=============================================================================
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20549

                                   FORM 10-K

(Mark one)

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

              For the fiscal year ended December 31, 2001

  / /   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)

           California                              95-3280412
(State or other jurisdiction of          (I.R.S. Employer Identification
incorporation or organization)                 Number: 95-3280412)

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


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

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

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

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

As of March 20, 2002, 7,590,205 shares of Common Stock of the registrant were
issued and outstanding.  The aggregate market value of the Common Stock held
by non-affiliates of the registrant on that date (based upon the closing
price of the Common Stock as reported by the OTC Bulletin Board) was
approximately $8,316,193.

                     DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's definitive Proxy Statement for its 2002 Annual
Meeting of Shareholders are incorporated by reference into Part III. Such
proxy statement shall be filed with the Securities and Exchange Commission
pursuant to Regulation 14A not later than 120 days after the registrant's
fiscal year ended December 31, 2001.

=============================================================================
<PAGE>
                               TABLE OF CONTENTS
<TABLE>
<CAPTION>

<S>                                                                 <C>
                                                                     Page
                                                                    Number
                                                                    ------
                                    PART I.

Item 1.	Business
            -  General............................................    1
            -  Recent Developments................................    2
            -  Our Lines of Business..............................    2
            -  Our Business Growth Strategies.....................    3
            -  Blood Products Operations..........................    4
               - Facts about Blood................................    4
               - Blood Collections and Component Utilization in
                 the United States................................    5
               - Apheresis Blood Component Collection.............    6
               - Apheresis Single Donor Platelets.................    6
               - Platelet Collections and Transfusions in the U.S.    7
               - The U.S. Blood Industry - U.S. Blood Centers.....    8
               - Blood Economics..................................    9
               - Universal Leukoreduction.........................   11
               - Recruiting Blood Donors - Volunteer Donor
                 Programs.........................................   11
                 - Whole Blood Collection Programs................   11
                 - Apheresis Platelet Donor Programs..............   12
               - Recruiting Blood Donors - Compensated Apheresis
                 Donor Program....................................   13
                 - History........................................   13
                 - Our Paid Platelet Donor Operations in Southern
                   California.....................................   14
                   - Program Design and Safety Record.............   14
                   - Program Cost Effectiveness...................   15
                   - California Legislative Authorization.........   15
            -  Blood Product Operations...........................   16
               -  Los Angeles, CA.................................   16
               -  Portland, ME....................................   16
            -  Blood Management Programs..........................   17
               - Children's Memorial Hospital of Chicago..........   17
               - Dartmouth-Hitchcock Medical Center...............   18
               - Eastern Maine Medical Center.....................   18
               - Long Beach Memorial Medical Center...............   18
               - Mount Auburn Hospital............................   18
               - Presbyterian Intercommunity Hospital.............   18
               - St. Peter's Hospital.............................   18
               - University of California, Irvine Medical Center..   19
               - University of  North Carolina....................   19
               - University of Southern California................   19
               - Other Smaller BMP Operations and Community
                   Mobile Programs................................   19
            -  Regional Blood Services Operations.................   20
               - General..........................................   20
               - Therapeutic Apheresis - Description..............   20
               - Plasma Exchange and Cell Depletion...............   22
               - Immunoadsorption.................................   21
               - Stem Cell Collection.............................   21
               - Photopheresis....................................   21
            -  Discontinued Operations............................   21
            -  Sales to Major Customers...........................   22

                                         i
<PAGE>
            -  Competition........................................   22
               - General..........................................   22
               - Blood Products...................................   22
               - Blood Services...................................   23
               - Litigation with the Blood Services Unit of the
                 American Red Cross...............................   23
            - Marketing...........................................   23
            - Human Resources.....................................   24
            - Supplies............................................   24
            - Government Regulation and Blood Safety..............   24
             - Blood Products Operations..........................   24
             - Laboratory Operations..............................   25
             - Sherman Oaks Paid Apheresis Platelet Donor Program.   25
             - Other Matters......................................   25
           - Professional and Product Liability Insurance.........   26
           - Risk Factors.........................................   26
Item 2.    Properties.............................................   31
Item 3.    Legal Proceedings......................................   32
           - Litigation with the Blood Services Unit of the
               American Red Cross.................................   32
Item 4.    Submission of Matters to a Vote of Security
             Holder...............................................   32

                                     PART II

Item 5.    Market for Registrant's Common Equity and
            Related Stockholder Matters...........................   32
Item 6.    Selected Financial Data................................   33
Item 7.    Management's Discussion and Analysis of Financial
            Condition and Results of Operations...................   33
Item 8.    Financial Statements and Supplementary Data............   42
Item 9.    Changes and Disagreements with Accountants on Accounting
            and Financial Disclosures.............................   42

                                     PART III

Item 10.   Directors and Executive Officers of the Registrant.....   43
Item 11.   Executive Compensation.................................   43
Item 12.   Security Ownership of Certain Beneficial Owners and
            Management............................................   43
Item 13.   Certain Relationships and Related Transactions.........   43

                                     PART IV

Item 14.   Exhibits, Financial Statement Schedules and Reports on
            Form 10-K.............................................   43
           Index to Consolidated Financial Statements and
             Schedules............................................  F-1

</TABLE>

                                    ii
<PAGE> 1

                                    PART I
ITEM 1. 	BUSINESS.

This 2001 Annual Report on Form 10-K contains statements which
constitute forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended.
Those statements include statements regarding the intent, belief
or current expectations of the Company and its management.
Prospective investors are cautioned that any such forward-looking
statements are not guarantees of future performance and involve
risks and uncertainties, and that actual results may differ
materially from those projected in the forward-looking statements
(See Risk Factors).

GENERAL

HemaCare Corporation collects, processes and distributes blood products
to hospitals in the United States.  Additionally, we provide blood
related services ("therapeutic apheresis" or "TA"), on a mobile basis,
to patients with a variety of disorders.  Therapeutic apheresis is
usually provided in the hospital setting under contractual arrangements
with the hospital as an outside purchased service.

We have provided blood products and therapeutic services in Southern
California since 1979.  In 1998, we expanded our operations to eleven
states in the eastern United States.  We market our products and
services as HemaCare Corporation ("HemaCare") in California and Coral
Blood Services, Inc. ("Coral") in other states.  Coral is a wholly
owned subsidiary of HemaCare.

In the United States, most blood is provided by the private sector
rather than government agencies.  Approximately 94 privately organized
blood centers, generally operating in limited geographic regions
(usually as a regional monopoly), supply hospitals with more than 90%
of their blood requirements.  The American Red Cross is by far the
largest blood center in the United States and provides approximately
50% of the total blood supply.  The remaining blood supply is collected
by hospitals themselves.  Although blood centers are generally
organized as not-for-profit, tax-exempt organizations, all are operated
as businesses and all charge fees for blood products.  These fees, or
blood product sales prices, are set at levels designed to recover the
costs of blood center operations and provide sufficient profit margins
to finance continued operations.

We believe we are the only investor-owned and taxable organization
operating as a blood supplier with significant operations in the U.S.

Our blood products and related services supplement those offered by
regional blood centers.  Our programs specialize in red cells, plasma
and apheresis platelets and generally charge hospitals fees for blood
products that are competitive with or lower than those charged by
regional blood centers.  Additionally, our programs offer hospitals a
level of service and terms of sale that are superior to those offered
by most blood centers.

In recent years, most areas of the U.S. have consistently experienced
blood product shortages. We believe our services offer hospitals an
effective tool to address these shortages and present a significant
opportunity for growth of the Company and expansion of our activities
throughout the United States.

Product safety is of paramount concern when dealing with blood products.
The U.S. Food and Drug Administration ("FDA") is the agency principally
responsible for regulation of the blood product industry in the U.S.
All of our blood product operations are either licensed or registered
with the FDA and are regularly inspected by FDA personnel.
Additionally, our operations are licensed, regulated, and inspected by
various state agencies.  We consider our regulatory record and our
relationships with the FDA and the various state regulatory agencies to
be good.

The American Association of Blood Banks ("AABB") is the blood industry
sponsored organization charged with maintaining and improving science,
safety, quality and education relating to blood.  We are an AABB
institutional member and our operations are accredited by the AABB.

                                   1
<PAGE>  2

The Joint Commission for Accreditation of Healthcare Organizations
("JCAHO") is the private sector accreditation organization for
hospitals and medical centers.  Our hospital based blood product
programs and our therapeutic operations are operated in a manner to
assure accreditation of these activities in hospitals that contract
with us for services.

RECENT DEVELOPMENTS

In 2001, the American Red Cross ("ARC") implemented major increases
in the prices it charges hospitals for red blood cell
products nationwide.  The ARC indicated that such
increases were necessary since it had sold red blood cells
at prices that were below cost for several years.

The increased prices for red blood cells have significantly
increased the level of hospital interest in HemaCare's
blood programs and made conducting such programs, even if
focused primarily on the production of red blood cells,
economic.  Previously, our programs producing significant
amounts of red blood cells for hospitals generated losses
or marginal profitability.

Since the announcement of the price increases, we have made
significant efforts to expand our organizational
capabilities to collect and process large quantities of red
blood cells.  These include increased sales and
marketing efforts to attract new hospital clients; hiring
and training additional blood donor recruiting, collection
and processing staff; purchasing additional equipment,
including bloodmobiles and a computerized blood banking
information system; expanding our quality assurance and
regulatory affairs department; opening new locations and
expanding our administrative structure.

Our expansion efforts have resulted in new clients and
additional blood product revenues.  However, to date, our
costs relating to blood products operations have increased
in amounts greater than our revenues resulting in a decline
in profitability in 2001 and a loss in the fourth quarter of
2001.

Our sales of therapeutic blood services have increased
primarily due to increased demand from existing hospital
customers.  Profits from therapeutic blood services also
increased in line with revenues.  However, the increase in
profits from our blood services business segment was not
sufficient to offset the decline in the profitability of
our blood products segment.

OUR LINES OF BUSINESS

We have two lines of business: 1) Blood Products; and 2) Blood
Services.  Our Blood Products segment provides hospitals with
significant portions of their blood supply needs.  Our Blood Product
segment also includes blood testing services.  The Blood Services
segment includes therapeutic apheresis procedures, stem cell collection
and other therapeutic treatments provided to patients.  Our Blood
Services operations provide hospitals with specially trained nurses and
specialized equipment on a mobile basis to treat patients with a
variety of health disorders. Since the number of patients requiring
these treatments is relatively small, most hospitals find that using a
mobile specialty provider like us for these services is more effective
from both a clinical and cost perspective than maintaining an in-
hospital capability.

As part of our marketing strategy we have entered into Blood Management
Programs ("BMPs") with many of our hospital customers.  In BMP
arrangements, we provide Blood Products and Blood Services under
multiyear contractual agreements.

Our Blood Management Programs benefit hospital clients in several ways:

-   The hospital has a dedicated blood supplier that supplements the
    local regional blood center and generally offers greater
    reliability for product deliveries and service than can be
    obtained from a regional blood center that often must ration
    scarce blood supplies.

-   The hospital realizes an overall reduction in blood procurement
    costs and better inventory management to prevent costly blood
    product outdates.

                              2
<PAGE> 3

-   The hospital's regulatory responsibilities for blood are
    transferred to an organization that is expert in FDA compliance.

-   Our on campus donor room programs perform autologous (blood self-
    donation by a patient usually before surgery) and directed blood
    collections for patients' friends and families in a convenient
    location.

-   Our community blood drives complement the hospital's public and
    community relations programs by increasing the visibility of the
    hospital and the importance of its mission in the local community.

-   If the hospital selects us as a therapeutic services provider (and
    most BMPs we have established to date have), the hospital gains
    access to nurses and physicians with significant expertise in
    addition to cost savings in providing these services.

-   If the hospital and its medical staff are involved in research
    projects relating to blood, our technical staffs assist in these
    efforts.

Previously, we reported our results of operations using three segments:
Blood Management Programs, Regional Blood Products and Regional Blood
Services.  In 2001, we changed our financial reporting to two lines,
which more closely reflects our internal financial reporting and our
organizational structure.  Blood products operations and blood testing
services are reported under our Blood Products segment.  All of
therapeutic services provided to patients are reported under our Blood
Services segment.  Under the previous reporting structure, revenue and
expenses from Blood Services and Regional Blood Products performed under
Blood Management Programs were allocated to our Blood Management Programs
segment. We continue to market our Blood Management Programs; however,
the revenue and expenses of these programs will be reflected as either
Blood Products or Blood Services.

OUR BUSINESS GROWTH STRATEGY

Our national expansion strategy is to establish new Blood Management
Programs providing both Blood Products and Blood Services with major
hospitals in markets where we do not have a local presence.  We believe
we can accomplish this by capitalizing on our existing client base, our
record for cost effectiveness and our record for safety and quality.

After meeting our primary clients' objectives in each of these new
markets, we intend to expand our business by offering Blood
Products and Blood Services to other hospitals in these new geographic
areas.

We also believe we can increase utilization of Blood Services in all
our markets by conducting educational seminars for physicians to inform
them of the benefits of TA relative to other modes of patient
treatment.  Our experience suggests that such educational efforts
result in increases of TA applications in medically appropriate
circumstances.

We believe our Blood Products operations directly address three major
areas of concern to hospitals:

-  The adequacy of blood supplies,
-  the cost of such blood supplies, and
-  regulatory compliance.

All of our blood collection programs directly address the problem of
increasing the blood supply by capitalizing on the connection of the
client hospital (and its patients needing blood transfusions) to the
local community.  Our Blood Product collection programs are generally
capable of providing blood supplies to hospitals at lower costs than
regional blood centers.

Additionally, we believe that our Blood Services operations will grow
significantly as a result of our expanded national presence.  Our
mobile programs provide services at a hospital only when patients in
need of TA services are being treated.  Therefore, they represent a
high quality, cost-effective solution to providing this service to most
hospitals in the U.S.
                                3
<PAGE> 4

However, there is no assurance that our national growth strategy will
be successful.  In particular, we compete with major blood centers
(such as the American Red Cross) that have significantly greater
financial resources and organizational depth than the Company.  Further
such organizations have, in many instances, established a history of
close relationships with their hospital clients through both formal and
informal working arrangements that may preclude our cost-effective
programs from being accepted by hospitals.

BLOOD PRODUCTS OPERATIONS

Facts About Blood
-----------------

Most adults have about 10 units of blood in their bodies (1 unit = 1 pint).
Blood consists of both cellular and liquid components.  The
cellular portion, which constitutes approximately 45% of blood volume,
is composed of red blood cells, white blood cells and platelets.  The
liquid portion, which constitutes the remaining 55% of blood volume, is
composed of plasma and soluble proteins.

The practice of modern medicine depends on the availability of a safe
and adequate blood supply and upon the capability of treating a medical
deficiency in one or more blood components by transfusion.  A summary
of major blood components and their therapeutic applications follows:


<TABLE>
<CAPTION>

Component        Shelf Life                   Function and Medical Applications
---------------  ----------      ----------------------------------------------------
<S>              <C>             <C>

Red Blood Cells  42 days         Carries oxygen to the body's tissues.  Transfused to
                                 replace losses due to surgery or trauma.

Platelets        5 days          Facilitate blood clotting and vascular integrity.
                                 Transfused to replace platelets lost in massive bleeding
                                 or inactivated in aggressive cancer treatments.  Due to
                                 small volume of platelets in the average, healthy persons's
                                 blood stream, between 6 and 10 units of platelets manufactured
                                 from whole blood  collections are pooled to generate a
                                 therapeutic dosage for transfusion.

Plasma           Frozen:         Liquid portion of blood.  Transports red blood cells and other
                 1 to 5          cellular components and contains several factors useful in
                 years           treating diseases. Transfused to replace fluid losses and treat
                 Thawed:         specific disease applications. Most often plasma is sold
                 24 hours        to fractionators that manufacture it into products used to
                                 treat many diseases.

Cryoprecipitate  Frozen:         Treatment of Hemophilia, Factor VIII deficiency, and
                 1 year          von Willebrand's disease, fibrinogen.

White Blood
Cells            N\A             Produced by the body's immune system to fight infection and
                                 disease.  Most often discarded and not transfused.
                                 Transfusion of white blood cells or leukocytes can result in
                                 adverse reactions in patients with impaired immune systems.
</TABLE>

Most blood product collections consist of single units of whole blood.
The actual collection process is simple and completely safe for the
donor.  Typically, a donation takes about 30 to 40 minutes consisting
of a pre-donation screening interview to review the donor's health
status and eligibility to donate, an 8 to 10 minute collection process
and a short rest period after donation.
                                 4
<PAGE>  5

After collection, whole blood units are generally processed in a
laboratory, separated into the various components, tested and then
distributed to hospitals for transfusion.

While significant research efforts have been made to develop artificial
or synthetic substitutes for human blood components, such
efforts offer no near term solution to the transfusion needs of most
patients.

Blood Collections and Component Utilization in the United States
----------------------------------------------------------------

The National Blood Data Resource Center ("NBDRC"), an affiliate of the
AABB, published a study compiling blood collections and transfusions in
the United States in 1999 and comparing such data to a similar study in
1997.  The data included in that study is summarized below:

<TABLE>
<CAPTION>
                       Blood
                      Centers   Hospitals   Total Supply    1997 Totals    Change 97-99
                      -------   ---------   ------------    -----------    ------------
                                    1999
                      ----------------------------------
<S>                   <C>       <C>         <C>             <C>            <C>

Whole Blood
Collections:

  Allogenic           12,221       714      12,935          11,741          10.2%
  Autologous/
   Directed              630       311         941             847          11.1%
    Total Whole
      Blood           12,851     1,025      13,876          12,588          10.2%
  Testing losses        (205)      (21)       (226)           (231)         (2.2%)
     Total Available  12,646     1,004      13,650          12,367          10.4%

Whole Blood and
 Red Blood Cell
 Transfusions:

  Allogenic                                 11,804          11,018           7.1%
  Autologous\
   Directed                                    585             501          16.8%
    Total Whole
     Blood and Red
     Blood Cells                            12,389          11,519           7.6%

Transfusions of
 Other Components
 Derived From
 Whole Blood:

 Platelet Concen-
  trates (pooled
  platelets)                                 3,036           3,396         (10.6%)

  Fresh Frozen
   Plasma                                    3,319           3,320          (0.03%)
    Cryoprecipate                              860             816           5.4%

</TABLE>

In recent years, most areas of the U.S. have experienced periodic blood
product shortages.  These shortages result in blood supplies being
rationed between hospitals and patients and, further, cause hospitals
to postpone or cancel procedures requiring blood transfusions.  Overall
trends in medicine and developments in the blood industry indicate that
blood product shortages will continue and become more common.

First, a portion (approximately 1.4% in 1999) of the U.S. blood supply
is presently imported from Europe.  Recently enacted FDA regulations
concerning Creutzfeldt-Jakob Disease ("CJD" or "Mad Cow" disease)
will prohibit such imports effective in late 2002.  Related FDA actions
and programs by blood centers to restrict blood donation by individuals
who have spent significant time in European and United Kingdom areas
suspected as presenting increased CJD risks reduce the eligible number
of individuals who are eligible to donate.  Estimates of the number of
blood donors affected vary widely.  These estimates range from 3% to 9%
of the total blood donor population and higher rates in the military
population.

Second, new medical treatments and the aging of population are
contributing to increases in transfusion demand.

Third, aside from any new regulatory restrictions, the percentage of
the eligible U.S. population that actually donates blood has
consistently declined since World War II.
                                5
<PAGE>  6

Apheresis Blood Component Collections
-------------------------------------

Modern blood collection technology (the "apheresis process") permits
the separation of various blood components during the actual donation
process. These automated technologies separate blood into its various
components through the use of centrifugal force and filters at the
donation site.  They permit the collection of only the desired
component of a donor's blood and return the other components to the
donor's blood stream.

HemaCare was founded as a company that specializes in the apheresis
process. Historically, our blood product operations specialize in the
collection and distribution of apheresis platelets.  Our focus on
single donor platelets contrasts sharply with other blood centers in
the U.S., which generally produce and distribute both platelets derived
from whole blood (pooled platelets) and single donor platelets.

Apheresis technology has been widely used to collect plasma for more
than 40 years.  Apheresis technology has been used to collect platelets
for more than 20 years.  Apheresis technology to collect two units of
red blood cells from a single donation was licensed by the FDA in 1998.
Apheresis technology can also be used to collect therapeutic doses of
two or more selected blood components from the same donor.

Apheresis blood component collection is considerably more complex than
whole blood collection and involves materially longer donation times.
The differences are summarized as follows:

<TABLE>
<CAPTION>

Component Collected       Procedure Time           Insertion Device(s)
-------------------       --------------        -------------------------
<S>                       <C>                   <C>
Whole blood               8-10 minutes          Single arm, single needle
Red Blood Cells           35-45 minutes         Single arm, single needle
Plasma - Apheresis        35-45 minutes         Single arm, single needle
Platelets - Apheresis     60-150 minutes        Two arms, two needles or
                                                single arm, single needle
</TABLE>

The human body replaces lost or donated blood components at different
rates. In particular, the body replaces red blood cells at much slower
rates than either plasma or platelets.  To protect the health of blood
donors, the AABB and the FDA have established guidelines that govern how
often blood components can be collected from the same individual.
These guidelines are summarized below:

<TABLE>
<CAPTION>

Blood Component              Minimum Donation Interval \ Maximum
                                  Number of Collections
------------------           ------------------------------------
<S>                          <C>
Whole Blood                  8 weeks (56 days)

Red Blood Cells (apheresis
 collection-two units)       16 weeks (112 days)

Plasma (apheresis
 collection)                 48 hours \ twice a week

Platelets (apheresis
 collection)                 48 hours \ twice a week \ 24 times a year

</TABLE>

The automated apheresis collection process is considerably more
expensive than whole blood collection and processing.  Apheresis
equipment is costly and requires a specialized kit (collection
software) for each donation.  Additionally, the longer donation times
involve increased labor costs.  Finally, recruiting donors for the
longer donation periods is considerably more difficult than recruiting
whole blood donors.

