8-K/A

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

Amendment No. 1

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of the earliest event reported):  August 29, 2006

HEMACARE CORPORATION

(Exact name of registrant as specified in its charter)

California	000-15223	95-3280412
(State or other jurisdiction of incorporation or organization)	(Commission File Number)	(I.R.S. Employer Identification No.)

21101 Oxnard Street, Woodland Hills, CA 91367
(Address of principal executive offices) (Zip Code)

(818) 226-1968(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

oWritten communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

oSoliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

oPre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

oPre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

EXPLANATORY NOTE

This Amendment No. 1 to the Current Report on Form 8-K amends and supersedes in its entirety the Current Report which was filed on September 5, 2006 (the “Report”).  In the Report, the Company indicated that it would file the financial statements and the financial information required under Item 9.01(a) and (b) no later than 71 calendar days after September 5, 2006.  The Company is hereby filing this Amendment No. 1 to Form 8-K to update portions of Item 2.01, Completion of Acquisition or Disposition of Assets, which were estimated at the time of the Report, and to reflect the amendment of the Stock Purchase Agreement, and other related documents, which the parties entered into on November 14, 2006.  In addition, this Amendment No. 1 updates Item 9.01, Financial Statements and Exhibits, to include the financial statements of the business acquired, and pro forma financial information which was not available at the time of the Report.

Item 2.01.              Completion of Acquisition or Disposition of Assets.

On August 29, 2006, HemaCare Corporation (the “Company”) purchased all the outstanding shares of the capital stock of Teragenix Corporation, a Florida corporation which provides human biological samples, quality control products and clinical trial management services (“Teragenix”), pursuant to that certain Stock Purchase Agreement dated as of August 29, 2006, among the Company, Teragenix, Joseph Mauro and Valentin Adia (the “Stock Purchase Agreement”).  The purchase price consisted of (i) $1,372,203 in cash, (ii) up to an additional $250,000 in cash, subject to the Company’s right to set-off, (iii) 285,895 shares of the Company’s Common Stock, (iv) secured, subordinated promissory notes issued by the Company in the aggregate principal amount of $200,000, (v) up to 248,000 additional shares of the Company’s Common Stock based on the “EBIT” (as defined) of Teragenix for the fiscal year ended March 31, 2007, and (vi) up to an additional $1,300,000 in cash based on the EBIT of Teragenix for the three fiscal years ended December 31, 2008, all as more fully described in the Stock Purchase Agreement.

The Company has entered into an employment agreement with Messrs. Mauro and Adia, pursuant to which they are employed as the Division President and the Vice President of Business Development, respectively, of Teragenix.  The term of employment for Messrs. Mauro and Adia commences on August 29, 2006 and expires on August 29, 2009 and automatically renews for an additional twelve months at the end of the initial term or any renewal term unless 90 days notice is given by either party.  Messrs. Mauro and Adia are entitled to receive (i) an annual base salary of $175,000 (subject to increase from time to time in the discretion of the Company’s board) and $125,000, respectively, (ii) a bonus of up to 20% and 16%, respectively, of base salary upon the achievement of specific goals and objectives established by the Company’s Chief Executive Officer, (iii) reimbursement of reasonable and documented business expenses and (iv) all benefits available to the Company’s employees generally or to senior executives.  In addition, Messrs. Mauro and Adia are entitled to receive (i) a $1,250 monthly automobile allowance and (ii) a whole life insurance policy in a face amount equal to their respective annual base salary.  In the event employment is terminated by the Company other than for “cause” (as defined) or by the employee for “good reason” (as

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defined), the employee shall be entitled to his annual base salary for the remainder of the term or twelve months, whichever is greater, and payment to continue his health insurance coverage for such period or until he obtains full-time employment, whichever is sooner.

On August 29, 2006, Teragenix issued to each of Dr. Lawrence Feldman and Dr. Karen Raben an unsecured, subordinated promissory note in the principal amount of $250,000, Messrs. Mauro and Adia contributed $400,000 to Teragenix, of which $200,000 was paid to each of Drs. Feldman and Raben, and the Company issued to each of Drs. Feldman and Raben 78,947 shares of the Company’s Common Stock from the total shares issued as part of the purchase price, all in exchange for and upon the cancellation by each of them of a promissory note in the principal amount of $450,000, dated November 11, 2005, issued by Teragenix to Dr. Feldman and Dr. Raben.

On November 14, 2006, the Company, Teragenix and Messrs. Mauro and Adia entered into an amendment to the Stock Purchase Agreement to change the distribution of cash and stock earned based on Teragenix’ future EBIT to 65% to Mr. Mauro and 35% to Mr. Adia, a copy of which is attached as Exhibit 99.12 to this Amendment.

The foregoing summary of the transactions contemplated by the Stock Purchase Agreement, as amended, and the ancillary agreements referred to therein, is qualified in its entirety by the copies of such agreements attached as exhibits and incorporated by reference in the Report and the Amendment No. 1.

Item 3.02.              Unregistered Sales of Equity Securities.

In connection with the transactions described in Item 2.01, on August 29, 2006, the Company:

·issued to Messrs. Mauro and Adia an aggregate of 128,000 shares of Common Stock;

·agreed to issue to Messrs. Mauro and Adia up to an aggregate of 248,000 additional shares of Common Stock based on the EBIT of Teragenix for the fiscal year ended March 31, 2007; and

·issued to Drs. Feldman and Raben an aggregate of 157,895 shares of Common Stock.

Such shares of Common Stock were issued, or will be issued if earned, directly, without the services of an underwriter, and without registration under the Securities Act of 1933, as amended, in reliance on Section 4(2) of that Act.

Item 7.01               Regulation FD Disclosure.

On August 29, 2006, the Company issued a press release describing the transactions contemplated by the Stock Purchase Agreement and the ancillary agreements referred to therein.  A copy of such press release was attached as Exhibit 99.10 to the Report and was incorporated therein by this reference.

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On August 29, 2006, the Company held an investor conference call discussing the transactions contemplated by the Stock Purchase Agreement and the ancillary agreements referred to therein. A transcript, of the conference call was attached to the Report as Exhibit 99.11 and was incorporated therein by reference.

Neither the information in this Item 7.01 nor Exhibit 99.10 and 99.11 shall be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.

Item 9.01.              Financial Statements and Exhibits

(a)Financial Statements of Businesses Acquired.

The unaudited balance sheet of Teragenix Corporation as of June 30, 2006, and the unaudited statement of income, and notes thereto, for the six months ended June 30, 2006, and 2005 are filed as Exhibit 99.13 hereto.

The audited balance sheets of Teragenix Corporation as of December 31, 2004 and 2005, and the audited statements of income, statements of stockholders’ equity and statements of cash flows, and the notes thereto, for the years ended December 31, 2004 and 2005, and the report of McGladrey & Pullen, LLP on the audited financial statements, are filed as Exhibit 99.14.

The audited balance sheets of Teragenix Corporation as of December 31, 2002 and 2003, and the audited statements of income and retained earnings, statement of cash flows, and the notes thereto, for the years ended December 31, 2002 and 2003, and the report of Panagos, Salver & Cook, LLP on the audited financial statements, are filed as Exhibit 99.15.

 (b)          Pro Forma Financial Information.

The unaudited pro forma consolidated condensed balance sheet as of June 30, 2006 giving effect to the acquisition and the unaudited pro forma condensed consolidated statements of income for the six months ended June 30, 2006 and the year ended December 31, 2005 giving effect to the acquisition of Teragenix Corporation as if it had occurred on January 1, 2005, and related notes thereto, are filed as Exhibit 99.16.

(d)           Exhibits

Exhibit No.	Description
23.1	Consent of McGladrey & Pullen, LLP.
23.2	Consent of Panagos, Salver & Cook, LLP.

