-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Rq8ZaqZl2A7HLY/V+tNctE0Zw+3P5U1DH4i14ztqKABAZndzNP413ZpqR0dkxf68 4VXOsGl2Sxkm6zB9mbDTQg== /in/edgar/work/0000801748-00-000008/0000801748-00-000008.txt : 20001115 0000801748-00-000008.hdr.sgml : 20001115 ACCESSION NUMBER: 0000801748-00-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HEMACARE CORP /CA/ CENTRAL INDEX KEY: 0000801748 STANDARD INDUSTRIAL CLASSIFICATION: [8090 ] IRS NUMBER: 953280412 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-15223 FILM NUMBER: 764485 BUSINESS ADDRESS: STREET 1: 4954 VAN NUYS BLVD 2ND FLR CITY: SHERMAN OAKS STATE: CA ZIP: 91403 BUSINESS PHONE: 8189863883 MAIL ADDRESS: STREET 1: 4954 VAN NUYS BLVD, 2ND FL. CITY: SHERMAN STATE: CA ZIP: 91403 10-Q 1 0001.txt QUARTER ENDED SEPTEMBER 30, 2000 =============================================================================== SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to _____________ Commission File Number 0-15223 HEMACARE CORPORATION (Exact name of registrant as specified in its charter) State or other jurisdiction of I.R.S. Employer I.D. incorporation or organization: California Number: 95-3280412 4954 Van Nuys Boulevard Sherman Oaks, California 91403 (Address of principal executive offices) (Zip Code) ___________________ Registrant's telephone number, including area code: (818) 986-3883 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: YES X NO ___ As of November 11, 2000, 7,510,899 shares of Common Stock of the Registrant were issued and outstanding. =============================================================================== INDEX HEMACARE CORPORATION AND SUBSIDIARIES PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated balance sheets - September 30, 2000 (unaudited) and December 31, 1999 Consolidated income statements - Three and nine months ended September 30, 2000 and 1999 (unaudited) Consolidated statements of cash flows - Nine months ended September 30, 2000 and 1999 (unaudited) Notes to consolidated financial statements - September 30, 2000 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations PART II. OTHER INFORMATION Item 1. Legal Proceedings Item 2. Changes in Securities and Use of Proceeds Item 3. Defaults Upon Senior Securities Item 4. Submission of Matters to a Vote of Security Holders Item 5. Other Information Item 6. Exhibits SIGNATURES HEMACARE CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
September30, December 31, 2000 1999 ------------ ----------- (Unaudited) ASSETS Current assets: Cash and cash equivalents............................ $ 1,774,000 $ 1,490,000 Marketable securities................................ 607,000 778,000 Accounts receivable, net of allowance for doubtful accounts - $226,000 (2000) and $256,000 (1999)............................................. 3,803,000 3,090,000 Product inventories.................................. 100,000 91,000 Supplies............................................. 632,000 690,000 Prepaid expenses..................................... 172,000 202,000 ------------ ------------ Total current assets..................... 7,088,000 6,341,000 Plant and equipment, net of accumulated depreciation and amortization of $2,063,000 (2000) and $1,920,000 (1999).............. 765,000 719,000 Goodwill, net of amortization of $102,000 (2000) and $62,000 (1999)....................................... 428,000 468,000 Other assets........................................... 39,000 46,000 ------------ ------------ $ 8,320,000 $ 7,574,000 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable..................................... $ 1,692,000 $ 1,305,000 Accrued payroll and payroll taxes.................... 871,000 530,000 Accrued professional fees............................ 44,000 73,000 Other accrued expenses............................... 28,000 376,000 Current obligations under capital leases............. 55,000 63,000 Current notes payable................................ - 138,000 Reserve for discontinued operations.................. 77,000 81,000 ------------ ------------ Total current liabilities................ 2,767,000 2,566,000 Obligations under capital leases, net of current portion................................... 151,000 188,000 Notes payable, net of current portion.................. - 353,000 Other long-term liabilities............................ 27,000 27,000 Commitments and contingencies.......................... Shareholders' equity: Preferred stock no par value 5,000,000 shares authorized, 450,0000 issued and outstanding........ 75,000 75,000 Common stock, no par value - 20,000,000 shares authorized, 7,618,949 issued, 7,533,174 outstanding in 2000 and 7,475,082 issued and oustanding in 1999.................................. 13,659,000 13,676,000 Accumulated deficit.................................. (8,359,000) (9,311,000) ------------ ------------ Total shareholders' equity............... 5,375,000 4,440,000 ------------ ------------ $ 8,320,000 $ 7,574,000 ============ ============
The accompanying notes are an integral part of these consolidated financial statements. 3 4 HEMACARE CORPORATION AND SUBSIDIARIES CONSOLIDATED INCOME STATEMENTS (Unaudited)
Three months ended Sept. 30, Nine months ended Sept. 30, 2000 1999 2000 1999 ------------ ------------ ------------ ------------ Revenues: Blood management programs.... $ 2,404,000 $ 2,032,000 $ 6,999,000 $ 5,605,000 Regional operations Blood products............. 1,341,000 1,006,000 3,660,000 3,195,000 Blood services............. 1,632,000 1,794,000 5,063,000 5,479,000 ------------- ------------ ------------- ------------- Total revenue............. 5,377,000 4,832,000 15,722,000 14,279,000 Operating costs and expenses: Blood management programs.... 2,039,000 1,725,000 5,821,000 4,932,000 Regional operations Blood products............. 1,087,000 748,000 2,843,000 2,301,000 Blood services............. 1,115,000 1,307,000 3,438,000 4,159,000 ------------- ------------ ------------- ------------- Total operating costs and expenses................ 4,241,000 3,780,000 12,102,000 11,392,000 ------------- ------------ ------------- ------------- Gross profit............... 1,136,000 1,052,000 3,620,000 2,887,000 General and administrative expenses..................... 819,000 771,000 2,621,000 2,244,000 Gain on sale of Gateway - - - 100,000 Community Blood Program...... ------------- ------------ ------------- ------------- Income from continuing operations before income taxes........................ 317,000 281,000 999,000 743,000 Provision for income taxes...... 16,000 14,000 47,000 28,000 ------------- ------------ ------------- ------------- Net income................... $ 301,000 $ 267,000 $ 952,000 $ 715,000 ============= ============ ============= ============= Income per shares: Basic........................ $ 0.04 $ 0.04 $ 0.13 $ 0.10 ============= ============ ============= ============= Diluted...................... $ 0.03 $ 0.03 $ 0.11 $ 0.09 ============= ============ ============= ============= Weighted average shares outstanding - basic........ 7,583,699 7,437,582 7,569,356 7,359,351 ============ =========== ============ ============= Weighted average shares outstanding - diluted...... 8,859,110 8,363,532 8,892,269 8,018,390 ============ =========== ============ =============