Apheresis or Single Donor Platelets
-----------------------------------

A single apheresis platelet donation can yield between one and three
therapeutic transfusion dosages, depending on the platelet content of a
donor's blood.  The use of platelets derived from whole blood to
achieve the same therapeutic effect would require combining or pooling
the platelets obtained from between 6 and 30 individual whole blood
donations of different donors.

Every transfusion involves certain risks to the patient.  These risks
include a slight chance of infectious disease transmission and the
chance that the patient will have an adverse reaction to the transfused
material.  The lower number of donors involved with a transfusion of
apheresis or single donor platelets materially reduces these risks.
                             6
<PAGE>  7

Additionally, patients receiving multiple platelet transfusions from
different donors often become refractory or resistant to the
therapeutic effect of the transfusions.  Utilization of single donor
platelets reduces the instances of patient refractory reactions.

As a result of the health benefits associated with single donor
platelets, they are generally preferred by physicians over transfusions
of pooled platelets derived from whole blood, particularly in the case
of patients receiving multiple transfusions.  However, U.S. hospitals
continue to use significant numbers of pooled platelets to meet
transfusion needs.  We believe that are there two principal reasons for
this:

-   First and most importantly is the extended time involved in the
    actual process of apheresis platelet donation.  Most potential
    donors are discouraged by the prospect of having multiple needles
    in their arms and lying still for donation periods that range as
    long as 2 1/2 hours. Most blood drive sponsors (employers and
    schools) where volunteer donors are recruited are unwilling to
    support extended time off the job or out of class that apheresis
    platelet donation involves.

-   The second reason is economic.  Because pooled platelets are a
    byproduct of whole blood, they can be produced readily and at
    little cost by any blood center with significant whole blood
    collections.  Thus, the revenue generated by blood centers from
    sales of pooled platelets represents a significant source of
    operating profits that can be easily obtained without additional
    recruiting efforts or increased cost of equipment and supplies.
    This source of operating income is lost if single donor platelets
    are utilized.

Many blood centers encourage hospitals to use pooled platelets and
minimize use of single donor platelets through their product pricing
strategies.  These strategies employ premium prices for single donor
platelets (relative to their costs of production) while offering
relative bargain prices for pooled platelets.

In several areas of the U.S., these pricing strategies have resulted in
hospital transfusion practices that heavily utilize pooled platelets
and rarely use single donor platelets on the basis of the hospitals'
cost \ benefit considerations.  However, these hospital-made cost \
benefit decisions are heavily influenced by the pricing practices of
blood centers. (Also see section regarding Universal Leukoreduction for
further comments on utilization of apheresis platelets and pooled
platelets.)

The following table summarizes platelet collections and utilization
data compiled by the NBDRC.  Each single donor platelet unit has been
converted to six effective units in order to compare the utilization of
single donor and pooled platelets.

Platelet Collections and Transfusions in the U.S.
-------------------------------------------------

<TABLE>
<CAPTION>


                                    1999                     1997            Change
                             --------------------    --------------------   ---------
                             Units (000s)     %      Units (000s)     %     1997-1999
                             -------------  -----    -------------  -----   ---------
<S>                          <C>            <C>      <C>            <C>     <C>

Collections:
------------
Single Donor Platelets        1,203                   1,131                    6.4%
Equivalency Factor               6x                      6x
Single Donor (effective
 units)                       7,218          61%      6,786           58%      6.4%
Pooled Platelets              4,693          39%      4,991           42%     (6%)
Total Platelets
 Available                   11,911         100%     11,777          100%      1.1%

Transfusions:
-------------
Single Donor (effective
 units)                       6,017          67%      5,640           62%      6.7%
Pooled Platelets              3,036          33%      3,396           38%    (10.6%)
Total Platelet
 Transfusions                 9,053         100%      9,036          100%      0.17%

</TABLE>

Platelet utilization is significantly affected by aggressive cancer
therapies that inactivate platelets and pose risks of internal
bleeding.  Historically, platelet utilization has increased
significantly faster than the utilization of other blood products for
many years.  While this trend was not continued in the period between
1997 and 1999, the Company believes, as a result of medical trends,
that the long-term rate of growth in platelet transfusions will
increase at faster rate than for other blood products.
                                 7
<PAGE>  8

Our blood product operations specialize in the collection and
distribution of apheresis platelets.  Our focus on single donor
platelets contrasts sharply with other blood centers in the U.S., which
generally produce and distribute both platelets derived from whole
blood (pooled platelets) and single donor platelets.

The U.S. Blood Industry -- U.S. Blood Centers
---------------------------------------------

In the United States, more than 90% of whole blood products and 85% of
single donor platelets are collected by privately organized blood
centers.  The remainder is collected by the hospitals directly.

A summary of collections by the fifteen largest U.S. blood centers, as
published by the AABB, in 2001 follows:

<TABLE>
<CAPTION>

                                                         Percentage of
                                                         Total U.S. Blood
                                   States of            Center Collections
 Organization                      Operation                 in 1998
---------------------         --------------------      -----------------
<S>                           <C>                       <C>
American National Red Cross   National                        49.8%
United Blood Services
(Blood Systems, Inc.)         12 States                        6.0%
New York Blood Center         New York, New Jersey             2.8%
LifeSource Blood Services     Illinois                         1.8%
Gulf coast Regional Blood
  Bank                        Texas                            1.5%
Puget Sound Blood Center      Washington                       1.5%
Florida Blood Services        Florida                          1.5%
Carter Blood Care             Texas                            1.4%
Oklahoma Blood Institute      Oklahoma                         1.2%
Sacramento Blood Center       California                       1.2%
Central Blood Bank            Pennsylvania                     1.1%
Central Indiana Blood Center  Indiana                          1.1%
Blood Center of South-
  eastern Wisconsin           Wisconsin                        1.1%
LifeSouth Community Blood
 Centers                      Florida                          1.0%
Bonfils Blood Center          Colorado                         1.0%
Other Regional Blood Centers
 (79 centers each
 representing 1% or less of
 total collections)                                           26.0%

 </TABLE>

Other than the American Red Cross ("ARC"), which operates nationally,
most U.S. blood centers operate in limited geographic regions of the
U.S. Often a single blood center (either the ARC or another blood
center) is the only practical source of blood products to hospitals in
a particular city or county.

Most blood centers in the U.S. are focused on collections of whole
blood products and distribution of red blood cells, pooled platelets
and plasma products that can be manufactured from whole blood
collections. HemaCare's operations, in contrast, have historically
focused on collections of single donor platelets.  We estimate that our
total blood product collections rank the Company as the 45th largest
blood producer in the U.S.  However, if ranked on the basis of single
donor platelet collections, we would rank 5th.
                                  8
<PAGE>  9

A summary of our blood product collections for the last three years
follows:

<TABLE>
<CAPTION>
                             2001          2000          1999
                          ----------    ----------    ----------
<S>                       <C>           <C>           <C>
California:
-----------
  Single donor platelets  15,900        15,700        10,900
  Whole blood collections 24,500        14,100         3,200
                          -------       -------       -------
                          40,400        29,800        14,100

Eastern United States:
----------------------
  Single donor platelets   7,400         7,300         6,800
  Whole blood collections  3,800         2,100         2,400
                          -------       -------       -------
                          11,200         9,400         9,200
                          -------       -------       -------

Total collections         51,600        39,200        23,300
                          =======       =======       =======
</TABLE>

Blood Economics
---------------

Most U.S. blood centers are organized as not-for-profit, tax-exempt
entities.  However, all blood centers finance their activities by
charging fees to hospitals for the products they utilize.  These fees
are generally set at levels designed to enable the blood center to
recover its overall costs of operation based on its business plans,
capital needs, market position, expected blood product collections, and
blood component demand.

In 2000, the Centers for Medicare & Medicaid Services ("CMS")
implemented a prospective pricing payment system to reimburse hospitals
for outpatient services.  CMS established reimbursement rates for hospital
transfusion procedures and separate rates for blood products transfused
to patients in an outpatient setting.  The blood product reimbursement
rates established by CMS were based on blood prices of major blood
centers, particularly the ARC, as they were reported to CMS during the
year 2000.

The national reimbursement rates are adjusted for variations in wage
and cost of living indices in different parts of the U.S.  A summary of
the selected blood product reimbursement rates in different geographic
as established by CMS for 2002 is presented below:

<TABLE>
<CAPTION>

                    National                                   Portland
Blood Product         Rate     Los Angeles  New York  Chicago    (ME)
-----------------   --------   -----------  --------  -------- ---------
<S>                 <C>        <C>          <C>       <C>      <C>

Red Blood Cells     $ 99       $111         $126      $105     $ 96
Red Blood Cells
 (Leukoreduced)      137        153          173       146      132
Pooled Platelets      47         53           60        50       46
Pooled Platelets
 (Leukoreduced)       57         64           72        61       55
Fresh Frozen
 Plasma               80         89          101        85       77
Apheresis Platelets
 (single donor)      469        525          594       499      453

</TABLE>

It is important to note that the above CMS reimbursement rates are
effective only for transfusions to Medicare patients in outpatient
settings.  The vast majority of transfusions are performed for patients
who are inpatients in hospitals.  CMS reimbursement for blood products
transfused to hospital inpatients are included in the diagnosis related
group ("DRG") payments that are based on a patient's illness and the
average costs of hospitalization for such illnesses.  While the AABB
and others have advocated changes to the hospital inpatient
reimbursement for blood products, DRG payments to hospitals presently
are unaffected by transfusions of blood products.

In the last several years, blood product prices (particularly prices of
red blood cells) have not kept pace with blood center cost increases.
As a result, many U.S. blood centers, including the ARC, have suffered
losses.   However, during 2001, the ARC, which supplies almost 50% of
the U.S. blood supply, announced substantial price (35 to 45%) increases
in the prices it charges for red blood cells (generally these prices
became effective in July 2001).  In connection with the announced price
increases, the Red Cross indicated that it had priced red blood cells
significantly below cost for the last several years.  Most smaller
blood centers have since also raised their prices for red blood cells.
As a result, the CMS prices for red blood cells (which were based on
data collected in 2000) are significantly below the prices now charged
nationally for red blood cells.
                                9
<PAGE>  10

The costs of collecting, processing and testing blood have risen
significantly in recent years.  These cost increases are related to new
and improved testing procedures to assure that blood is free of
infectious disease, increased regulatory requirements related to blood
safety, and increased costs associated with recruiting blood donors.

With the exception of red blood cells, our existing prices for all
blood products are significantly lower in all areas of the U.S. than
the CMS reimbursement rates reflected above.  We operate profitably at
these lower price levels.  We believe that the reimbursement rates
established by CMS (other than for red blood cells) will, over time,
effectively become an industry benchmark for blood product pricing and
reimbursement across the U.S.  Therefore, if CMS pricing standards are
adopted, we believe the outlook for future growth and profitability of
the Company is improved.  However, there is no assurance that CMS
pricing will be widely adopted and no assurance that profits will
improve as a result of CMS's actions.

At present, blood prices in areas of the U.S. where the Company
operates differ widely from the CMS regional rates reflected above.
The higher red blood cell prices reflect blood centers' higher costs of
production. We believe the pricing differences of blood products other
than red cells result from a variety of factors unrelated to the blood
center costs of operation but rather based on the competitive market
position and business objectives of various blood centers, particularly
the ARC.

We have filed suit against the blood services unit of the ARC for
anticompetitive and illegal tactics relating to blood product pricing
and other terms of blood sales.  Generally, our suit alleges that the
ARC prices its products significantly below its costs in selected areas
of the U.S. to eliminate competitors and increase its market share.  In
other areas of the U.S. the ARC charges premium prices and requires
hospitals, in effect, to purchase blood products exclusively from the
ARC as a condition of doing business with the ARC.  Our lawsuit alleges
that these arrangements are designed to assure that the ARC remains the
dominant or only blood provider in these areas.  Our lawsuit is
currently in the discovery stage. "See Item 3.  Legal Proceedings."

We believe that our established operations have a lower overall cost
structure than the ARC and most regional blood centers in the U.S.
despite the fact that as a for-profit, investor owned company we are
subject to taxes and do not have access to tax-exempt debt securities
or charitable contributions to finance our operations.  Thus, our
established operations compete effectively in a blood product
market where prices are set fairly in relation to the costs of
operation.

The nationwide increases in prices of red blood cells in 2001, combined
with chronic product shortages in many parts of the U.S., have
significantly increased the level of hospital interest in our blood
product collection programs.  Additionally, we believe that current
pricing levels for red blood cells now offer opportunities to earn
attractive profit margins on large scale production and collections of
whole blood products.

As a result, we have recently significantly expanded our programs for
collecting whole blood and producing red blood cells.  These efforts
have required significant investments in new personnel for donor
recruiting, product collections and processing at all existing
operations of the Company.  Additionally, in California, we have
dedicated significant resources to the development of a large
department dedicated exclusively to conducting blood collections in
mobile settings.

We believe that these expanded whole blood collection operations offer
significant opportunities for future growth and profitability as the
programs reach greater economies of scale and as overall pricing on
these programs approaches market rates.  However, in 2001, these new
programs generated operating losses as a result of early stage
operations and product pricing arrangements that do not reflect current
market conditions.  While we believe the operating losses are the
result of the early stage operations focused on red blood cells and
whole blood, there is no assurance that these operations will achieve
anticipated economies of scale or that pricing of these programs can be
successfully adjusted to generate profitability.
                                 10
<PAGE>  11

Universal Leukoreduction
------------------------

The blood industry has recently begun a conversion process to
universally leukoreduce all cellular blood products at the time they
are collected or manufactured (pre-storage leukoreduction). The
leukoreduction process removes the white blood cells or leukocytes from
blood and platelets before they are transfused.  Leukocytes in
transfused blood can cause adverse patient reactions and repeated
transfusions can result in diminished transfusion effectiveness.   We
have produced only leukoreduced apheresis platelets for several years.

Historically, only portions of blood component transfusions were
leukoreduced and the process was often performed in the hospital
setting immediately prior to transfusion rather than at the time the
blood product was collected.

The Department of Health and Human Services ("HHS") Advisory Committee
on Blood Safety and Availability ("BSAC") in January 2001 recommended
that universal pre-storage leukoreduction be implemented as soon as
feasible.  BSAC's recommendation was conditioned on an implementation
process that does not diminish blood supplies and also that HHS
establishes adequate funding for the effort. We expect that the
FDA will soon mandate that all blood products distributed be
leukoreduced.

The adoption of a universal leukoreduced policy for all cellular blood
products may significantly raise the costs of blood products
nationally.  Additionally, because the costs of leukoreducing pooled
platelet products are significantly greater than the costs of similarly
leukoreduced, single donor platelet products, the new policy reduces the
relative cost difference between transfusions of pooled platelets and
apheresis platelets.  We anticipate that universal leukoreduction
policies will increase the demand for leukoreduced single donor
platelets and reduce utilization of pooled platelet concentrates.

RECRUITING BLOOD DONORS - VOLUNTEER DONOR PROGRAMS

Whole Blood Donor Collection Programs
-------------------------------------

Historically, we believe that the low participation rate in blood
donation, while partially due to societal factors, is largely due to
economics.  Specifically, artificially low blood prices have caused
blood collection agencies to focus their efforts primarily in settings
where potential donors can be accessed easily, conveniently, and
economically from the standpoint of the blood center.

As a result, a disproportionate amount of the U.S. blood supply is
collected outside of major urban areas (in areas where labor costs are
lower) and in settings where large numbers of donors at a single
location improve economies of scale (high schools, very large
commercial employers with significant formalized community service
programs, and government agencies).  Such collection practices bypass
the largest portion of the U.S. population and the greatest number of
potential donors.

We believe that more than adequate whole blood supplies can be
collected in the U.S. if blood donation is made convenient for the
donor.  We believe that developing trends in blood product pricing will
support expanded whole blood collection efforts in donor convenient
settings that are significantly smaller than those used in recent
years.

We directly approach employers, churches, community organizations and
educational institutions and request their participation in a community
blood drive for a specific hospital and its patients.  Once a sponsor
organization has agreed to hold a blood drive, our staff (and often the
staff of the sponsor) attempt to advertise and generate enthusiasm for
giving blood in the potential donor group by explaining the critical
need for blood and the health benefits to those needing transfusions.
Additionally we offer prizes, t-shirts and other tokens of recognition
for participation.  Finally, we follow up individually (often
telephonically) with donors who donate and request their participation
in additional donations at our donor sites.
                                11
<PAGE>  12

In addition to our recruiting efforts, our collection staff is selected
on the basis of their interpersonal skills (in addition to technical
skills). A key factor to retaining donors is making the actual donation
a friendly and pleasant process. Thus, a donor-friendly collection
staff is essential to the long-term effectiveness of initial recruiting
efforts by securing repeat donations.

We believe that our donor recruiting processes are essentially similar
to techniques employed by other blood centers and differ only in the
size of the potential donor groups targeted and the use of a hospital
name to contact donors rather than the name of a blood collection
organization.  We actively seek to arrange blood drives with
organizations that do not meet the minimum size criteria set by other
blood centers.  While we sacrifice some economies of scale conducting
blood drives in this manner, we believe our overall lower cost
structure enables us to conduct blood drives economically in smaller
settings.

While the Company has developed what we believe are cost effective
strategies to recruit volunteer blood donors, there can be no assurance
that such strategies will in fact result in sufficient blood product
collections to meet client hospital needs or to assure profitability.

Recruiting Blood Donors - Apheresis Platelet Donor Programs
(Uncompensated Donors)
-----------------------------------------------------------

While the apheresis technology to collect single donor platelets was
perfected in the late 1970's and the vast majority of informed
physicians prefer single donor platelets to pooled platelets
manufactured from whole blood, it was not until 1994, more than 18
years after the apheresis technology was available, that single donor
platelets constituted more than 50% of U.S. platelet transfusions.  In
1999, single donor platelets constituted 59% of platelets available and
66% of platelet transfusions.

This medically preferred product is in chronic short supply.

Relative to whole blood donations, apheresis platelet donation is an
arduous process.  Apheresis platelet donation times range from 60 to 150
minutes (vs. an average 8 to 10 minutes for whole blood) and are most
efficiently performed in a blood center with large automated collection
units that are not easily transportable.  Adding pre-donation interview
and screening time and post-donation rest periods, an apheresis
platelet donation can take approximately 3 1/2 hours excluding the time
involved in commuting to the donor center.

Most apheresis platelet donors are recruited by blood centers from the
most dedicated and committed subset of whole blood donors. On average,
such dedicated donors donate platelets between four and six times a
year. We estimate that the U.S. apheresis platelet supply is provided
by between 0.06% and 0.09% of the U.S. population.

Our programs that directly recruit apheresis platelet donors involve
significant donor education efforts, mobile platelet collection drives
(we believe we are one of very few blood centers that collects single
donor platelets outside of the donor center environment), and
telerecruiting programs.  Additionally, our programs involve providing
a friendly, collegial environment for our donors while they donate,
such as movies and other entertainment while donating, and donor
appreciation events and other elements that make the donation process
and participation in our programs a friendly environment that
encourages repeat donations.

Our programs have been successful in recruiting sufficient apheresis
platelet donors to meet our client hospital needs in Maine, New
Hampshire and North Carolina.  However, our apheresis platelet donor
programs focused on uncompensated apheresis donors in both New York
City and Southern California (major urban areas) have been largely
unsuccessful in meeting collection goals or in meeting income
objectives.  Our newest Blood Management Program for Children's
Memorial Hospital in Chicago began operations in June 2001 and has not
met its collection goals as yet.  We believe that this program will
eventually meet its collection goals since most hospitals for children
generate a level of community support much greater than that obtained
by other types of hospitals or blood centers.  However, there can be no
assurance that our efforts to recruit sufficient volunteer apheresis
platelet donors in urban areas such as Chicago will be sufficient to
meet the needs of the client hospital or in meeting income objectives.
                               12
<PAGE>  13

RECRUITING BLOOD DONORS - COMPENSATED APHERESIS DONOR PROGRAM

History
-------

Modern transfusion medicine and large-scale blood collection activities
were developed during World War II ("WWII").  During WWII, and for
many years thereafter, blood donation was widely viewed as a
civic and patriotic responsibility by most U.S. citizens.  As with many
societal trends, blood donation rates have changed considerably over
the years. Since WWII, the percentage of the U.S. population that
donates blood has dropped precipitously.

During the 1950's and 1960's, many U.S. blood centers adopted practices
of paying blood donors for blood donations. Because prices of blood
products were low, many of these blood centers focused their recruiting
efforts on segments of the population that were economically destitute
and would donate blood for minimal compensation.  Very often paid blood
donors in these periods were recruited from populations accurately
described in academic and scientific studies of the time as
"derelicts."

