SERACARE INC, 10KSB40, 2000-05-30

SERACARE INC
10KSB40, 2000-05-30
SPECIALTY OUTPATIENT FACILITIES, NEC

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549
------------------------

FORM 10-KSB

(MARK ONE)

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

FOR THE FISCAL YEAR ENDED FEBRUARY 29, 2000
OR

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

FOR THE TRANSITION PERIOD FROM ______________ TO ______________

COMMISSION FILE NUMBER 0-21781
------------------------

SERACARE, INC.

(Name of Small Business Issuer in its charter)

DELAWARE 95-4343492
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)

1925 CENTURY PARK EAST, SUITE 1970 90067
LOS ANGELES, CALIFORNIA (Zip Code)
(Address of principal executive offices)

Issuer's telephone number: (310) 772-7777

Securities registered under Section 12(b) of the Exchange Act: NONE

Securities to be registered under Section 12(g) of the Exchange Act:

COMMON STOCK, $.001 PAR VALUE
(Title of Class)
------------------------

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-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-KSB or any amendment to this Form 10-KSB. /X/

The issuer's revenue for its fiscal year ended February 29, 2000 was
$62,771,003.

As of April 28, 2000, the aggregate market value of the issuers voting
shares held by non-affiliates was approximately $26,623,000 based on the last
price per share of such common stock at which the stock was sold on such date as
reported by the AMEX.

As of April 28, 2000, the issuer had 8,519,418 shares of its common stock,
$.001 par value issued and outstanding.

Transitional Small Business Disclosure Format. Yes / / No /X/

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PART I

ITEM 1. BUSINESS

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Except for historical information contained herein, the statements in this
report (including without limitation, statements indicating that the Company
"expects," "estimates," "anticipates," or "believes" and all other statements
concerning future financial results, product offerings or other events that have
not yet occurred) are forward-looking statements that are made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995,
Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A
of the Securities Act of 1933, as amended. Forward-looking statements involve
known and unknown factors, risks and uncertainties which may cause the Company's
actual results in future periods to differ materially from forecasted results.
Those factors, risks and uncertainties include, but are not limited to: the
positioning of the Company's products in the Diagnostic and Therapeutic Plasma
Products industry; the Company's ability to effectively manage its various
businesses in a rapidly changing environment; the impact of new blood safety
measures by the American Blood Resources Association or FDA which could
disqualify certain of the Company's current donors or impose excessive new costs
through new or revised testing and/or screening requirements; new competition
for donors and customers; the Company's dependence on a few major customers and
its ability to negotiate new agreements with such customers with favorable terms
and conditions; the inability of the Company to obtain FDA approval of newly
established centers; the ability of the company to integrate newly acquired
company's with geographically separated organizations, different business
backgrounds and different corporate cultures; and the introduction of synthetic
products which could eliminate the need for plasma products.

DESCRIPTION OF THE BUSINESS

SeraCare, Inc. ("SeraCare" or the "Company") was incorporated under the laws
of the State of Delaware in 1991 and changed its name from American Blood
Institute, Inc. to SeraCare, Inc. effective February 6, 1996. The Company's
principal business and executive offices are at 1925 Century Park East, Suite
1970, Los Angeles, California 90067, telephone (310) 772-7777.

COMPANY HISTORY. The Company as it is currently organized has evolved over
the last four years since February 6, 1996, when a new management team with a
strategic plan for expansion and growth began guiding the Company. During that
four year period, the Company has grown from six plasma collection centers to a
total of thirty four centers as of February 29, 2000, both through acquisition
and by establishing new startup centers. In January 1998, the Company acquired
Western States Group, Inc. (herein referred to as "Western States") and
Consolidated Technologies (herein referred to as "CTI"). On February 29, 2000,
the Company sold substantially all of the operating assets of CTI in a strategic
move to reduce debt and reorganize the company along business lines.
SeraCare, Inc. went public in May 1996 on the OTC Bulletin Board and is now
listed on the American Stock Exchange under the symbol SRK.

PRINCIPAL BUSINESS OPERATIONS. During the fiscal year just ended, the
Company was organized by division and consisted of three divisions: Consolidated
Technologies Division; Western States Plasma Division; and the Biologics
Division. With the acquisitions of Western States and CTI, the Company became a
fully integrated collector; manufacturer and marketer of plasma based diagnostic
products and tests. Western States provided expanded worldwide marketing with
its domestic customer base and an extensive European and Asian presence. In
addition, the Company's Biologics Division continued to be a factor in the
business of collecting and selling source plasma to manufacturers of
pharmaceutical and diagnostic products (called Fractionators). While the primary
product of the Company's Biologics Division continues to be source plasma, the
Company also collected and sold significant volumes of Cytomegalovirus Antibody
Plasma (CMV), Tetanus Antibody Plasma and HbSag (hepatitus positive) plasma
during the fiscal year ended February 29, 2000. The Company's customers process
source plasma into such

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products as gamma globulin (used to provide passive immunity for infectious
diseases such as hepatitis B, tetanus and rabies), the Antihemophilic factor
(used to treat hemophiliac victims), normal serum albumin (used for shock,
trauma and burn victims), diagnostic test kits for hepatitis and allergies, and
blood bank typing reagents. The Company also established a Specialty Plasma
Program during the year which focuses on rare and valuable antibodies and
reactive units. Initial results coordinated through the efforts of Western
States have been promising.

The process of collecting plasma is called Plasmapheresis, which consists of
drawing whole blood from a donor; centrifuge separation of the whole blood into
its components; removal of the plasma component; and returning of the red blood
cells to the donor; all in the same process. Because the red blood cells are
returned to the donor, it is possible to donate plasma more frequently than
whole blood. According to FDA rules, a donor can donate plasma up to twice per
week or 104 times per year.

The Company's Biologics Division currently sells the majority of the source
plasma it collects to fractionators under one to five year renewable contracts
which allow for annual pricing adjustments. The fractionators process the plasma
into therapeutic products which are then sold for distribution to the end users
of the products. None of the source plasma collected by the Company is sold or
administered to an end user without being processed by a fractionator.