The accompanying notes are an integral part of these consolidated financial statements. 4 5 HEMACARE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine months ended Sept. 30, 2000 1999 ------------ ------------ Cash flows from operating activities: Net Income................................................ $ 952,000 $ 715,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization.......................... 183,000 266,000 Issuance of common stock and options for compensation.. 75,000 65,000 Changes in operating assets and liabilities: (Increase) decrease in accounts receivable............ (713,000) 175,000 Decrease (increase) in inventories, supplies and prepaid xxpenses..................................... 79,000 (39,000) (Increase) in other assets, net....................... - (3,000) Increase (decrease) in accounts payable, accrued expenses and other liabilities....................... 347,000 (614,000) ----------- ----------- Net cash provided by (used in) operating activities... 923,000 565,000 Cash flows from investing activities: Decrease in other assets.................................. 7,000 14,000 Decrease (increase) in marketable securities.............. 171,000 (198,000) Purchase of plant and equipment, net...................... (189,000) (51,000) ----------- ----------- Net cash used in investing activities..................... (11,000) (235,000) Cash flows from financing activities: Proceeds from issuance of common stock.................... 34,000 - Repurchase of common stock................................ (126,000) - Principal payments on line of credit, net and capital leases.................................................. (536,000) (257,000) ----------- ----------- Net cash used in financing activities..................... (628,000) (257,000) ----------- ----------- Increase in cash and cash equivalents....................... 284,000 73,000 Cash and cash equivalents at beginning of period............ 1,490,000 1,372,000 ----------- ----------- Cash and cash equivalents at end of period.................. $1,774,000 $1,445,000 =========== =========== Supplemental disclosure: Interest paid............................................. $ 21,000 $ 68,000 =========== =========== Income taxes paid......................................... $ 110,000 $ 39,000 =========== =========== Items not impacting cash flows: Income in capital lease obligations....................... $ - $ 126,000 =========== ===========
The accompanying notes are an integral part of these consolidated financial statements. 5 6 HEMACARE CORPORATION Notes to Consolidated Financial Statements Note 1 - Basis of Presentation and General Information The accompanying unaudited consolidated financial statements of HemaCare Corporation (the "Company" or "HemaCare") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2000, are not necessarily indicative of the results that may be expected for the year ending December 31, 2000. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on For 10-K for the year ended December 31, 1999. Note 2 - Lines of Credit In May 2000, the Company entered into two new line of credit agreements, one relating to working capital and the other for equipment purchases. Under the terms of the working capital agreement, the Company may borrow the lesser of 75% of eligible accounts receivable or $2.0 million at an interest rate of prime plus 0.25% (9.75% as of September 30, 2000). The Company must maintain certain financial ratios and covenants. Additionally, the Company has a secondary line of credit of $350,000 for equipment purchases. Borrowings on the equipment purchase line of credit may be converted annually to a fully amortized note payable. This equipment purchase line of credit bears interest at the rate of the bank's internal cost of funds plus 3.0% (9.5% as of September 30, 2000). Both of these lines of credit mature on December 15, 2001. As of September 30, 2000, there were no borrowings on either of these lines of credit and the Company was in compliance with all loan covenants. Note 3 - 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, which, would have expired on December 31, 2001. In February 2000, AB 2714, sponsored by the Company, was introduced in the California Legislature. The intent of this bill was to make permanent the provision of California law allowing payment of apheresis platelet donors. AB 2714 was passed by the State Assembly and was submitted to the State Senate. The State Senate required significant modifications to the bill before passage. Rather than making the exemption permanent, the Senate extended the current exemption for one additional year. The modified bill was enacted into law on September 7, 2000. Unless a new exemption is obtained, the existing exemption will expire under its sunset provision on December 31, 2002, which could have a material adverse effect on the Company's revenue and net income. 