dividend, distribution, subscription rights or other rights or for the
determination of stockholders entitled to vote on such proposed
dissolution, liquidation or winding up. Such notice shall specify such
record date or the date of closing the transfer books, as the case may
be. Failure to mail or receive such notice or any defect therein shall
not affect the validity of any action taken with respect thereto.

Section 11. Registration Rights.

(a) Whenever the Company proposes to file with the Commission
a Registration Statement (other than a registration statement on Form
S-4 or S-8 or any corresponding future forms, or any other form for a
limited purpose which excludes registration of the Shares, or any
registration statement covering only securities proposed to be issued in
exchange for securities or assets of another corporation) in connection
with the registration of its Common Stock, the Company shall, at least
fifteen (15) days prior to each such filing, give written notice of such
proposed filing to the Warrantholder and each holder of the Shares, and
shall use its reasonable efforts to include in such filing any proposed
disposition of the Shares (issued or issuable upon the exercise of
Warrants which are then vested in accordance with Section 7, herein)
upon receipt by the Company of a written request therefor, given within
ten (10) days after such notice is given by the Company, setting forth
the facts with respect to such proposed disposition and all other
information with respect to such person necessary to be included in such
Registration Statement; provided that the Company shall have the right
to postpone or withdraw any registration of its Common Stock (and the
corresponding registration effected pursuant to this Section 11) without
obligation to the Warrantholder or any holder of the Shares.

(b) Notwithstanding the foregoing, the Company shall not be
required to include any Shares in an underwritten public offering unless
the Warrantholder or holder of the Shares accepts the terms of the
underwriting as agreed upon between the Company and the underwriter(s)
selected by it, and then only in such quantity as will not, in the
opinion of the managing underwriter(s), jeopardize or be detrimental to
the success of the offering (including price) by the Company. In the
event that the managing underwriter(s) advise the Company in writing
that the inclusion of all or any portion of the Shares in the offering
would jeopardize or be detrimental to the success of the offering, the
number of the Shares to be included in the offering shall be reduced to
the number of Shares, if any, that the managing underwriter(s) believe
may be sold without causing such adverse effect. In the event that the
managing underwriter(s) advise the Company in writing that the inclusion
of a portion of such Shares in the offering would not jeopardize or be
detrimental to the success of the offering, and such portion is less
than the amount requested for inclusion by all persons having
registration rights in respect of the offering, then the amount to be
included shall be prorated among the requesting Warrantholder,
requesting holders of the Shares and other security holders of the
Company possessing similar registration rights in accordance with their
relative holdings, it being agreed to by the Company that no person who
does not possess such registration rights shall be allowed to
participate in the offering to the exclusion of any Shares requested to
be included by any holder of the Warrants or the Shares, and such Shares
shall be offered and sold on the same terms and conditions as the shares
of Common Stock, if any, being offered by the Company in such offering.
In the event that any of the Shares are registered in connection with
the registration of an underwritten public offering but are not included
in such underwritten public offering, those Shares which are excluded
from the offering shall be withheld from the market by the Warrantholder
or the holder(s) of such Shares for a period, not to exceed 120 days,
which the managing underwriter(s) reasonably determine is necessary in
order to effect the underwritten public offering. The Company shall use
its best efforts to keep effective any Registration Statement covering
any of the Shares not subject to or included in an underwritten public
offering for a period of 90 days after the later of the effective date
of such Registration Statement or the date, if any, that the
underwriter(s) specify to be the date upon which such Shares may first
be distributed.

(c) All fees, disbursements and out-of-pocket expenses (other
than brokerage or underwriting fees and commissions and legal fees of
counsel to the Warrantholder or any holder of the Shares, if any) in
connection with the filing of any Registration Statement under this
Section 11 and in complying with applicable securities and Blue Sky laws
shall be borne by the Company; provided, however, that all underwriting
discounts and selling commissions applicable to the Shares covered by
registrations effected pursuant to this Section 11 shall not be borne by
the Company but shall be borne by the Warrantholder and each holder of
the Shares benefited thereby. Notwithstanding the foregoing, the
Company shall not be required to register the Shares or perfect any
exemption for the offering and sale of the Shares under (i) the
securities laws of any foreign jurisdiction or (ii) the securities laws
of any State, territory or possession of the United States in the event
that registration or the perfection of an exemption under the law of any
such State, territory or possession would, in the opinion of the
Company, result in the imposition of unreasonable restrictions on the
Company or its shareholders, officers, directors or employees. The
Company at its expense will supply the Warrantholder and any holder of
the Shares with copies of such Registration Statement and the prospectus
included therein and other related documents in such quantities as may
be reasonably requested by the Warrantholder or holder of the Shares.
In addition, the Company shall have no obligation to register the Shares
in the event the Warrantholder is free to sell such securities under
Rule 144 under the Act.