With the sale of substantially all of the operating assets of CTI as of
February 29, 2000, the Company has reorganized along business lines.
Organizationally, the Company now consists of two business segments, the
Therapeutic Products Segment and the Diagnostic Products Segment. The
Therapeutic Products Segment consists primarily of the plasma collection
operations and certain of the distribution operations which focus on the
international markets for therapeutic products. The Diagnostic Products Segment
consists primarily of that portion of the distribution operation which focuses
on the worldwide markets for diagnostic products and that portion of the plasma
collection operations which identifies and collects rare antibody and reactive
units.

CURRENT OPERATIONS.

BIOLOGICS DIVISION. The Biologics Division currently conducts its business
through five wholly-owned subsidiaries: AVRE, Inc., a Nevada corporation, Binary
Associates, Inc., a Colorado corporation, BHM Labs, Inc., an Arkansas
corporation, American Plasma, Inc. a Texas corporation, and SeraCare
Acquisitions, Inc., a Nevada corporation. During FY 2000, the Biologics Division
opened new centers in Laredo, Texas; Allentown, Pennsylvania; and Reading,
Pennsylvania, all of which became fully licensed by the FDA and QPP certified
before or during March 2000. As of April 30, 1999, the Pasco center was
operating under a Reference Number from the FDA pending approval of license
applications. Collection centers which have not received FDA approval of its
license application are allowed to operate under a Reference Number and process
donors in order to develop sufficient training and records for review by FDA
inspectors to establish the locations ability to comply with FDA Regulations.
Such centers are however, precluded from selling any of the collected plasma
until final approval of its license application. Historically, it has taken
approximately six to eighteen months from date of filing to obtain final FDA
approval on a new license application. The Company's customers require both an
FDA license and QPP Certification under all current contracts. QPP Certification
for such centers is requested when the FDA license application has been approved
and can take six to eight weeks to obtain.

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Delaware; Lancaster, Pennsylvania; Reading, Pennsylvania; Allentown,
Pennsylvania, and Laredo, Texas. During FY 2000, such centers processed about
626,076 donations.

The Company is also in the initial stages of establishing two new centers in
Danville, Virginia and Providence, Rhode Island which are expected to be
operational during the next three to six months.

The plasma centers are operating under the tradename "SeraCare" which is
registered with the United States Patent and Trademark Office.

During the fiscal year ended February 29, 2000 about 67 percent of the
revenue derived from the Biologics Division was from Grupo Grifols, S.A. the
leading fractionator in Spain. Effective January 1, 1999, Grupo Grifols, S.A.
and the Company signed a new two-year contract which was amended on
November 19, 1999 to extend through the year 2002. The new agreements expand the
plasma requirements by one-third for the year 2000 through calendar 2002. About
18 percent of the revenue derived from plasma collection operations was from
sales to Alpha Therapeutic, a subsidiary of Yashi Tomi Pharmaceutical ("Alpha").
Alpha and the Company signed new two-year agreements covering production from
ten of the centers acquired on July 6, 1998. About 15 percent of plasma revenue
was from other entities including inter-divisional sales.

In September 1999, the Company announced a Marketing and Distribution
Strategic Alliance with Aventis Bio-Services, Inc. ("Aventis"). Under terms of
the five year Plasma Purchase and Management Services Agreement, Aventis agreed
to provide management services relating to certain specified centers and to
purchase all of the plasma collected at such centers. Aventis
Bio-Services, Inc. is a wholly owned subsidiary of Centeon L.L.C., a joint
venture of Hoechst AG and Rhone-Poulenc Rorer Inc., and is the world's largest,
fully integrated plasma collection company with offices, laboratories, logistics
centers and collection centers throughout the United States and Germany.

There is also a very active "Spot Market" for plasma via which the Company
could sell excess plasma should any of their location contracts not be renewed.
Prices for "Spot Market" plasma vary, but generally run ten to fifteen percent
higher than the Company's current contract pricing.

Most of the Biologics Division's revenue is derived under contracts and
relationships, which once established continue to be renewed. The plasma
collected by the Biologics Division is generally used in the manufacture of
therapeutic products to treat certain diseases. Several companies are attempting
to develop and market products to treat these diseases based upon technology,
which would lessen or eliminate the need for human blood plasma. Such products,
if successfully developed and marketed, could adversely affect the demand for
plasma. Products utilizing technology developed to date have not yet proven as
cost-effective or as marketable to healthcare providers as products based on
human blood plasma. However, there can be no assurances that such technology
will not ultimately become economically viable and cause a severe adverse impact
upon the Company and the plasma industry as a whole.

During fiscal 2000, the Company has responded to the challenge of issues
raised by the FDA and has made several changes which the Company believes are
necessary in order to be successful in this highly regulated industry. The
Company has established the position of "Director of Quality Assurance and
Compliance". This position serves as the communication link between the company
and the FDA, in addition to having responsibility for insuring that the Company
maintains a high level of compliance. Three new manager positions, "Manager of
Quality Assurance", were developed in support of the Director of Quality
Assurance and Compliance to provide appropriate focus and control over the
centers. Each Manager of Quality Assurance responds to day-to-day issues
encountered by the various centers and are on site during FDA audits to insure
that any issues are addressed and corrected timely. The Company has also
established full time Quality Assurance positions in each of the 34 plasma
collection centers with the ongoing responsibility of insuring compliance within
the center. In order to verify that the Company's commitment to compliance is
being adhered to, the Company retained an independent Compliance

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Auditor to perform periodic unannounced compliance inspections at the centers,
simulating FDA inspections, with the audit results being sent directly to the
President of the Biologics Group and the President of the Company. The focus of
all inspections and review processes is to insure that each of the Company's
centers are in compliance with all customer, European or FDA regulations that
protect the integrity of the products and the safety of donors and employees.