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 6 7 believes its present operations comply with applicable regulations, there can be no assurance that future legislation or rule making, or the interpretation of existing laws and regulations will not prohibit or adversely impact the delivery by HemaCare of its services and products. Note 4 - Common Stock On July 5, 2000, the Company announced its intention to repurchase up to 15% of its outstanding shares, or up to 1.1 million shares. The Company repurchases these shares from time to time in open market and private transactions depend- ing on price and availability. As of September 30, 2000, the Company repurchased 85,000 shares at an average cost per share of $1.48. Note 5 Business Segments The Company operates in three business segments, each of which represents a separate business activity. The segments and a description of their business activities follows: - - Blood Management Programs (BMP) - outsource programs that provide all or a major portion of the blood related functions to a hospital. - - Blood Products - the collection, manufacture and distribution of apheresis and whole blood derived products. - - Blood Services - therapeutic apheresis and stem cell collection procedures, autologous interoperative transfusion and donor testing. Management uses more than one measure to evaluate segment performance. How- ever, the dominant measurements are consistent with the Company's consoli- dated financial statements, which present revenue from external customers and operating income for each segment. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS HemaCare's operations include blood management programs ("Blood Management Programs" or "BMPs") and regional sales of blood products ("Blood Products") and blood services ("Blood Services"). A 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, interoperative autologous transfusion and donor testing. In February 2000, the Company commenced a Blood Management Program with Long Beach Memorial Medical Center ("LBMMC") and in May 2000 opened a Blood Management Program with Presbyterian Intercommunity Hospital ("PIH"). The Company now operates eight blood management programs. In addition to these new programs opened in year 2000, the Company operates programs at the University of Southern California ("USC"), the University of California at Irvine ("UCI"), Dartmouth-Hitchcock Medical Center ("DHMC"), Maine Medical Center ("MMC"), St. Vincent Hospital ("St. Vincent") and University of North Carolina ("UNC"). 7 8 All comparisons within the following discussions are to the comparable periods of the previous year. Three-months ended September 30, 2000 compared to the three-months ended September 30, 1999 Revenues and Gross Profit Overview - ---------------------------------- Revenue for the three-months ended September 30, 2000 was $5,377,000 compared to $4,832,000 for the three-months ended September 30, 1999. The increase of $545,000 (11%) was primarily due to the expansion of the California based BMPs and more Blood Product sales partially offset by lower Blood Service revenue. Gross profit as a percentage of revenue declined from 22% in 1999 to 21% in 2000. The decrease in profit margins reflects higher costs associated with Blood Products and continuing price competition, partially offset by increased margins on Blood Services. Blood Management Programs - ------------------------- Revenues for the three-months ended September 30, 2000 were $2,404,000 compared to $2,032,000 for the three-months ended September 30, 1999. The increase of $372,000 (18%) was primarily attributed to the addition of two new California based BMPs. The LBMMC BMP opened in February 2000 and the PIH BMP opened in May 2000. Revenues at the Company's existing BMPs were consistent with the same period in the prior year. The gross profit from BMPs for the three months ended September 30, 2000, was $365,000 compared to $307,000 in the same period. The gross profit margin for both periods was 15%. The gross profit increase of $58,000 represents improved margins at existing BMPs offset by certain start-up losses at PIH. The PIH losses reflect an investment to develop a larger donor base. All other BMPs remain profitable. Blood Products - -------------- Revenue for the three-months ended September 30, 2000, was $1,341,000 compared to $1,006,000 for the three-months ended September 30, 1999. The increase of $335,000 (33%) reflects additional platelet sales to new customers offset by a lower price per unit. Price competition (primarily from the American Red Cross) remains intense. The gross profit percentage was 19% for the three months ended September 30, 2000, compared to 26% during the three months ended September 30, 1999. The decrease reflects lower pricing per unit due to the above described price competition. The Company recently adopted new standards governing platelet donations. These new standards result in better product consistency but reduce the average number of saleable products obtained per donation. Additionally, the Company experienced a greater number of product expirations during the quarter ended September 30, 2000, compared to the same period in the prior year. Blood Services - -------------- Blood services revenue for the three-months ended September 30, 2000, was $1,632,000 compared to $1,794,000 for the three-months ended September 30, 1999. The decrease of $162,000 (9%) reflects a decrease in demand for therapeutic apheresis services in New England. Competition with other therapeutic apheresis providers in this region intensified during the quarter. The Company often provides albumin, a plasma replacement fluid, used in therapeutic procedures. The Company's cost of albumin and the price the Company charges its customers decreased in the three-months ended September 30, 2000, compared to the same period in 1999. Revenues from other regions were consistent with the prior year. 8 9 The gross profit from Blood Services was 32% for the three-months ended September 30, 2000, compared to 27% in the same period of 1999. The improvement in gross profit margin percentage is a result of better cost controls and efficiencies and the changes in the mix of sales from various regions. The cost controls and efficiencies resulted from better labor utilization thereby reducing overtime and associated payroll expenses. General and administrative expenses - ----------------------------------- General and administrative expenses were $819,000 for the three-months ended September 30, 2000 compared to $771,000 for the three months ended September 30, 1999. The increase of $48,000 (6%) reflects additional expenses in connection with the Company's sponorship of the California legislative initiative (AB2714) (See Liquidity and Capital Resources) and increased marketing efforts. Comparison of the Nine-Months Ended September 30, 2000 to the Nine-Months Ended September 30, 1999 Revenue and gross profit overview - --------------------------------- Revenues for the nine-months ended September 30, 2000, were $15,722,000 compared to $14,279,000 during the three-months ended September 30, 1999. The increase of $1,443,000 (10%) was primarily due to expansion of the California based BMPs and greater sales of blood products partially offset by a decline in the demand for blood services. Gross profit as a percentage of revenue was 23% for the nine-months ended September 30, 2000, compared to 20% in the same period in the prior year. The increase reflects continued improvement in the BMPs and blood services partially offset by higher cost of sales in blood products. Blood Management Programs - ------------------------- Revenues for the nine-months ended September 30, 2000, were $6,999,000 compared to $5,605,000 during the nine-months ended September 30, 1999. The increase of $1,394,000 (25%) was primarily due to the expansion of the California based BMPs. The LBMMC BMP opened in February 2000 and the PIH BMP opened in May 2000. Additionally, revenues for the nine-months ended September 30, 2000, includes nine months of revenue from the UCI BMP. This BMP opened in June 1999. Revenue from the Company's other BMPs was consistent with the same period in the prior year. The gross profit margin from BMP was 17% for the nine-months ended September 30, 2000 compared to 12% in the same period of 1999. The increase reflects increased product collections and operating efficiencies and changes in the mix of products and services provided to BMP customers. All of the Company's BMPs were profitable except the PIH BMP that incurred certain start-up expenses. Blood Products - -------------- Blood products revenue for the nine-months ended September 30, 2000, was $3,660,000 compared to $3,195,000 for the nine-months ended September 30, 1999. The increase of $465,000 (15%) reflects additional sales to new customers offset by a lower price per unit. Price competition (primarily from the American Red Cross) remains intense. The gross profit margin from blood products was 22% for the nine-months ended September 30,2000 compared to 28% in the same period in the prior year. The decrease reflects lower prices per unit due to the above described price competition. During the nine-months ended September 30, 2000, the Company adopted new standards governing platelet donations. These new standards result in better product consistency but reduce the average number of saleable products obtained per donation. This difference in donor yield negatively impacted the gross profit for the nine-months ended September 30, 2000. 9 10 Blood Services - -------------- Blood services revenue for the nine-months ended September 30, 2000, was $5,063,000 compared to $5,479,000 for the nine-months ended September 30, 1999. The decrease of $416,000 (8%) was primarily due to a decrease in demand for therapeutic apheresis procedures in New England partially offset by an increase in demand for services in New York. Additionally, the Company's cost of albumin and the price the Company charges its customers, decreased in the nine-months ended September 30, 2000. Demand for services in other regions was consistent between periods. The gross margin from blood services was 32% for the nine-months ended September 30, 2000, compared to 24% in the same period last year. The improvement in gross profit margin percentage is a result of better cost controls and efficiencies and the changes in the mix of sales from various regions. The cost controls and efficiencies resulted from better labor utilization thereby reducing overtime and associated payroll expenses. Profit margins tend to be less in New England than in other regions. Therefore, while the reduction in demand for blood services in New England reduces the Company's overall gross profit dollars, it also increases the Company's gross profit margin. Additionally, the Company has emphasized better personnel utilization thereby reducing overtime, especially in the New York region. General and administrative expenses - ----------------------------------- General and administrative expenses were $2,621,000 for the nine-months ended September 30, 2000, compared to $2,244,000 for the nine-months ended September 30,1999. The increase of $377,000 (17%) reflects additional expenses incurred in connection with the Company's sponsorship of the California legislative initiative (AB2714) (See Liquidity and Capital Resources) and expanded marketing efforts. Liquidity and Capital Resources - ------------------------------- At September 30, 2000, the Company had cash and cash equivalents and marketable securities of $2,381,000 and working capital of $4,321,000. During the second quarter of 2000, the Company paid off its term note payable with a remaining balance of $457,000 using its cash and marketable securities. Since the interest rate on the term note payable exceeded the average interest rate of the Company's marketable securities, paying off the note should reduce future net interest expense. The Company has two lines of credit with a commercial bank. The first line of credit is a working capital line with an availability equal to the lesser of 75% of eligible accounts receivable or $2.0 million. Interest is payable monthly at a rate of prime plus 0.25% (9.75% as of September 30, 2000). The second line of credit provides $350,000 for equipment purchases. On an annual basis, the Company may convert its equipment purchases into a long-term, fully amortized note payable. The note requires monthly payments including interest equal to the Bank's internal cost of funds plus 3% (9.5% as of September 30, 2000). These lines of credit are secured by substantially all of the Company's unencumbered assets and require the Company to maintain certain financial covenants. As of September 30, 2000, the Company was in compliance with these covenants and there were no borrowings on these lines. These lines of credit mature on December 15, 2001. During the second quarter of 2000, the Company experienced an increase in its accounts receivable balances as certain customers delayed payments. As of December 31, 1999, accounts receivable were collected in an average of 59 days. As of June 30, 2000, 10 11 accounts receivable were collected in an average of 71 days. In response to the slowdown in collections the Company instituted certain procedures. These