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99.1*	Stock Purchase Agreement dated as of August 29, 2006, among HemaCare Corporation, Joseph Mauro, Valentin Adia and Teragenix Corporation, incorporated by reference to Exhibit 99.1 to Registrant’s Current Report on Form 8-K filed on September 5, 2006.
99.2	Escrow Agreement dated as of August 29, 2006, among HemaCare Corporation, Joseph Mauro, Valentin Adia and U.S. Bank, National Association, incorporated by reference to Exhibit 99.2 to Registrant’s Current Report on Form 8-K filed on September 5, 2006.
99.3	Promissory Note dated August 29, 2006, in the principal amount of $153,800, of HemaCare Corporation payable to Joseph Mauro, incorporated by reference to Exhibit 99.3 to Registrant’s Current Report on Form 8-K filed on September 5, 2006.
99.4	Promissory Note dated August 29, 2006, in the principal amount of $46,200, of HemaCare Corporation payable to Valentin Adia, incorporated by reference to Exhibit 99.4 to Registrant’s Current Report on Form 8-K filed on September 5, 2006.
99.5†	Employment Agreement dated August 29, 2006, between HemaCare Corporation and Joseph Mauro, incorporated by reference to Exhibit 99.5 to Registrant’s Current Report on Form 8-K filed on September 5, 2006.
99.6†	Employment Agreement dated August 29, 2006, between HemaCare Corporation and Valentin Adia, incorporated by reference to Exhibit 99.6 to Registrant’s Current Report on Form 8-K filed on September 5, 2006.
99.7	Promissory Note dated August 29, 2006, in the principal amount of $250,000, of Teragenix Corporation, payable to Dr. Lawrence Feldman, incorporated by reference to Exhibit 99.7 to Registrant’s Current Report on Form 8-K filed on September 5, 2006.
99.8	Promissory Note dated August 29, 2006, in the principal amount of $250,000, of Teragenix Corporation, payable to Dr. Karen Raben, incorporated by reference to Exhibit 99.8 to Registrant’s Current Report on Form 8-K filed on September 5, 2006.
99.9	Letter agreement dated August 29, 2006, among HemaCare Corporation, Teragenix Corporation, Dr. Lawrence Feldman and Dr. Karen Raben, incorporated by reference to Exhibit 99.9 to Registrant’s Current Report on Form 8-K filed on September 5, 2006.

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99.10	Press release dated August 29, 2006, entitled “HemaCare Announces Acquisition of Teragenix Corporation”, incorporated by reference to Exhibit 99.10 to Registrant’s Current Report on Form 8-K filed on September 5, 2006.
99.11	Transcript of conference call conducted by HemaCare Corporation on August 29, 2006, incorporated by reference to Exhibit 99.11 to Registrant’s Current Report on Form 8-K filed on September 5, 2006.
99.12	Amendment to Stock Purchase Agreement dated as of November 14, 2006, among HemaCare Corporation, Joseph Mauro, Valentin Adia and Teragenix Corporation.
99.13	Unaudited balance sheet of Teragenix Corporation as of June 30, 2006, and the unaudited statements of income and notes thereto, for the six months ended June 30, 2006 and 2005.
99.14	Audited balance sheets of Teragenix Corporation as of December 31, 2004 and 2005 and the audited statements of income, statements of stockholders’ equity and statements of cash flows, and the notes thereto, for the years ended December 31, 2004 and 2005.
99.15	Audited balance sheets of Teragenix Corporation as of December 31, 2002 and 2003, and the audited statements of income and retained earnings, statement of cash flows, and the notes thereto, for the years ended December 31, 2002 and 2003.
99.16	Unaudited pro forma condensed consolidated financial information.

*Certain exhibits and schedules to this exhibit have been omitted.  Any omitted schedule or exhibit will be furnished supplementally to the Securities and Exchange Commission upon request.

†Management contracts and compensatory plans and arrangements.

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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 hereunto duly authorized.

Date: November 15, 2006	HEMACARE CORPORATION
	By	/s/ Robert S. Chilton
		Robert S. Chilton,
		Executive Vice President and Chief Financial Officer

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Exhibit Index

Exhibit No.	Description
23.1	Consent of McGladrey & Pullen, LLP.
23.2	Consent of Panagos, Salver & Cook, LLP.
99.1*	Stock Purchase Agreement dated as of August 29, 2006, among HemaCare Corporation, Joseph Mauro, Valentin Adia and Teragenix Corporation, incorporated by reference to Exhibit 99.1 to Registrant’s Current Report on Form 8-K filed on September 5, 2006.
99.2	Escrow Agreement dated as of August 29, 2006, among HemaCare Corporation, Joseph Mauro, Valentin Adia and U.S. Bank, National Association, incorporated by reference to Exhibit 99.2 to Registrant’s Current Report on Form 8-K filed on September 5, 2006.
99.3	Promissory Note dated August 29, 2006, in the principal amount of $153,800, of HemaCare Corporation payable to Joseph Mauro, incorporated by reference to Exhibit 99.3 to Registrant’s Current Report on Form 8-K filed on September 5, 2006.
99.4	Promissory Note dated August 29, 2006, in the principal amount of $46,200, of HemaCare Corporation payable to Valentin Adia, incorporated by reference to Exhibit 99.4 to Registrant’s Current Report on Form 8-K filed on September 5, 2006.
99.5†	Employment Agreement dated August 29, 2006, between HemaCare Corporation and Joseph Mauro, incorporated by reference to Exhibit 99.5 to Registrant’s Current Report on Form 8-K filed on September 5, 2006.
99.6†	Employment Agreement dated August 29, 2006, between HemaCare Corporation and Valentin Adia, incorporated by reference to Exhibit 99.6 to Registrant’s Current Report on Form 8-K filed on September 5, 2006.
99.7	Promissory Note dated August 29, 2006, in the principal amount of $250,000, of Teragenix Corporation, payable to Dr. Lawrence Feldman, incorporated by reference to Exhibit 99.7 to Registrant’s Current Report on Form 8-K filed on September 5, 2006.
99.8	Promissory Note dated August 29, 2006, in the principal amount of $250,000, of Teragenix Corporation, payable to Dr. Karen Raben, incorporated by reference to Exhibit 99.8 to Registrant’s Current Report on Form 8-K filed on September 5, 2006.

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99.9 Letter agreement dated August 29, 2006, among HemaCare Corporation, Teragenix Corporation, Dr. Lawrence Feldman and Dr. Karen Raben, incorporated by reference to Exhibit 99.9 to Registrant’s Current Report on Form 8-K filed on September 5, 2006.

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99.10	Press release dated August 29, 2006, entitled “HemaCare Announces Acquisition of Teragenix Corporation”, incorporated by reference to Exhibit 99.10 to Registrant’s Current Report on Form 8-K filed on September 5, 2006.
99.11	Transcript of conference call conducted by HemaCare Corporation on August 29, 2006, incorporated by reference to Exhibit 99.11 to Registrant’s Current Report on Form 8-K filed on September 5, 2006.
99.12	Amendment to Stock Purchase Agreement dated as of November 14, 2006, among HemaCare Corporation, Joseph Mauro, Valentin Adia and Teragenix Corporation.
99.13	Unaudited balance sheet of Teragenix Corporation as of June 30, 2006, and the unaudited statements of income, and notes thereto, for the six months ended June 30, 2006 and 2005.
99.14	Audited balance sheets of Teragenix Corporation as of December 31, 2004 and 2005 and the audited statements of income, statements of stockholders’ equity and statements of cash flows, and the notes thereto, for the years ended December 31, 2004 and 2005.
99.15	Audited balance sheets of Teragenix Corporation as of December 31, 2002 and 2003, and the audited statements of income and retained earnings, statement of cash flows, and the notes thereto, for the years ended December 31, 2002 and 2003.
99.16	Unaudited pro forma condensed consolidated financial information.

*Certain exhibits and schedules to this exhibit have been omitted.  Any omitted schedule or exhibit will be furnished supplementally to the Securities and Exchange Commission upon request.

†Management contracts and compensatory plans and arrangements.