In the U.S., and throughout the world, economically disadvantaged
populations have higher rates of hepatitis and other diseases that can
be transmitted through blood transfusions.  Because no effective
screening tests for transfusion-transmitted diseases were available or
employed at the time, utilization of paid donors from economically
disadvantaged populations resulted in disproportionate levels of
hepatitis infections in transfusion recipients in the 1950's and
1960's.

In the 1970's, the FDA mandated that blood products be
labeled as being obtained from either a paid or volunteer (unpaid)
donor.  A paid donor, as defined by the FDA, is one that receives
direct compensation from the blood collection agency that is or can be
readily converted to cash.  For example, donors who are paid by their
employers for the time they spend donating or awarded other forms of
incentives, such as additional paid time off work, are considered as
unpaid volunteers under the FDA definition, whereas, donors who
receive tickets to sporting events that can be resold are considered
paid.

The FDA labeling requirements resulted in the elimination of virtually
all programs that paid whole blood donors in cash. This in turn
significantly reduced the large scale recruiting of blood donors from
economically disadvantaged populations and significantly reduced the
incidence of transfusion-transmitted hepatitis.

Since the 1970's, the U.S. has relied on an "all volunteer" donor pool
for whole blood collections and most blood centers have adopted the
philosophy that donor altruism is an essential element of blood safety.
However, most blood donors who donate in employer-sponsored blood
drives are paid for the time they donate and employer sponsored
programs that offer additional paid time off work in consideration for
blood donations are a very effective donor recruiting tool used widely
in the U.S. Additionally, many other forms of incentives, not involving
the direct payment of cash, are utilized by the blood industry to
attract blood donors.

When the apheresis technology was introduced for platelet collection in
the 1970's, the National Institute of Health both conducted and
sponsored through grants programs that directly paid apheresis platelet
donors for the extended time involved in apheresis platelet donation.
Unlike the paid donor programs of the 1950's and 1960's, however, these
modern programs targeted healthy populations and required blood donors
to undergo health status prescreening and infectious disease testing
prior to donation.

Scientific studies comparing the relative safety of blood obtained from
volunteers (whose health status and blood is not tested before
donation) with blood from paid donor programs (which require such
testing) have consistently demonstrated that these modern programs are
safer than volunteer collection systems. However, because of extremely
effective laboratory testing techniques, the current volunteer system
is still very safe.

Despite their demonstrated safety records and their effectiveness in
collecting apheresis platelets, most paid platelet donor programs have
been eliminated for philosophic reasons, i.e., the desire to have an
"all volunteer" blood supply. Today there are only three major programs
in the United States that directly pay platelet donors.  These are
operated by the Mayo Clinic, the University of Iowa and HemaCare's
operation in Sherman Oaks, California.
                                13
<PAGE>  14

As can been seen from the national platelet transfusion statistics,
reliance on volunteer donors has never produced sufficient number of
single donor platelets to meet the nation's needs despite physician
preferences for these superior products.

Our Paid Platelet Donor Operations in Southern California
---------------------------------------------------------

Program Design and Safety Record

We introduced single donor platelets to the Southern California market
using paid donors in 1979.  At the time other blood centers operating
in the area (principally the ARC) did not routinely offer this product
and only provided pooled platelets.

Our donor recruiting and retention program involves paying donors
between $50 and $75 for each platelet donation depending on how many
times they have donated (this amounts to approximately $15 per hour).
Additionally, we pay bonuses for cumulative donation milestones as an
incentive to donors who remain active in the program.  Donors receive
$500 upon their 100th donation and smaller bonus amounts for each 25th
donation.  Our payment programs have been successful in attracting and
retaining desirable donors.

Prior to being selected for the program, each donor receives a physical
examination by a physician, has their blood tested for infectious
disease and other characteristics, and is presented an educational
program on the apheresis donation process and the benefits of platelet
donation for patients.  After the initial physical examination there is
a one to two week waiting period, a requirement that all donations be
scheduled (no drop-in donations are allowed) and all donors are paid in
the form of a check.  Additionally, each donor in the program repeats
the physician-conducted physical examination annually.

In addition to our program's unique donor selection and screening
procedures, we interview and prescreen all donors before every donation
and test each donation for infectious disease in accordance with FDA
standards and other standard practices for all blood centers and
volunteer (unpaid) donors.

At various points in our history, the blood screening tests we employ
have exceeded the typical industry practices. However, today virtually
all blood centers use the same laboratory tests we do to assure blood
safety.  The donor deferral practices we follow (which temporarily
defer donations from donors who are taking medications or have the flu
etc., in addition to permanently prohibiting donors with infectious
disease risk factors) are among the strictest in the nation and exceed
those used by most other blood centers or required by the FDA.

Management believes our program has achieved excellent results. In our
entire history (which involves the production of more than 130,000
platelet products), we have never experienced an instance where a
patient has been infected with either Hepatitis or HIV.  Further, we
have experienced no problems in our donor group.  We have never had an
individual donor, once admitted to our program, subsequently contract
and test positive for either Hepatitis or HIV.

Most blood industry professionals believe that the safest blood donors
are repeat donors who have been repeatedly tested for infectious
disease.  Because our program encourages repeat donations, last year we
produced more than 15,000 platelet units using fewer than 750
individual donors.  On average a platelet produced in our program comes
from a donor who has donated (and been tested) more than 35 times. Our
average donor donates more than 10 times each year.

Our program is regularly inspected by the State of California, the FDA
and the AABB and has an exemplary regulatory record.

However, despite our impressive safety record, there can be no
assurance that our program will prevent all cases of infectious disease
transmission from our donors. Such absolute assurance cannot be
achieved in any blood program using technology available today.
                              14
<PAGE>  15

Program Cost Effectiveness
--------------------------

We believe that our program is among the lowest cost platelet
production operations in the U.S. despite the facts that we incur
significant costs in prescreening donors (a practice not followed by
most blood centers), pay the donors, and operate in a relatively high
cost urban environment.   Our cost effectiveness results from several
factors, including the small number of donors in the program (which
results in lower regulatory compliance costs), our unusually effective
practices of scheduling and processing donations, and our ability to
select donors who have high platelet counts in their blood.

We pass on the benefits of cost efficiencies in the form of competitive
single donor platelet prices.  We believe that single donor platelet
prices in Southern California have consistently been among the lowest
in the nation despite the fact that the area is a high cost urban
environment.

California Legislative Authorization
------------------------------------

In 1974, California enacted legislation effectively banning the trans-
fusion of blood products obtained from paid donors by requiring
physicians to determine in each transfusion case that no blood
products from unpaid volunteer donors were available.  This
legislation was enacted because there were no effective laboratory
tests for detecting hepatitis or other infectious diseases at the time.
This legislation also predates the commercialization of the
technology to collect apheresis platelets.

Since 1986, our paid donor program has operated under a special
provision of California Law that exempts apheresis platelets from the
1974 law. The exemption contains a sunset provision and must be
continued by the California legislature periodically to remain
effective.  California has extended this exemption in 1986, 1989, 1992,
1994 and 2000. The current exemption is scheduled to expire January 1,
2003.

Our hospital customers and the California Medical Association support
changing the law to make the exemption under which we operate
permanent. However, the American Red Cross and other competitor blood
centers vigorously oppose the existing exemption and any further
extensions.

The American Red Cross and other blood centers maintain that our paid
donor program poses a threat to public health (despite the program's
quality record) and has the potential of undermining efforts to collect
blood from volunteer donors (despite the small group of donors
involved).  Aside from these reasons (which in our opinion are
unfounded), the ARC maintains that California should adopt an "all
volunteer" donor philosophy.  Further, American Red Cross
representatives have advised the legislature that, unlike all other
blood products, there are excess supplies of single donor platelets in
California available from volunteer donors.

By all objective measures our paid donor program has been a public
health success.  In Southern California, unlike many other areas of the
nation, transfusing single donor platelets is regarded as the standard
of care by most hospitals and pooled platelets are not routinely
marketed to hospitals in the area.   Additionally, the prices of single
donor platelets have been consistently lower than in other areas of the
U.S.

We estimate that, generally, the supply of single donor platelets has
been adequate to meet more than 95% of Southern California hospital
platelet transfusion needs (in contrast to 66% nationwide). We estimate
that single donor platelet supply needs in Southern California are met
by our production (approximately 30%), production by the ARC in
Southern California (approximately 42%) and by significant numbers of
platelets imported by the ARC from other parts of the U.S.
(approximately 28%).

We believe that there is no objective public policy reason to legally
ban our California paid donor operation.  Further we believe (and all
objective evidence suggests) that a significant shortage of platelets
will develop if our program is eliminated.  We intend to continue our
efforts to change California law to either further extend or make
permanent the legal authorization to operate our program.  However,
there can be no assurance that we will be successful.
                                15
<PAGE>  16

In 2001, our paid donor program produced revenues of $5.96 million or
24% of our total operating revenues and $1.2 million of gross
profits.  The Company's overall financial position will be materially
and adversely affected if we are required to close the Southern
California platelet program.

In the event that California law is not amended or a new exemption
obtained, we are studying several potential courses of action.  These
include:

-   Commencing the manufacture and sale of pooled platelets derived
    from whole blood donations. We presently do not produce pooled
    platelets from whole blood collections in California; however, we
    believe that a significant market for these less preferred
    products will develop, similar to other areas of the U.S., if our
    paid apheresis platelet collection program is eliminated.

-   Significantly raising our prices, downsizing the paid donor
    program, and acting as a backup emergency supplier of single donor
    platelets whenever there are shortages in the volunteer supply
    (which we anticipate will be often).

-   Exporting our single donor platelet products to areas outside of
    California.

-   Absent significant economic improvement in our volunteer donor
    blood programs in Southern California, exiting the blood products
    business in California and focusing on our continued therapeutic
    apheresis operations in the state and our non-California blood
    products operations and BMPs.

With the exception of exiting the California blood products market
entirely and concentrating on other areas of the U.S., which we believe
we can do successfully (although the Company would be much smaller than
today), the financial feasibility of the other options discussed above
requires further study.

BLOOD PRODUCTS OPERATIONS

Blood Center Operations
-----------------------

Los Angeles, California

We have operated as a regional blood center supplying single donor
platelets to more than 100 hospitals in the Greater Los Angeles area
since 1979. Our donor center is located in Sherman Oaks, a suburb
located north of central Los Angeles. This location also has
laboratory, manufacturing and distribution facilities that support our
BMP programs located in Southern California.

While the Sherman Oaks facility specializes in collecting single donor
platelets it is licensed for a full variety of blood products and
serves as the principal processing location for most whole blood
products collected in mobile drives for our California BMP customers.

The Sherman Oaks facility also provides components derived from whole
blood, such as red blood cells, fresh frozen plasma and
cryoprecipitate, to hospitals other than our BMP customers.  Some of
these products are purchased by the Company.  All purchased product is
obtained from blood centers located in the United States.  All such
suppliers are FDA licensed and accredited by the AABB.

Portland, Maine

We operate a regional blood center, the "Maine Blood Center," located
in Scarborough, a suburb of Portland.  This regional program has evolved
from a BMP program for Maine Medical Center ("MMC"), a 660-bed hospital
that is the largest teaching and tertiary hospital in the state.

While our operations were originally operated under MMC's licensure as
an outsourcing program, the program has operated under our FDA
registration since 1999 and received FDA licensure in 2001.
                            16
<PAGE>  17

Prior to 2001, the Portland operation specialized in collecting single
donor platelets, although it was capable of providing a full array of
blood products to hospitals.  Our sales have been primarily limited to
MMC as most ARC contracts in Maine require the hospital to purchase
blood only from the ARC unless it is unable to deliver product.  The
Maine Blood Center facility, similar to the Los Angeles facility,
supports our mobile blood collection programs for all BMP clients in
the area.

0UR BLOOD MANAGEMENT PROGRAMS

A Blood Management Program ("BMP") is an arrangement in which a
hospital outsources some or all of its blood procurement and donor
center management functions to the Company, while retaining the
convenience and efficiencies of an in-house program. A BMP aligns the
interests of the Company and its hospital customer, and provides the
customer with a "partner" in achieving its financial, regulatory
compliance and patient service goals related to blood.

In a BMP arrangement, we generally establish and operate a blood
donation center under the name of the sponsoring BMP hospital either on
or nearby the hospital's campus. Typically, we provide all the center
staff and assume responsibility for regulatory compliance. We supply
the BMP customer with blood products from collections at the hospital's
donation center, from mobile blood drives collections at other Company
donation sites or, to a limited degree, from products purchased by us
from other blood centers.

In 2001, we expanded the BMP concept to include arrangements where
we operate community mobile blood drives on behalf of hospitals.  These
arrangements operate similarly to other BMP programs, but do not involve
the Company operating a donor room on the hospital's campus.

Aside from economic benefits, each BMP client enjoys a blood collection
operation where regulatory compliance matters are managed by an
organization with expertise in such matters.  All our BMP programs are
subject to inspection by the FDA, and we seek AABB accreditation for
each such program. The overall regulatory compliance records of the BMP
programs described below are very good.

The following briefly describes each of our major BMP programs.

Children's Memorial Hospital of Chicago
---------------------------------------

Children's Memorial Hospital of Chicago ("CMH") is a tertiary and
teaching facility affiliated with Northwestern University and dedicated
to the treatment of infants and pediatric patients.

In March 2001, we entered a BMP with CMH to operate a blood collection
center on the hospital's campus in central Chicago and to provide TA
and stem cell services to patients at the hospital.  This program
became operational in June 2001.

Dartmouth-Hitchcock Medical Center
----------------------------------

Dartmouth-Hitchcock Medical Center ("DHMC") is a 430-bed hospital located
in Lebanon, New Hampshire. DHMC is affiliated with Dartmouth College
and is the teaching hospital for Dartmouth College Medical School. DHMC
is a major research center and serves as the tertiary care center for
New Hampshire and adjacent areas of Vermont.

Under the DHMC BMP arrangement, we perform apheresis platelet and
plasma collections, autologous and directed donation collection
services, therapeutic apheresis and stem cell collection services and
blood related research support.  During 2001, we added red blood cell
collections through the recently approved double red cell apheresis
process for DHMC and whole blood collections.
                               17
<PAGE>  18

One of the significant benefits of all our BMPs is the ability of the
hospital to implement blood safety standards that the hospital medical
staff believes are appropriate, but which are more restrictive than the
minimum standards mandated by the FDA or generally followed by regional
blood centers. DHMC has made several such elections that consist of
stricter donor deferral criteria than required by the FDA and AABB
donor deferral criteria.

DHMC has also elected to utilize only donor-retested plasma for
transfusion.  Because plasma has a long shelf life, it can be stored for
periods of time sufficient for a donor to make a repeat donation.
Donor-retested plasma is quarantined after collection until the donor
again successfully donates plasma after a period of 112 days.

While modern testing methods for both HIV and HCV are excellent, there
remains a slight risk that the blood of donors recently exposed to and
infected with the HIV and HCV viruses within the "window period" (a
short period of time immediately prior to donation and testing) will
not be detected.  The infectious disease testing of the donor's blood
performed at the times of both donations thus minimizing the
possibility that the plasma transfused after the quarantine period is
infected with HIV and HCV viruses.  The BMP arrangement with DHMC began
in 1995.

Eastern Maine Medical Center
----------------------------

Eastern Maine Medical Center ("EMMC") is a 411-bed medical and trauma
center serving communities throughout central, eastern and northern
Maine.  The Company recently contracted with EMMC to provide whole
blood and apheresis products.  The EMMC Blood Donor Program will open
April 1, 2002 in Bangor, Maine.

Long Beach Memorial Medical Center
----------------------------------

Long Beach Memorial Medical Center ("LBMMC") is a 726-bed major
tertiary teaching hospital facility located in Southern Los Angeles
County.  LBMMC is the largest hospital in a five-hospital system
operating in Los Angeles and Orange Counties.

Under our BMP agreement, we have assumed responsibility for managing
LBMMC's pre-existing programs for blood collection and for expanding
those programs to include mobile blood drives in the greater Long Beach
community. Additionally, we are responsible for providing therapeutic
apheresis services to patients requiring this medical treatment.

Mount Auburn Hospital
---------------------

Mount Auburn Hospital is affiliated with CareGroup Healthcare System
hospital located in Cambridge, Massachusetts.  Mount Auburn is an
acute-care, community teaching hospital.

The Company has been operating a blood collection program for the
hospital since October 2000.

Presbyterian Intercommunity Hospital
------------------------------------

Presbyterian Intercommunity Hospital ("PIH") is a 339-bed community
medical center located in Whittier, California.

Since May 2000, we have been responsible for the management of PIH's
pre-existing blood collection programs, and for expanding those
programs to include mobile blood drives in the greater Whittier and
Los Angeles areas. In addition, we provide the hospital with platelets
from our Sherman Oaks facility and provide therapeutic apheresis
services to patients.

St. Peter's Hospital
--------------------

St. Peter's Hospital is a 442-bed acute care facility located in
Albany, New York, servicing the New York capital area.  The hospital is
part of St. Peter's Health Care Services in Albany and is affiliated
with the Catholic Health East hospital system.

The Company will create and manage a blood donor center for St. Peter's
Hospital which is scheduled to open in Spring 2002.
                             18
<PAGE>  19

University of California, Irvine Medical Center
-----------------------------------------------

The University of California, Irvine Medical Center ("UCI") is a 462-
bed tertiary facility that serves as the teaching hospital for the
University of California, Irvine Medical School.

Under this BMP program, we operate a donor center on the UCI hospital
campus and conduct blood drives for the hospital in the surrounding
communities.  The donor center provides directed and autologous donation
services to hospital patients, friends and family and supports various
research efforts relating to blood.  Additionally, we provide single
donor platelets to the hospital that are collected at our Sherman Oaks
facility and serve as the hospital's primary TA provider.

University of North Carolina
----------------------------

UNC Hospitals in Chapel Hill, North Carolina ("UNC") is a 660-bed
teaching and tertiary hospital complex operated by the University of
North Carolina in Chapel Hill.  UNC is also an active blood-banking
research institution.

We have operated the UNC BMP since 1997.  Under the original program,
we are the primary provider of single donor platelets for UNC and we
operate a donor room on the hospital campus and conduct mobile
collection drives in the community.  We have expanded our program for
UNC to include plasma collections and, in 2001, a portion of the
therapeutic apheresis services performed at the medical center.

University of Southern California
---------------------------------

The University of Southern California ("USC") operates two hospitals on
the campus of USC, Norris Comprehensive Cancer Center and Hospital and
USC University Hospital. Together these hospitals comprise a 340-bed
tertiary care and research center.  Tenet HealthCare manages these
hospitals.

Under our BMP, we developed, financed, and now operate, a blood
donation center located on the USC hospitals' campus.  This center
provides research support to hospital physicians and performs autologous
and directed donation services.  Further, we provide a full array of
blood products to USC including platelets collected at our Sherman Oaks
center and other blood products collected on mobile drives or purchased
by us from other blood centers.  Additionally, the Company serves as
the hospitals' primary provider of therapeutic apheresis services and
stem cell collections.  We have operated the BMP at USC since 1995.

Other Smaller BMP Operations and Community Mobile Programs
----------------------------------------------------------

We provide a limited scope of blood management program services to
hospitals in Paterson, New Jersey and Los Angeles.  These programs do
not involve our establishing a full-time presence on the hospital
campus.  Rather, we perform blood product collection services either on
the hospital's campus or we simply conduct mobile drives in the
community on behalf of the hospital and provide all products we collect
to the sponsoring hospital.

The Community Mobile Programs in Los Angeles are focused on collections
of whole blood and are generally supplemented by supplying single donor
platelets from our Sherman Oaks facility.  Hospital demand for these
programs increased dramatically during 2001 in response to the ARC's
announced price increase.  In response to this increase in demand, we
significantly expanded our donor recruitment, collection and processing
capabilities.  We incurred substantial expenses to expand our capacity
and, consequently, these operations were only marginally profitable
during 2001.  Because of our capability to increase mobile red cell
collections, along with escalating prices and blood shortages, we should
be positioned for increased profitability of this program in future
periods.    However, there can be no assurance that these expanded
programs will be successful and profitable in the future.
                          19
<PAGE>  20

BLOOD SERVICES OPERATIONS

General
-------

Since its inception, we have performed almost 57,000 therapeutic
apheresis procedures in the treatment of more than 27 diseases thereby
providing us with a substantial and perhaps unparalleled level of
experience.

We provide therapeutic apheresis services to all of our BMP hospital
customers and we offer such services on a regional basis in a total of
11 states on the east and west coasts of the U.S.  Our major operations
are located in Los Angeles, New York and Connecticut.

Unlike some other therapeutic apheresis providers, we do not require
that patients receiving our therapeutic apheresis services also be
treated by a physician affiliated with the Company. Rather patients
referred to us for TA services remain under the care of the referring
physician or another trained physician at the client hospital.  Our
medical directors serve as a backup resource to the treating physician
if assistance is desired. Additionally, our medical directors conduct
physician training and educational seminars on medical applications of
therapeutic apheresis.

Therapeutic Apheresis - Description
-----------------------------------

TA is a technique for removing harmful components from a patient's
blood and is used in the treatment of autoimmune diseases and other
disorders. Therapeutic services are provided upon the request of a
hospital, which has received an order from a patient's physician.
Therapeutic treatments are administered using mobile units operated at
the patient's bedside or in a hospital outpatient setting. The mobile
therapeutics equipment includes a state-of-the-art blood cell separator
and the disposables and supplies needed to perform the procedure.