procedures include requiring stricter adherence to the Company's credit terms; lowering the credit limits to slow paying customers and more frequent customer contact. As a result of these efforts days sales outstanding was reduced during the third quarter 2000, to 65 days. The Company will continue its adherence to these new procedures. In July 2000, the Company announced its intention to repurchase up to 15% of its outstanding common stock, or up to 1.1 million shares. Purchases are made in the open market or in private transactions depending on price and availability. The Company is funding the purchases from its cash and cash equivalents and marketable securities along with profits generated in the normal course of business. As of September 30, 2000, the Company repurchased 85,000 shares at an average price of $1.48 per share. In February 2000, AB 2714, sponsored by the Company, was introduced in the California Legislature. The intent of this bill was to make permanent the provision of California law allowing payment of apheresis platelet donors. AB 2714 was overwhelmingly passed by the State Assembly and was submitted to the State Senate. The State Senate required significant modifications to the bill before passage. Rather than making the exemption permanent, the Senate extended the current exemption for one additional year. The modified bill was enacted into law on September 7, 2000. Unless a new exemption is obtained, the existing exemption will expire under its sunset provision on December 31, 2002, which could have a material adverse effect on the Company's revenue and net income. 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 the Form 10-Q and other materials filed or to be filed by the Company with the Securities and Exchange Commission (as well as information included in oral statements or other written statements made or to be made by or on behalf of the Company) are forward-looking, such as statements relating to operational and financing plans, competition, the effects of discontinued operations, the effect of state and Federal regulation and demand for the Company's products and services. Such forward-looking statements involve important risks and uncertainties, many of which will be beyond the control of the Company. These risks and uncertainties could significantly affect anticipated results in the future, both short-term and long-term, and accordingly, such results may differ from those expressed in forward-looking statements made by or on behalf of the Company. These risks and uncertainties include, but are not limited to, the Company's ability to use paid apheresis platelet donors in California beyond December 31, 2002, the ability of the Company to expand its operations, to obtain additional financing, to repay existing debt, to retain existing customers and obtain new customers and to comply with the covenants under its bank line of credit. Each of these risks and uncertainties as well as others are discussed in greater detail in the preceding paragraphs of this Management's Discussion and Analysis of Financial Condition and Results of Operations and in the Company's Annual Report on Form 10-K for the year ended December 31, 1999. 11 12 PART II. OTHER INFORMATION Item 1. Legal Proceedings See disclosure in Form 10-K for the year ended December 31, 1999. Item 2. Changes in Securities and Use of Proceeds - None Item 3. Defaults Upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders - None Item 5. Other Information - None Item 6. Exhibits and Reports on Form 8-K a. Exhibits 10 Employment agreement between the Registrant and William D. Nicely dated June 1, 2000 11 Net Income per Common and Common Equivalent Share 27 Financial Data Schedule for the Quarter Ended September 30, 2000 b. The Company did not file any reports on Form 8-K during the three months ended September 30, 2000. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date November 14, 2000 HEMACARE CORPORATION -------------------- ------------------------------ (Registrant) /s/ David E. Fractor ------------------------------ David E. Fractor, Chief Financial Officer (Duly authorized officer and principal financial and accounting officer) 12 13 14 EX-10 2 0002.txt EXHIBIT 10 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into by and between HemaCare Corporation (the "Company"), located at 4954 Van Nuys Boulevard, Sherman Oaks, CA 91403, and William D. Nicely (the "Employee") as of June 1, 2000. I. Employment The Company employs the Employee and the Employee accepts employment (hereinafter, the "Employment") upon the terms and conditions of this Agreement. II. Duties Employee shall perform the duties of Chief Executive Officer (with primary responsibility for Western U.S. Products/BMP Unit and focusing on the California market, marketing, growth, profitability and quality assurance) and such other duties of a responsible nature consistent with his position as may be prescribed from time to time by the Board of Directors. Employee is to devote all of his working time and efforts to the business and affairs of the Company. During the Employment, Executive shall report directly to the Executive Chairman and from to time to the Board of Directors of the Company. III. Term The term of this Agreement shall begin on June 1, 2000 (the "Effective Date") and shall continue for an indefinite period until terminated as provided herein. This Agreement may be terminated by either party, without cause, upon prior written notice to the other party. The effective date of such termination is referred to hereinafter as the "Termination Date." IV. Compensation A. Base Salary The Company shall pay the Employee for all services rendered a salary of $200,000 per year which may be adjusted by the Board of Directors of the Company as recommended by the Board Compensation Committee, payable in semi-monthly installments or in such other manner as the Company shall pay its executives. B. Incentive Compensation The Company may (but shall not be obligated to) award Employee an annual or other bonus in such amounts, and on such terms and conditions, as the Board Compensation Committee and/or the Board of Directors of the Company may determine in its sole discretion. C. Stock Options Stock options awarded to Employee in Section IV, C of that certain Employment Agreement dated May 27, 1998 between the Company shall remain in full force and effect in accordance with the terms thereof (it being understood that Employee shall not be entitled to stock options which have not vested as of the Termination Date under this Agreement). D. Fringe Benefits Employee shall be eligible for all fringe benefits as stated in the HemaCare Corporation Personnel Manual, plus the following additions/modifications and those which are from time to time provided to other employees of the Company holding senior executive positions. 