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EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statements on Form S-8 pertaining to the 2006 Equity Incentive Plan (No. 333-135663), 2004 Stock Purchase Plan (No. 333-116405), and the 1996 Stock Incentive Plan (No. 333-18601, 333-114013 and 333-132603) of HemaCare Corporation, of our report dated February 17, 2006, with respect to the consolidated financial statements of Teragenix Corporation included in this Amendment No. 1 to the Current Report on Form 8-K of HemaCare Corporation dated November 15, 2006.

/s/ McGladrey & Pullen, LLP

Fort Lauderdale, Florida

November 15, 2006

EX-23.2

Exhibit 23.2

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statements on Form S-8 pertaining to the 2006 Equity Incentive Plan (No. 333-135663), 2004 Stock Purchase Plan (No. 333-116405), and the 1996 Stock Incentive Plan (No. 333-18601, 333-114013 and 333-132603) of HemaCare Corporation, of our report dated February 18, 2004, with respect to the consolidated financial statements of Teragenix Corporation included in this Amendment No. 1 to the Current Report on Form 8-K of HemaCare Corporation dated November 15, 2006.

/s/ Panagos, Salver & Cook, LLP

Fort Lauderdale, Florida

November 15, 2006

EX-99.12

Exhibit 99.12

FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT

FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT (this “Amendment”), dated as of November 14, 2006, by and among (a) HemaCare Corporation, a California corporation (“Buyer”), (b) Joseph Mauro, an individual resident of the state of Florida (“Mauro”), and Valentin Adia, an individual resident of the state of Florida (“Aida”, and together with Mauro, each a “Seller” and together “Sellers”) and (c) Teragenix Corporation, a Florida corporation (the “Company”).

W I T N E S S E T H:

WHEREAS, Buyer, Sellers and the Company entered into that certain Stock Purchase Agreement (the “Stock Purchase Agreement”) dated as of August 29, 2006; and

WHEREAS, Buyer, Sellers and the Company wish to amend the Stock Purchase Agreement, on the terms and subject to the conditions set forth in this Amendment, such that certain future payments which may be made by Buyer to Sellers under the Stock Purchase Agreement shall be made according to a different pro rata division between Sellers than the pro rata division used for certain payments previously made by Buyer to Sellers under the Stock Purchase Agreement.

NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth and other good and valuable consideration, the receipt and sufficiency of which is acknowledged, it is hereby agreed among Sellers, Buyer and the Company as follows:

1.             Adjustment to Sellers’ Split of Cash Earn–Out Amount(s) and Determination of Tax Adjustment.  Sections 2.2(a)(vi) and 6.3(f)(i)(c) of the Stock Purchase Agreement are hereby amended by substituting “Modified Pro Rata Share” for each instance of “Pro Rata Share” contained therein.

2.             Adjustment to Sellers’ Split of Buyer Earn–Out Shares.  Section 2.2(a)(v) of the Stock Purchase Agreement is hereby amended and restated in its entirety to read as follows:

“(v)         Earn–Out Shares.  If and only if the EBIT of the Company for the twelve-month period ended March 31, 2007 as finally and conclusively determined in accordance with Section 2.2(b) is equal to or greater than $325,000, then on May 1, 2007, Buyer (A) shall deliver to Mauro an aggregate number of shares of Buyer Common (the “Mauro Earn–Out Shares”) equal to 161,200 and (B) shall deliver to Adia an aggregate number of shares of Buyer Common (the “Adia Earn–Out Shares”, and together with the Mauro Earn–Out Shares, the “Buyer Earn–Out Shares”; and the Buyer Earn–Out Shares together with the Buyer Closing Shares, the “Buyer Shares”) equal to 86,800;”

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3.             New Definitions – “Modified Pro Rata Share”.  Annex 1 of the Stock Purchase Agreement is hereby amended by adding the following new definition, in its proper alphabetic order:

“              ‘Modified Pro Rata Share’ as used in this Agreement with respect to the Sellers shall mean sixty-five percent (65%) with respect to Mauro and thirty-five  percent (35%)  with respect to Adia.”

4.             Reference to and Effect on Stock Purchase Agreement.  Except as amended hereby, the Stock Purchase Agreement shall remain in full force and effect in accordance with its terms.  On and after the date hereof, each reference in the Stock Purchase Agreement to “this Agreement,” “hereunder,” “hereof,” “hereto”, “herein,” or words of like import referring to the Stock Purchase Agreement shall mean and be a reference to the Stock Purchase Agreement as amended by this Amendment.

5.             Execution in Counterparts; Facsimile.  This Amendment may be executed in two or more counterparts and via facsimile, each of which shall be considered an original instrument, but all of which shall be considered one and the same agreement, and shall become binding when one or more counterparts have been signed by each of the parties hereto and delivered to Sellers, Buyer and Parent.

6.             Governing Law.  This Amendment shall be governed by and construed in accordance with the internal laws (as opposed to the conflicts of law provisions) of the State of California.

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to Stock Purchase Agreement to be executed and delivered as of the day and year first above written.

SELLERS:

JOSEPH MAURO, an individual

VALENTIN ADIA, an individual

COMPANY:

TERAGENIX CORPORATION,

a Florida corporation

By:

Name:

Title:

BUYER:

HEMACARE CORPORATION,

a California corporation

By:

Name:

Title:

S-1

EX-99.13

EXHIBIT 99.13

Teragenix Corporation

Balance Sheet

As of June 30, 2006

	Unaudited
Assets
Current assets:
Cash and cash equivalents	$	300,000
Accounts receivable, less allowance for doubtful accounts of $95,000 (Note 7)	480,000
Inventories and supplies, less obsolescence reserve of $52,000 (Note 1)	766,000
Prepaid expenses and other current assets	24,000
Total current assets	1,570,000
Property and equipment, net (Notes 2)	161,000
Other assets	16,000
Total assets	$	1,747,000
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	369,000
Other accrued expenses	31,000
Deferred revenue	8,000
Current obligations under notes payable (Notes 4 and 5)	182,000
Total current liabilities	590,000
Obligations under notes payable, net of current portion	991,000
Total liabilities	1,581,000
Commitments and contingencies	—
Shareholders’ equity:
Common Stock	—
Accumulated Earnings	166,000
Total shareholders’ equity	166,000
Total liabilities and shareholders’ equity	$	1,747,000

See Notes to Financial Statements

Teragenix Corporation

Statement of Operations (Income)

(Unaudited)

	For the six month period ended June 30,
	2006		2005
Revenue	$	2,037,000	$	2,646,000
Cost of goods sold	653,000		685,000
Gross profit	1,384,000		1,961,000
Operating expense	1,231,000		1,073,000
Operating income	153,000		888,000
Interest expense	12,000		2,000
Income before income taxes	141,000		886,000
Provision for income taxes	—		—
Net income	$	141,000	$	886,000

See Notes to Financial Statements

Notes to Financial Statements

Note 1 — Nature of Business and Significant Accounting Policies

Nature of business:     Teregenix Corporation (the “Company”), a Florida Corporation, operates an in-vitro diagnostic development service business.  The Company transacts its business worldwide and deals primarily with U. S. blood banks, reference laboratories, major pharmaceutical companies and investigational review boards.

A summary of the Company’s significant account polies follows:

Accounting estimates:  The preparation of the financial statements in conformity with accounting policies generally accepted in the United States of America 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 and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

Revenue recognition:  The Company recognizes revenue upon shipment of specimens to its customers.  The Company also collects specific specimens for certain customers under contracts.  Advance payments are generally required under the contracts.  These advance payments are considered deferred revenue until the specimens are shipped in accordance with the contract terms.

Cash and cash equivalents:  The Company considers money market accounts to be cash equivalents.  The Company maintains its cash and cash equivalents with one financial institution, which, at times, may exceed federally-insured limits.  The Company has not experienced any losses in such accounts.  The Company believes it is not exposed to any significant credit risk on cash and cash equivalents.

Accounts receivable:  Accounts receivable are carried at original invoice amount less and estimate made for doubtful receivables based on a review of all outstanding amounts on a monthly basis.  Accounts receivable are written off when deemed uncollectible.  Recoveries of accounts receivable previously written off are recorded when received.  An account receivable is considered past due if any portion of the receivable balance is outstanding for more than 60 days.