WESTERN STATES PLASMA DIVISION. During fiscal 2000, the Western States
Plasma Division operated through Western States Group, Inc., located in
Oceanside, California. Western States is an FDA licensed worldwide marketing
organization for therapeutic based blood plasma products, diagnostic test kits,
specialty plasma and bulk materials, with offices in Helsinki, Germany, Milan,
Mexico City, Tel Aviv and Seoul. Western States is a vendor-approved supplier to
507 pharmaceutical and other healthcare companies, including being listed as an
Exclusive Supplier in many customers regulatory applications with the FDA.
Western States has also helped certain customers develop internal protocols and
standards used to establish quality control benchmarks and has performed various
other value-added services for its' customers in order to establish solid
relationships. This Division's primary focus is on multinational biotech,
pharmaceutical and technology products. Western States generally sells its
plasma under purchase order agreements, but is also active in the spot market.
During fiscal 2000, Western States also established itself as a major supplier
of plasma based diagnostic products to several major domestic pharmaceutical
companies and signed a significant distribution agreement with the largest
producer of Bovine Products in the world. Additionally, this Division cultivated
alternative diagnostic applications for traditionally therapeutic products as an
alternative to animal based mediums and established itself as a manufacturer of
bulk plasma based products and serums.

CONSOLIDATED TECHNOLOGIES DIVISION. During fiscal 2000, the Consolidated
Technologies Division operated through SeraCare Technology, Inc., a Nevada
corporation. Located in Austin, Texas, Consolidated Technologies is a biomedical
company which manufacturers over 200 plasma based diagnostic products consisting
primarily of proficiency test specimens, controls and calibrators. Consolidated
Technologies supplies two of the leading proficiency testing services in the
United States who use these products to test members of their respective
organizations. Laboratories and other healthcare companies use controls,
calibrators and standards to assess the accuracy and precision of laboratory
test methods and instruments. Consolidated Technologies' products include
biological materials and private-labeled products for manufacturing or
laboratory use. Products have applications in most laboratory test disciplines,
including serum chemistry, urine chemistry, toxicology, immunology/serology,
coagulation, and infectious disease.

On February 29, 2000 (the "Closing Date") the Company sold substantially all
of the operating assets of SeraCare Technology, Inc., (dba Consolidated
Technologies), a Nevada corporation (herein referred to as "CTI") located in
Austin, Texas to Consolidated Technologies, Inc., a Minnesota corporation, which
is a subsidiary of Sybron International, Inc. (referred to herein as "Sybron").
Under terms of the Asset Purchase Agreement the transaction was an all cash
transaction with the purchase price received by SeraCare (which is subject to
adjustment) consisting of $16,750,000 base purchase price plus $656,515 in
various closing adjustments. The purchase price was determined through arms
length negotiations between the Company and Sybron. The operating assets sold by
SeraCare included, but were not limited to: certain real property; furniture and
fixtures; machinery and equipment; leasehold improvements; licenses and other
intangible properties including certifications, FDA licenses and trademarks;
inventories; certain trade receivables; and interests arising under or in
connection with contracts with customers.

COMPETITION

The Company's Biologics Division competes for donors with pharmaceutical
companies which collect plasma for their own use, several other commercial
plasma collection companies, and non-profit organizations, such as the American
Red Cross and community blood banks, which solicit the donation of whole blood.
A number of these competitors have access to greater financial, marketing and
other resources than

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the Company. If the Company is unable to maintain and expand its donor base, its
business and future prospects will be adversely affected.

The Western States Group competes with fractionators in the sale of plasma
products and other plasma collection companies in the sale of human source
plasma and specialty plasma. Long term established relationships internationally
and domestically serve as the cornerstone of Western States competitive edge. In
addition, Western States ability to work with customers in developing SOP's and
formulations for FDA approval appears unique within the industry. However, if
Western States is not able to sustain their relationships, or if more
pharmaceutical companies decide to buy directly from fractionators, its business
and future growth could be adversely affected.

CTI competes with an array of small diagnostics manufacturers in a highly
diverse competitive environment with each company targeting a small segment of
the $20 billion diagnostics industry. Several major pharmaceutical companies are
moving toward outsourcing of their diagnostic test kits, controls and
calibrators, with the key to success as a contract manufacturer being quality
control and a quality end product. CTI has focused its efforts on this segment
where their technical expertise and established quality control procedures
provide a competitive edge. However, if major pharmaceutical companies determine
to manufacture their own products or if CTI fails to maintain a quality image,
their business and future prospects could be adversely affected.

TRADEMARKS

The Company's plasma collection centers are operated under the tradename
"SeraCare" which is registered with the United States Patent and Trademark
Office.

REGULATORY ISSUES

The plasma collection and derivative industry is one of the most heavily
regulated in the United States. Federal, state and local regulations are
designed to protect the health of the donors as well as the integrity of the
products. The Food and Drug Administration (the "FDA") administers the federal
regulations across the country. Failure to comply with FDA regulations, or state
and local regulations, may result in the forced closure of a collection center
or monetary fines or both, depending upon the issues involved. The Company is
also subject to regulation by Occupational Safety and Health Administration
("OSHA"). The following summarizes the nature of these regulations:

FEDERAL GOVERNMENT

FOOD AND DRUG ADMINISTRATION:

The Food and Drug Administration has extensive regulations pertaining to the
collection, storage and transport of human SOURCE PLASMA. These regulations are
found in the Code of Federal Regulations 21: Parts 207, 211, 606 and 640.

Part 207 requires the operators of blood and blood products establishments
to register and list their products with the Center for Biologics Evaluation and
Research ("CBER"), FDA. Part 211, Subparts B and C regulate the quality control
personnel and facilities as well as the overall facilities themselves.

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Part 606 relates to the qualifications of the center personnel, both medical
and technical as well as the plant or center facilities and buildings.
Part 640, Subpart G titled Source Plasma is a comprehensive set of regulations
covering virtually every aspect of a plasma center operation. These include but
are not limited to:

informed consent,

medical supervision,

donor suitability,

collection of blood for source plasma,

plasmapheresis (the actual procedure of collecting plasma),

required laboratory tests,

processing of plasma,

general requirements,

labeling of containers,

manufacturing responsibility,

records,

reporting of donor reactions,

modification of source plasma and

shipping and storage of plasma.

In addition to the Code of Federal Regulations, the FDA regularly releases
various guidelines to which all registered blood establishments are expected to
comply.