1. Vacation: 4 Weeks 2. Health/Dental Insurance commencing on the first day of the month following the date of employment. 3. To the extent the Company is able to purchase an insurance policy therefor, long term disability insurance equal to two-thirds of Base Salary pursuant to the terms of such insurance policy. Benefits under such policy will be payable to the Employee on the same terms as other senior executive officers of the Company notwithstanding the Company's ability to terminate this Agreement for cause as stated in Section VIII, B. 4. Term Life Insurance: On terms customary for other employees of the Company. 5. Participation in the Company's employee retirement programs including the Company's (401K) Plan. 6. Car allowance of $600.00 per month. -2- E. Change of Control In the event of a Change of Control (as defined in Exhibit A hereto) which occurs during the Employment and within twelve months thereafter the Employment is terminated by the Board without Cause, Employee shall be entitled to receive two (2) times the amount of the severance payment determined pursuant to paragraph X below. V. Extent of Services During the Term, Employee shall not, without the prior written consent of the Company, be engaged in any other business activity whether or not such business activity is pursued for gain, profit or other pecuniary advantage. This shall not be construed as preventing Employee from investing his assets in such form or manner as will not require the performance of services of Employee in the operation of the affairs of the enterprises or companies in which said investments are made. VI. Non-Disclosure; Nonsolicitation; Nondisparagement A. Employee shall not during the Term or at any time thereafter (i) disclose to any person not employed by the Company or any person, firm or corporation engaged to render services to Company except during the Term for the benefit of Company, or (ii) use for the benefit of himself, or others, any Confidential Information (as defined below) obtained by Employee prior to the Effective Date, during the Term or any time thereafter, including, without limitation, "know-how", trade secrets, details of the Company's contracts with third parties, pricing policies, financial data, operational methods, marketing and sales information or strategies, product development techniques or plans or any strategies relating thereto, technical processes, designs and design projects, and other proprietary information of Company ("Confidential Information"); provided, however, that this provision shall not preclude Employee from (x) upon advice of counsel and after reasonable notice to Company, making any disclosure required by any applicable law or (y) using or disclosing information known generally to the public (other than information known generally to the public as a result of any violation of this paragraph VI by or on behalf of Employee). B. As requested by the Company from time to time and upon the termination of the Employment for any reason, Employee will promptly deliver to the Company all copies and embodiments, in whatever form, of all Confidential Information in Employee's possession or within Employee's control (including, but not limited to, written records, notes, photographs, manuals, notebooks, documentation, program listings, flow charts, magnetic media, disks, diskettes, tapes and all other materials containing any such Confidential Information) regardless of the location or form of such material and, if requested by the Company, will provide -3- the Company with written confirmation that all such materials have been delivered to the Company. C. The Employee shall not, either directly or indirectly, call on, solicit or take away or assist to be called on, solicited or taken away, any of the customers, other employees or independent contractors of the Company on whom the Employee called or with whom the Employee became acquainted during the Employee's employment with or hiring by the Company, either for the Employee's own benefit, or for the benefit of any other person, firm or corporation. The Employee shall not disclose the name of any employee, customer, sales representative or other employee of the Company to any third party, unless the disclosure occurs during the Employee's employment with the Company and is reasonably required by the Employee's position with the Company. The Employee shall not now or in the future disrupt, damage, impair or interfere with the business of the Company in any manner, including, without limitation, inducing an employee to leave the employ of the Company or inducing an employee, a consultant, a sales representative or an independent contractor to sever that person's relationship with the Company either by interfering with or raiding the Company's employees or sales representatives, disrupting its relationships with customers, agents, independent contractors, representatives or vendors, or otherwise. In the event of a breach or threatened breach by Employee of the provisions of this paragraph, the Company will be entitled to injunctive or other equitable relief restraining Employee from any breach or threatened breach of this paragraph VI. Nothing herein shall be construed as prohibiting the Company from pursuing any other remedies available to the Company for such breach or threatened breach, including the recovery of damages from Employee. VII. Expenses The Employee may incur reasonable expenses, in accordance with Company policies for such expenses, for promoting the Company's business, including expenses for entertainment, travel and similar items. The Company will reimburse the Employee for all such expenses upon the Employee's presentation of an itemized account of such expenditures and supporting documentation, in accordance with Company policy. VIII. Termination by the Company for Cause This Agreement may be terminated by the Company