Section 12. Notices.

Any notice pursuant to this Agreement by the Company or by a
Warrantholder or a holder of Shares shall be in writing and shall be
deemed to have been duly given if delivered or mailed by certified mail,
return receipt requested:

(a) If to the Warrantholder or a holder of Shares -
addressed to Lori Terra-Vassalo, XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX,
XXXXXXXXX.

(b) If to the Company - addressed to it at 4954 Van Nuys
Boulevard, Sherman Oaks, California 91403, Attention: William D.
Nicely, Chief Executive Officer, with a copy to Sheppard, Mullin,
Richter & Hampton, LLP, 333 South Hope Street, 48th Floor, Los
Angeles, California 90071, Attention: James M. Rene, Esquire.

Each party may from time to time change the address to which notices to
it are to be delivered or mailed hereunder by notice in accordance
herewith to the other party.

Section 13. Successors.

All the covenants and provisions of this Agreement by or for the
benefit of the Company, the Warrantholder or the holders of Shares shall
bind and inure to the benefit of their respective successors and assigns
hereunder.

Section 14. Survival of Representations and Warranties.

All statements contained in any schedule, exhibit, certificate or
other instrument delivered by or on behalf of the parties hereto, or in
connection with the transactions contemplated by this Agreement, shall
be deemed to be representations and warranties hereunder.
Notwithstanding any investigations made by or on behalf of the parties
to this Agreement, all representations, warranties and agreements made
by the parties to this Agreement or pursuant hereto shall survive.

Section 15. Applicable Law.

This Agreement shall be deemed to be a contract made under the laws
of the State of California and for all purposes shall be construed in
accordance with the laws of said State. This Agreement has been
executed and delivered by the parties in the State of California.

Section 16. Benefits of this Agreement.

Nothing in this Agreement shall be construed to give to any person
or corporation other than the Company, the Warrantholder and the holders
of Shares any legal or equitable right, remedy or claim under this
Agreement. This Agreement shall be for the sole and exclusive benefit
of the Company, the Warrantholder and the holders of Shares.

Section 17. Entire Agreement; Amendments.

This Agreement sets forth the entire understanding of the parties
with respect to the subject matter hereof, supersedes any and all prior
agreements with respect to the subject matter hereof, and may be
modified only by a written instrument duly executed by each party
affected by any such modification.

Section 18. Descriptive Headings.

The descriptive headings of the several Sections of this Agreement
are inserted for convenience only and shall not control or affect the
meaning or construction of any of the provisions hereof.

IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed, all as of the day and year first above written.

HEMACARE CORPORATION
(CORPORATE SEAL)

By: /s/ William D. Nicely
---------------------------
William D. Nicely
Chief Executive Officer
ATTEST:

/s/ JoAnn R. Stover
- ---------------------------
JoAnn R. Stover, Secretary

/s/ Lori Terra-Vasslo
------------------------
LORI TERRA-VASSALO

EXHIBIT A

THE SALE, TRANSFER, ASSIGNMENT, PLEDGE OR HYPOTHECATION OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE OR
FOREIGN JURISDICTION. THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS SUCH TRANSACTION IS DULY REGISTERED
UNDER THE ACT AND ALL OTHER APPLICABLE SECURITIES LAWS OR UNLESS SUCH
TRANSFER IS EXEMPT FROM THE REGISTRATION PROVISIONS OF THE ACT AND ALL OTHER
APPLICABLE SECURITIES LAWS.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS
ON TRANSFER UNDER A WARRANT AGREEMENT DATED AS OF ______________, A COPY OF
WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE ISSUER.

WARRANT CERTIFICATE NO. __________

WARRANT TO PURCHASE _______ SHARES OF COMMON STOCK
VOID AFTER 5:00 P.M.,
PACIFIC TIME, ON ___________, 20__

HEMACARE CORPORATION
INCORPORATED UNDER THE LAWS OF THE STATE OF CALIFORNIA

This certifies that, for value received,_________________________
or permitted assigns (the "Holder"), is entitled to purchase from
HEMACARE CORPORATION, a California corporation (the "Company"), at any
time before 5:00 p.m., Pacific Time, on _______, 200_, at a per share
purchase price of $_____ (the "Warrant Price"), the number of shares of
Common Stock, without par value, of the Company set forth above (the
"Shares"). The number of Shares purchasable upon exercise of this
Warrant and the Warrant Price are subject to adjustment from time to time
as set forth in the Warrant Agreement referred to below.