Treatments are administered by trained, nurse-specialists acting in
accordance with documented operating procedures and quality assurance
protocols based on guidelines developed by the AABB and the Joint
Commission on Accreditation of Healthcare Organizations ("JCAHO"),
under the supervision of a specially trained physician.

The Company provides therapeutic services using all currently
recognized treatment methods: 1) plasma exchange and cell depletion, 2)
in-line immunoadsorbant columns, 3) stem cell collection, and 4)
photopheresis.

Plasma Exchange and Cell Depletion
----------------------------------

The primary blood services provided by the Company, accounting for 90%
of therapeutics procedures in 2001, were plasma exchange and cell
depletion therapy.  These procedures involve removing harmful
substances from a patient's blood, using automated blood separation
equipment.  As the patient's blood flows through the cell separator,
abnormal or excess proteins or components associated with the disease
being treated are selectively removed.  The remaining blood components
are returned to the patient.

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

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

When required, in situations where the hospital requests it, we also
provide albumin to the hospitals utilizing our therapeutic apheresis
services.

                               20
<PAGE>  21

Immunoadsorption
----------------

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

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

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

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

Since the FDA approval of TA treatments for RA in 1999, actual
utilization of the procedure for RA treatments has not met
expectations.  We attribute this to the introduction of certain new
drugs that also address severe cases of RA and to unclear policies of
insurance carriers, including the Medicare program, as to the amount of
reimbursement that will be paid to the hospital and physicians for
performing the treatment.

Stem Cell Collection
--------------------

Since 1990, we have been providing peripheral blood stem cell
collection services.  In this application, stem cells (those cells
which mature into all the different cellular components of blood) are
collected from a cancer patient using apheresis technology.  The
patient then receives a series of intensive chemotherapy treatments
followed by reinfusion of the patient's own stem cells.

Photopheresis
-------------

Photopheresis is a therapeutic technique in which patient's lymphocytes
(white blood cells) are collected by a blood separation device.  The
lymphocytes are then exposed to ultraviolet A light, in combination
with the drug 8-mexthoxypsoralen.  This drug is a photosensitizing
agent, which becomes active when it is exposed to ultraviolet light.
After this exposure, the lymphocytes are returned to the patient.  The
treated cells stimulate the immune system to attack the cells which are
causing the disease.

Photopheresis is FDA approved for the treatment of Cutaneous T-Cell
Lymphoma ("CTCL").  Research studies are in progress for the approval of
photopheresis in the treatment of heart transplant rejection,
scleroderma and graft vs. host disease.

DISCONTINUED OPERATIONS

From 1990 through 1995, the Company, through its wholly owned
subsidiary HemaBiologics, Inc., conducted research and development
activities relating to Immupath, an anti-HIV hyperimmune plasma
product. In November 1995, the Company decided to terminate these
research and development activities.
                                21
<PAGE>  22

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

During the wind down of the research and development operations, the
Company manufactured a supply of Immupath sufficient for the patients
still receiving treatment for a limited period of time. There are
currently two patients receiving Immupath treatments. In 1997, the
Company reviewed and revised its estimate of the remaining costs of
discontinued operations, including the costs to treat remaining
patients and the other continuing liabilities of the discontinued
operations, and recognized an additional gain on disposal of $173,000.
The Company does not expect discontinued operations to have a material
impact on its future operating performance and has a reserve of $75,000
as of December 31, 2001.

SALES TO MAJOR CUSTOMERS

During 2001 and 2000, no customer accounted for more than 10% of our
total sales.  Sales of products and services to USC/Norris
Comprehensive Cancer Center and Hospital and USC University Hospital
(the "USC Hospitals") comprised 12% of the Company's revenues in 1999.
Although the USC Hospitals are not under common ownership, the
Company's agreements with these hospitals are interrelated.

COMPETITION

General
-------

We compete on the basis of responsiveness to customer needs, value-
based pricing and the high quality of our services and products.  Our
competitors are generally not-for-profit entities, including the ARC
and regional and community blood banks. Many of these organizations
have greater financial, technical and personnel resources than we do.
Since such competitors are tax exempt, they do not incur costs for many
taxes that are levied on our operations and they have access to low
cost tax-exempt debt to finance their operations.

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

The primary competitor for our single donor platelet and whole blood
component business is the ARC. To a lesser extent we also compete with
other community based blood centers and hospital-based blood banks.

We have developed several blood product and service programs to respond
to our customers' needs.  These include a depot system where we assume
the risk of platelet products outdating and our BMP outsourcing
programs.  We believe our strategy of offering blood product and
service programs tailored to the requirements of individual customers
favorably differentiates us from other suppliers of blood products and
services and that outsourcing programs provide opportunities for
expansion of the Company's businesses.

We consistently reevaluate and revise our product and BMP outsourcing
programs to meet customer needs and respond to marketplace factors.  At
present we are unaware of any competitors in this field.  However,
there is no assurance that others blood centers or new market
participants will not successfully introduce similar programs that will
compete with those of the Company.

Blood Services
--------------

Competitors for our therapeutic blood services business are primarily
regional and community blood banks (principally, the New York Blood
Center and, in New England, the ARC).  Additionally, many larger
hospitals maintain their own in-house apheresis service units.  Also
dialysis companies and local kidney specialists (nephrologists)
occasionally supplement acute dialysis services with therapeutic
apheresis services. In addition, some of the diseases that are treated
by therapeutic apheresis can also be treated by other medical
therapies.  Since therapeutic apheresis treatment requests are often
sporadic and unpredictable, most community hospitals cannot afford to
equip, staff and maintain an apheresis unit.  Our mobile service
enables such hospitals to offer state-of-the-art therapeutic apheresis
services to their patients on an "as needed" basis without incurring
the fixed costs associated with providing these services from in-house
resources.  For larger hospitals with in-house programs our mobile
programs serve as a back-up or supplemental provider of therapeutic
apheresis services.
                             22
<PAGE>  23

We have lost several therapeutic services customers in the New England
area to the ARC. The ARC began offering therapeutic services in New
England in 1997 or 1998 and generally charges higher prices to
hospitals than our pricing arrangements.  However, we understand that
hospitals utilizing the ARC therapeutic services in New England receive
discounts on other products and services they purchase from the ARC
that economically compel those hospitals to utilize the ARC for these
services.

Litigation with the Blood Services Unit of the American Red Cross
-----------------------------------------------------------------

We have filed an antitrust suit against the blood services unit of the
ARC for business practices that we believe capitalize on
its position as the dominant blood supplier in the U.S. and illegally
attempt to prevent or eliminate competition in the blood industry.
These practices have significantly restricted our ability to attract
and retain customers in areas outside of California and, in California,
have severely limited profit margins on existing customers and made
many expansion activities uneconomic (See Item 3. Legal Proceedings).

MARKETING

Our marketing programs include a combination of medical education,
technical and tradeshow presentations, advertising and promotional
programs, in-person sales and other marketing programs directed to
selected physicians, hospitals and donor groups.

We market our products and services as components of custom-tailored
programs developed to meet the needs of specific customers. The BMP is
the most recent application of this marketing strategy. The Company
uses a depot system for distributing its blood products to BMP and
other large volume customers, which enhances convenience and product
availability. The depot system provides the customer with an on-site
inventory of blood products stocked by the Company under a standing
order.

HUMAN RESOURCES

At March 18, 2001, the Company had approximately 283 employees
including 94 part-time employees.  Most of the Company's professional
and management personnel possess prior experience in hospitals, medical
service companies or blood banks.

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

SUPPLIES

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

The Company relies on blood donors to provide the platelets and whole
blood required to produce the blood products manufactured and sold by
the Company.  The Company, unlike the ARC and most community blood
banks, compensates platelet donors who donate at its Sherman Oaks,
California facility thereby enhancing its ability to retain a pool of
qualified repeat platelet donors. Sales of apheresis platelets from
paid donors may be prohibited by California law after December 2002
(See "Government Regulation" and "Risk Factors"). Platelet and whole
blood donors at the Company's BMP donor centers are not given cash
compensation.
                                23
<PAGE>  24

The Company competes somewhat with the ARC and other blood banks in
recruiting its volunteer donors. However, it should be noted that less
than 5% of the U.S. population donates blood.  Thus, donor recruiting
efforts of various blood collectors rarely overlap.  The growth of the
Company's manufactured blood products business is dependent on the
Company's ability to attract, screen and retain qualified compensated
and non-compensated donors.

Albumin is the most commonly used replacement fluid in therapeutic
apheresis procedures. In late 1996, a shortage of albumin arose when a
major U.S. manufacturer was required by regulatory agencies to
temporarily cease operations. As a result of the shortage, the price of
albumin to HemaCare more than doubled.  During 1999 and 2000, the
supply of albumin increased and prices declined.

GOVERNMENT REGULATION AND BLOOD SAFETY

Blood Products Operations

Safety is of paramount concern when dealing with blood products.  We
have developed extensive procedures and internal quality control
programs to assure that blood products collected and distributed are
safe and of the highest quality.

All hospitals and blood centers that collect blood and distribute blood
for transfusion are subject to extensive regulation by the FDA and
various state licensing authorities.  The FDA regulations are
comprehensive and complex and extend to virtually all aspects of the
industry operations including recruiting and screening blood donors;
processing, testing, labeling, storage and shipping blood products;
recordkeeping; and communications with hospitals customers and donors.
In addition, FDA regulations also extend to the manufacturers of all
critical supplies and equipment used in blood center operations.

An FDA license allows the license holder to sell licensed products
across state lines. Such licensure is extended to a qualifying
organization; each blood product produced by that organization and
every variation of such product requires separate licensure.

In contrast, an FDA registration permits collection and sales of blood
products only within a state. Most hospitals operate their own blood
collection programs under FDA registration.

We hold FDA licenses for our operations in Sherman Oaks, California and
Portland, Maine. In addition, our USC BMP program is operated under our
establishment licensure.  Most of the products we produce are licensed
for interstate distribution, and it is our practice to apply and obtain
such licensure for all products we produce.  While we typically do not
distribute products produced in California outside of the state, we view
such licensure as a part of our overall commitment to quality.

Our present blood management programs (other than USC) are operated
under the various hospitals' FDA registrations.

Irrespective of licensed or registered status, the FDA conducts regular
inspections of all facilities collecting blood. Most of our operations
have been inspected by the FDA within the last 12 months.  These
inspections are not scheduled in advance and can range from a few days
to two weeks depending on the FDA's election as to the scope of the review.

In addition to FDA regulations, various states have regulatory agencies
that govern blood product operations.  In California, our operations
are inspected for compliance at least annually by state
representatives.

Aside from government organizations, the AABB is the private-sector,
industry-sponsored organization charged with maintaining and improving
science, safety, quality and education relating to blood.  The AABB
publishes extensively on matters pertaining to blood and works closely
with the FDA and other government agencies with respect to developing
regulations governing blood banking.  The AABB also maintains a
voluntary accreditation program for organizations desiring such
accreditation.  Accreditation requires organizations to maintain
internal quality plans and procedures to assure blood safety and
requires such organizations to undergo periodic inspections for
compliance.  We are an AABB institutional member and our operations are
accredited by the AABB.
                               24
<PAGE>  25

We consider our regulatory compliance record with the FDA, the various
states and the AABB to be very good.

Laboratory Operations
---------------------

The Company's laboratory is licensed and accredited to perform various
tests required by the FDA and State of California to ensure the purity,
potency and quality of the blood products that it sells in California.
Prior to June 1999, this lab performed infectious disease testing for
our California based blood collections.  In June 1999, we implemented a
new type of infectious disease test, nucleic acid testing or NAT, which
required that we outsource the testing function.

NAT testing is a newly developed testing protocol that materially
reduces the "window" periods for HIV and Hepatitis C ("HCV").  The
"window" period is the period of time, immediately after a person has
been infected with either HIV or HCV, when current testing technology
cannot detect the infection due to the body producing only limited
amounts of antibodies against the virus.

NAT testing has been widely used by most blood centers since 1999 even
though it was only under FDA evaluation.  Recently, the FDA approved
NAT testing and we expect that the FDA will mandate NAT testing very
soon.  Presently, there are only a few laboratories that perform NAT
testing; however, that number is expected to increase now that FDA
approval has been obtained.

All blood donations tested by outside laboratories are performed on a
contract basis.  These laboratories are FDA licensed and the Company
regularly audits their operations to assure compliance with stated
standards.

Sherman Oaks Paid Apheresis Platelet Donor Program
--------------------------------------------------

Since 1974, California law has prohibited the infusion of blood
products into patients if the donors of those products were paid
unless, in the opinion of the recipient's physician, blood from a non-
paid donor was not immediately available. Apheresis platelet products
obtained from paid donors, including the Company's Sherman Oaks
center's paid donors, have been exempted from this law by a series of
state statutes the latest of which was passed in 2000. Unless a new
exemption is obtained, the existing exemption will expire on December
31, 2002, which could have a material adverse effect on the
Company's revenue and net income. See discussion under "Donor
Recruitment - Our Paid Platelet Donor Operations in Southern
California."

Other Matters
-------------

State and Federal laws set forth anti-kickback and self-referral
prohibitions and otherwise regulate financial relationships between
blood banks and hospitals, physicians and other persons who refer
business to them.  While the Company believes its present operations
comply with applicable regulations, there can be no assurance that
future legislation or rule making, or the interpretation of existing
laws and regulations, will not prohibit or adversely impact the
delivery by HemaCare of its services and products.

Joshua Levy, M.D., the national medical director of the Company and a
shareholder, through his private practice in Sherman Oaks, California,
treats patients who require therapeutic services. Sales by the Company
to hospital customers for therapeutic services provided to Dr. Levy's
patients amounted to approximately 2%, 2%, and 3% of the Company's
total revenues for 2001, 2000 and 1999, respectively.  There are no
agreements between Dr. Levy, or the Company or the Company's hospital
customers that require the hospitals to select HemaCare to provide
therapeutic services to the hospital's patients.
                                25
<PAGE>  26

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

PROFESSIONAL AND PRODUCT LIABILITY INSURANCE

The nature of the Company's business is such that it may be subject to
substantial liabilities for personal injury.  We maintain medical
professional liability insurance in the amount of $2,000,000 for a
single occurrence and $5,000,000 in the aggregate per year in
California, and $1,000,000 for a single occurrence and $3,000,000 in
the aggregate per year outside of California.  There can be no
assurance that potential insurance claims will not exceed present
coverage or that additional insurance coverage would be available at
affordable premium costs.  If such insurance were ineffective or
inadequate for any reason, the Company could be exposed to significant
liabilities.

RISK FACTORS AFFECTING THE COMPANY

We Operate in a Heavily Regulated Industry
------------------------------------------

Our business  consists  of  the  collection, processing and
distribution of blood and blood products, all activities that
are subject to extensive and complex regulation by the state and
federal governments.  With regard to the safety of  our products,
facilities and procedures and the purity and  quality of our
blood products, we are required to obtain and maintain numerous
licenses in different locations and are subject to frequent
regulatory inspections.  In  addition, state and federal laws
include anti-kickback and self-referral prohibitions and other
regulations that affect the relationships between blood banks
and hospitals, physicians and other persons who refer business to
them.  Health insurers and government payers such as Medicare and
Medicaid also cap reimbursement for our  products and services
and have regulations that must be complied with before reimbursement
will be made.

The Company devotes substantial resources to complying with laws
and regulations and believes it is currently in compliance.
However, the possibility cannot be eliminated that interpretations
of existing laws and regulations will result in a finding that
we have not complied with a significant existing regulations, which
could materially harm our business. Moreover, healthcare reform is
continually under consideration by regulators, and we do not know how
laws and regulations will change  in  the  future. Some of these
changes  could  require costly compliance efforts or expensive
outsourcing of functions we currently handle internally, could
make some of the Company's operations prohibitively expensive
or impossible to continue.

See "Item 1.  Government Regulation and Blood Safety."

Product Safety and Product Liability
------------------------------------

Blood products carry the risk of transmitting infectious diseases,
including hepatitis, HIV and Creutzfeldt-Jakob Disease. HemaCare
carefully screens donors, uses the latest available technology to
test its blood products for known pathogens and complies with all
applicable safety regulations. Nevertheless, the risk that testing
and screening and testing processes might fail or that new
pathogens may be undetected by them cannot be completely eliminated.
There is currently no test to detect the pathogen responsible for
Creutzfeldt-Jakob Disease. If patients are infected by known or unknown
pathogens, claims brought against us could exceed our insurance coverage
and materially and adversely affect our financial condition.

Environmental Risks
--------------------

HemaCare's operations involve the controlled use of biohazardous
materials and chemicals. Although the Company believes that its
safety procedures for handling and disposing of such materials
comply with the standards prescribed by state and  federal regulations,
the risk of accidental contamination or injury from these materials
cannot be completely eliminated. In the event of such an accident, the
Company could be held liable for any  damages that result, and
any such liability could exceed the resources of the Company and
its insurance coverage.  The Company may incur substantial costs
to maintain compliance with environmental regulations as it
develops and expands its business.
                               26
<PAGE>  27

Access to Insurance
-------------------

We  currently  maintain insurance coverage that we believe is
appropriate for our products and our industry.  However, if
we experience losses or the risks associated with the blood products
industry increase in the future, insurance may become more expensive
or unavailable at reasonable prices or at  all. We also cannot
assure you that as our business expands or we introduce new products
and services we will be able to  obtain additional liability insurance
on acceptable terms, or that our insurance  will provide adequate
coverage against any  and  all potential claims. Also, the limitations
of liability contained in agreements  to which we are a party may
not be enforceable and  may  not otherwise protect us from liability
for  damages. The successful assertion of one or more large claims
against us that  exceeds available insurance coverage, or changes
in  our insurance policies, such as premium increases or the
imposition of large deductibles or co-insurance requirements, could
materially and adversely affect our business.

Declining Blood Donations
--------------------------

Our business depends on the availability  of donated  blood.
Only a small percentage of the population donates blood, and the
rate continues to decline.  In addition, new regulations intended
to reduce the risk of introducing infectious diseases in the blood
supply have eliminated some groups of potential donors.  While the
Company has developed strategies to recruit volunteer blood donors,
there can be no assurance that these strategies will result in
sufficient blood collections to meet hospital needs or to assure
profitability.

New Laws May Threaten Our Compensated Donor Program
----------------------------------------------------

In  2001, we realized revenues of $5.96 million, or 24% of total
revenues, and gross profits of $1.2 million from the sale in
California of platelets obtained from paid apheresis donors.
In 2000, we realized revenues of $5.6 million, or 26% of total
revenues, and gross profits of $1.5 million from this program.
California law generally prohibits the use of blood products
obtained from paid donors, except for apheresis platelets.
This exception will expire on January 1, 2003, unless extended.
There is significant opposition to the extension of this
exemption from competitor blood centers.  If the exemption
is not extended, we may be  forced to cease selling in California
apheresis products obtained from paid donors.  The loss of these
sales would have a material adverse effect on our business and
results of operations.

Not-For-Profit Status Gives Advantages to Our Competitors
---------------------------------------------------------

We  believe we are the only significant blood supplier in the
U.S. that is operated for profit and investor owned.  Our
competitors are nonprofit organizations, which are exempt from
federal and state taxes, have substantial community support and
have access to tax-exempt financing.  Although we believe that as
a result of our responsibility to operate for the benefit of
investors we have consistently achieved lower overhead than our
nonprofit  competitors, there can be no assurance that we can maintain
this advantage.  If we do not, we will not be able to compete
successfully with nonprofit organizations and our business and
results of operations will suffer material adverse harm.

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

As a supplier of blood products we compete principally with the
ARC and  to a lesser degree with community-based blood centers
and hospital-based blood banks.  As a provider of therapeutic
blood services, we compete principally  with regional and
community blood banks and hospital-based apheresis centers.
We strive  to provide cost effective services, but our competitors
sometimes have advantages of price or established positions in their
communities.  Also, the ARC is a much larger organization than
HemaCare and has greater resources to sustain periods of unprofitable
sales  or to adopt aggressive pricing strategies for the purpose
of defending or increasing its market share.
                               27
<PAGE>  28

We May Have Difficulty Achieving Our Growth Targets
---------------------------------------------------

Our ability to increase profitability depends on the continued growth
of our business.  Our national expansion strategy is to establish
new blood management programs, providing both  blood products and
blood services to major hospitals in markets where we do not have a
local presence.  However, our competitors have close, long-term
relationships with hospitals in these markets, which may impair our
ability to enter new geographic areas.  Failure to successfully
expand our business could prevent us from increasing our
profitability.

We Face Increasing Costs
------------------------

The  costs of collecting, processing and testing blood have risen
significantly in recent years and will likely continue to rise.
These cost increases are related to new and improved testing procedures
to assure that blood is free of infectious disease, increased regulatory
requirements related to blood safety, and increased costs associated
with recruiting  blood donors.   New testing protocols have required us
to outsource some of our testing.  Costs may increase further if the
FDA makes pre-storage leukoreduction mandatory.  Because
competition limits our ability to pass these increased costs on to
customers, the increased costs could reduce our profitability and could
have a material adverse effect on our business and results of operations.