under any of the following circumstances: A. Upon the death of Employee; or -4- B. Upon the inability of Employee to perform all of his duties hereunder by reason of illness, physical, mental or emotional disability or other incapacity, which inability shall continue for more than three (3) successive months or six (6) months in the aggregate during any period of twelve (12) consecutive months, or C. For cause, defined as: (i) the willful failure of Employee (other than for the reasons described in subparagraph VIII(B) above) to substantially perform his duties hereunder. No act, or failure to act, on Employee's part shall be considered "willful" unless done, or omitted to be done, by him not in good faith and without reasonable belief that his action or omission was in the best interest of the Company; (ii) conviction of a crime involving a felony, fraud embezzlement or the like, (iii) the engaging by Employee in conduct, or the taking by Employee of any action, which is materially injurious to the Company, (iv) habitual insobriety or habitual abuse of a controlled substance, (v) misappropriation of the Company's funds, or vi) the failure of Employee to comply with the provisions of Paragraphs V or VI above. Termination pursuant to this subsection may only occur after written notice from the Company to the Employee specifying the grounds for termination and the Employee fails within ten (10) days after receipt of such notice to cure such failure. Upon any termination of this Agreement (whether by the Company or Employee), Employee shall be deemed to have resigned from the Board without any further action unless the Company and Employee agree otherwise. IX. Termination by Employee for Cause This Agreement may be terminated by Employee under any of the following circumstances: A. The failure of the Company to observe or comply with any of the material terms or provisions of this Employment Agreement after written notice from -5- Employee to Company specify to grounds for termination and the Company fails within ten (10) days after receipt of such notice to cure such failure; B. Any material reduction in Employee's Base Salary Amount, or a material reduction in Employee's fringe benefits or any other material failure by the Company to comply with Sections II and IV hereof; C. The Company sells substantially all of its assets to a single purchaser or to a group of associated purchasers; D. At least two-thirds of the outstanding corporate shares of the Company are sold, exchanged, or otherwise disposed of, in one transaction or a series of related transactions; E. The Company dissolves or liquidates its business. Termination pursuant to this subsection may only occur after written notice from the Employee to the Company specifying the grounds for termination and the Company fails within ten (10) days after receipt of such notice to cure such failure. X. Severance In the event this Agreement is terminated by the Company, without cause, or in the event this Agreement is terminated by the Employee for any of those causes listed in paragraph IX, (i) the Company shall continue to pay the Employee his then current Base Salary and provide the benefits set forth in paragraph IV(D)(2), (3) and (4) above for the period commencing on the Termination Date and expiring on the sooner of (i) six months after the Termination Date, or (ii) such date that the Employee commences new full time employment acceptable to the Employee. In the event of any termination prior to year-end, the Employee shall not be entitled to stock options which have not vested as of the Termination Date. The Company may, at its option and at any time, discharge all its obligations to Employee under this paragraph in a single payment in an amount equal to the net present value (at a discount rate equal to the prime rate announced from time to time by Bank of America NT&SA) of all amounts then payable hereunder. As of the date of payment of all amounts required to be paid by the Company under this paragraph, the Company will have no further obligation to Employee with respect to the payment of severance pay. XI. Waiver of Breach The waiver by either party of a breach of any provision of this Agreement by the other shall not operate or be construed as a waiver of any subsequent breach. -6- XII. Arbitration Any dispute arising out of or relating to this Agreement or the transactions contemplated hereby shall be finally resolved and determined by mandatory, binding arbitration before a single arbitrator in Los Angeles, California, in accordance with the then- prevailing commercial arbitration rules of the American Arbitration Association; provided, however, that no claim for specific performance or injunctive relief shall be required to be submitted to arbitration; provided, further, that the arbitrator shall apply the internal laws of the State of California. Each of the parties hereto submits to the jurisdiction of the arbitrator appointed in accordance with such rules and (without limiting the effect of the foregoing arbitration clause) to the jurisdiction of any state or federal court sitting in Los Angeles County, California, in any action or proceeding arising out of or relating to this Agreement and agrees that all claims in respect of the action or proceeding may be heard and determined in any such court. Each of the parties hereto waives any defense of inconvenient forum to the maintenance of any action or proceeding so brought and waives any bond, surety, or other security that might be required of any other party with respect thereto. Nothing in this paragraph XII, however, shall affect the right of any party to bring any action or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby in any other court or to serve legal process in any other manner permitted by law or at equity, for the purposes of compelling arbitration, enforcing any award in arbitration, or seeking specific performance or injunctive relief. Any party hereto may make service on any other party by sending or delivering a copy of the process to the party to be served at the address and in the manner provided for the giving of notices in paragraph XVI hereof. Each party hereto agrees that a final award in any such arbitration or final judgment in any such action or proceeding so brought shall be conclusive and may be enforced by entry of such award in any court of competent