This Warrant may be exercised in whole or in part by presentation
of this certificate with the Purchase Form attached hereto duly executed
(with a signature guarantee as provided on such Purchase Form) and
simultaneous payment of the Warrant Price (subject to adjustment) at the
principal office of the Company or at the office of any stock transfer
agent designated by the Company for such purposes. Payment of such price
shall be made at the option of the Holder in cash or by certified check
or bank draft, all as provided in the Warrant Agreement.

This Warrant is part of a duly authorized issue of Common Stock
Purchase Warrants with rights to purchase an aggregate of up to ________
Shares of Common Stock of the Company and are issued under and in
accordance with a Warrant Agreement dated as of ________, 19__, between
the Company and _____________ (the "Warrant Agreement") and are subject
to the terms and provisions contained in the Warrant Agreement, to all of
which the Holder of this Warrant certificate by acceptance hereof
consents. A copy of the Warrant Agreement may be obtained for inspection
by the Holder hereof upon written request to the Company. The Warrant
Agreement provides for the early termination of this Warrant upon the
occurrence of certain events.

Upon any partial exercise of this Warrants, there shall be
countersigned and issued to the Holder a new Warrant certificate in
respect of the Shares as to which this Warrant has not been exercised.
This Warrant certificate may be exchanged at the principal office of the
Company, or at the office of any stock transfer agent designated by the
Company for such purposes, by surrender of this Warrant certificate
properly endorsed (with a signature guarantee) either separately or in
combination with one or more other Warrants for one or more new Warrants
to purchase the same aggregate number of Shares evidenced by the Warrant
or Warrants exchanged. No fractional Shares will be issued upon the
exercise of this Warrant, but the Company shall pay the cash value of any
fractional share otherwise issuable upon the exercise of this Warrant.
This Warrant is transferable at the principal office of the Company, or
at the office of any stock transfer agent designated by the Company for
such purposes, in the manner and subject to the limitations set forth in
the Warrant Agreement.

The Holder hereof may be treated by the Company and all other
persons dealing with this Warrant certificate as the absolute owner
hereof for all purposes and as the person entitled to exercise the rights
represented hereby, any notice to the contrary notwithstanding, and until
such transfer is entered on such books, the Company may treat the Holder
hereof as the owner for all purposes.

This Warrant certificate does not entitle the Holder hereof to
any of the rights of a shareholder of the Company.

Dated as of: ___________
HEMACARE CORPORATION

By: __________________________
Alan C. Darlington
Chairman of the Board
ATTEST:

___________________________
JoAnn R. Stover, Secretary

<PAGE>

HEMACARE CORPORATION
PURCHASE FORM
Mailing Address:
HemaCare Corporation
4954 Van Nuys Boulevard
Sherman Oaks, California 91403

The undersigned hereby irrevocably elects to exercise the
right of purchase represented by the within Warrant for, and to
purchase thereunder, Shares of Common Stock provided for
therein, and requests that certificates for such Shares be issued in
the name of:

________________________________________________________________
(Please Print or Type Name, Address and Social Security Number)
________________________________________________________________
and, if said number of Shares shall not be all the Shares purchasable
hereunder, that a new Warrant certificate for the balance of the Shares
purchasable under the within Warrant certificate be registered in the
name of the undersigned Holder or his Assignee as below indicated and
delivered to the address stated below.

I hereby make the following representations and warranties with
respect to the Shares I am hereby acquiring: (i) I am purchasing the
Shares for my own account, for investment purposes only and not with a
view to or for sale in connection with the distribution of such Shares;
(ii) I have relied on my own business and financial knowledge and
experience in making the decision to invest in the Shares; (iii) I have
sufficient knowledge and experience in business and financial matters
to enable me to use the information made available to me about the
Company (including the Company's periodic and other filings with the
Securities and Exchange Commission) to evaluate the merits and risks of
an investment in the Shares and to make an informed investment decision
with respect thereto; and (iv) I have no reason to anticipate any
change in circumstances, financial or otherwise, that necessitate or
require any sale or distribution of the Shares.

Dated: ___________________________________________

Name of Holder or Assignee:
_________________________________________________________
(Please Print)

Address:
__________________________________________________________________
__________________________________________________________________

Signature:_________________________________________________________
_
Note: The above signature must correspond with the name as it
appears upon the face of the within Warrant certificate in every
particular, without alteration or enlargement or any change whatever,
unless this Warrant has been assigned

Signature Guaranteed:________________________________________________

(Signature must be guaranteed by a bank or trust company having an
office or correspondent in the United States or by a member firm of a
registered securities exchange or the National Association of
Securities Dealers, Inc. The guarantor of signature must be a
participant in the Medallion Stamp Program.)

<PAGE>

ASSIGNMENT

(To be signed only upon assignment of Warrant)

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto

- -------------------------------------------------------------
(Name and Address of Assignee Must Be Printed or Typewritten)
the within Warrant, hereby irrevocably constituting and

appointing _________________________________________
Attorney to transfer said Warrant on the

books of the Company, with full power of substitution in the premises.