To ensure compliance, the FDA, through their various regional offices,
conduct unannounced inspections of all plasma and blood centers. These
inspections are usually annual and the results are kept on record at CBER, FDA.
The inspectors generally examine records, equipment, facilities, review the
training documents for personnel, review the physical examination procedures and
observe the various procedures being accomplished. These inspections typically
last from two to five days and may involve more than one inspector. The
observations of an inspector are recorded on a Form 483, a copy of which is
given to the local manager. These observations must be responded to within a two
week period, detailing what, if any, actions have been taken to correct the
observation. The regional office generally makes a determination together with
CBER as to whether these responses properly address the issues. If the
observations were considered serious enough; or, if the answers were not
considered adequate, CBER will issue a REGULATORY LETTER. This is considered a
"red flag" in the industry and if not responded to in a timely and appropriate
manner, can result in CBER taking further action, including actually closing the
center.

The FDA, through the Federal Register, frequently prints any actions taken
against a blood bank or plasma center as a result of compliance problems. These
are easily obtained either by contacting the FDA directly or on the FDA world
wide web page "www. fda.com".

Fractionators (manufacturers to whom we sell the plasma) also conduct
compliance inspections in our centers on an annual basis. In addition, because
some of our products find their way into Europe and Asia, the Company is also
periodically inspected by members of other country's regulatory equivalent to
the FDA.

During fiscal 2000, the Company has responded to the challenge of issues
raised by the FDA and made several changes which the Company believes are
necessary in order to be successful in this highly

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regulated industry. The Company has established the position of "Director of
Quality Assurance and Compliance". This position serves as the communication
link between the company and the FDA, in addition to having responsibility for
insuring that the Company maintains a high level of compliance. Three new
manager positions, "Manager of Quality Assurance", were developed in support of
the Director of Quality Assurance and Compliance to provide appropriate focus
and control over the centers. Each Manager of Quality Assurance responds to
day-to-day issues encountered by the various centers and are on site during FDA
audits to insure that any issues are addressed and corrected timely. The Company
has also established full time Quality Assurance positions in each of the 34
plasma collection centers with the ongoing responsibility of insuring compliance
within the center. In order to verify that the Company's commitment to
compliance is being adhered to, the Company retained an independent Compliance
Auditor to perform periodic unannounced compliance inspections at the centers,
simulating FDA inspections, with the audit results being sent directly to the
President of the Biologics Group and the President of the Company. The focus of
all inspections and review processes is to insure that each of the Company's
centers are in compliance with all customer, European or FDA regulations that
protect the integrity of the products and the safety of donors and employees.

CLINICAL LABORATORY IMPROVEMENT ACT OF 1988:

In 1988, the U.S. Department of Public Health introduced an updated set of
laboratory regulations. One of the many areas which this law, regulates is the
definition of the education level of personnel required to perform clinical
laboratory tests as well as regulating the equipment and the required controls
and calibrations. Among the various tests that must be passed by plasma center
personnel, there are several that fall under the guidelines of this act.
Although in most states the Federal Government has specifically delegated the
enforcement of this act to the States, the act is universally applied. Plasma
centers are periodically inspected under the CLIA 88 regulations.

Part of the required compliance is that centers participate in a quality
control program which is CLIA approved. Consistent with such quality control
program, center personnel perform tests, the results of which are transmitted to
program administrators. The results must fall within an acceptable range in
order for the center to maintain its CLIA approval. To date, no SeraCare center
has failed to obtain CLIA approval.

OCCUPATIONAL SAFETY AND HEALTH ADMINISTRATION:

As with most operating companies, all of our centers must comply with both
Federal and State OSHA regulations. SeraCare trains its employees in current
OSHA standards, provides hepatitis vaccine to employees when desired, and
maintains all required records. OSHA does inspect operating locations as they
deem appropriate, and generally do so without advance notice. SeraCare has no
outstanding issues relating to an OSHA inspection which required corrective
action.

STATE GOVERNMENTS

NEVADA:

Nevada law parallels the federal requirements as stated above with one
addition. The state requires that all employees of plasma centers be certified
with the state. This requires 6 months of experience, a completed application
and a fee.

ALL OTHER STATES

All other states in which SeraCare operates have regulations that parallel
the federal regulations. Most states do conduct periodic unannounced inspections
and require licensing under each state's procedures. The Company currently has
no unresolved issues relating to any state regulations.

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INDUSTRY STANDARDS

AMERICAN BLOOD RESOURCES ASSOCIATION:

The American Blood Resources Association ("ABRA"), an industry organization
headquartered in Maryland, represents the majority, by far, of both plasma
collection companies and manufacturers. ABRA has established a voluntary program
in which member centers agree to adhere to a set of standards that exceed those
of FDA or state and local agencies. This program, entitled the Quality Plasma
Program ("QPP"), has been supported by the FDA, the National Hemophilia
Association as well as many European regulatory agencies. The QPP program
requires a biannual inspection which focuses on: employee training; facilities,
including cleanliness; and donor selection. The QPP criteria includes but is not
limited to:

Donors must have permanent addresses with 150 miles of the center.

The rates of viral marker tests must be within set national limits.

A record of all employee training must be available along with the training
procedure.

A program of donor drug testing must be implemented.

All new donors must be checked with the National Donor Deferral Registry.

The facility must meet all published standards, including location and
neighborhood.

All of the Company's operating centers are QPP certified with the exception
of the one center for which final FDA license approval is pending. All of the
Company's newly established centers and initial stage centers have been designed
and planned to QPP specifications.

During the past five years, the QPP program has created a higher level of
performance criteria with a focus on upgrading the image of the U.S. plasma
collection industry. Examples of the requirements which are enforced by the FDA,
state authorities and ABRA include: upgraded standards for the physical
facilities; higher standards for Standard Operating Procedures; strict screening
of donors for drugs and disease; verified addresses for all donors; use of a
national registry of deferred donors; and controlled viral reactive rates to
insure they remain within prescribed limits. The Quality Plasma Program ("QPP")
is designed to eliminate the collection of plasma from donors who are homeless,
transient or drug addicted. In addition, it requires all certified centers to
maintain documented and approved employee-training programs. All testing
required by the center must be performed in a QPP-approved laboratory.

The Company closely monitors compliance with applicable governmental
regulations, ABRA standards imposed through QPP and the Company's own quality
assurance standards. In addition, contracts with fractionators require that
individual locations be reviewed and approved by such customer in order to allow
them to sell their end products in various countries throughout the world.