Inventory:  The Company’s inventory, which is comprised of various components of blood and blood plasma, is valued at the lower of cost or market using the moving average cost method.

Property and equipment:  Property and equipment is stated at cost.  Depreciation is computed using the straight-line method over the following useful lives:

Computer equipment	5 years
Furniture and fixtures	7 years
Leasehold improvements	Lease term
Machinery and equipment	7 years

Depreciation of leasehold improvements is over the shorter of the assets’ estimated useful lives or term of the lease and is included with depreciation expense on owned assets.

Income taxes:  The Company, with the consent of its stockholders, has elected to be taxed under sections of the federal and state income tax laws that provide, in lieu of corporation income taxes, the stockholders account for their pro rata share of the Company’s items of income, deduction, losses and credits.  Therefore, no provision for income taxes is reflected in the Company’s financial statements.  No provision has been made for any amounts which may be advanced or paid as a distribution to the stockholders to assist them in paying their personal income taxes on the income of the Company.

Note 2 — Property and Equipment

Property and equipment as of June 30, 2006, consist of the following:

	June 30, 2006
Computer equipment	$	100,000
Furniture and fixtures	26,000
Leasehold improvements	109,000
Machinery and equipment	183,000
	418,000
Less: Accumulated depreciation	257,000
	$	161,000

Note 3 — Line of Credit

During 2004, the Company entered into a line of credit agreement with a bank.  Maximum borrowings of $250,000 are available bearing interest at prime (8.25% as of June 30, 2006) plus 1%.  Borrowings are due on demand.  The line is collateralized by the assets of the Company and guaranteed by one of the stockholders.  There were no outstanding borrowings under this agreement as of and for the six month period ended June 30, 2006.

Note 4 — Long-Term Debt

Long-term debt as of June 30, 2006 consists of the following:

	June 30, 2006
Note payable to a bank with interest at 6.5%, payable in monthly installments, including interest, of $3,069 maturing October 2007, collateralized by substantially all assets of the Company and guaranteed by one of the Company’s stockholders.	$	42,000
Note payable to a bank with interest at 8%, payable in monthly installments, including interest, of $5,082 maturing 2010, collateralized by substantially all assets of the Company and guaranteed by one of the Company’s stockholders.	231,000
Promissory note payable to former stockholder with interest at 7%, payable in annual installments of $50,000, plus interest, maturing November 2014 collateralized by a pledge agreement of the redeemed stock (i).	450,000
Promissory note payable to former stockholder with interest at 7%, payable in annual installments of $50,000, plus interest, maturing November 2014 collateralized by a pledge agreement Of the redeemed stock (i).	450,000
	1,173,000
Less current maturities	182,000
	$	991,000

(i)If the Company has a change in ownership control, the full amount outstanding becomes immediately due.  There are also certain covenants on distributions which create mandatory prepayment of principal and interest in an amount equal to 25.2% of the amount distributed.

Remaining aggregate maturities required on long-term debt as of June 30, 2006 are summarized as follows:

Year ended December 31,
2006	$	140,000
2007	176,000
2008	150,000
2009	154,000
2010	153,000
Thereafter	400,000
	$	1,173,000

Note 5 — Leases

The Company leases its office facilities under an agreement classified as an operating lease expiring August 2006.  The Company also leases several vehicles under operating leases expiring through July 2008.

Note 6 — Profit Sharing Plan

The Company has a defined contribution 401(k) profit-sharing plan (the “Plan”) which provides for benefits to substantially all full-time employees upon their retirement, death or disability who meet the various requirements as defined in the Plan, based on years of service and an employee’s compensation during the last two years of employment.  Contributions by the Company are limited to the maximum amount deductible for federal income tax purposes, and are expensed as incurred throughout the year, as approved by the Board of Directors.

Note 7 — Major Customers

Net sales for the six month period ended June 30, 2006 include sales to the following major customers, together with the accounts receivable from these customers as of June 30, 2006:

Customer	Net Sales		Accounts Receivable
A	$	585,000	$	39,000
B	357,000		151,000
Total	$	942,000	$	190,000

Note 8 — Subsequent Events

On August 29, 2006, all of the outstanding stock of the Company was acquired by HemaCare Corporation, and subsequently renamed HemaCare BioScience, Inc. (“HemaBio”), for $4.8 million comprised of (i) $1,372,000 in cash, (ii) up to an additional $250,000 in cash, subject to the Company’s right to set-off, (iii) 285,895 shares of the Company’s common stock, (iv) secured, subordinated promissory notes issued by the Company in the aggregate principal amount of $200,000, (v) up to 248,000 additional shares of the Company’s common stock based on the “EBIT” (as defined) of HemaBio for the twelve month period ended March 31, 2007, and (vi) up to an additional $1,300,000 in cash based on the EBIT of HemaBio for the three fiscal years ended December 31, 2008.

On September 15, 2006, the Company entered into an amendment to the office lease for its primary offices in Fort Lauderdale, Florida, to add an additional 1,193 rentable square feet, and extend the term of the lease to September 30, 2009.  Commencing January 1, 2007, after the Company takes possession of the additional space, the new monthly lease obligation will be $8,165.

EX-99.14

Exhibit 99.14

McGladrey & Pullen
Certified Public Accountants

Independent Auditor’s Report

To the Board of Directors
Teragenix Corporation
Fort Lauderdale, Florida

We have audited the accompanying balance sheets of Teragenix Corporation as of December 31, 2005 and 2004, and the related statements of income, stockholders’ equity (deficit) and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the 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 financial statements referred to above present fairly, in all material respects, the financial position of Teragenix Corporation as of December 31, 2005 and 2004, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

McGladrey & Pullen, LLP

Fort Lauderdale, Florida
February 17, 2006

McGladrey & Pullen, LLP is a member firm of RSM International,
an affiliation of separate and independent legal entities.

1

Teragenix Corporation

Balance Sheets
December 31, 2005 and 2004

Assets (Notes 3 and 4)	2005			2004
Current Assets
Cash and cash equivalents	$	760,146		$	226,908
Accounts receivable, less allowance for doubtful accounts 2005 $95,375; 2004 $15,000 (Note 7)	348,585			589,521
Inventory, less obsolescence reserve 2005 and 2004 $52,000	688,452			565,388
Prepaid expenses	8,915			8,915
Total current assets	1,806,098			1,390,732
Property and Equipment, net (Notes 2 and 5)	190,273			210,998
Other Assets	15,628			18,228
	$	2,011,999		$	1,619,958
Liabilities and Stockholders’ Equity
Current Liabilities
Current maturities of long-term debt (Notes 4 and 5)	$	76,510		$	33,453
Accounts payable and accrued expenses	320,962			426,365
Distributions payable	407,070			—
Deferred revenue	127,961			662,356
Total current liabilities	932,503			1,122,174
Long-Term Debt, less current maturities (Note 4)	233,343			63,327
Current maturities of promissory notes (Note 4)	100,000			—
Promissory notes, Less current maturities (Note 4)	800,000			—
Total Long-term Debt	$	1,133,343		$	63,327
Commitments and Contingency (Notes 5 and 8)
Stockholders’ Equity (Deficit) (Notes 4 and 8)
Common stock, no par value; authorized 50,000,000 shares	1			100
Additional paid in capital	—			200,000
Preferred stock, no par value; authorized 5,000,000 shares; issued none	—			—
Retained earnings (deficit)	(53,848		)	234,357
	(53,847		)	434,457
	$	2,011,999		$	1,619,958

See Notes to Financial Statements.

2

Teragenix Corporation

Statements of Income
Years Ended December 31, 2005 and 2004

	2005			2004
Net sales (Note 7)	$	5,028,728		$	2,532,855
Out of pocket reimbursements	156,216			—
Total revenue	5,184,944			2,532,855
Cost of goods sold	1,701,908			981,353
Gross profit	3,483,036			1,551,502
Operating expenses	2,268,204			1,797,759
Operating income (loss)	1,214,832			(246,257		)
Financial income (expense):
Interest expense	(13,836		)	(9,825		)
Other income	3,863			796
	(9,973		)	(9,029		)
Net income (loss)	$	1,204,859		$	(255,286	)

See Notes to Financial Statements.