Dated: _____________

______________________________________________
Signature of Registered Holder

The signature on this assignment must correspond
with the name as it appears upon the face of the
within Warrant certificate in every particular,
without alteration or enlargement or any change
whatever.

Signature Guaranteed:_________________________________________________

(Signature must be guaranteed by a bank or trust company having an
office or correspondent in the United States or by a member firm of a
registered securities exchange or the National Association of Securities
Dealers, Inc. The guarantor of signature must be a participant in the
Medallion Stamp Program.)

<PAGE>

EXHIBIT B

Net Issue Election

HemaCare Corporation
4954 Van Nuys Boulevard
Sherman Oaks, CA 91403

Ladies and Gentlemen:

The undersigned hereby elects under Section __ of the Warrant dated
________ (the "Warrant"), to exercise its right to receive ________
shares of Common Stock pursuant to the Warrant. The certificate(s) for
such shares issuable upon such net issue election shall be issued in the
name of the undersigned or as otherwise indicated below:

Name for Registration:____________________________________

Mailing Address: _________________________________________

__________________________________________________________

Name: _____________________________________

By:
Its:
<PAGE>

HemaCare Corporation

EXHIBIT 11

Net Income per Common and Common Equivalent Share
<TABLE>
<CAPTION>

Years Ended December 31,
-------------------------------------------------------
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 7,393,001 7,267,753
=========== ============ ============ =========

Net income.......... $ 342,000 $ 420,000 $1,057,000 $ 745,000
=========== ============ ============ =========

Basic net income per share............. $ 0.05 $ 0.06 $ 0.14 $ 0.10
=========== ============ ============ =========

DILUTED
-------
Weighted average common shares used to
compute basic earnings per share.... 7,437,582 7,281,120 7,393,001 7,267,753
=========== =========== ============ =========

Dilutive preferred equivalent shares.. 500,000 376,344 500,000 94,086
Dilutive effect of common stock
issuable in connection with
acquisition.......................... 45,000 11,342
Dilutive common equivalent shares
attributable to stock options
(based on average market price)..... 185,726 - 243,680 -
Dilutive common equivalent shares
attributable to warrants (based on
average market price)............... 19,600 - 20,838 -
---------- ---------- ---------- ---------
Weighted average common shares and
equivalents used to compute
diluted earnings per share.......... 8,142,908 7,702,464 8,157,519 7,373,181
=========== =========== ============ =========

Net income........... $ 342,000 $ 420,000 $1,057,000 $ 745,000
========== =========== ============ ==========

Diluted net income per share ...... $ 0.04 $ 0.06 $ 0.13 $ 0.10
=========== =========== ============ ==========
</TABLE>

EXHIBIT 21

SUBSIDIARIES OF THE REGISTRANT

HemaBiologics, Inc., a California corporation
Comprehensive Blood Services, Inc., a Missouri corporation
Coral Blood Services, Inc., a California corporation

EXHIBIT 23

Consent of Independent Public Accountants

As independent public accountants, we hereby consent to the incorporation
by reference in this Form 10-K, of our report dated March 25, 2000 included
in Registration Statements on Form S-8 File No. 33-30991, File No. 33-52622,
File No. 33-60101 and File No. 333-18601 and on Form S-3 File No. 33-44869
and File No. 333-18599. It should be noted that we have not audited any
financial statements of the Company subsequent to December 31, 1999 or
performed any audit procedures subsequent to the date of our report.

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

Los Angeles, California
March 28, 2000

WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.

<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from audited
financial statements contained in Form 10-K for the year ended December 31, 1999
and is qualified in its entirety by reference to such financial statements.
</LEGEND>

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 1,490,000
<SECURITIES> 778,000
<RECEIVABLES> 3,346,000
<ALLOWANCES> 256,000
<INVENTORY> 781,000
<CURRENT-ASSETS> 6,341,000
<PP&E> 2,639,000
<DEPRECIATION> 1,920,000
<TOTAL-ASSETS> 7,574,000
<CURRENT-LIABILITIES> 2,566,000
<BONDS> 0
0
75,000
<COMMON> 13,676,000
<OTHER-SE> 9,311,000
<TOTAL-LIABILITY-AND-EQUITY> 7,574,000
<SALES> 19,021,000
<TOTAL-REVENUES> 19,021,000
<CGS> 14,995,000
<TOTAL-COSTS> 14,995,000
<OTHER-EXPENSES> 3,041,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 93,000
<INCOME-PRETAX> 1,085,000
<INCOME-TAX> 28,000
<INCOME-CONTINUING> 1,057
,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,057,000
<EPS-BASIC> 0.14
<EPS-DILUTED> 0.13

</TABLE>