THE INDUSTRY AND THE MARKET

THE PRODUCT

Currently, the Company's primary product is "SOURCE PLASMA." SOURCE PLASMA
is plasma collected from humans. Plasma is the liquid part of blood and is
collected through a procedure similar to giving blood. The clear plasma is
mechanically separated from the cellular elements of the blood (such as red and
white blood cells and platelets) through centrifugation or membrane filtration
at the time the donation is made. These cellular elements are then returned to
the donor as part of the same procedure. The process of collecting plasma is
known as PLASMAPHERESIS. Because blood cells are returned, it is possible for
individuals to donate plasma more frequently than whole blood. Donations of
plasma can be made up to twice per week or 104 times per year pursuant to FDA
rules.

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PLASMA DERIVED PRODUCTS

Source plasma is sold to fractionators who process the plasma into two
primary groups of plasma products: INJECTABLE AND NON-INJECTABLE. These products
are used throughout the world to prevent illness and treat injuries.

Pursuant to FDA Regulations, plasma collected by the Company is placed in
storage on site while a sample thereof is sent to a lab for testing. No plasma
can be shipped unless test results are received which indicate the plasma is
free of any bacterial or viral occurrences. If results of the testing indicate
any bacterial or viral presence, the Company now has various customers who use
such plasma for diagnostic and/or research purposes. If the plasma cannot be
sold as source plasma or specialty plasma, it is generally destroyed. The
Company operates primarily under its own STANDARD OPERATING PROCEDURES which has
been approved by the FDA. These procedures which all employees are required to
follow, carefully spell out all safety related instructions. In accordance with
such procedures, all initial donors are given a physical examination before
being accepted as a plasma donor. Additionally, every time the donor donates, he
is tested for the presence of blood borne pathogens such as hepatitis B,
hepatitis C, HIV (antigen and antibody) and liver enzymes (indication of liver
disease, such as other types of hepatitis). The donor is also checked for serum
protein content and hematocrit (percent of red blood cells in serum). These
tests serve as a safety mechanism for both the donor and the plasma. New donors
are also checked for syphilis and drug use. Repeat donors are re-tested for
syphilis three times each year and for drug use once each year.

All plasma collected from a donor is held until the results of his viral
tests are completed. If a donor has a reactive result, all of that donor's
plasma is usually culled from the source plasma inventory. In some cases, the
fractionator operates the laboratory which performs these.

Once the plasma arrives at the fractionation facility, all plasma containers
are checked by the fractionator's quality control staff. The unique donor number
is matched to the test results to ensure no plasma is used that has been found
reactive to viral tests. Once cleared, the fractionator processes the plasma
into its final products. That processing consists of various procedures that, in
and of themselves, reduce the presence of any microorganisms that might have
been in the plasma pool. Temperature and pH are brought to specific levels, then
the in-process products are subjected to a solvent detergent that further
reduces viral activity. There are a number of additional steps, depending on the
product, including dry heat, acetone drying, lyophilizing and membrane
filtration that all reduce the presence of any microorganisms. Some
fractionators actually perform further testing both on in-process products and
final products, so sensitive, that the presence of any single microorganism will
be detected.

None of the source plasma or hyperimmune plasma collected by SeraCare, Inc.
is given to end users without first being processed by a fractionator.

Donor safety is very important to the Company. Accordingly, operating
procedures require that donors have the process thoroughly explained, including
the hazards and side effects and that an informed consent form be signed by each
donor The Company does extensive training of employees in order to insure the
safety of its donors.

INJECTABLE PLASMA PRODUCTS

SOURCE PLASMA is the base raw material used to manufacture many injectable
therapeutic products, the most important of which are:

NORMAL SERUM ALBUMIN AND PLASMA PROTEIN FRACTION, which are primarily used
to keep vessel walls from collapsing following major injury, as blood volume
expanders and as a protein replacement. They are used:

- to treat shock due to trauma or hemorrhage;

- to treat fluid loss due to severe burns;

10
<PAGE>
- in cardiovascular surgery;

- to treat liver and kidney diseases; and

- as a carrier for many other injectable solutions.

IMMUNE GLOBULINS, which are used to strengthen the immune system in order to
fight off common diseases such as:

- Suppressed immune systems in cases of organ transplants, HIV and other
immune deficiencies;

- Hepatitis B;

- Tetanus;

- Rabies, whooping cough, measles and polio; and

- Other immune related diseases.

ANTIHEMOPHILIC FACTORS, which are specific proteins found in plasma that are
an integral part of the blood clotting mechanism. Persons born with an absence
or a deficient amount of the protein suffer from hemophilia, types A, B, or Von
Willebrand's Disease.

RH IMMUNE GLOBULIN, which is a substance administered to prevent
incompatibilities between the blood of a fetus and mother. Rh incompatibility
occurs when an Rh-negative woman is pregnant with an Rh-positive fetus. This
occurs in 9-10% of pregnancies. If no preventive measures are taken, 0.7-1.8% of
Rh-negative women with an Rh-positive fetus will become isoimmunized
antenatally, developing Rh (D) antibody through exposure to fetal blood; 8-15%
will become isoimmunized at birth, 3-5% after abortion (spontaneous or
therapeutic), and 2.1-3.4% after amniocentesis. Rh(D) isoimmunization currently
occurs at a rate of about 1.5 per 1000 births. Its effects on the fetus or
newborn include hemolytic anemia, hyperbilrubinemia, kernicterus, or
intrauterine deaths due to hydrous fetalis. About 45% of cases require
intrauterine or exchange transfusions to survive, and there are about four
deaths from this disease per 100,000 total births. The prevalence of Rh(D)
isoimmunization has declined significantly following the introduction of Rh(D)
immune globulin.

The administration of Rh(D) immune globulin to these women prevents maternal
sensitization and subsequent hemolytic disease in Rh-positive infants. RhIG must
be administered after abortion, amniocentesis, ectopic pregnancy, and antepartum
hemorrhage, as well as after delivery.