jurisdiction, suit on the award or judgment, or in any other manner provided by law or at equity. In the event of legal action or arbitration to construe or enforce this Agreement, the prevailing party (as determined by the court or arbitrator, as applicable) shall be entitled to recover its reasonable attorneys' fees and costs. XIII. Assignment The rights and obligations of the Company under this Agreement shall inure to the benefit of and shall be binding upon the successors and assigns of the Company, but the rights and obligations of Employee are personal and may not be assigned or delegated without the Company's prior written consent. XIV. Entire Agreement This Agreement and the Exhibits attached herein, contains the entire Agreement of the parties and may not be changed orally, but only by an agreement in writing executed by the party against whom enforcement -7- of any waiver, change, modification, extension or discharge is sought. XV. Law Applicable This Agreement shall be governed in all respects, whether as to validity, construction, capacity, performance or otherwise, by the laws of the State of California. In the event any provision of this Agreement shall be held invalid by a court with jurisdiction over the parties to this Agreement, such provision shall be deleted from the Agreement, which shall then be construed to give effect to the remaining provisions thereof. XVI. Notices Any notice to the Company required or permitted under this Agreement shall be given in writing to Company, either by personal service or by registered or certified mail, postage prepaid, addressed to the Chairman of the Company at its then principal place of business. Any such notice to Employee shall be given in a like manner and, if mailed, shall be addressed to Employee at his home address then shown in the Company's files. For the purpose of determining compliance with any time limit in this Agreement, a notice shall be deemed to have been duly given (a) on the date of service, if served personally on the party to whom notice is to be given, or (b) on the second business day after mailing, if mailed to the party to whom the notice is to be given in the manner provided in this paragraph. -8- IN WITNESS WHEREOF, the parties intending to be legally bound, have executed this Agreement the day and year first above stated. HEMACARE CORPORATION EMPLOYEE /s/ Alan C. Darlington /s/ William D. Nicely - ------------------------------ -------------------------- Alan C. Darlington, Chairman of William D. Nicely the Board of Directors -9- Exhibit "A" As used in this Agreement, the phrase "Change of Control" shall mean: (a) Except as provided by subparagraph (b) hereof, the acquisition by any person, entity or "group", within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more of the combined voting power of the then outstanding securities entitled to vote generally in the election of directors of the Company; or (b) Approval by the Board of a reorganization, merger or consolidation of the Company with any other person, entity or corporation, other than: (i) a merger or consolidation which would result in the voting securities of the Company immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of another entity) more than 50% of the combined voting power of the securities entitled to vote generally in the election of directors of the Company or such other entity outstanding immediately after such merger or consolidation; or (ii) a merger or consolidation effected to implement a recapitalization of the Company or similar transaction in which no person, entity or group acquires beneficial ownership of 50% or more of the combined voting power of the securities entitled to vote generally in the election of directors of the Company outstanding immediately after such merger or consolidation; or (iii) Approval by the Board of a plan of complete liquidation of the Company or an agreement for the sale or other disposition by the Company of all or substantially all of the Company's assets pursuant to which all or substantially all of the Company's assets continue to be owned by an affiliate of the Company. A-1 EX-11 3 0003.txt EXHIBIT 11 HEMACARE CORPORATION BASIC AND DILUTED NET INCOME PER SHARE
Three Months Ended Nine Months Ended September 30, September 30, 2000 1999 2000 1999 ------------ ------------ ------------ ---------- BASIC Weighted average common shares used to compute basic earnings per share................................... 7,583,699 7,437,582 7,569,356 7,359,351 ========== ========== ========== ========== Net income.................................... $ 301,000 $ 267,000 $ 951,000 $ 715,000 ========== ========== ========== ========== Basic net income per share............................. $ 0.04 $ 0.04 $ 0.13 $ 0.10 ========== ========== ========== ========== DILUTED Weighted average common shares used to compute basic earnings per share............................. 7,583,699 7,437,582 7,569,356 7,359,351 Dilutive preferred equivalent shares................... 500,000 500,000 500,000 500,000 Dilutive common equivalent shares attributable to stock options (based on average market price)......... 710,927 396,457 752,984 153,644 Dilutive common equivalent shares attributable to warrants (based on average market price).............. 64,484 29,493 69,929 5,395 ---------- ---------- ---------- ---------- Weighted average common shares and equivalents used to compute diluted earnings per share................. 8,859,110 8,363,532 8,892,269 8,018,390 ========== ========== ========== ========== Net income.................................... $ 301,000 $ 267,000 $ 951,000 $ 715,000 =========== =========== ========== ========== Diluted net income per share........................... $ 0.03 $ 0.03 $ 0.11 $ 0.09 ========== =========== ========== ==========
EX-27 4 0004.txt
5 This schedule contains financial information extracted from unaudited financial statements contained in Form 10-Q for the Quarter ending September 30, 2000 and is qualified in its entirety by reference to such financial statements. 9-MOS DEC-31-2000 SEP-30-2000 1,774,000 607,000 4,029,000 226,000 732,000 7,088,000 2,828,000 2,063,000 8,320,000 2,767,000 0 0 75,000 13,659,000 0 8,320,000 15,722,000 15,722,000 12,102,000 12,102,000 2,621,000 0 20,000 999,000 47,000 952,000 0 0 0 952,000 .13 .11
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