Increasing Reliance on Outside Laboratories
-------------------------------------------

We maintain laboratories that are licensed and accredited to test
blood products for purity, potency and quality.  Recently, we
have turned to outside laboratories for nucleic acid testing or
NAT, a new type of infectious disease test, which we expect to be
mandated by the FDA.  As other new testing and processing technologies
are introduced, we may have to increase our reliance on outside
laboratories.  In using outside laboratories we will have less control
over testing quality. In addition, because laboratory facilities
competent in these new technologies are scarce, the loss of an outside
laboratory because of competition for capacity would have a material
adverse effect on our business.

Obstacles Exist To Expanding Our Apheresis Collection Activities
-------------------------------------------------------------

Our collection of apheresis platelets has concentrated on paid
donors in Southern California.  If we are to expand our sales of
apheresis platelets we will need to increase our apheresis
collection activities in  other states and increase our voluntary
apheresis donors.  However, apheresis collection requires much more
time than whole blood  collection, which significant limits the
base of available donors.  To date, we have not been successful
in recruiting sufficient apheresis donors in all regions.  We have
had difficulty  recruiting sufficient volunteer apheresis donors
to meet our objectives in Southern California, New York and Chicago.
We  can give no assurance that our future recruiting efforts will
yield sufficient apheresis donors to meet patient needs or our
income objectives.

Our Target Donors Involve Higher Collection Costs
--------------------------------------------------

Our competitors are most active in collecting blood outside of
major urban areas at sites where large numbers of potential
donors are concentrated, such as schools, large commercial
employers and government facilities.  We believe that strategy
has bypassed the largest portion of the U.S. population and have
instead targeted smaller donor groups to raise blood for specific
hospitals and their patients.  While we believe our donor
recruitment and blood collection activities are generally
more cost-effective than our competition, our  targeted donor
community does not offer the same economies of scale as that of
our competitors.  As  we grow we will need  to increase our number
of donors, and our emphasis on smaller donor organizations could
make it more difficult for us to maintain a price advantage over
our competition.
                                  28
<PAGE  29

Reimbursement Rates Have Not Kept Pace With Cost Increases
-----------------------------------------------------------

The reimbursement rates for blood products provided to Medicaid
and Medicare patients were based on market prices prevailing
several years ago, when the ARC reportedly sold red blood cells
at below-cost prices.  Market prices have increased substantially
since that time, but the reimbursement rates have not.  At present,
the Company's prices are less than the reimbursement rates in its
established markets and as a result the Company's products are
profitable.  But costs may continue to  increase in the future,
and there can be no assurance that reimbursement rates will
increase at that time. If they do not, our profits could be
reduced or eliminated.

Market Prices For Blood Do Not Necessarily Reflect Costs
--------------------------------------------------------

In the past our competition, in particular the ARC, has priced
blood products at levels below their cost in certain geographic
areas.  We depend on competitive pricing to gain sales.  Our cost
management strategy has generally enabled us to profitably sell
blood products at or below the prices of our competition.  But as
our  costs increase we will not be able to raise our prices
commensurately if our competitors do not.  Some of our competitors
have greater resources than we have to sustain periods of
unprofitable sales. Cost increases may therefore have a direct
negative effect on our profits and a material adverse affect
on our business.

HemaCare's Business May Face Interruption Due to Terrorism
and Increased Security Measures In Response to Terrorism
------------------------------------------------------------

HemaCare's  business depends on the free flow of products and
services through the channels of commerce and freedom of movement
for patients and donors.  Recently, in response to terrorist
activities and threats aimed at the U.S., transportation, mail,
financial and other services have been slowed or stopped altogether.
Further delays or stoppages in transportation of perishable
blood products and interruptions of mail, financial or other
services could have a material adverse effect on HemaCare's business,
results of operations and financial condition. Furthermore, HemaCare
may experience an increase in operating costs, such as costs for
transportation, insurance and security, as a result of the
terrorist activities and potential activities, which may target
health care facilities or medical products. The Company may also
experience delays in receiving payments from payers that have
been affected by terrorist activities and potential activities.
The U.S. economy in general is being adversely affected by the
terrorist activities and potential activities and any economic
downturn could adversely impact the Company's results of operations,
impair its ability to raise capital or otherwise adversely affect
its ability to grow its business.

We May Be Unable to Meet Future Capital Needs
---------------------------------------------

Currently, the Company believes it has sufficient cash available
through its cash on hand, bank credit facilities and funds from
operations to finance its operations for the next twelve months.
However, the Company had a loss in the fourth quarter which reduced
available cash.  The Company may need to raise additional capital
in the debt or equity markets.  There can be no assurance that
we will be able to obtain such financing on reasonable terms or
at all.

We May Be Unable to Finance Expansion of Our Business
-----------------------------------------------------

Our plans to expand blood collections and  blood management
programs to new hospital customers will require significant
capital investments in equipment for  new  blood  collection centers,
bloodmobiles, blood processing laboratories and other supporting
facilities.  In addition, these new programs will require capital
to finance start-up costs and working  capital requirements.  The
amount of these capital needs may exceed our existing sources of
capital and require us to raise additional capital in the debt or equity
markets.  There can be no assurance that we will be able to obtain
such financing on reasonable terms or at all.

We Could Lose our Lines of Credit.
-----------------------------------

At December 31, 2001, the Company had an accumulated deficit of
$4,638,000.  From time to time the Company has failed to comply with
the covenants in its bank credit agreements, and has had to seek
waivers from its lenders.  In particular, the Company has failed in
the fourth quarter of 2001 to comply with a covenant that it be
profitable in each quarter, and may not comply with that covenant
at the end of the first quarter of 2002 as well.  Its lenders have
waived the default for 2001 and given a limited prospective waiver
for any default in the first quarter of 2002.  While the lenders
have previously granted these waivers when needed, we cannot assure
you that they  will continue to grant them in the future.  Failure
to obtain such waivers when and, if needed, could result in acceleration
of  payment obligations under our credit facilities and severely
reduce our liquidity and available cash resources.
                              29
<PAGE>  30

We May Be Adversely Affected by Changes in the Healthcare Industry
------------------------------------------------------------------

In the U.S., a fundamental change  is occurring  in the healthcare
system.  Competition to gain patients on the basis of price, quality
and service is intensifying among healthcare providers who are
under pressure to decrease the costs of healthcare delivery.  This
trend is expected to continue. In addition, there has been significant
consolidation among healthcare providers as providers seek to
enhance efficiencies, and this consolidation is expected to continue.
As a result of these trends, we may be limited in our ability to
increase prices for our products in the future, even if our costs
increase. Further, we could be adversely affected by customer
attrition as a result of consolidation among healthcare providers.

Future Technological Developments Could Jeopardize Our Business.
----------------------------------------------------------------

Because of the risks posed by blood-borne diseases, many
companies are currently seeking to develop synthetic
substitutes for human blood products.  At present, none of
these products is a medically accepted substitute for human blood
and its constituents. Nevertheless, because our business
consists of collecting, processing and distributing human
blood and blood products, the introduction and acceptance
in the market of synthetic blood substitutes would cause
material adverse harm to our business.

We Depend on Our Key Personnel
-------------------------------

We are highly dependent upon the expertise and services of the
principal members of our management and medical  staff, in
particular, Alan  C. Darlington, our Chairman and Chief
Executive Officer, Dana E. Belisle, Chief Operating Officer,
and Joshua Levy, M.D., our National Medical Director.  Our
business would be materially and adversely affected if the
services of any of them ceases to be available.

In addition, the loss of the services of any of our other
senior management and medical personnel also could have a
material and adverse effect on us. Our success also depends,
in large part, upon our ability to continue to attract and
retain  highly skilled medical, managerial and marketing
personnel.  Competition for such personnel is intense.
Competitors and others have in the past, and may in the future,
attempt to recruit our employees.  We cannot assure you that
we will be successful in attracting and retaining personnel.

Our Articles of Incorporation and Rights Plan Could Delay
or Prevent an Acquisition or Sale of HemaCare
----------------------------------------------------------

Our Articles of Incorporation empower the Board of Directors to
establish and issue a class of preferred  stock, and to
determine the rights, preferences and privileges of the preferred
stock.  This gives the Board of Directors the ability to deter,
discourage or make more difficult a change in control of HemaCare,
even if such a change in control would be in  the interest of a
significant number of our shareholders or if such a change in control
would provide our shareholders with a substantial premium for
their shares over the then-prevailing market price for our common
stock.

In addition, the Board of Directors has adopted a Shareholder's
Right Plan designed to require a person or group interestd in
acquiring a significant or controlling interest in HemaCare to
negotiate with the Board.  Under the terms of our Shareholders'
Rights Plan, in general, if a person or group acquires more than
15% of the outstanding shares of common  stock, all of our other
shareholders would have the right to purchase securities from us
at a discount to the fair market value of our common stock, causing
substantial dilution to the acquiring person or group. The
Shareholders' Rights Plan may inhibit a change in control
and, therefore, could materially adversely affect our
shareholders' ability to realize a premium over the then
prevailing market price for our common stock in connection
with such a transaction.  For a description of the Rights
Plan, see the Company's Current Report on Form 8-K filed with
the SEC on March 5, 1998.
                              30
<PAGE>  31

Stocks Traded on the OTC Bulletin Board are Subject to
Greater Market Risks than Those of Exchange-Traded and
Nasdaq Stocks
----------------------------------------------------------

Our common stock was delisted from the Nasdaq Small Cap Market
on October 29, 1998 because we failed to maintain the market's
requirement of a minimum bid price of $1.00.  Since November 2,
1998 our common stock has been traded on  the OTC Bulletin
Board, an electronic, screen-based trading system operated by
the National Association of  Securities Dealers, Inc. Securities
traded on the OTC Bulletin Board are, for the most part, thinly
traded and generally are not subject to the level of regulation
imposed on securities listed or traded on the Nasdaq Stock
Market or on a national securities exchange.  As a result, an
investor may find it difficult to dispose of our common stock or to
obtain accurate quotations as to its price.

Our Stock Price Could Be Volatile
----------------------------------

The  price of our common stock has fluctuated in the past
and may be more volatile in the future. The reported sale
price in 2001 ranged from a low $.88 to a high of $2.69.
Factors such as the announcements of government regulation,
new products or services introduced by us or our competitors,
healthcare legislation, trends in the health insurance and
HMO industry, litigation, fluctuations in our operating
results and market conditions for healthcare stocks in
general could have a significant impact on the future price
of our common stock.  In addition, the stock market has from
time to time experienced extreme price and volume fluctuations
that may be unrelated to the operating performance of particular
companies.  The generally low volume of trading in our common
stock makes it more vulnerable to rapid changes in price in
response to market conditions.

Future Sales of Equity Securities Could Dilute the Company's
Common Stock.
-------------------------------------------------------------

The Company may seek new financing in the future through the sale
of its securities.  Future sales of common stock or securities
convertible into common stock could result in dilution of the
common stock currently outstanding. In addition, the perceived
risk of dilution may cause some of our shareholders to sell their
shares, which could further reduce the market price of the Common
Stock.

We Do Not Expect to Pay Any Dividends
-------------------------------------

The Company intends to retain any future earnings for use in its
business, and therefore does not anticipate declaring or paying
any cash dividends in the foreseeable future. The declaration and
payment of any cash dividends in the future will depend on the
Company's earnings, financial  condition, capital needs and
other factors deemed relevant by the Board of Directors.  In addition,
the Company's credit agreement prohibits the payment of dividends
during the term of the agreement.

ITEM 2.  	PROPERTIES.
-------     -----------

The Company occupies a 12,000-square foot facility in Sherman Oaks,
California, where it operates a platelet apheresis center, a blood bank
laboratory, a manufacturing facility for whole blood components and a
distribution center. The lease on this space expires October 31, 2002.

In December 2001, the Company relocated its corporate offices and part
of its distribution center to an 11,250 square foot facility in
Woodland Hills, California.  The lease on this space expires October
31, 2006.

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

In addition, the Company occupies a 1,278 square foot office space in
Yonkers, New York which expires August 31, 2006, and a 2,500 square
foot office space in Bangor, Maine which expires December 31, 2006.
                                31
<PAGE>  32

In connection with each of its blood management programs, the Company
occupies space on the campus of its client hospitals.  While the
arrangements vary, certain of these facilities are formally subject to
a lease agreement with the sponsoring hospital for periods concurrent
with the blood management program agreement. Other agreements grant the
Company the right to utilize space and facilities on the hospital
premises during the term the Company continues to provide services to
the hospitals without specific lease terms.

ITEM 3.  	LEGAL PROCEEDINGS.
-------     ------------------

In December 2000, HemaCare filed with the United States District Court
in the Central District of California an antitrust and unfair
competition complaint to recover damages and secure injunctive relief
against the ARC in connection with ARC pricing practices in Southern
California and other areas of the nation where we operate.

Our lawsuit alleges that the ARC, as part of a publicly announced
strategy to increase its market share in the U.S. blood industry, has
employed below cost and bundled product pricing to eliminate
competition.

Our lawsuit also contains other allegations, which we believe
constitute unfair competition by the ARC.  These include:

-   Threatening hospitals with disruptions in available blood supplies
    if they contract with the Company or make other arrangements to
    obtain blood products.
-   Interfering with our efforts to hold blood drives and recruit
    volunteer blood donors.
-   Allocating blood supplies, in times of severe shortages, to
    prevent sales of blood products by the Company rather than on the
    legitimate needs of hospitals and patients in these areas.
-   Falsely disparaging the quality and safety of our blood products.

In 1995, we filed an earlier antitrust lawsuit against the American Red
Cross for practices in California that compelled Southern California
ARC customers to purchase platelet products from the ARC at prices
higher than those offered by the Company. In June 1997, that suit was
settled on confidential terms.

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

ITEM 4.  	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
-------     ----------------------------------------------------

None.

                               PART II

ITEM 5. 	MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
            MATTERS.
-------     -------------------------------------------------------------

Market for Common Stock
-----------------------

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

The following table sets forth the range of high and low closing bid
prices of the Common Stock, as reported by the OTC Bulletin Board, for
the quarters ended March 31, June 30, September 30 and December 31,
2001 and 2000.  These prices reflect inter-dealer quotations, without
retail markups, markdowns or commissions, and do not necessarily
represent actual transactions.
                                32
<PAGE>  33

<TABLE>
<CAPTION>
                               2001             2000
Quarter ended             High     Low       High     Low
--------------            -----    ----      -----    ----
<S>                       <C>      <C>       <C>      <C>
March 31                  $1.44    $0.88     $3.00    $0.69
June 30                   $2.69    $1.21     $2.25    $1.00
September 30              $2.65    $1.50     $1.94    $1.25
December 31               $1.90    $1.25     $1.81    $1.00

</TABLE>

The Company intends to retain any future earnings for use in its
business, and therefore, does not anticipate declaring or paying
any cash dividends in the foreseeable future.  The declaration and
payment of any cash dividends in the future will depend upon the
Company's earnings, financial condition, capital needs and other
factors deemed relevant by the Board of Directors.


ITEM 6.    SELECTED FINANCIAL DATA
-------    ----------------------
The following selected financial data should be read in conjunction
with the other information and financial statements, including the
notes thereto, appearing elsewhere herein.

<Table>
<Caption>

                                                     Years Ended December 31,
                                               (In Thousands, except Per Share Data)
                                         2001       2000        1999       1998       1997
                                       -------    -------     --------    -------    -------
<S>                                    <C>        <C>         <C>         <C>        <C>
Revenues                               $25,199    $21,512     $19,021     $13,124    $11,101
Gross profit                             4,409      4,850       4,026       3,122      1,907
Income (loss) from continuing
  operations                               323      4,350       1,057         745         37
Provision (benefit) for income
  taxes                                    190     (2,901)         28          23          -
Net income (loss)                      $   323     $4,350     $ 1,057     $   745    $   330

Basic per Share Amounts:
------------------------
Income (loss) from continuing
 operations                            $  0.04    $  0.57     $  0.14      $ 0.10    $  0.01
Net income (loss)                      $  0.04    $  0.57     $  0.14     $  0.10    $  0.05

Diluted Per Share Amounts:
--------------------------
Income (loss) from continuing
  operations                           $  0.04    $  0.50     $  0.13     $  0.10    $  0.01

Net income (loss)                      $  0.04    $  0.50     $  0.13     $  0.10    $  0.05

Total assets                           $13,082    $11,477     $ 7,574     $ 7,662    $ 4,384
Long-term debt and capital
 lease obligations, net of
 current portion                           802         46         541       1,118        209
Shareholders' equity                     8,427      8,203       4,440       3,291      2,402

</Table>

ITEM 7.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
            AND RESULTS OF OPERATIONS
-------     -----------------------------------------------------------

Our business segments include Blood Products and Blood Services.

Our Blood Products segment supplies hospitals with a portion of their
blood product needs.  We perform blood collection efforts for the
benefit of our hospital clients.  We also provide apheresis platelets
collected in our Sherman Oaks facility and specialty blood components
such as cryo poor plasma and cryoprecipitate and donor testing services
purchased from other blood centers for hospitals in Southern
California.
                                  33
<PAGE>  34

Blood Services include therapeutic apheresis procedures, stem cell
collection and other blood treatments provided to patients, generally
in a hospital setting.

As part of our marketing strategy we have entered into Blood Management
Programs ("BMP") with many of our hospital customers.  Under a BMP
arrangement, we provide some or all of the needed blood products under
a multiyear contractual agreement.  We often operate a donor collection
center on or near the hospital campus and recruit donors utilizing the
hospital's community reputation.  We also conduct blood drives in the
community on behalf of the hospital.  In addition to providing blood
products, often we also provide blood services to our BMP customers.

Previously, we reported our results of operations using three segments:
blood management programs, regional blood products and regional blood
services.  In 2001, we changed our financial reporting to two lines,
which more closely reflects our internal financial reporting and our
organizational structure.  Blood products and blood testing services
are reported under our Blood Products segment.  All of our blood
services are reported under our Blood Services segment.  Under the
previous reporting structure, revenue and expenses from regional blood
services and regional blood products that benefited our blood
management programs were allocated to our Blood Management Programs.
We continue to market our blood management programs; however, the
revenue and expenses of these programs is reflected as either Blood
Products or Blood Services.

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

Year ended December 31, 2001 compared to the Year ended December 31,
2000
--------------------------------------------------------------------

Revenue and Gross Profit Overview

Revenue for 2001 was $25,199,000 compared to $21,512,000 in 2000.  The
increase of $3,687,000 (17%) reflects the expansion of our blood
product operations and an increase in the number of blood service
procedures.

Gross profit as a percentage of revenue was 17% ($4,409,000) during
2001, compared to 23% ($4,850,000) in 2000.  The decrease reflects
lower levels of profitability in our Blood Products segment resulting
from our investments to expand the areas served and the range of the
products we offer.  Our Blood Products segment incurred substantial
start-up costs ($260,000) for new programs in Chicago, Illinois, Raleigh,
North Carolina and Bangor, Maine.  Additionally, we incurred certain
costs associated with expanding the scope of our programs to collect
larger volumes of whole blood products for both existing and new
customers (including an expanded regulatory affairs and quality
control function, expanded blood donor recruiting capabilities and
expanded laboratory and distribution capabilities).  Our Sherman Oaks
platelet operations experienced a decline in profitability as a result
of several factors, including the delayed implementation of technology
to maintain product yield per collections in response to new FDA
requirements.

The gross profit of our Blood Services segment increased as a result of
higher procedure volumes.  Gross profit margins in this segment were
comparable between years.

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

Revenue for 2001 was $16,466,000 compared to $14,019,000 in 2000, an
increase of $2,447,000 (17%).

A breakdown of revenue and certain operational data is summarized in
the following table:
                                 34
<PAGE>  35

<TABLE>
<CAPTION>
                                             2001            2000
                                         ------------   ------------
<S>                                      <C>            <C>
Revenue
 Platelets                               $  9,559,000   $ 9,014,000
 Whole blood                                3,402,000   $ 1,162,000
 Donor testing                                679,000       502,000
Purchased blood components                    981,000     1,121,000
Fixed price BMP program (discontinued
  in 2001)                                  1,312,000     1,687,000
Other                                         533,000       533,000
                                         ------------   ------------
                                         $ 16,466,000   $ 14,019,000
                                         ============   ============

Units sold
    Platelets                                  22,800        21,500
    Whole Blood                                27,000        14,100

Revenue per unit sold
 Platelets                               $        419   $       419
 Whole blood                             $        126   $        82

</TABLE>

In 2001, the ARC announced that, after years of selling red blood cells
at prices that were less than cost, it was raising prices.  This price
increase was in addition to a previously announced new ARC policy of
providing exclusively leukoreduced red blood cells to hospitals
requesting red blood cells.  Leukoreduced red blood cells sell at
premium prices relative to red cells that are not leukoreduced.  For
some hospitals, the combined effect of these ARC price increases
and the new policy of supplying only leukoreduced red blood cells
resulted in blood costs increasing by as much as 85% to 90%.

Consequently, many hospitals (including our existing customers) began
looking for alternative blood vendors, and we have made efforts to
significantly increase our whole blood collection capabilities.  We
hired and trained additional donor recruiters, collection personnel and
expanded our laboratory capabilities.  We also invested in new capital
assets including mobile collection vehicles and laboratory equipment.
In Southern California, we expanded our mobile red cell collection
program and collected almost 12,000 whole blood donations during 2001
compared to 3,500 during 2000.  The increase in the average revenue per
whole blood collection reflects several factors including: 1) price
increases, 2) increased productivity and sales of fresh frozen plasma
and 3) increased sales of leukoreduced red cells.  To date, our mobile
operations in Southern California have been only marginally profitable.
This is due to pricing that does not reflect current prices and the
costs associated with expanding our collection capabilities.