3

Teragenix Corporation

Statements of Stockholders’ Equity (Deficit)
Years Ended December 31, 2005 and 2004

	Common Stock					Additional			Retained Earnings
	Shares		Amount			Paid-in Capital			(Deficit)			Total
Balance, December 31, 2003	81,960		$	100		$	200,000		$	598,931		$	799,031
Stockholder distributions			—			—			(109,288		)	(109,288		)
Net loss			—			—			(255,286		)	(255,286		)
Balance, December 31, 2004	81,960		100			200,000			234,357			434,457
Stock redemption (Note 8)	(46,454	)	(99		)	(200,000		)	(925,021		)	(1,125,120		)
Stockholder distributions			—			—			(568,043		)	(568,043		)
Net income			—			—			1,204,859			1,204,859
Balance (deficit), December 31, 2005	35,506		$	1		$	—		$	(53,848	)	$	(53,847	)

See Notes to Financial Statements.

4

Teragenix Corporation

Statements of Cash Flows
Years Ended December 31, 2005 and 2004

	2005			2004
Cash Flows From Operating Activities
Net Income (loss)	$	1,204,859		$	(255,286	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation	66,967			88,649
Increase in inventory obsolescence reserve	—			52,000
(Increase) decrease in:
Accounts receivable	240,936			(234,306		)
Inventory	(123,064		)	(145,724		)
Prepaid expenses	—			(2,061		)
Increase (decrease) in:
Accounts payable and accrued expenses	(105,403		)	177,276
Deferred revenue	(534,395		)	662,356
Net cash provided by operating activities	749,900			342,904
Cash Flows From Investing Activities
Purchases of property and equipment	(46,242		)	(92,947		)
Decrease (increase) in other assets	2,600			(2,510		)
Net cash used in investing activities	(43,642		)	(95,457		)
Cash Flows From Financing Activities
Borrowings on long-term debt	22,943			4,259
Repayments of long-term debt	(34,990		)	(52,370		)
Stockholders’ distributions	(160,973		)	(109,288		)
Net cash used in financing activities	(173,020		)	(157,399		)
Net increase in cash and cash equivalents	533,238			90,048
Cash and cash equivalents:
Beginning	226,908			136,860
Ending	$	760,146		$	226,908
Supplemental Disclosures of Cash Flow Information:
Cash payments for interest	$	5,961		$	12,457
Supplemental Schedule of Noncash Investing and Financing Activities
Redemption of common stock with long-term debt	$	225,120		—
Redemption of common stock with promissory notes	$	900,000		$	—
Long-term debt repaid and acquired through refinancing	$	—		$	95,741
Distributions payable	$	407,070		$	—

See Notes to Financial Statements.

5

Teragenix Corporation

Notes to Financial Statements

Note 1.Nature of Business and Significant Accounting Policies

Nature of business: Teragenix Corporation (the “Company”), a Florida Corporation, operates an in-vitro diagnostic development service business. The Company transacts its business worldwide and deals primarily with U.S. blood banks, reference laboratories, major pharmaceutical companies and investigational review boards.

A summary of the Company’s significant accounting policies follows:

Accounting estimates: The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America 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 and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Revenue recognition and shipping and handling: The Company recognizes revenue upon shipment of specimens to its customers. The Company also collects specific specimens for certain customers under contracts. Advance payments are generally required under the contracts. These advance payments are considered deferred revenue until the specimens are shipped in accordance with the contract terms. Out of pocket reimbursements are recognized as revenue and expenses when the expense is incurred. Shipping and handling costs are expensed as incurred and recorded as a component of cost of goods sold.

Cash and cash equivalents: The Company considers money market accounts to be cash equivalents. The Company maintains its cash and cash equivalents with one financial institution, which, at times, may exceed federally-insured limits. The Company has not experienced any losses in such accounts. The Company believes it is not exposed to any significant credit risk on cash and cash equivalents.

Accounts receivable: Accounts receivable are carried at original invoice amount less an estimate made for doubtful receivables based on a review of all outstanding amounts on a monthly basis. Accounts receivable are written off when deemed uncollectible. Recoveries of accounts receivable previously written off are recorded when received. An account receivable is considered past due if any portion of the receivable balance is outstanding for more than 60 days.

Inventory: The Company’s inventory, which is comprised of various components of blood and blood plasma, is valued at the lower of cost or market using the moving average cost method.

Property and equipment: Property and equipment is stated at cost. Depreciation is computed using the straight-line method over the following estimated useful lives:

	Years
Computer equipment	5
Furniture and fixtures	7
Leasehold improvements	Lease Term
Machinery and equipment	7

Depreciation of leasehold improvements is over the shorter of the assets’ estimated useful lives or term of the lease and is included with depreciation expense on owned assets.

6

Note 1.Nature of Business and Significant Accounting Policies (Continued)

Income taxes: The Company, with the consent of its stockholders, has elected to be taxed under sections of the federal and state income tax laws that provide that, in lieu of corporation income taxes, the stockholders account for their pro rata share of the Company’s items of income, deduction, losses and credits. Therefore, no provision for income taxes is reflected in the Company’s financial statements. No provision has been made for any amounts which may be advanced or paid as a distribution to the stockholders to assist them in paying their personal income taxes on the income of the Company.

Reclassifications: Certain reclassifications have been made in the 2004 financial statements in order to conform to the 2005 financial statement presentation, with no effect on net loss or stockholders’ equity.

Note 2.Property and Equipment

Property and equipment as of December 31, 2005 and 2004, consist of the following:

	2005		2004
Computer equipment	$	97,581	$	52,886
Furniture and fixtures	26,212		25,413
Leasehold improvements	108,786		108,786
Machinery and equipment	180,275		179,527
	412,854		366,612
Less accumulated depreciation	222,581		155,614
	$	190,273	$	210,998

Note 3.     Line of Credit

During 2004, the Company entered into a line of credit agreement with a bank. Maximum borrowings of $250,000 are available bearing interest at the prime rate (7.25% as of December 31, 2005) plus 1%. Borrowings are due on demand. The line is collateralized by the assets of the Company and guaranteed by one of the stockholders. There were no outstanding borrowings under this agreement as of and for the years ended December 31, 2005 and 2004.

7

Note 4.           Long-Term Debt

Long-term debt as of December 31,2005 and 2004 consists of the following:

	2005		2004
Note payable to a bank with interest at 6.5%, payable in monthly installments, including interest, of $3,069 maturing October 2007, collateralized by substantially all assets of the Company and guaranteed by one of the Company’s stockholders.	$	63,328	$	94,915
Note payable to a bank with interest at 8%, payable in monthly installments, including interest, of $5,082 maturing 2010, collateralized by substantially all assets of the Company and guaranteed by one of the Company’s stockholders.	246,525		—
Promissory note payable to former stockholder with interest at 7%, payable in annual installments of $50,000, plus interest, maturing November 2014 collateralized by a pledge agreement of the redeemed stock. (i)	450,000		—
Promissory note payable to former stockholder with interest at 7%, payable in annual installments of $50,000, plus interest, maturing November 2014 collateralized by a pledge agreement of the redeemed stock. (i)	450,000
21.9% capital lease obligation due May 2005 (Note 5)	—		1,865
	1,209,853		96,780
Less current maturities	176,510		33,453
	$	1,033,343	$	63,327

(i) If the Company has a change in ownership control, the full amount outstanding becomes immediately due. There are also certain covenants on distributions which create mandatory prepayment of principal and interest in an amount equal to 25.2% of the amount distributed.

8

Note 4.     Long-Term Debt (Continued)

Aggregate maturities required on long-term debt as of December 31,2005 are summarized as follows:

Year Ending
December 31,
2006	$	176,510
2007	175,985
2008	150,208
2009	154,375
2010	152,775
Thereafter	400,000
	$	1,209,853

Note  5.    Leases

The Company leased equipment under an agreement that had been classified as a capital lease. The lease ended in May 2005. For the year ended December 31, 2004, machinery and equipment included cost of $12,097 and accumulated depreciation of $4,608 for the capitalized equipment.