NON-INJECTABLE PLASMA PRODUCTS

A secondary use of plasma is to manufacture certain diagnostic products
which are for the most part non- injectable. Some of the primary diagnostic
products are:

- BLOOD GROUPING AND TYPING REAGENTS which are used by blood banks to match
donor blood with the recipient.

- LABORATORY CONTROL REAGENTS which are used by laboratories to assure the
quality control of their tests.

- SPECIAL TEST KIT REAGENTS which are derived from the plasma of donors
known to have a specific disease and are used in the laboratory as a
positive control test.

SPECIALTY PLASMAS

Specialty Plasmas generally contain high concentrations of specific
antibodies and are used primarily to manufacture immune globulin therapeutic
products which bolster the immunity of patients to fight a particular infection
or to treat certain immune system disorders. Following advances in intravenous
therapy in the mid-1980s, use of specialty plasmas for therapeutic purposes
significantly increased. Among

11
<PAGE>
the current uses for specialty plasmas are the production of products to prevent
hepatitis, Rh incompatibility in newborns, tetanus and rabies. Specialty plasmas
are also widely used for diagnostic and tissue culture purposes. Depending on
the rarity of the antibody or medical history of the donor, the pricing for
specialty plasmas currently ranges from $95 to about $6,000 per liter. Most
specialty plasma is derived serendipitously (not the result of stimulation)
which poses no abnormal risk to the plasma collector.

The Company currently collects and sells both source plasma and specialty
plasmas, including Cytomegalovirus Antibody Plasma (CMV), Tetanus Antibody
Plasma and various other specialty antibody plasma. The Company has initiated a
program that emphasizes the collection of specialty plasmas by identifying
potential specialty plasma donors through various screening and testing
procedures.

THE PLASMA INDUSTRY

The blood resource industry can be divided into two industry segments. One
is the non-profit or voluntary sector which is commonly thought of as the
American Red Cross and various independent non-profit blood centers. This
"non-profit" sector is primarily concerned with providing whole blood and
components of whole blood for transfusion in medical applications at hospitals.
The other is the commercial or "for-profit" segment and is composed primarily of
plasma collection centers. This "for-profit" commercial sector currently
consists of about 450 plasma collection centers throughout the United States
which collect plasma from paid donors and sell the plasma to Fractionators, who
produce plasma derivative products or fractions that are used in therapeutics.
These plasma collection centers are owned by both foreign and U.S. fractionators
and by independent companies such as SeraCare, Inc., who sell to diagnostic
companies and fractionators.

PLASMA MARKET

The source plasma industry has experienced a number of fluctuations in the
supply and demand cycles. In the Company's opinion, the market factors currently
driving the plasma industry include the following:

- The expanded use of immune globulins to prevent and treat disease.

- The worldwide plasma shortage of plasma which has been made worse by the
impact of the "Mad Cow" decease in England which resulted in the stopping
of all plasma collection activities within that country and the
replacement of such plasma from the US.

- Extensive public concern over the safety of blood products which has led
to increased domestic and foreign regulatory control over the collection
and testing of plasma and the disqualification of certain segments of the
population from the donor pool.

- The continuing increase in the uses of plasma as the source material for
new treatments and applications such as fibrin glue, a growth agent for
microbiotics, and vaccines.

- The increased demand for plasma based healthcare products worldwide which
has led to expansion of fractionation capacity.

- The barriers to entry into the fractionation and plasma collection
business which includes an extensive FDA and ABRA approval process which
can take years to complete.

The Company believes that a significant worldwide shortage of plasma has
developed which could last three to five years. This accelerating shortage is
being driven by a series of factors including: the shutdown of plasma collection
in England resulting from "Mad Cow" decease issues; the expanding fractionation
capacity worldwide resulting from the increased need for plasma components to
treat larger and older populations; and, a diminished pool of donors that
resulted from more restrictive testing and screening requirements imposed by
regulatory authorities. In 1998, the FDA introduced the "Applicant Donor
Program" which required first time donors to donate a second time before the
first donation can be sold.

12
<PAGE>
This new requirement has caused a decrease in liters of source plasma available
for sale. Another market factor has been increasing public concern over HIV and
other viruses, which has lead to increased testing and tighter screening
processes. And finally, the Company believes that there is a direct correlation
between the economy and the donor pools, wherein as the economy gets better, it
becomes harder to maintain donor pools and attract new donors.

The Company has generally sold its plasma under contracts ranging from one
to five years, which allow for annual pricing renegotiations. Pricing for
product deliveries is generally mutually agreed upon prior to the beginning of
the contract year and fixed for that year. Consequently, the Company may be
adversely or beneficially affected if its costs of collecting and selling plasma
rise or fall during the year as a result of changes in government regulation,
donor fees or other factors.

FRACTIONATORS

Fractionation is the process of separating the raw source plasma into a
variety of derivative products (see "The Product" above). Prior to being
fractionated, source plasma is blended into pools of 4,500 to 10,000 liter units
from many different donor sources.

The four leading fractionators in the United States are:

<TABLE>
<S> <C>
ALPHA THERAPEUTIC CORPORATION........ a subsidiary of Yashi Tomi
Pharmaceutical

AVENTIS BIO-SERVICES, INC............ a subsidiary of Rhone-Poulenc-Rorer,
a French government owned
pharmaceutical conglomerate

BAYER CORPORATION.................... a division of Germany's Bayer A.G.

BAXTER, INC.......................... a division of Baxter, Inc., an $8.1
billion revenue U.S. company.
</TABLE>

CURRENT OPERATIONS

CURRENT PLASMA CENTERS

As of April 30, 2000, the Company had thirty four plasma collection centers
in operation which were located in: Las Vegas, Nevada; Clarkesville, Tennessee;
Phoenix, Arizona(2); Ft. Smith, Arkansas; Clearfield, Utah; Raleigh, North
Carolina; Pasco, Washington; Toledo, Ohio; Macon, Georgia; Savannah, Georgia;
Reno, Nevada; South Bend, Indiana; Kalamazoo, Michigan; Boise, Idaho; Pocatello,
Idaho; Salt Lake City, Utah; Amarillo, Texas; Beaumont, Texas; Longview, Texas;
Houston, Texas (4); Casa Grande, Arizona; Pasadena, Texas; Mesa, Arizona; Baton
Rouge, Louisiana; Port Arthur, Texas; Wilmington, Delaware; Lancaster,
Pennsylvania; Reading, Pennsylvania; Allentown, Pennsylvania; and Laredo, Texas.
The Company is also in the initial stages of establishing two new centers which
are expected to be operational during the next three to six months. During
fiscal year 2000, such centers processed about 626,000 donations of plasma.