The current market price of leukoreduced red blood cells approximates
$200 nationally.  Additionally, plasma units which can be produced from
whole blood collections are priced between $20 to $70 per unit
nationally.  Several of our existing customers have pricing
arrangements that predate the recent market price increases implemented
by the ARC. Therefore, our pricing is significantly less than current
market prices.  We are in the process of negotiating with these hospitals
for price increases that reflect the current market price of red cells.
These discussions are ongoing and there can be no assurance that we
will obtain the requested price increases prior to the expiration of
the existing contracts.  Blood product prices to our new BMP customers
reflect current market prices.  Therefore, our pricing reflects a mix
of new and old customers.  We expect that as contracts with our existing
customers are adjusted to reflect current pricing, our average revenue
per whole blood collection will increase.  This expectation is
conditional on the ARC maintaining its current pricing structure for
blood products.

One major BMP arrangement was terminated on August 31, 2001.  This
agreement was a multi-year, fixed price agreement which required the
Company to either purchase or collect all of the hospital's
requirements for blood products.  Revenue from this customer amounted
to $1.3 million during 2001 and a loss of $57,000.  The loss of this
customer has not materially impacted our operations.
                               35
<PAGE>  36
Gross profit as a percentage of revenue was 9% ($1,487,000) for 2001
compared to 17% ($2,323,000) in 2000.  During 2001, we opened a BMP at
Children's Memorial Hospital in Chicago and incurred start-up losses.
As discussed above, we expanded our mobile whole blood collection
programs and expanded our whole blood collection efforts at certain
BMPs that were previously limited to apheresis platelet and plasma
collections.  We incurred significant costs to expand our collection
capabilities, most of which was charged to operations during the second
half of 2001.  Additionally, our profit margins on apheresis platelets
were negatively affected by several factors.  These included: 1) a new
regulatory requirement that reduced the number of saleable products
that we obtained per donor; 2) higher donor recruiting and compensation
costs and 3) less than optimum inventory controls over our platelets
produced in Sherman Oaks resulting in increased imports of platelets
from other blood centers.  During the fourth quarter of 2001, we
acquired new laboratory technology to improve the average product
yield per platelet collection.  The increase in donor
yield is expected to reduce the number of donors required to produce a
like number of products and thereby reduce our variable costs of
platelet production and reduce our reliance on imported platelets. The
new laboratory equipment was placed in service during December 2001 and
our average product yield per donor is increasing.   We can not assure
that these efforts will be successful.

Blood Product Pricing and Litigation against the American Red Cross
-------------------------------------------------------------------

Blood product prices in the United States and in areas we operate are
effectively established by the American Red Cross ("ARC").  Nationally,
the ARC supplies approximately 50% of total U.S. blood supplies and is
the only blood provider with the capabilities of supplying all areas of
the U.S. with blood products.  In the areas where the Company operates
(other than Chicago), the ARC is generally the only other blood
supplier that regularly provides blood products to area hospitals.

The profitability of our operations is heavily influenced by ARC
pricing practices.

We estimate that we provide approximately 30% of the greater Los Angeles
area's single donor platelets and less than 10% of the area's red blood
cells.  Since 1997, the ARC has lowered its prices for single donor
platelets in the Los Angeles area by more than 30%.  The ARC price
reductions have been implemented despite the increasing costs of producing
the product (these costs are associated with new infectious disease testing
protocols, consequent shorter product shelf life and higher product
expirations) and despite the fact that the ARC reports that its blood
product operations generate operating losses in Southern California.

HemaCare has filed a lawsuit against the ARC alleging violation of
Federal antitrust laws and unfair competition.  Our lawsuit contends
that ARC business practices are designed to prevent or eliminate
competition in the blood products and services industry.  Specific to
Southern California, our lawsuit alleges that ARC pricing practices for
single donor platelets in the Los Angeles area are predatory and are
designed to eliminate HemaCare as a competitor in this market.  Our
contentions in the lawsuit are supported by the fact that ARC prices
for single donor platelets in Los Angeles are lower than ARC prices in
all other areas of the U.S., and that Los Angeles is a high cost market
for both blood products and other healthcare services relative to most
other parts of the U.S.

While the ARC announced major increases in its nationwide pricing
structure effective July 1, 2001 for red blood cells, in the Los
Angeles area the changes also involved further reductions in prices of
single donor platelets.  We expect continued pricing and margin
pressure in Southern California platelet sales until we can
successfully conclude our litigation with the ARC.  However, there is
no assurance that our litigation will be successful.  "See Item 3.
Legal Proceedings."

Blood Services
---------------

Revenue for 2001 was $8,733,000 compared to $7,493,000 in 2000.  The
increase of $1,240,000 (17%) reflects a higher demand for therapeutic
services.  During 2000, we began an expanded physician education
program designed to familiarize physicians with the benefits of
therapeutic apheresis.  We believe these efforts resulted in increased
                                   36
<PAGE>  37


procedure volumes.  Additionally, during 2001 there was an increase in
the disease states where therapeutic apheresis is applicable. During
2001, we provided approximately 7,300 therapeutic apheresis procedures
at an average price of $1,201 per procedure compared to approximately
5,900 therapeutic apheresis procedures at an average price of $1,265
per procedure in 2000.  The decrease in the average price per procedure
reflects lower utilization of albumin (a protein replacement fluid)
during 2001.

Gross profit as a percentage of revenue was 33% ($2,922,000) in 2001
compared to 34% in 2000 ($2,527,000).  Gross profit margins were
negatively impacted by higher recruitment and training costs associated
with hiring additional registered nurses needed to perform the
additional procedures.  These expenses were partially offset by
increased operating efficiencies associated with higher procedure
volumes.

General and Administrative Expenses
-----------------------------------

General and administrative expenses were $3,918,000 in 2001 compared to
$3,492,000 in 2000 an increase of $426,000 (12%).  The increase is
primarily the result of expenditures associated with increased legal
fees related to the ARC litigation, increased marketing expenses and
expanded staff to support our growing operations.  General and
administrative expenses as a percentage of revenue were 16% in both
years.

Provision for income taxes
--------------------------

Prior to 1997, we incurred operating losses that we used to offset
current income for financial reporting and tax purposes.  Accordingly,
we recognized minimal tax expense in recent years.  Prior to December
31, 2000, we accounted for these accumulated losses by determining
their future benefit, but did not recognize this benefit as an asset
since our ability to use these losses in future periods was uncertain.
During the fourth quarter of 2000, we determined that it was more
likely than not that we will be able to utilize almost all of the tax
benefits associated with these net operating losses.  Accordingly, we
recorded a deferred tax asset for the expected future tax benefit.  The
amount of the tax benefit as of December 31, 2000 is $3,093,000.
Results for 2001, reflect normal tax expense for financial reporting
purposes.  The normalized tax expenses will reduce the deferred tax
assets.  We will continue to use our net operating losses to offset
future taxable income and minimize the amount of taxes we pay to the
federal and state agencies.  This adjustment does not impact our
current or future cash flows.

Fourth Quarter Adjustment
-------------------------

During 2001, we acquired and began installation of a blood bank
computer system.  We have capitalized the cost of the hardware and
software associated with the system.  During the third quarter of 2001,
we expensed the costs of our internal labor and related benefits
associated with the validation and implementation of this system.
After review we determined that the appropriate accounting treatment
for these costs should be capitalization as part of the cost of the
computer system.  Therefore, during the fourth quarter of 2001, we
capitalized $132,000 of labor costs associated with the validation and
installation of this system of which $58,000 relates to the third
quarter of 2001.

Year ended December 31, 2000 compared to the Year ended December 31,
1999
-------------------------------------------------------------------

Revenue and Gross Profit Overview
---------------------------------
Revenue for 2000 was $21,512,000 compared to $19,021,000 for 1999.  The
increase of $2,491,000 (13%) is primarily due to the increase in the
number of customers in our Blood Products segment partially offset by a
decline in demand for Blood Services.

Gross profit as a percentage of revenue was 23% ($4,850,000) during
2000, compared to 21% ($4,026,000) in 1999.  The increase reflects
greater efficiencies in our Blood Services segment.
                                 37
<PAGE>  38

Blood Products

Revenue for 2000 was $14,019,000 compared to $11,155,000 in 1999.

A breakdown of revenue and certain operational data is summarized in
the following table:

<TABLE>
<CAPTION>
                                             2000           1999
                                         ------------   ------------
<S>                                      <C>            <C>
Revenue
 Platelets                               $  9,014,000   $ 7,409,000
 Whole blood                                1,162,000       310,000
 Donor testing                                502,000       495,000
 Purchased blood components                 1,121,000       847,000
Fixed price BMP program (discontinued
  in 2001)                                  1,687,000     1,381,000
Other                                         533,000       713,000
                                         ------------   ------------
                                         $ 14,019,000   $ 11,155,000
                                         ============   ============

Units sold
    Platelets                                  21,500        17,500
    Whole Blood                                14,100         3,200

Revenue per unit
 Platelets                               $        419   $       423
 Whole blood                             $         82   $        97

</TABLE>

The revenue increase of $2,864,000 (26%) is 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, 2000
revenues include twelve months of revenue from the UCI BMP, which
opened in June 1999.  Additionally, we sold more platelets collected in
our Sherman Oaks donor center partially offset by a lower price per
unit.

Gross profit as a percentage of revenue was 17% ($2,323,000) for 2000,
compared to 16% ($1,810,000) in 1999. The increase reflects more
product collections at existing donor sites and improvement in
operating activities.  These improvements were offset by a lower margin
on our Sherman Oaks produced platelets.  The average selling
price per platelet declined slightly from $423 in 1999 to $419 in 2000.
The decrease in price reflects aggressive price competition from the ARC,
particularly in Southern California.  We collected and sold approximately
14,100 whole blood donations with average revenue per collection of $82.
This represents an improvement over 1999 where we collected 3,200 whole
blood donations.  The increase in the number of donations reflects the
California-based BMPs opened in 2000 and 1999.  However, several of these
programs have pricing that is based upon a fixed fee that limited our
compensation for whole blood collection activities.

Blood Services

Blood Services revenue for 2000 was $7,493,000 compared to $7,866,000
for 1999, a decrease of $373,000 (5%). The total number of therapeutic
apheresis procedures in both years was approximately 6,300.  However,
the cost of albumin, a protein replacement fluid used in certain
therapeutic procedures, and the price we charged our customers,
decreased in 2000 compared to 1999.

Gross profit as a percentage of revenue was 34% ($2,527,000) in 2000,
compared to 28% ($2,216,000) in 1999. The increase in gross profit is a
result of better cost controls, improved efficiencies and changes in
the mix of sales from various regions.  The cost controls and
efficiencies resulted from better labor utilization by reducing
overtime and associated payroll expenses.
                                  38
<PAGE>  39

Gain on Disposition
-------------------

Previously, we operated a blood management program in St. Louis,
Missouri called Gateway.  This program was sold during 1997.  As part
of the terms of the sale we were entitled to receive a payment of
$100,000 when the program received an FDA establishment license.
During the first quarter of 1999 we received this amount and accounted
for this cash receipt as an additional gain on the sale of Gateway.

General and Administrative Expenses
-----------------------------------

General and administrative expenses were $3,492,000 for 2000, compared
to $3,008,000 for 1999.  The increase of $484,000 (16%) reflects
additional expenses incurred in connection with our sponsorship of the
California legislative initiative to extend the sunset provision of our
paid platelet program in California (See Liquidity and Capital
Resources) and expanded marketing efforts.  As a percentage of revenue
general and administrative expenses was 16% of revenue for both years.

Provision for income taxes
--------------------------

Prior to 1997 we incurred operating losses that we used to offset
current income for financial reporting and tax purposes.  Accordingly,
we recognized minimal tax expense.  Prior to December 31, 2000, we
accounted for these accumulated losses by determining their future
benefit, but did not recognize this benefit as an asset since our
ability to use these losses in future periods was uncertain.  During
the fourth quarter of 2000, we determined that it was more likely than
not that we would be able to utilize almost all of the tax benefits
associated with these net operating losses.  We recorded a deferred tax
asset for the expected future tax benefit.  The amount of the tax
benefit as of December 31, 2000 is $3,093,000.  Of this amount
$1,239,000 is recorded as a current asset and $1,854,000 is recorded as
a non-current asset.  In future periods we will report a more normal
tax expenses for financial reporting purposes.  The normalized tax
expenses will reduce the deferred tax assets.  We will continue to use
our net operating losses to offset future taxable income and minimize
the amount of taxes we pay to the federal and state agencies.  This
adjustment will not impact our future cash flows.

Quarterly Financial Data
-------------------------

The following table presents unaudited statement of operations data for
each of the eight quarters ended December 31, 2001.  We believe that
all necessary adjustments have been included to fairly present the
quarterly information when read in conjunction with the consolidated
financial statements.  The operating results for any quarter are not
necessarily indicative of the results for any subsequent quarter.
                                39
<PAGE>  40

                             UNAUDITED
               In thousands except per share data

<TABLE>
<CAPTION>
                                      2001                                       2000
                                 Quarter Ended                              Quarter Ended
                    ---------------------------------------   ---------------------------------------
                    March 31  June 30   Sept. 30   Dec. 31    March 31   June 30   Sept. 30   Dec. 31
                    --------  -------   --------   --------   --------   -------   --------   -------
<S>                 <C>       <C>       <C>        <C>        <C>        <C>       <C>        <C>
Revenues            $ 6,057   $ 6,238   $ 6,440    $ 6,464   $ 4,972    $ 5,373   $ 5,377    $ 5,790
Gross Profit          1,192     1,211     1,145        861     1,231      1,253     1,136      1,230
Pre-tax Income          347       244         7        (85)      340        342       317        450
Income tax Provi-
 sion (benefit)         128        91         2        (31)       15         16        16     (2,948)
Net Income              219       153         5        (54)      325        326       301      3,398

EPS
  Basic             $  0.03    $ 0.02   $     -    $ (0.01)  $  0.04    $  0.04   $  0.04    $  0.45
  Diluted           $  0.03    $ 0.02   $     -    $ (0.01)  $  0.04    $  0.04   $  0.03    $  0.39

</TABLE>

Liquidity and Capital Resources
-------------------------------

At December 31, 2001, we had cash and cash equivalents and marketable
securities of $1,025,000 and working capital of $4,046,000.

We have two lines of credit with a commercial bank.  The first line of
credit is a working capital line.  We can borrow the lesser of 75% of
eligible accounts receivable or $2.0 million.  Interest is payable
monthly at a rate of prime plus 0.25% (5.0% as of December 31, 2001).
The second line of credit provides $1.25 million for equipment
purchases.  Periodically, we can convert equipment purchase loans 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 2.5% (6.5% as of December 31, 2001).  As of December 31, 2001, we
had net borrowings of $175,000 on the working capital line and $619,000
on the equipment line of credit.   These lines of credit are secured by
substantially all of our unencumbered assets and require us to maintain
certain financial covenants.  As of December 31, 2001, we were not
in compliance with one of these covenants due to our incurring a loss in
the fourth quarter of 2001.  The bank has waived this covenant
violation.   Additionally, the bank has agreed to waive the
profitability covenant, if necessary, and within certain limits, should
the Company incur a loss in the first quarter of 2002.

The following table summarizes our contractual obligations by year (in
thousands).

<TABLE>
<CAPTION>
Contractual Obligations                       Payments due by year
------------------------     --------------------------------------------------------
                             Total     2002    2003    2004     2005    2006    thereafter
<S>                          <C>       <C>     <C>     <C>      <C>     <C>     <C>
Operating leases             $1,721    $  572  $  336  $  323   $  267  $  222  $   1
Capitalized leases              247        35      30      70       62      50      -
Long term debt                  794       168     343     168      115       -      -
                             ------    ------  ------  ------   ------  ------  -------
Totals                       $2,762    $  775  $  709  $  561   $  444  $  272  $   1
                             ======    ======  ======  ======   ======  ======  =======

</TABLE>

During 2001, net cash used in operations was $93,000. This compares to
cash generated from operations of $1,431,000 in 2000 and $990,000 in
1999.

During 2001, we experienced an increase in our accounts receivable
balances that exceeded our growth in revenue.  As of December 31, 2001
the average number of days revenue in accounts receivable was 77 days
compared to 63 days at December 31, 2000.  The increase is due to a
variety of factors but generally reflects a trend on the part of our
hospitals to lengthen the cycle associated with payment processing.  We
are pursuing a variety of tactics to shorten the amount of time
associated with revenue collection, including more frequent customer
contacts and stricter adherence to our credit and collection policies.
                                    40
<PAGE>  41

Cash used in investing activities was $778,000 in 2001, $346,000 in
2000 and $552,000 in 1999.  The cash used in investing activities was
primarily for the acquisition of plant and equipment.  During 2001, we
made a significant investment in capital assets ($1,646,000).  These
additions included mobile blood collection vehicles, a new blood
banking computer system that will be operational in 2002, a new and
expanded corporate facility and laboratory equipment to accommodate
the new levels of production.  Many of these additions were financed
through our equipment line of credit.

Cash provided by financing activities in 2001 was $534,000.  Cash used
in financing activities in 2000 was $1,213,000 and $320,000 in 1999.
The cash provided in 2001 was primarily net borrowings of $842,000 on
our lines of credit discussed above.  During 2000, we paid off certain
debt of $551,000 and repurchased $697,000 of Company stock.  In 1999,
we paid down certain debt in accordance with the terms of the
agreement.

Our programs to expand whole blood collections for existing customers
and to extend our blood collection and blood management programs to new
hospital customers will require significant capital investments in new
equipment for new blood collection centers, mobile collection units
("bloodmobiles"), blood processing laboratories and other supporting
facilities.  Additionally, these new programs will require capital to
finance start-up costs and working capital requirements.  The amounts
of such capital needs may exceed our existing sources of capital
(operating cash flow and unused borrowing facilities) and require us to
raise additional capital in the debt or equity markets.  There can be
no assurance that we will be able to obtain such financing on
reasonable terms or at all.

Our primary sources of liquidity include our cash on hand, available
lines of credit and cash generated from operations.  Our liquidity is
dependent, in part, on timely collections of accounts receivable.  Any
significant delays in customer payments could adversely affect our
liquidity.  Our liquidity is also dependent on our maintaining
compliance with our bank covenants.  As previously stated the bank
waived the December 31, 2001 covenant violation and has issued a
prospective waiver for the first quarter of 2002.   However, if we are
unable to comply with our loan covenants after March 31, 2002, and the
bank does not issue a waiver, then our liquidity could be materially
affected.

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 our Sherman Oaks center's paid
donors, have been exempted from this law by a series of state statutes.
Unless a new exemption is obtained, the existing exemption will expire
under its sunset provision of December 31, 2002. This could have a
material adverse effect on the Company's revenue and net income.
Revenue from paid platelet donors was $5.96 million in 2001. If we are
unable to continue our practice of paying platelet donors in our
Sherman Oaks  operation, it would have a materially adverse affect on
our profitability and could have an impact on loan compliance.  Absent
significant economic improvement in our volunteer donor blood programs
in Southern California, we may exit the blood products business and
focus on our therapeutic apheresis operations in the state and our non-
California blood products operations and BMPs.

We anticipate that our cash on hand and borrowing from the bank
lines of credit will be sufficient to provide funding for our needs
during the next 12 months, including (i) expansion of Blood Products
and Blood Services, (ii) the remaining costs of discontinued
operations, and (iii) other working capital requirements, including
capital and operating lease commitments.
                                   41
<PAGE>  42

In July 2000, we announced our intention to repurchase up to 15% of our
outstanding common stock, or up to 1.1 million shares.  Purchases were
made in the open market or in private transactions depending on price
and availability.  We funded the purchases from cash and cash
equivalents and marketable securities along with profits generated in
the normal course of business.  As of December 31, 2001, we repurchased
772,000 shares at an average price of $1.41 per share.

Although we incurred a loss during the fourth quarter of 2001, most of
our established operations remain profitable.  Our losses were primarily
due to start-up losses associated with our new BMP in Chicago, expenses
associated with the expansion of our whole blood collection program,
litigation expense associated with our lawsuit against the ARC and
lower donor yields on our platelet program.  We anticipate that the
continuation of our growth in Blood Products will require the use of
capital to fund start-up costs.

Factors Affecting Forward-Looking Information
---------------------------------------------

The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" from liability for forward-looking statements. Certain
information included in this Form 10-K and other materials filed or to
be filed by our 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 our Company) are
forward-looking, such as statements relating to operational and
financing plans, competition, the impact of future price increases for
blood products, the effects of discontinued operations, demand for our
Company's products and services, and the anticipated outcome of
litigated matters. Such forward-looking statements involve important
risks and uncertainties, many of which will be beyond the control of
our 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 our Company.
These risks and uncertainties include, but are not limited to,
the following:  the high degree of government regulation of our
business; product safety concerns and potential liability for
blood-borne diseases; environmental risks; access to insurance;
declining blood donations; new laws that might threaten our paid
donor programs; our competitor's advantages as tax-exempt
organizations; difficulties in expanding our business; increasing
costs; increasing reliance on outside laboratories; our emphasis
on single-donor platelet products, which may have limited future
growth; difficulty in recruiting new volunteer donors for apheresis
collection; our emphasis on smaller donor groups than our
competitors; lack on increases in reimbursement rates from Medicare
and Medicaid payers; competitive restraints on our ability to
pass increased costs on to customers; increased use of fixed price
contracts for our services; possible interruptions from terrorist
activity; uncertainty about our ability to obtain additional
capital when needed in the future or to obtain capital for
expansion of our business; defaults on our credit agreements
that could lead to a loss of our working capital credit line;
our dependence on key personnel; our Rights Plan and provisions
of our Articles of Incorporation, which could discourage a
takeover of the Company; the limited market for our stock
resulting from our delisting from the Nasdaq Small Cap Market
and thin trading volume; possible volatility in our stock
price; possible dilution from future issuances of equity
securities; and the likelihood that we will not pay dividends
in the future.