The Company leases its office facilities under an agreement classified as an operating lease expiring August 2006. The Company also leases several vehicles under operating leases expiring through July 2008. Rent expense was $142,694 and $123,028 for the years ended December 31, 2005 and 2004.

Future minimum lease payments under the noncancelable operating leases are due as follows as of December 31, 2005:

Year Ending
December 31,
2006	$	76,358
2007	21,168
2008	5,205
Total minimum lease payments	$	102,731

Note 6.Profit Sharing Plan

The Company has a defined contribution 401(k) profit-sharing plan (the “Plan”) which provides for benefits to substantially all full-time employees upon their retirement, death or disability who meet the various requirements as defined in the Plan, based on years of service and an employee’s compensation during the last two years of employment. Contributions by the Company are limited to the maximum amount deductible for federal income tax purposes, and are expensed as incurred throughout the year, as approved by the Board of Directors. For the years ended December 31, 2005 and 2004, the Board elected to make employer contributions, which aggregated $6,931 and $11,308, respectively and are included in operating expenses.

9

Note 7.          Major Customers

Net sales for the years ended December 31, 2005 and 2004 include sales to the following major customers, together with the accounts receivable due from these customers as of December 31, 2005 and 2004

	2005
Customer	Net Sales		Accounts Receivable
A	$	1,319,665	$	57,401
B	1,474,544		135,051
	$	2,794,209	$	192,452
	2004
A	$	421,600	$	189,345
C	304,840		23,294
	$	726,440	$	212,639

Note 8.Stock Redemption

During 2005, the Company redeemed 46,454 shares. The stock redemption was financed through a bank loan and promissory notes with the former stockholders (see Note 4). If the Company has a change in ownership control within 12 months of November 11, 2005, the Company will owe $62,560 to a former stockholder.

Note 9.Subsequent Event

The Company signed a nonbinding letter of intent subsequent to December 31, 2005. The letter sets forth proposed terms for 100% of all the outstanding capital stock of the Company to be required. Unless mutually agreed by both parties, the letter will terminate on June 11, 2006.

10

McGladrey & Pullen
Certified Public Accountants

Independent Auditor’s Report
on the Supplementary Information

To the Board of Directors
Teragenix Corporation
Fort Lauderdale, Florida

Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplementary information is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.

McGladrey & Pullen, LLP

Fort Lauderdale, Florida
February 17, 2006

11

Teragenix Corporation

Statements of Income Information
Years Ended December 31, 2005 and 2004

Operating Expenses	2005		2004
Advertising and business development	$	12,001	11,610
Automobile expenses	25,910		24,329
Bad debt expense	85,703		—
Bank and credit card charges	15,571		9,671
Computer expense	61,647		78,454
Commissions	39,592		88,649
Depreciation	66,967		6,975
Donations	665		500
Dues and subscriptions	800		5,881
Entertainment	—		8,185
Equipment rental	7,265		3,893
Insurance	83,679		59,562
Legal fees	7,753		4,959
Laboratory supplies	56,085		68,398
Licenses and taxes	7,253		13,608
Marketing	39,118		19,686
Membership and subscription	5,309		—
Office expense	46,861		61,296
Payroll processing fees	18,874		15,604
Payroll tax expense	82,287		60,865
401(k) plan contributions	6,931		11,308
Professional fees	88,285		111,176
Rent expense	116,784		98,699
Repairs and maintenance	43,105		36,986
Salaries and wages expense	1,209,764		879,327
Telephone expense	37,263		39,445
Travel	66,731		51,573
Utilities	23,058		19,153
Other	12,943		7,967
	$	2,268,204	$	1,797,759

12

EX-99.15

Exhibit 99.15

PANAGOS SALVER & COOK LLP
Certified Public Accountants

To the Board of Directors
TERAGENIX CORPORATION
Fort Lauderdale, Florida

We have audited the accompanying balance sheet of TERAGENIX CORPORATION, an S Corporation, as of December 31, 2003 and 2002, and the related statement of income and retained earnings, and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the 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 audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of TERAGENIX CORPORATION as of December 31, 2003 and 2002, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

Respectfully submitted,

Panagos, Salver & Cook, LLP

Panagos, Salver & Cook, LLP
February 18, 2004

2721 Executive Park Drive • Suite 4 • Weston, FL 33331
Tel 954.389.1333 • Fax 954.389.1397 • CPAS@psccpas.com

TERAGENIX CORPORATION

BALANCE SHEET

December 31, 2003 and 2002

ASSETS

	2003		2002
CURRENT ASSETS
Cash in bank	$	136,860	$	140,128
Accounts receivable, net	355,215		83,063
Inventory	471,664		327,612
Prepaid expenses	6,854		9,558
Total current assets	970,593		560,361
PROPERTY AND EQUIPMENT, NET	206,700		188,828
OTHER ASSETS
Security Deposits	13,118		13,118
Deposits - Auto	2,600		—
Total other assets	15,718		13,118
Total assets	$	1,193,011	$	762,307

See accompanying notes and accountants’ audit report

2

TERAGENIX CORPORATION

BALANCE SHEET

December 31, 2003 and 2002

LIABILITIES AND STOCKHOLDERS’ EQUITY

	2003		2002
CURRENT LIABILITIES
Accounts payable	$	239,749	$	81,066
Credit cards payable	1,833		12,202
Deposits and other payables	60,738		25,565
Notes payable, current portion	1,348		19,946
Interest payable	2,632		12,632
Total current liabilities	306,300		151,411
LONG-TERM DEBT
Notes payable – Stockholders	—		150,000
Notes payable, net of current portion	87,680		19,514
Total long-term debt	87,680		169,514
Total liabilities	393,980		320,925
STOCKHOLDERS’ EQUITY
Common stock, no par value, 50,000,000 shares authorized, 82,000 shares issued and outstanding	100		100
Paid in capital	200,000		—
Preferred stock, no par value, 5,000,000 shares authorized, 0 shares issued and outstanding
Retained earnings	598,931		441,282
Total stockholder’s equity	799,031		441,382
Total liabilities and stockholder’s equity	$	1,193,011	$	762,307

See accompanying notes and accountants’ audit report

3

TERAGENIX CORPORATION

STATEMENT OF INCOME AND RETAINED EARNINGS

FOR THE YEARS ENDED DECEMBER 31, 2003 and 2002

	2003			2002
REVENUES	$	2,882,501		$	1,479,128
COST OF GOODS SOLD
Beginning inventory	327,612			203,304
Purchases	1,061,288			597,052
Less: Ending inventory	(471,664		)	(327,612		)
Total cost of goods sold	917,236			472,744
Gross profit	1,965,265			1,006,384
OPERATING EXPENSES (page 11)	1,522,373			940,497
Net Income	442,892			65,887
RETAINED EARNINGS
Beginning	441,282			557,774
Less: Stockholders’ distributions	(285,243		)	(182,379		)
Ending retained earnings	$	598,931		$	441,282

See accompanying notes and accountants’ audit report

4

TERAGENIX CORPORATION

STATEMENT OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2003 and 2002

	2003			2002
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income	$	442,892		$	65,887
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	34,717			27,711
Provision for doubtful accounts	7,000			—
(Increase) decrease in:
Accounts receivable	(279,152		)	269,851
Inventory	(144,052		)	(124.308		)
Prepaid expenses	2,366			(2,377		)
Deposit - Auto	(2,600		)	—
Increase (decrease) in:
Accounts payable	158,683			(32,828		)
Interest payable	(10,000		)	9,206
Credit card payable	(10,369		)	746
Deposits and other payables	15,227			20,587
Net cash provided by operating activities	214,712			234,475
CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property and equipment	(52,253		)	(14,811		)
Net cash (used) in investing activities	(52,253		)	(14,811		)
CASH FLOWS FROM FINANCING ACTIVITIES
(Decrease) Increase in Notes payable	69,515			(6,026		)
Satisfaction of stockholders note payable	(150,000		)	—
Stockholder distributions	(285,243		)	(182,379		)
Increase in paid in capital	200,000			—
Net cash (used) in financing activities	(165,728		)	(188,405		)
Net (Decrease) increase in cash	(3,268		)	31,259
Cash, Beginning	140,128			108,869
Cash, Ending	$	136,860		$	140,128
Supplemental Disclosures of Cash Flow Information: Cash paid during the year for interest	$	10,999		$	12,875

See accompanying notes and accountants’ audit report

5

TERAGENIX CORPORATION

NOTES TO FINANCIAL STATEMENTS

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

The Corporation, a Florida Corporation, operates an in-vitro diagnostic development service business under the name of Teragenix Corporation. The Company transacts its business worldwide and deals primarily with U.S. blood banks, reference laboratories, major pharmaceutical companies, and investigational review boards. The Company moved into a new facility on September 9, 2001 in order to expand its operations, productivity and capabilities. In 2003, the company began providing testing services through its laboratory component, TeraLab.