DONORS

FDA standards restrict the frequency in which a donor may give plasma to
twice a week or 104 times per year. Most regular donors donate between 40 and 60
times per year.

The QPP certification program is focused on excluding drug or alcohol
addicts or homeless persons by requiring proof of permanent address as well as
alcohol and drug use testing.

13
<PAGE>
MARKETING/DONOR RECRUITMENT

Effective recruitment, management and retention of donors are essential to
the Company's plasma business. The Company seeks to attract and retain its donor
base in the following ways:

- by utilizing competitive financial incentives which the Company offers for
the donation of the plasma.

- by providing outstanding customer service to its donors.

- by implementing programs designed to attract donors through education as
to the uses of plasma.

- by encouraging regular participation in its donor programs.

- by providing incentives to encourage donors to return.

Repeat donors are important because of the lower cost associated with
obtaining their plasma and less risk that their plasma will not satisfy
regulatory and customer requirements. The Company's centers advertise for donors
through targeted mailings, flyers and newspapers. Radio and television ads are
also used when advantageous.

The Company's donor records are maintained with the assistance of donor
database systems at each center which allows the Company's personnel to track
the frequency of donor visits. When a donor has not visited a center in over one
month, the center sends a reminder card to the donor emphasizing the importance
of the donor's continued participation.

DONOR PROCESSING

On their first visit all new donors are given a physical examination by
either a licensed physician or physician substitute. The National Donor Deferral
Registry and the deferral lists of the Fractionators and other local plasma
centers are all checked to determine if the donor has ever had positive viral
test results or has ever been previously deferred or rejected as a donor. In
addition to the deferral list checks, each time the donor visits, the donor is
given the opportunity to defer himself confidentially and is asked a number of
screening questions which he must audibly answer. In addition, each time he
visits, the donor is tested for: blood pressure; temperature; pulse; weight;
hematocrit; total proteins; HIV; hepatitis B and C; and liver enzymes.

QUALITY AND OPERATIONAL CONTROLS

Through its QPP and internal operating procedures and policies, the Company
strives to maintain a high level of quality control. The Company's policies
require that donor charts be audited on a daily basis, and that equipment be
regularly re-calibrated. Quality control records and procedures are maintained
at a detailed level.

TRAINING

The Company is focusing on two levels of training: (a) technical training of
employees; and (b) center management skills and development.

All employees are required to read and study detailed training materials and
are then given a written test covering that material. Results of the written
tests must be kept available for FDA inspection. Employees are also required to
demonstrate specific skills to an FDA-certified trainer. Each level of an
employee's training is tracked and documented and each employee is required to
be re-tested on all material every six months. All employees are "cross trained"
in all three of the center's functional areas, allowing for more efficient
scheduling. Ongoing or continuing education sessions are periodically held to
review new procedures, equipment and FDA requirements. All training
documentation is subject to FDA approval.

14
<PAGE>
It is the Company's philosophy to continually develop competent individuals
within the Company to move into management positions. Selected individuals are
sent to outside management development seminars in addition to the in-house
program of development. Consequently, all of the open manager positions during
the past three years have been filled with existing in-house personnel.

EMPLOYEES

As of April 30, 2000, the Company employed 543 full time employees and 44
part time employees. The Biologics Division employed 476 full time and 41 part
time employees. Each location in the Biologics Division has at least one nurse
and/or nurse substitute and the balance are cross-trained as technicians,
receptionists and phlebotomists. The Western States Plasma Division employed 18
full time employees and one part time employee. The Consolidated Technologies
Division employed 49 full time employees and two part time employees. Corporate
office consisted of eight full time employees as of April 30, 2000.

The Company believes that the relations between the Company's management and
its employees are good, although there can be no assurances that such relations
will continue. The inability of the Company to attract or retain qualified
personnel could have a material adverse effect on the Company.

ITEM 2. PROPERTIES

As of April 30, 2000, the Company occupied thirty nine locations with
executive offices at 1925 Century Park East, Suite 1970, in Los Angeles; Western
States Division in Oceanside, California; Plasma Lab in Austin, Texas; and
thirty seven plasma center locations in: Las Vegas, Nevada; Clarksville,
Tennessee; Phoenix, Arizona(2); Ft. Smith, Arkansas; Clearfield, Utah; Raleigh,
North Carolina; Pasco, Washington; Toledo, Ohio; Macon, Georgia; Savannah,
Georgia; Reno, Nevada; South Bend, Indiana; Kalamazoo, Michigan; Boise, Idaho;
Pocatello, Idaho; Salt Lake City, Utah; Amarillo, Texas; Beaumont, Texas;
Longview, Texas; Houston, Texas (4); Casa Grande, Arizona; Pasadena Texas; Mesa,
Arizona; Phoenix, Arizona; Baton Rouge, Louisiana; Port Arthur, Texas;
Wilmington, Delaware; Lancaster, Pennsylvania; Reading, Pennsylvania; Allentown,
Pennsylvania; Danville, Virginia; Providence, Rhode Island; and Laredo, Texas.
All of the Company's facilities are leased from unaffiliated parties under
leases expiring through 2009 and comprising approximately 190,000 square feet.
Most of these leases contain renewal options which permit the Company to renew
the leases for periods of from two to five years at the then fair rental value.
The Company believes that in the normal course of its business it will be able
to renew or replace its existing leases. The Company believes that the space it
occupies is adequate for its current operations.

The Company's plasma collection centers range in size from approximately
2,950 to 7,500 square feet and generally are located in population centers of
60,000 to 1,000,000 people.

ITEM 3. LEGAL PROCEEDINGS.

There are no material pending legal proceedings, other than routine
litigation occurring in the normal course of the Company's operations, to which
the Company is a party or of which any of its property is subject.

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

Not Applicable.