ITEM 8.  	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
-------     --------------------------------------------

The Index to Financial Statements and Schedules appears on page F-1,
the Report of Independent Public Accountants appears on F-2, and the
Consolidated Financial Statements and Notes to Consolidated Financial
Statements appear on pages F-3-15.

ITEM 9.  	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
            AND FINANCIAL DISCLOSURES.
-------     -----------------------------------------------------------

None.

                                  42
<PAGE>  43

                                PART III


ITEM 10.  	DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
--------    ---------------------------------------------------

The information required by this Item is set forth under the caption
"Election of Directors" in the Company's definitive Proxy Statement to
be filed with the Securities and Exchange Commission pursuant to
Regulation 14A within 120 days after the end of the Company's last
fiscal year and is incorporated herein by this reference as if set
forth in full.

ITEM 11.  	EXECUTIVE COMPENSATION.
--------    -----------------------

The information required by this Item is set forth under the caption
"Executive Compensation" in the Company's definitive Proxy Statement to
be filed with the Securities and Exchange Commission pursuant to
Regulation 14A within 120 days after the end of the Company's last
fiscal year and is incorporated herein by this reference as if set
forth in full.

ITEM 12.  	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
--------    ---------------------------------------------------------------

The information required by this Item is set forth under the caption
"Principal Shareholders" in the Company's definitive Proxy Statement to
be filed with the Securities and Exchange Commission pursuant to
Regulation 14A within 120 days after the end of the Company's last
fiscal year and is incorporated herein by this reference as if set
forth in full.

ITEM 13.  	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
--------    -----------------------------------------------

The information required by this Item is set forth under the caption
"Certain Transactions" in the Company's definitive Proxy Statement to
be filed with the Securities and Exchange Commission pursuant to
Regulation 14A within 120 days after the end of the Company's last
fiscal year and is incorporated herein by this reference as if set
forth in full.


                                   PART IV

ITEM 14.  	EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
--------    ----------------------------------------------------------------

The following are filed as part of this Report:

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

    2.	Financial Statement Schedules

        	The following financial statement schedule is filed herewith:

        	Schedule II - Valuation and Qualifying Accounts

            All other schedules for which provision is made in the applicable
            accounting regulations of the Securities and Exchange Commission
            are not required under related instructions or are inapplicable,
            and therefore have been omitted.
                                             43
<PAGE>  44

    3.	Exhibits

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

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

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

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

             3.2  Bylaws of the Registrant, as amended--incorporated by
                  reference to Exhibit 2.0 to Form 10-Q of the Registrant for
                  the quarter ended June 30, 2001.

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

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

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

             4.4  Warrant Agreement between the Registrant and Lori Terra-
                  Vassalo, dated March 4, 1999 -- incorporated by reference to
                  Exhibit 4.8 to Form 10-K of the Registrant for the year ended
                  December 31, 1999.

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

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

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

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

            10.1  1996 Stock Incentive Plan, as amended, of the Registrant--
                  incorporated by reference to Exhibit 4.1 to Form 10-Q of the
                  Registrant for the quarter ended September 30, 1996.

            10.2  Office Building Lease dated August 21, 1998 between the
                  Registrant and Tar Asset Addison Place, L.P.--incorporated
                  by reference to Exhibit 10.1 to Form 10-Q for the quarter
                  ended September 30, 1998.
                                            44
<PAGE>  45

            10.3  Revolving Credit Loan and Security Agreement between the
                  Registrant and Comerica Bank dated March 1, 2000 --
                  incorporated by reference to Exhibit 10.1 to Form 10-Q of the
                  Registrant for the quarter ended March 31, 2000.

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

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

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

            10.7  Loan Reimbursement Agreement between HemaBiologics, Inc., a
                  wholly owned subsidiary of the Registrant, and Joshua Levy
                  dated January 30, 1998.

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

            10.9  Employment agreement between the Registrant and William D.
                  Nicely dated June 1, 2000 --incorporated by reference to Form
                  10-Q for the quarter ended June 30, 2000.

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

            10.11 Employment Agreement between the Registrant and Joshua
                  Levy dated March 22, 2000 -- incorporated by reference to
                  Exhibit 10.12 of Form 10-K of the Registrant for the year
                  ended December 31, 2000

            11    Computation of earnings (loss) per common equivalent share

            21    Subsidiaries of the Registrant

            23    Consent of Arthur Andersen LLP

            99    Arthur Andersen LLP's Letter to Company regarding Controls

  (b) 	Reports on Form 8-K.

         	None.
                                       45
<PAGE>  46

                                    SIGNATURES

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




Dated:  April 1, 2002                HEMACARE CORPORATION

                                     /s/ David E. Fractor
                                    -----------------------------------
                                    David E. Fractor, Chief
                                     Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the Registrant in the capacities indicated on the 1st day of April,
2002.


          Signature                     Title

\s\  Alan C. Darlington
-----------------------------            Chairman of the Board
Alan C. Darlington			    (Principal Executive Officer)


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

\s\ Stephen Wallace                      Director
-----------------------------
Stephen Wallace


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


\s\  Robert L. Johnson                   Director
-----------------------------
Robert L. Johnson
                                          46
<PAGE>  F-1


            INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
                             ITEM 14(A) (1) AND (2)


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

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

Consolidated balance sheets at December 31, 2001 and
December 31, 2000...........................................      F-3

For the years ended December 31, 2001, 2000 and 1999:

     Consolidated income statements.........................      F-4

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

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

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

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

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

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

                                   F-1
<PAGE>  F-2


                Report of Independent Public Accountants


To the Shareholders and Board of Directors of HemaCare Corporation:

We have audited the accompanying consolidated balance sheets of
HemaCare Corporation (a California corporation) and subsidiaries as of
December 31, 2001 and 2000, and the related consolidated statements of
income, shareholders' equity and cash flows for each of the three years
in the period ended December 31, 2001. These consolidated financial
statements are the responsibility of the Company's management.  Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
HemaCare Corporation and subsidiaries as of December 31, 2001 and 2000,
and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 2001 in conformity
with accounting principles generally accepted in the United States.


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




Los Angeles, California
March 14, 2002
                                    F-2
<PAGE>  F-3

PART 1. 	FINANCIAL INFORMATION
-------     ---------------------

Item. 1	Financial Statements


                            HEMACARE CORPORATION AND SUBSIDIARIES
                                  CONSOLIDATED BALANCE SHEETS
                                AS OF DECEMBER 31, 2001 AND 2000
<TABLE>
<CAPTION>
                                                    2001              2000
                                                -------------     ------------
<S>                                             <C>               <C>
		ASSETS

Current assets:
  Cash and cash equivalents.................... $  1,025,000      $  1,362,000
  Marketable securities........................            -           868,000
  Accounts receivable, net of allowance for
   doubtful accounts of $212,000 (2001) and
   $204,000 (2000).............................    5,454,000         3,996,000
  Product inventories and supplies.............      707,000           723,000
  Prepaid expenses.............................      192,000           187,000
  Deferred taxes...............................      498,000         1,239,000
                                                -------------     -------------
           Total current assets................    7,876,000         8,375,000

Plant and equipment, net of accumulated
  depreciation and amortization of
  $2,030,000 (2001) and $1,988,000 (2000)......    2,348,000           799,000
Goodwill, net of amortization of
  $168,000 (2001) and $115,000 (2000)..........      362,000           415,000
Deferred taxes.................................    2,405,000         1,854,000
Other assets...................................       91,000            34,000
                                                -------------     -------------
                                                $  13,082,000      $ 11,477,000
                                                =============     =============
  LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
  Accounts payable............................. $  2,495,000      $  2,044,000
  Accrued payroll and payroll taxes............      948,000           874,000
  Other accrued expenses.......................      113,000           156,000
  Current obligations under capital leases.....       31,000            51,000
  Current notes payable........................      168,000                 -
  Reserve for discontinued operations..........       75,000            76,000
                                                -------------     -------------
           Total current liabilities...........    3,830,000         3,201,000

Obligations under capital leases, net
  of current portion...........................      176,000            46,000
Notes payable, net of current portion..........      626,000                 -
Other long-term liabilities....................       23,000            27,000
Commitments and contingencies..................
Shareholders' equity:
  Common stock, no par value - 20,000,000
    shares authorized, 7,590,205 issued and
    outstanding in 2001 and 7,689,657 issued
    and outstanding in 2000....................   13,065,000        13,164,000
  Accumulated deficit..........................   (4,638,000)       (4,961,000)
                                                -------------     -------------
           Total shareholders' equity..........    8,427,000         8,203,000
                                                -------------     -------------
                                                $ 13,082,000      $ 11,477,000
                                                =============     =============

</TABLE>

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

<PAGE>  F-4
                    HEMACARE CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED INCOME STATEMENTS
                 FOR THE THREE YEARS ENDED DECEMBER 31, 2001


<TABLE>
<CAPTION>

                                          2001           2000           1999
                                      ------------   ------------   ------------
<S>                                   <C>            <C>            <C>
Revenues:
    Blood products..................  $ 16,466,000   $ 14,019,000   $11,155,000
    Blood services..................     8,733,000      7,493,000     7,866,000
                                      -------------  -------------  ------------
    Total revenue...................    25,199,000     21,512,000    19,021,000

Operating costs and expense:
    Blood products..................    14,979,000     11,696,000     9,345,000
    Blood services..................     5,811,000      4,966,000     5,650,000
                                      -------------  -------------  ------------
    Total operating costs and
      expenses......................    20,790,000     16,662,000    14,995,000


    Gross profit....................     4,409,000      4,850,000     4,026,000

General and administrative expenses.     3,918,000      3,492,000     3,008,000
                                       ------------  -------------  ------------
Income from operations..............       491,000      1,358,000     1,018,000
Other income (expense)..............        22,000         91,000       (33,000)
Gain on sale of Gateway Community
  Blood Program.....................             -              -       100,000
                                      -------------  -------------  ------------
Income before income taxes..........       513,000      1,449,000     1,085,000
Provision (benefit) for income
   taxes............................       190,000     (2,901,000)       28,000
                                      -------------  -------------  ------------
Net income..........................   $   323,000   $  4,350,000   $ 1,057,000
		                          ============= =============  ============

Income per share
 Basic..............................  $       0.04   $       0.57   $      0.14
                                      =============  =============  ============

 Diluted............................  $       0.04   $       0.50   $      0.13
                                      =============  =============  ============

Weighted average shares outstanding
 - basic............................     7,534,000      7,567,000     7,393,000
                                      =============  =============  ============

Weighted average shares outstanding
 - diluted..........................     8,298,000      8,776,000     8,158,000
                                      =============  =============  ============

</TABLE>

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

<PAGE>  F-5

                    HEMACARE CORPORATION AND SUBSIDIARIES
	       CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
             FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999

<TABLE>
<CAPTION>

			           Preferred Stock         Common Stock         Accumulated
		               Shares     Amount      Shares       Amount        Deficit        Total
                          --------  ----------  ----------  ------------  -------------   -----------
<S>                       <C>       <C>         <C>         <C>           <C>             <C>
Balances at December
 31, 1998.............     450,000  $ 75,000     7,281,120  $13,584,000   $(10,368,000)   $ 3,291,000
Issuance of common
 stock for employee
 401(k) and
 incentive bonus
 plans................          -         -         96,462       44,000              -         44,000
Private placement.....          -         -         97,500        9,000              -          9,000
Non-cash compensation.          -         -              -       39,000              -         39,000
Net income............          -         -              -            -       1,057,000     1,057,000
                          --------  --------    -----------  ------------  -------------   -----------
Balances at December
 31, 1999...........      450,000    75,000      7,475,082    13,676,000     (9,311,000)    4,440,000

Issuance of common
 stock for employee
 401(k) and
 incentive bonus
 plans..............                               115,133        75,000              -        75,000
Preferred stock
 conversion.........     (450,000)  (75,000)       500,000        75,000              -             -
Stock repurchased and
 warrants redeemed..                              (439,558)     (697,000)             -      (697,000)
Stock options and
 warrants exercised.            -         -         39,000        35,000              -        35,000
Net income..........            -         -              -             -      4,350,000     4,350,000
                          --------  --------    -----------  ------------  -------------   ------------
Balances at December
 31, 2000...........            -         -      7,689,657    13,164,000     (4,961,000)     8,203,000

Issuance of common
 stock for employee
 401(k) and
 incentive bonus
 plans..............            -         -         92,848        93,000              -         93,000
Stock repurchased...            -         -       (332,300)     (391,000)             -       (391,000)
Stock options
 exercised..........            -         -        140,000       199,000              -        199,000
Net income..........            -         -              -             -        323,000        323,000
                          --------  --------    -----------  ------------  -------------   ------------
Balances at December
  31, 2001..........            -   $     -      7,590,205   $13,065,000   $ (4,638,000)   $ 8,427,000
                          ========  ========    ===========  ============  =============   ============

</TABLE>

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

				                                F-5
<PAGE>   F-6
                                   HEMACARE CORPORATION AND SUBSIDIARIES
                                    CONSOLIDATED STATEMENT OF CASH FLOWS
                                 FOR THE THREE YEARS ENDED DEMCEBER 31, 2001
<TABLE>
<CAPTION>

                                                             Years ended December 31,
                                                      2001            2000          1999
                                                   ------------   ------------  -------------
<S>                                                <C>            <C>           <C>
Cash flows from operating activities:
 Net Income......................................  $   323,000    $ 4,350,000   $ 1.057,000
 Adjustments to reconcile net income
  to net cash provided by operating activities:
    Provision for bad debts......................       10,000         21,000             -
    Recognition (use) of deferred tax assets.....      190,000     (3,093,000)            -
    Depreciation and amortization................      299,000        198,000       334,000
    Loss (gain) on disposal of assets............        2,000        (51,000)            -
    Issuance of common stock and options for
     compensation................................       93,000         75,000        83,000

 Changes in operating assets and liabilities:
    (Increase) decrease in accounts receivable...   (1,468,000)      (927,000)      131,000
    (Increase) decrease in inventories, supplies
     and prepaid expenses........................       11,000         73,000      (110,000)
    (Increase) in other assets...................      (57,000)             -       (10,000)
    Increase (decrease) in accounts payable,
     accrued expenses, and other liabilities.....      505,000        790,000      (467,000)
    (Expenditures for) discontinued
     operations..................................       (1,000)        (5,000)      (28,000)
                                                   ------------   ------------  ------------
    Net cash (used in) provided by operating
     activities..................................      (93,000)     1,431,000       990,000

Cash flows from investing activities:
 Decrease in other assets........................            -         12,000        19,000
 Proceeds from sale of plant and equipment.......            -         17,000             -
 Decrease (increase) in marketable securities....      868,000        (90,000)     (490,000)
 (Purchase) of plant and equipment,net...........   (1,646,000)      (285,000)      (81,000)
                                                   ------------   ------------  ------------
  Net cash (used in) investing activities........     (778,000)      (346,000)     (552,000)

Cash flows from financing activities:
 Proceeds from exercise of stock options.........      199,000         35,000             -
 Repurchase and retirement of common stock.......     (391,000)      (697,000)            -
 Principal payments on notes payable and
  capitalized leases.............................     (116,000)             -             -
 Net borrowings on lines of credit...............      842,000       (551,000)     (320,000)
                                                   ------------   ------------  ------------
 Net cash provided by (used in) financing
  activities.....................................      534,000     (1,213,000)     (320,000)

 (Decrease) increase in cash and cash
  equivalents....................................     (337,000)      (128,000)      118,000
 Cash and cash equivalents at beginning of
   period........................................    1,362,000      1,490,000     1,372,000
                                                   ------------   ------------  ------------
 Cash and cash equivalents at end of period......  $ 1,025,000    $ 1,362,000   $ 1,490,000
                                                   ============   ============  ============

Supplemental disclosure:
 Interest paid...................................  $    30,000    $    22,000   $    93,000
                                                   ============   ============  ============

 Income taxes paid...............................  $    44,000    $   133,000   $    39,000
                                                   ============   ============  ============

Items not impacting cash flow:
 Increase in capital lease obligations...........  $   151,000    $         -   $   401,000
                                                   ============   ============  ============
 Termination of capital leases...................  $         -    $    94,000   $   769,000
                                                   ============   ============  ============
 Conversion of preferred stock into common stock.  $         -    $    75,000   $         -
                                                   ============   ============  ============

</TABLE>

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

<PAGE>  F-7

                                HEMACARE CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

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

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

Coral Blood Services, Inc. ("CBS"), a wholly owned subsidiary of the
Company, was formed in October 1998, for the purpose of purchasing
certain assets of a company which had been in the business of supplying
blood products and services to hospitals primarily in the eastern
United States.

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

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

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

Cash and Cash Equivalents: The Company considers all highly liquid
investments with an original maturity of three months or less to be
cash equivalents.

Marketable Securities:  Marketable securities consist principally of
certificates of deposits which approximate fair market value.
Substantially all of the Company's investments are issued by a large
financial institution. The Company accounts for its short term
investments in accordance with Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities." The Company classifies its investments as held-to-
maturity which are recorded at cost. Realized gains and losses are
included in interest and other income. Dividend and interest income is
recognized when earned.

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

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

Inventories and Supplies: Inventories consist of Company-manufactured
platelets and whole blood components as well as component blood
products purchased for resale.  Supplies consist primarily of medical
supplies used to collect and manufacture products and to provide
therapeutic services. Inventories are accounted for on a first-in,
first-out basis.
                                F-7

<PAGE>  F-8

Plant and Equipment: Plant and equipment is stated at original cost.
Furniture, fixtures, equipment and vehicles are depreciated using the
straight-line method over three to ten years.  Leasehold improvements
are amortized over the lesser of their useful life or the length of the
lease, ranging from three to five years. The cost of normal repairs and
maintenance are expensed as incurred.

Goodwill: Goodwill is being amortized on a straight-line basis over ten
years. It is the Company's policy to periodically evaluate goodwill for
recoverability. In the event of a permanent impairment, the goodwill
balance would be reduced to net realizable value, and the write down
would be charged to expense.  Goodwill amortization was $53,000 for
each of the years ending December 31, 2001.

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

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

Warrants and options to purchase 590,000, 575,000 and 863,800 shares of
common stock outstanding at December 31, 2001, 2000 and 1999,
respectively, were not included in the computation of diluted earnings
per share because the exercise price of the warrants and options was
greater than the average market price of the common stock.

Concentration of risk: Sales of products and services to an
unaffiliated hospital group accounted for $2,221,000 (12%) of the
Company's revenues in 1999.  During 2001 and 2000, no single customer
accounted for more than 10% of the Company's revenues.  At December 31,
2001 and 2000, no customer accounted for over 10% of the Company's
accounts receivable.

Reclassification:  Certain prior year amounts have been reclassified to
conform to the current year presentations (See Note 10).

Recent accounting pronouncements: In June  2001, the FASB issued
two statements: SFAS No. 141, "Business Combinations" and SFAS  No.
142, "Goodwill and Other Intangible Assets," which provide guidance
on  the accounting for business combinations, requires all
future business combinations to be accounted for using the
purchase method, discontinues amortization of goodwill, defines when
and how intangible assets are amortized, and requires an annual
impairment test for  goodwill.  HemaCare will adopt these statements in
January 2002 and is currently reviewing these statements to
determine their impact; however, the Company does not expect the
adoption of these statements to have a material impact on its
financial position or results of operations other than not amortizing
goodwill.  In August 2001, the FASB issued SFAS No. 144,
"Accounting for the Impairment and Disposal of Long Lived Assets,"
which supercedes SFAS No. 121 and certain sections of APB Opinion
No. 30.  SFAS No. 144 classifies long-lived assets as either (1) to be
held and used, (2) to be disposed of by other than sale, or (3)
to  be disposed of by sale.  This standard introduces a probability-
weighted cash flow estimation approach to deal with situations in
which alternative courses of action to recover the carrying amount
of a long-lived asset are under consideration or a range is estimated
for  the amount of possible future cash flows.  HemaCare will adopt
this statement  in  January 2002 and is currently reviewing this
statement to determine its impact; however, the Company does not expect
the adoption of this standard to have a material impact on its
financial position or results of operations.
                               F-8
<PAGE>  F-9

Note 3 - Plant and Equipment

Plant and equipment consists of the following:

                                                   December 31,
                                            ---------------------------
                                              2001            2000
                                            ------------   ------------

Furniture, fixtures and equipment           $ 4,000,000    $ 2,584,000
Leasehold improvements                          378,000        203,000
                                            ------------   ------------
                                              4,378,000      2,787,000
Less accumulated depreciation and
 amortization                                (2,030,000)    (1,988,000)
                                            ------------   ------------
                                            $ 2,348,000    $   799,000
                                            ============   ============

During 2001, the Company entered into an agreement to acquire a blood
bank computer system that will benefit the Blood Products segment.  The
Federal Food and Drug Administration ("FDA") rules require the
Company to validate the blood bank computer system before it may be
used in operations.  This validation and installation process had not
been completed as of year end.  The Company expects to complete the
validation and installation process and begin initial operation of the
system during 2002.  As of December 31, 2001, the Company has capitalized
all software and hardware costs to acquire the system along with its
internal costs to validate and install the system.  The total amount
capitalized as of December 31, 2001 was $235,000.  Since the system was
not placed in service as of December 31, 2001, no depreciation expense
has been recorded.