Basis of Accounting

The accompanying financial statements have been prepared on the accrual basis of accounting in conformity with generally accepted accounting principles.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash, accounts receivable and purchases.

Cash

The Company maintains deposit balances at financial institutions that, from time to time,  may exceed federally insured limits. At December 31, 2003, the Company had cash balances on deposit with one bank that exceeded the federally insured limit by $82,000. The Company believes that such risks are minimized as a result of the size and stature of the financial institution in which the Company maintains its accounts.

Accounts Receivable

The Company provides credit in the normal course of business to its customers and performs ongoing credit evaluations of those customers. Because the Company has had no historical trend of unpaid receivables, and operates on a predetermined basis, it records its credit losses when realized using the direct write-off method. The Company has established a $15,000 and $8,000 account receivable allowance as of December 31, 2003, and 2002, respectively. The Company’s five largest clients, all public companies, accounted for approximately 73% and 77% of its business in 2003 and 2002, respectively.

See accountants’ audit report

6

Purchases

The company procures its inventory from a variety of vendors. The company’s four largest vendors accounted for 25% and 26% of its purchases during 2003 and 2002, respectively.

Use of Estimates

Management uses estimates and assumptions in preparing financial statements in conformity with generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could differ from those estimates.

Depreciation

The Company’s equipment and leasehold improvements are depreciated using the straight-line method for financial reporting purposes. Depreciation expense amounted to $34,717 and $27,111 for the years ended December 31, 2003 and 2002, respectively.

Inventory

The Company’s inventory, which is comprised of various components of blood and blood plasma, is valued at the lower of cost or market using the average cost method.

Labor and Administrative Expenses

During the fourth quarter the company entered into an employee leasing arrangement with an outside entity which previously processed its payroll, paid. its payroll taxes and administeed its pension plan.

Income Taxes

The Company has elected to be taxed under the provisions of Subchapter S of the Internal Revenue Code. Under those provisions, the Company does not incur federal corporate income taxes on its taxable income. Rather, the Company’s five stockholders are liable for individual federal income taxes based on the Company’s taxable income in proportion to their ownership percentages.

See accountants’ audit report

7

NOTE B - PROPERTY AND EQUIPMENT

	2003			2002
Property and equipment consists of the following:
Computers and equipment	$	51,023		$	54,016
Furniture and fixtures	24,582			25,694
Leasehold improvements	88,527			82,717
Machinery and equipment	109,533			84,218
	273,665			246,645
Less: accumulated depreciation	(66,965		)	(57,817		)
	$	206,700		$	188,828

Property and equipment are stated at cost. Depreciation is computed using the straight-line method for financial reporting purposes and amounted to $34,717 and $27,111 for the years ended December 31, 2003 and 2002, respectively. For federal income tax purposes, depreciation is generally computed using accelerated cost recovery options.

Expenditures for major renewals and betterments that extend the useful lives of property and equipment are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred.

NOTE C - DESCRIPTION OF LEASING ARRANGEMENTS

The Company entered into a 5-year lease agreement on June 29th, 2001 with Commerce Center Development Corp. for its corporate headquarters and operations center. The lease commencement date was September 9th, 2001. Under the lease agreement, the rent during 2003 was payable in equal monthly installments of $6,855,82. The monthly rent increases by three percent at the expiration of each lease year. The company is also responsible for its proportionate share of the common area maintenance. The following is a schedule of future minimum lease payments required under the lease:

2004	$	84,738
2005	87,280
2006 (January 1 - September 9, 2006)	66,447
	$	238,465

The Company leased a new vehicle for its president in February. 2003 for a monthly charge of $930,64. The future minimum lease payments required under this lease are $36,295 and will expire in May, 2006. Vehicle lease expense for the year ended December 31, 2003 and 2002 amounted to $13,337 and $16,200, respectively. The Company also reimburses two of its employees for auto allowance, totaling $1,020 per month.

See accountants’ audit report

8

NOTE D - STOCKHOLDER NOTES

Notes Payable – Stockholders

In January 2003 the company satisfied, in full, stockholder notes totaling $ 150,000. These notes were unsecured and bore interest at 6% per annum. Accrued interest on these notes was $12,631 of which $10,000 was paid during the year. Management intends to satisfy the remaining balance in early 2004.

NOTE E - LONG TERM DEBT

During 2003 the Company obtained a $160,000 loan from Fleet National Bank to satisfy the $150,000 note due to, two of its stockholders. This loan is secured and personally guaranteed by three of the stockholders of the Company. The loan includes interest at the rate of 5.19% payable in 48 monthly installments of principal and interest in the amount of $3,704. The balance due on the loan was $126,330 as of December 31, 2003.

During 2001 the Company purchased its security system and its telephone system under 36 month lease/purchase arrangements, with $2,318 and $1 buyouts, respectively. Both leases, which include an interest rate of 6.5%, have been capitalized. The balances due on its security system and its telephone system were $6,910 and $5,772, respectively, as of December 31, 2003. During 2002, the Company purchased laboratory equipment under a 36 month lease/purchase arrangement, with a $125 buyout. This lease, which includes an interest rate of 19.3%, has also been capitalized. The balance due on its laboratory equipment was $5,882 as of December 31, 2003.

Aggregate annual principal payments under the above obligations are as follows:

2004	$	55,864
2005	42,051
2006	42,867
2007	7,069
Total	$	147,851

NOTE F- PROFIT SHARING PLAN

The Company has a defined contribution 401(k) profit-sharing plan (Plan) which provides for benefits to substantially all full-time employees upon their retirement, death or disability who meet the various requirements as defined in the Plan; based on years of service and an employee’s compensation during the last two years of employment. Contributions from the Company are limited to the maximum amount deductible for federal income tax purposes, and are expensed as incurred throughout the year, as approved by the Board of Directors. In 2003 and 2002, the Board elected to make employer contributions, which aggregated to $9,789 and $985, respectively and are included in operating expenses. The Company’s plan is administered by its payroll processing company.

See accountants’ audit report

9

NOTE G - COMMITMENTS AND CONTINGENCIES

In late 2003 Teragenix Corporation was sued by Theragenics Corporation (an entity which manufactures radioactive implants for the treatment of prostate cancer) for the sole purpose of name change. The company’s insurance company is handling the legal defense of this case. In the opinion of management, there is no client confusion or any business misrepresentation as the two entities are not in similar businesses. Presently the company is not being sued for damages. According to management, it appears that the worst case scenario facing the company is the cost of being required to change its name.

NOTE H - CORPORATE STOCK

As part of the company’s overall recapitalization. 50.000.000 no par. common shares have been authorized. As of December 31,2003 82,000 shares are issued and outstanding. The outstanding shares include 8,200 shares issued to a key employee on December 31, 2003, as part of a compensation bonus valued at $200,000.

The company also has 5,000,000 no par preferred stock shares authorized, none of which is issued or outstanding.

