A Diagnostics & Imaging Week

Close on the heels of acknowledgements concerning "material weaknesses" in its internal controls and the related firing of four top company executives, SeraCare Life Sciences (Oceanside, California) reported the filing of Chapter 11 bankruptcy proceedings in the U.S. Bankruptcy Court for the Southern District of California.

The company last week reported the problems in its internal controls and said it had terminated employment agreements with Chairman Barry Plost, President and CEO Michael Crowley Jr., Secretary Jerry Burdick and CFO Craig Hooson.

With that report, it also said that its FY05 guidance was to be withdrawn because of its unreliability, and that its financial statements for the quarters ended Dec. 31, 2004; March 31, 2005; and June 30, 2005, would be restated.

Taking over the responsibilities of company president and CEO is COO Thomas Lawlor, with Robert Cresci assuming chairmanship of its board.

The company had previously received a notice from its senior lenders, accelerating about $20.3 million in principal obligations.

As a result of its bankruptcy filing, its $4 million in subordinated indebtedness is automatically accelerated. The company also has about $2.2 million in promissory notes secured by a mortgage on its West Bridgewater, Connecticut, facility.

With the filing, the company said it had about $24.2 million in cash securities, representing collateral for its outstanding senior and subordinated indebtedness. It said it intends to request authorization from the bankruptcy court for use of this cash collateral during the bankruptcy proceedings.

Commenting on the bankruptcy filing, Cresci said the action came after careful board consideration of alternatives, adding that "the company's committee of independent directors determined that a Chapter 11 filing was a necessary and prudent step and the best way to position the company to continue to have access to the cash resources necessary to maintain regular operations and allow for a successful restructuring."

He added: "SeraCare has a strong foundation in place, with a professional and experienced work force. Chapter 11 protection will provide us with the ability to address our financial challenges without disrupting our ability to continue to serve our customers and ship our products on a timely basis, consistent with our high quality standards."

The company also reported this week that as of Wednesday its securities were delisted from the Nasdaq exchange. Subsequent to an early February hearing, the company received two additional staff determination letters from Nasdaq regarding delisting, on Feb. 13 and March 15, citing reasons for the delisting.

SeraCare manufactures biological products and services to diagnostic, therapeutic, drug discovery, and research organizations. Its offerings include plasma-based therapeutic products, diagnostic products and reagents, cell culture products, specialty plasmas, in vitro stabilizers and the SeraCare BioBank, a proprietary database of medical information and associated blood, plasma, DNA and RNA samples.