Depreciation on expense for 2001, 2000 and 1999 was $246,000, $145,000
and $297,000, respectively.

Note 4 - Line of Credit and Note Payable
----------------------------------------

Line of Credit

The Company has a working capital line of credit with a bank whereby
the Company may borrow the lesser of 75% of eligible accounts
receivable or $2.0 million at an interest rate of prime plus .25% (5.0%
as of December 31, 2001).  As of December 31, 2001, the Company's net
borrowings on this line of credit were $175,000.  There were no
borrowings as of December 31, 2000.  This line of credit matures in
June 2003, and is including in notes payable, net of current portion on
the balance sheet.

In addition, the Company has a credit facility with the same bank which
provides for $1.25 million to be used to acquire vehicles and
equipment.  Payments are made on a straight-line basis over a period of
four years including interest equal to the bank's internal cost of
funds plus 2.5% (6.5% as of December 31, 2001).  This loan is
collateralized by substantially all of the Company's assets and is
cross defaulted with the Company's working capital line of credit.  At
December 31, 2001 the total amount financed under the equipment line of
credit is $619,000 and requires 48 monthly principal payments of
approximately $14,000 plus interest at a weighted average fixed rate of
6.6% per annum.  Interest expense for 2001, 2000 and 1999 was $30,000,
$22,000, and $93,000, respectively.

These two lines of credit are collateralized by substantially all of
the Company's assets and are cross defaulted.  They also require the
maintenance of certain financial covenants.  As of December 31, 2001,
the Company was not in compliance with a covenant that requires the
Company to be profitable each quarter.  During the fourth quarter of
2001, the Company incurred a loss.  The bank has waived this violation.

Note 5 - Leases
---------------

The Company has entered into several capital leases for equipment,
expiring on various dates through 2006.  Included in property and
equipment are the following assets held under capital leases.

                               F-9
<PAGE>  F-10

   Year ending December 31,     2001       2000
                              ---------   --------
    Equipment                 $ 315,023   $ 245,512
    Accumulated Depreciation    (86,242)   (108,991)
                              ----------  ----------
                              $ 228,781   $ 136,521
                              ==========  ==========

The Company leases its facilities and certain equipment under
operating leases that expire through the year 2007. Future minimum
rentals under capitalized and operating leases are as follows:

Year Ending December 31,
                               Capital    Operating
                              ---------   ----------
2002                          $ 35,000    $  572,000
2003                            30,000       336,000
2004                            70,000       323,000
2005                            62,000       267,000
2006                            50,000       222,000
Thereafter                          --         1,000
                              ---------   ----------
                               247,000    $1,721,000
                                          ==========
Less: Interest                 (40,000)
                              ---------
Present value                  207,000
Less: Current portion          (31,000)
                              ---------
                              $176,000
                              =========

Total rent expense under all operating leases was $517,000, $497,000
and $463,000 for the years ended December 31, 2001, 2000 and 1999,
respectively.

Note 6 - Income Taxes
---------------------

The Provision (benefit) for income taxes for the years ended December
31, 2001, 2000 and 1999 are as follows:

<TABLE>
<CAPTION>
                       2001           2000          1999
                   -----------    ------------    ----------
<S>                <C>            <C>             <C>
Current taxes:
   Federal.......  $     5,000    $    29,000     $   9,000
   State.........       12,000         56,000        19,000
                   ------------   ------------    ----------
                        17,000         85,000        28,000

Deferred taxes:
   Federal.......      146,000     (2,633,000)           --
   State.........       27,000       (353,000)           --
                   ------------   ------------    ----------
                       173,000     (2,986,000)           --

Provision (bene-
 fit) for income
 taxes...........  $   190,000    $(2,901,000)    $  28,000
                   ============   ============    ==========

</TABLE>

Differences between the provision (benefit) for income taxes and income
taxes at statutory federal income tax rate for the years ended December
31, 2001, 2000 and 1999 are as follows:
                                   F-10
<PAGE>  F-11

<Table>
<Caption>

                                      2001        2000          1999
                                   ----------   ---------     ----------
<S>                                <C>          <C>           <C>
Income tax expense at federal
  statutory rate.................  $   174,000  $   493,000   $ 369,000
State income taxes, net of
  federal benefit................       30,000       87,000      65,000
Change in valuation allowance....           --   (3,650,000)   (531,000)
Permanent differences............       34,000      146,000     120,000
Other............................      (48,000)      23,000       5,000
                                   ------------ ------------  ----------
Income tax expense (benefit).....  $   190,000  $(2,901,000)  $  28,000
                                   ============ ============  ==========
</Table>

The Company has recorded a net deferred tax asset of $2,903,000 at
December 31, 2001.  The components of the net deferred tax asset at
December 31, 2001 and 2000 are as follows:


<Table>
<Caption>

                                      2001           2000
                                   -----------     -----------
<S>                                <C>             <C>
Current:
Reserves.......................... $   75,000      $    76,000
Accrued expenses and other........    223,000          238,000
Net operating loss................    200,000          925,000
Valuation allowance...............          -                -
                                   ----------      ------------
Total deferred tax asset.......... $  498,000      $ 1,239,000
                                   ==========      ============
Noncurrent:
Net operating loss................ $1,673,000      $ 1,176,000
Depreciation and amortization.....    233,000          199,000
Tax credit carryforward...........    866,000          866,000
Other.............................     33,000           13,000
Valuation allowance...............   (400,000)        (400,000)
                                   -----------     ------------
                                   $2,405,000      $ 1,854,000
                                   ===========     ============
</Table>

A valuation allowance is recorded if the weight of available evidence
suggests it is more likely that not that some portion or all of the
deferred tax asset will not be recognized. The Company provided a
valuation allowance against all of its deferred tax assets through
September 30, 2000.  A determination was made in the fourth quarter of
2000 that, based on recent historical and expected future operating
results it is more likely than not that the Company will be able to
realize a significant portion of its deferred tax assets.

At December 31, 2001, the Company had net operating loss carryforwards
available for Federal income and state tax purposes totaling $5,400,000
which expire  through 2010.  At December 31, 2001, the Company had
federal income tax credit  carryforwards of approximately $550,000
expiring through 2010, and state tax credit carryforwards of
approximately $300,000 which are not subject to expiration.

Acquisitions of common stock which result in changes in equity
ownership in the Company could result in an "ownership change" within
the meaning of Section 382 of the Internal Revenue Code of 1986, as
amended (the "Code"), thereby imposing an annual limitation (the
"Section 382 Limitation") on the Company's ability to utilize its net
operating loss carryforwards to reduce future taxable income.  In the
event of a Section 382 Limitation, the Company's utilization of its net
operating loss carryforwards would be restricted.
                              F-11
<PAGE>  F-12

Note 7 - Shareholders' Equity
------------------------------

Stock Options

In July 1996, the Company's Board of Directors approved and adopted a
new stock incentive plan (the "1996 Plan") which provides for grants of
both stock options and shares of restricted stock.  Prior to that date,
options were granted under the Company's 1986 Stock Option Plan, as
amended (the "1986 Plan"). A total of 2,000,000 shares may be granted
under the terms of the 1996 Plan.  The term of the options granted is
determined by the Company's Board of Directors, but in no event may be
longer than ten years.  The exercise price of options granted generally
is required to be not less than the fair market value of the common
stock on the date of grant. Options granted to employees generally vest
at a rate of at least 20% per year. The 1986 Plan expired in July 1996.
At December 31, 2001, there were no options outstanding under the 1986
Plan.

The table below summarizes transactions in the 1986 Plan and the 1996
Plan (together, the "Plans").

<Table>
<Caption>
                                       2001               2000                1999
                               ------------------   ----------------  -----------------
                               Shares       Price   Shares    Price   Shares     Price
                               ---------   ------  ---------  ------  --------   ------
<S>                            <C>         <C>     <C>        <C>     <C>        <C>

Outstanding at beginning
  of year....................  1,365,000   $0.86   1,321,300  $0.89     923,300  $1.12
Granted......................    345,000    1.32     145,000   1.85     505,000   0.55
Exercised....................   (140,000)  (1.42)    (26,500) (0.63)          -      -
Canceled.....................    (94,000)  (1.07)    (74,800) (0.63)   (107,000) (2.38)
                               ----------          ----------         ----------
Outstanding at end of year...  1,476,000   $0.91   1,365,000  $0.86   1,321,300  $0.89
                               ==========  ======  ========== ======  ========== ======
Exercisable at end of year...    894,000   $0.78     862,800  $0.85     520,800  $1.12
                               ==========  ======  ========== ======  ========== ======
</Table>

The following table summarizes the range of exercise price, weighted
average remaining contractual life ("Life") and weighted average
exercise price ("Price") for all stock options outstanding as of
December 31, 2001:

<Table>
<Caption>


                                 Options Outstanding        Options Exercisable
                             ----------------------------   -------------------
Range of  Exercise Price       Shares      Life     Price     Shares    Price
------------------------     ---------   --------   -----    --------  -------
<S>                          <C>         <C>        <C>      <C>      <C>
$0.41 to $0.75                 971,000   6.7 years  $0.57    723,000  $0.57
$0.76 to $1.50                 320,000   8.9 years   1.22    101,000   1.22
$1.51 to $2.44                 185,000   8.3 years   2.35     70,000   2.35
                             ---------                       -------
                             1,476,000              $0.91    894,000  $0.78
                             =========              =====    =======  =====
</Table>

The Company grants stock options to employees and others in accordance
with the terms of its Plans.  Warrants are granted upon the Board of
Directors' approval.  The Company has elected to adopt SFAS 123
"Accounting for Stock-Based Compensation" for disclosure purposes only
and applies the provisions of APB Opinion No. 25. The Company
recognized $39,000 of compensation expense related to consulting
options in 1999.  The Company did not recognize any compensation
expense related to the issuance of stock options in 2001 or 2000. Had
compensation expense for all options granted to employees been
recognized in accordance with SFAS 123, the Company's net income and
net income per share would have been as follows:

<Table>
<Caption>
                                        Years ended December 31,
                                    2001          2000        1999
                                 -----------  -----------  ----------
<S>                              <C>          <C>          <C>
Pro forma net income...........  $  171,000   $4,184,000   $ 870,000
Pro forma basic net income
 per share.....................  $    0.02    $    0.55    $    0.12
Pro forma diluted net income
 per share.....................  $    0.02    $    0.48    $    0.11

</Table>
                                  F-12
<PAGE>  F-13

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

<Table>
<Caption>

                                       Years ended December 31,
                                    2001         2000         1999
                                ------------  -----------  -----------
<S>                             <C>           <C>          <C>
Expected life.................  4 Years        3 Years     3 Years
Expected volatility...........    40%            60%         80%
Interest rate.................   6.2%           6.2%        5.5%
Dividend yield................    0 %            0 %         0 %

</Table>

Warrants
--------

At December 31, 2001, 2000 and 1999, the Company had a total of
520,000, 540,000 and 600,000 warrants to purchase common stock
outstanding, at weighted average exercise prices of $4.60, $4.54 and
$4.17, respectively. All of the warrants outstanding at December 31,
2001 and 2000 were exercisable.

At December 31, 2001, 2000 and 1999, 30,000, 50,000 and 50,000 warrants
for consulting services were outstanding, respectively. The warrants
outstanding at December 31, 2001, were exercisable at a price of $3.69
and expire in June 2002.

In 1993, the Company issued warrants to purchase 400,000 shares of
stock at $5.50 per share in connection with an acquisition of a license
(See Note 11). These options expire in February 2003.

During 2000, 12,500 warrants previously issued for consulting services
were exercised with an average price of $1.33 per share.  No warrants
were exercised in 2001 or 1999.

Preferred Stock
---------------

In October 1998 as part of the purchase price of an acquisition,
450,000 shares of no par value Senior Convertible Series B preferred
stock ("Series B Preferred") were issued to the seller. The Series B
Preferred was convertible into 500,000 shares of HemaCare common stock,
at the option of the holder at any time after one year from the date of
issuance.  In December 2000, the holder of the Series B Preferred
converted all of the preferred stock into 500,000 shares of HemaCare
common stock.

Note 8 - Employee Salary Deferral Plan
---------------------------------------

HemaCare's Employee Salary Deferral Plan qualifies under Section 401(k)
of the Internal Revenue Service Code (the "401(k) Plan").  Eligible
employees may contribute up to 12 percent of their pre-tax salaries,
subject to certain limitations.  HemaCare may elect to match a portion
of the employees' contribution. In 2000, 1999 and 1998, the Company
elected to match 50 percent of each participant's contribution, up to
5% of the participants' annual salary, with HemaCare common stock.

During 2001, 2000 and 1999, HemaCare issued 92,848 shares ($93,000),
115,133 shares ($75,000) and 96,462 shares ($44,000) of common stock as
matching contributions for the 2000, 1999 and 1998 plan years,
respectively.  The Company intends to issue 78,365 shares ($122,000) in
2002 as matching contributions for the 2001 plan year.

Note 9 - 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, will expire on January 1, 2003.  Unless existing
California law is modified, the exemption will expire, which could have
a material adverse effect on the Company's revenue and net income. The
California State Legislature is currently considering modifications to
existing law to preserve this program. During 2001, 2000 and 1999
revenues from apheresis platelets were $5,956,000, $5,593,000 and
$4,764,000 respectively.  Gross profit from apheresis platelet sales
were $1,195,000, $1,497,000 and $1,329,000 for the years ended
December 31, 2001, 2000 and 1999.
                               F-13
<PAGE>  F-14


State and federal laws set forth anti-kickback and self-referral
prohibitions and otherwise regulate financial relationships between
blood banks and hospitals, physicians and other persons who refer
business to them. While the Company believes its present operations
comply with applicable regulations, there can be no assurance that
future legislation or rule making, or the interpretation of existing
laws and regulations will not prohibit or adversely impact the delivery
by HemaCare of its services and products.

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

In December 2000, the Company filed with the United States District
Court in the Central District of California an antitrust and unfair
competition complaint to recover damages and secure injunctive relief
against the ARC in connection with ARC pricing practices in Southern
California and other areas of the nation where the Company operates.
The lawsuit alleges that the ARC as part of a publicly announced
strategy to increase its market share in the U.S. blood industry has
employed below cost and bundled product pricing to eliminate
competition.  The lawsuit also contains other allegations, which we
believe constitute unfair competition by the ARC.

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

The Company entered into a long-term commitment with a vendor to
purchase kits used to produce blood products from blood donors and to
provide blood services to patients.  Under the terms of the agreement,
the Company is obligated to purchase $12,500,000 of kits at established
prices through July 2006.

Note 10 - Segment and Related Party Information
------------------------------------------------

Business Segments

The Company operates in two business segments as follows:

-  Blood Products: Collection, processing and distribution of
   apheresis and whole blood derived products and donor testing.
-  Blood Services: Therapeutic apheresis and stem cell collection
   procedures and other therapeutic services provided to patients.

Previously, the Company reported its results of operations using three
segments: blood management programs, regional blood products and
regional blood services.  During 2001, the Company reorganized its
operations and accordingly changed its segment reporting to conform to
the new organization structure.

Management uses more than one criterion to measure segment performance.
However, the dominant measurements are consistent with the Company's
consolidated financial statements which present revenue from external
customers and operating profit income for each segment. Supplemental
data are as follows:
                               F-14
<PAGE>  F-15

<Table>
<Caption>

                                Blood Products   Blood Services
                                --------------   --------------
<S>                             <C>              <C>
2001
----
Depreciation and amortization   $  109,000      $   27,000
Expenditures for fixed assets    1,097,000         145,000

2000
----
Depreciation and amortization   $   65,000       $  26,000
Expenditures for fixed assets      154,000          31,000

1999
----
Depreciation and amortization   $  171,000       $ 114,000
Expenditures for fixed assets       14,000           3,000

</Table>

Management evaluates segment performance based primarily on operating
income. Other revenue and expenses are not allocated to the segments.
The accounting policies of the segments are the same as those described
in the significant accounting policies.

Related Party Loan
-------------------

In 1995 and 1994, the Company made a series of personal loans to Dr.
Joshua Levy, then an officer and director of the Company totaling
$98,000.  The proceeds of these loans were used to refinance existing
debt that was collateralized by HemaCare stock owned by Dr. Levy.  In
January 1996, these individual notes were consolidated into a
promissory note, collateralized by HemaCare stock owned by Dr. Levy,
which accrued interest at a rate equal to the rate paid by the Company
under its line of credit. The Company received installment payments in
accordance with the terms of this note of $15,000 in January 1996 and
January 1997. Effective July 31, 1997, the Company entered into an
agreement with Dr. Levy that superceded the 1996 note. Under the terms
of this agreement, the Company agreed to forgive the remaining balance
of Dr. Levy's note, including interest accrued at a 10% annual rate,
over a five-year period so long as Dr. Levy remains employed by the
Company.  As of December 31, 2001, the balance remaining on this note
receivable was $13,000.

Note 11 - Discontinued Operations
---------------------------------

In November 1995, the Company discontinued the operations of HBI,
including the research and development of Immupath and the associated
specialty plasma business.

During the wind down of the research and development operations, the
Company manufactured a supply of Immupath to supply the patients still
receiving treatment for a limited period of time. There are currently
two patients receiving Immupath treatments.  The Company has a reserve
of $75,000 at December 31, 2001, for costs relating to the two patients
receiving Immupath treatments. The Company does not expect discontinued
operations to have a material impact on future operating results.

                                  F-15
<PAGE>  S-1



                Report of Independent Public Accountants on
                       Financial Statement Schedule



To the Shareholders and Board of Directors of HemaCare Corporation:


We have audited in accordance with auditing standards generally
accepted in the United States, the consolidated financial statements
included in HemaCare Corporation's annual report to shareholders
included in this Form 10-K, and have issued our report thereon dated
March 14, 2002.  Our audit was made for the purpose of forming an
opinion on those statements taken as a whole.  The schedule listed in
the index of consolidated financial statements is the responsibility of
the Company's management and is presented for purposes of complying
with the Securities and Exchange Commission's rules and is not part of
the basic consolidated financial statements.  This schedule has been
subjected to the auditing procedures applied in the audit of the basic
consolidated financial statements and, in our opinion, fairly states in
all material respects the financial data required to be set forth
therein in relation to the basic consolidated financial statements
taken as a whole.



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




Los Angeles, California
March 14, 2002

                                       S-1
<PAGE>  S-2


                     HEMACARE CORPORATION AND SUBSIDIARIES
               SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS


For The Years Ended December 31, 2001, 2000 and 1999



<Table>
<Caption>

                                                  Additions
                                            ----------------------
                              Balance at    Charged to   Charged to                 Balance
                              beginning     costs and      other                    at end of
Description                   of period     expenses      accounts     Write-offs    period
---------------------------   ----------    -----------  ----------    -----------  ----------
<S>                           <C>           <C>          <C>           <C>          <C>

Year ended December 31,
2001 - Allowance for
uncollectible accounts        $ 204,000     $ 10,000                   $  (2,000)   $ 212,000

Year ended December 31,
2000 - Allowance for
uncollectible accounts        $ 256,000     $ 21,000                   $ (73,000)   $ 204,000

Year ended December 31,
1999 - Allowance for
uncollectible accounts        $ 596,000     $     --     $(183,000)(1) $(157,000)   $ 256,000

</Table>

1)   Represents goodwill adjustment of acquired receivables.

                                                    S-2
<PAGE>


                              Index to Exhibits
<Table>
<Caption>

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

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

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

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

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

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

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

 4.4    Warrant Agreement between the Registrant and Lori Terra-
        Vasslo, dated March 4, 1999 -- incorporated by reference
        to Exhibit 4.8 to Form 10-K of the Registrant for the
        year ended December 31, 1999...............................

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

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

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

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

10.1    1996 Stock Incentive Plan of the Registrant, as amended--
        incorporated by reference to Exhibit 4.1 to Form 10-Q of
        the Registrant for the quarter ended September 30, 1996....

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

10.3    Revolving Credit Loan and Security Agreement between the
        Registrant and Comerica Bank dated March 1, 2000 -- incorp-
        orated by reference to Exhibit 10.1 to Form 10-Q for the
        quarter ended March 31, 2000...............................

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

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

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

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

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

10.9    Employment Agreement between the Registrant and William
        D. Nicely, dated June 1, 2000 -- incorporated by reference
        to Form 10-Q for the quarter ended June 30, 2000............

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

10.11   Employment Agreement between the Registrant and Joshua Levy
        dated March 22, 2000 -- incorporated by reference to
        Exhibit 10.12 of Form 10-K of the Registrant for the year
        ended December 31, 2000.....................................

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

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

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

99      Arthur Andersen LLP's Letter to Company regarding Controls. Filed herewith
                                                                    Electronically
</Table>