NOTE I - SUBSEQUENT EVENTS

The Company had been actively seeking outside investment capital during 2002 and early 2003 to further expand its present capabilities and future business opportunities. As of 2004, the Company does not intend to pursue outside investment capital.

See accountants’ audit report

10

EX-99.16

Exhibit 99.16

PRO FORMA CONSOLIDATED UNAUDITED FINANCIAL INFORMATION

The unaudited pro forma consolidated financial statements as of and for the six months ended June 30, 2006, have been prepared from the June 30, 2006 unaudited financial statements of the Company and the unaudited financial statements of Teragenix Corporation for the six months ended June 30, 2006.  The unaudited pro forma consolidated statement of income for the year ended December 31, 2005 has been prepared from the December 31, 2005 financial statements of the Company and the statement of income of Teragenix Corporation for the year ended December 31, 2005.

The unaudited pro forma consolidated financial statements have been prepared on a basis to reflect the acquisition of Teragenix Corporation as if such acquisition occurred as of January 1, 2005 for the statements of income and as of June 30, 2006 for the balance sheet.

The unaudited pro forma consolidated financial statement should not be considered indicative of actual results that would have been achieved had the acquisition and the other transactions and events described been completed as of the dates or as of the beginning of the period indicated and do not purport to project the financial condition or results of operations and cash flows for any future date or period.

The reader should read these unaudited pro forma consolidated financial statements in conjunction with the Company’s financial statements as of and for the year ended December 31, 2005 and the interim unaudited consolidated financial statements as of and for the six months ended June 30, 2006.

The pro forma adjustments are based on preliminary estimates, available information and certain assumptions, and may be revised as additional information becomes available.  The pro forma adjustments are more fully described in the notes to the unaudited pro forma consolidated financial statements.

HemaCare Corporation

Unaudited Pro Forma Consolidated Balance Sheet

As of June 30, 2006

						Pro Forma
	HemaCare			Teragenix		Adjustments				Pro Forma
	Corporation			Corporation		Debit		Credit		Combined
Assets
Current assets:
								273,000	(e)
Cash and cash equivalents	$	1,732,000		$	300,000	1,275,000	(c)	2,223,000	(d)	$	811,000
Accounts receivable, net	3,992,000			480,000						4,472,000
Inventories and supplies, net	1,214,000			766,000				422,000	(a)	1,558,000
Prepaid expenses and other current assets	749,000			24,000						773,000
Total current assets	7,687,000			1,570,000						7,614,000
Property and equipment, net	3,012,000			161,000						3,173,000
Other assets	285,000			16,000						301,000
Goodwill	—			—		2,834,000	(d)			2,834,000
Total assets	$	10,984,000		$	1,747,000					$	13,922,000
Shareholders’ Equity
Current liabilites:
Accounts payable	$	1,734,000		$	400,000					$	2,134,000
Accrued payroll and payroll taxes	1,201,000			—						1,201,000
Other accrued expenses	195,000			—				12,000	(b)	207,000
Deferred revenue				8,000						8,000
Current obligations under capital leases	47,000			—						47,000
Current obligations under notes payable	—			182,000		182,000	(e)	1,275,000	(c)	1,275,000
Total current liabilities	3,177,000			590,000						4,872,000
Other long-term liabilities
Obligations under capital leases, net of current portion	—			—						—
						91,000	(e)
Obligaitions under notes payable, net of current portion	—			991,000		400,000	(f)	200,000	(d)	700,000
Total liabilities	3,177,000			1,581,000						5,572,000
Commitments and contingencies	—			—						—
Shareholders’ equity:
Common Stock	13,708,000			—				543,000	(d)	14,251,000
Unearned compensation	362,000			—						362,000
Accumulated (deficit) earnings	(6,263,000		)	166,000		166,000	(d)			(6,263,000		)
Total shareholders’ equity	7,807,000			166,000						8,350,000
Total liabilities and shareholders’ equity	$	10,984,000		$	1,747,000					$	13,922,000

HemaCare Corporation

Unaudited Pro Forma Consolidated Income Statement

For the Year Ended December 31, 2005

					Pro Forma
	HemaCare		Teragenix		Adjustments				Pro Forma
	Corporation		Corporation		Debit		Credit		Combined
Revenues	$	31,227,000	$	5,185,000					$	36,412,000
Operating costs and expenses	24,651,000		1,702,000		141,000	(a)			26,494,000
Gross profit	6,576,000		3,483,000						9,918,000
General and administrative expenses	4,890,000		2,278,000		126,000	(h)	14,000	(i)	7,280,000
Income before income taxes	1,686,000		1,205,000						2,638,000
Provision for income taxes	31,000		—		78,000	(b)			109,000
Net income	$	1,655,000	$	1,205,000					$	2,529,000
Net income per basic share	$	0.20							$	0.30
Net income per diluted share	$	0.19							$	0.28
Based shares outstanding	8,121,000				286,000	(g)			8,407,000
Diluted share outstanding	8,847,000				286,000	(g)			9,133,000

HemaCare Corporation
Unaudited Pro Forma Consolidated Income Statement
For the Period Ended June 30, 2006

	Hemacare		Teragenix		Pro Forma Adjustments			Pro Forma
	Corporation		Corporation		Debit		Credit	Combined
Revenues	$	16,620,000	$	2,037,000				$	18,657,000
Operating costs and expenses	13,482,000		653,000		76,000	(a)		14,211,000
Gross profit	3,138,000		1,384,000					4,446,000
General and administrative expenses	2,667,000		1,228,000		51,000	(h)		3,946,000
Income before income taxes	471,000		156,000					500,000
Provision for income taxes	26,000		—		12,000	(b)		38,000
Net income	$	445,000	$	156,000				$	462,000
Net income per basic share	$	0.05						$	0.05
Net income per diluted share	$	0.05						$	0.05
Based shares outstanding	8,122,000				286,000	(g)		8,408,000
Diluted share outstanding	9,140,000				286,000	(g)		9,426,000

Notes to the Unaudited Pro Forma Consolidated Financial Statements

The notes to the unaudited pro forma consolidated financial statements that follow are intended to provide additional information regarding the effect of the pro forma adjustments on the consolidated financial statements.

(a)Adjustment to record inventory valuation reserve for Teragenix Corporation (“Teragenix”) utilizing HemaCare Corporation’s (“HemaCare”) inventory valuation methodology during the pro forma period. HemaCare’s methodology utilizes historical sales volume of individual inventory items as an indication of future sales for purposes of determining a potential reserve for obsolete inventory. Methodology would result in a reduction in the value of Teragenix’s inventory of $422,000 as of June 30, 2006, with a corresponding increase in cost of goods sold of $141,000 and $76,000 for the year ended December 31, 2005, and the six month period ended June 30, 2006, respectively.

(b)Reflects increase in provision for income taxes to reflect change in Teragenix’s tax status to HemaCare’s tax status.  Previously Teragenix’s income was reported as taxable income of the owner’s of Teragenix.  As a result, Teragenix did not record a provision for income taxes.  Under HemaCare’s tax status, Teragenix’s income would have been reported on HemaCare’s consolidated tax return and therefore subject to Florida’s income tax estimated at 7.5%.

(c)Reflects debt incurred by HemaCare to fund cash portion of Teragenix acquisition.

(d)Reflects the acquisition of 100% of the outstanding stock of Teragenix by HemaCare for a purchase price of $2,967,000, including $1,622,000 in cash, $543,000 in HemaCare stock to the sellers, $200,000 in notes to sellers, and $602,000 in acquisition costs.  The purchase price was allocated to the fair value of the assets acquired, net of liabilities assumed, resulting in goodwill of $2,834,000.

(e)Payoff of Teragenix debt paid upon acquisition by HemaCare.

(f)Reflects payoff portion of Teragenix debt prior to acquisition by HemaCare.

(g)Reflects HemaCare common stock issued as part of Teragenix acquisition.

(h)   Adjustment to increase interest expense as a result of debt incurred to fund cash portion of Teragenix acquisition.

(i)    Adjustment to reduce interest expense accrual as a result of the reduction of Teragenix’s notes payable as part of the acquisition by HemaCare.