15
<PAGE>
PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

(a) MARKET INFORMATION:

The Company's Common Stock is quoted on AMEX and is traded under the symbol
"SRK". The Company stock began initial trading on the Bulletin Board in
May 1996. On March 25, 1998 the Company's Common Stock began trading on the
American Stock Exchange (AMEX). The following table sets forth the range of bid
prices for the Common Stock during the periods indicated, and represents inter-
dealer prices, without retail mark-up, mark-down or commission to the
broker-dealer, and may not represent actual transactions. The information
summarized in the following table has been derived from the NASD's Monthly
Statistical Report.

<TABLE>
<CAPTION>
HIGH LOW
---------- ----------
<S> <C> <C>
For the period March 1, 1998 through May 31, 1998........... 8 7/8 6 1/4
For the period June 1, 1998 through August 31, 1998......... 7 7/8 4 7/8
For the period September 1, 1998 through November 30,
1998...................................................... 5 3/4 4
For the period December 1, 1998 through February 28, 1999... 6 5/8 4 1/4

For the period March 1, 1999 through May 31, 1999........... 6 4 5/16
For the period June 1, 1999 through August 31, 1999......... 6 3/8 4 3/4
For the period September 1, 1999 through November 30,
1999...................................................... 5 3/16 3 1/8
For the period December 1, 1999 through February 29, 2000... 4 3/4 2 1/2
</TABLE>

(b) HOLDERS:

<TABLE>
<CAPTION>
APPROXIMATE NUMBER OF
RECORD HOLDERS (AS
TITLE OF CLASS OF MARCH 31, 2000)
-------------- ---------------------
<S> <C>
Common Stock, $.001 par value........................... 380(1)
</TABLE>

------------------------

(1) Certain of the Company's shareholders hold shares under "street name" and
are not identified individually. Accordingly, the Company estimates that it
has a total of approximately 630 beneficial shareholders.

The Company has never paid cash dividends on its Common Stock. Pursuant to
the terms and conditions of the $16 million subordinated debenture and the
$15 million senior credit facility, the Company may not declare or pay
dividends, except that SeraCare, Inc. may issue warrants, options, stock, rights
or any other form of equity security as a dividend. The declaration and payment
of dividends in the form of equity securities by the Company's board of
directors will depend, among other factors, on earnings as well as the operating
and financial condition of the Company. At the present time, the Company does
not expect to declare or issue any dividends within the foreseeable future.

ITEM 6. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

16
<PAGE>
occurred) are forward-looking statements that are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995,
Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A
of the Securities Act of 1933, as amended. Forward-looking statements involve
known and unknown factors, risks and uncertainties which may cause the Company's
actual results in future periods to differ materially from forecasted results.
Those factors, risks and uncertainties include, but are not limited to: the
positioning of the Company's products in the Company's market segment; the
Company's ability to effectively manage its various businesses in a rapidly
changing environment; new competition for donors and customers; the inability of
the Company to obtain FDA approval of newly established centers; and the
introduction of synthetic products which could eliminate the need for plasma
products.

RESULTS OF OPERATIONS

FISCAL YEAR ENDING FEBRUARY 29, 2000 VS FISCAL YEAR ENDING FEBRUARY 28, 1999

REVENUE

Revenue increased by $13,072,796 to $62,771,003, an increase of 26 percent.
The primary contributors to the increase were: the Biologics Division due to
improved pricing for plasma and an increased volume of plasma collected during
the current fiscal year; and the Western States Plasma Division which added a
significant number of new plasma products. The Company collected about 502,000
liters of plasma during the year ended February 29, 2000 compared to about
423,000 for the comparable prior period or an increase of 18 percent. The
increased volumes were mainly the result of the continued ramp-up of newly
established centers and increases in certain mature centers as a result of
increased donor promotions. The increased volumes in these centers were
partially offset by decreases in certain centers which resulted from a
restructuring of the Company's quality assurance and compliance program which
involved employee training and other necessary actions which were deemed
necessary to insure FDA Compliance.

GROSS PROFIT

Gross profit increased by $1.4 million or 13 percent in 2000 to $11,942,071.
The Biologics Division contributed an increase of $2.2 million due primarily to
the increased plasma prices mostly offset by an increase in the direct cost of
operating plasma collection centers, while the Western States Plasma Division
contributed an increase of $.5 million due to the increased sales partially
offset by a narrowing of profit margins on certain commodity type products. The
Consolidated Technologies Division reflected a decrease of $1.3 million due
mainly to increases in direct manufacturing costs. As a result of the
aforementioned, the gross profit percentage decreased from 21.3% in fiscal 1999
to 19% in fiscal 2000.

GENERAL AND ADMINISTRATIVE EXPENSES

General and Administrative expenses for fiscal year 2000 were higher by
$2,689,442 or 64 percent. This increase was primarily due to the increased
salaries and travel associated with complying with the increased quality control
and compliance standards established by the FDA. In addition, salaries and
expenses were higher in Western States Plasma due to a restructuring of
marketing and sales in order to establish a more focused attention on customers
and opportunities. The Company also experienced higher legal and professional
fees; increased travel expenses; increased salary and related benefits expenses;
and, higher general insurance costs.

INTEREST EXPENSE / NON-CASH INTEREST EXPENSE

Interest expense increased by $868,902 in fiscal 2000 as a result of the
increased debt during the year, primarily the senior debt facility which was
increased to $22.0 million in July 1999. Included in interest expense is
$1,322,405 of amortization of the deferred bond offering costs related to the
issuance of the $16 million subordinated debentures.

17
<PAGE>
OTHER ITEMS

Other income for the current year includes a $269,212 gain from the sale of
CTI. Other income for the prior year includes a $534,000 gain from the sale of
certain properties during the year.

INCOME TAXES

No federal taxes were paid or accrued during the year due to the
availability of various loss carryforwards and deferred tax credits. The taxes
reflected are for the various state income taxes paid.

INCOME BEFORE CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING METHOD

As a result of the above, income before the cumulative effect of a change in
accounting method for the fiscal year ended February 29, 2000 was $141,732
compared to $2,705,002 for the same prior year period.

CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING METHOD

Effective March 1, 1999, the Company adopted Statement of Position 98-5
"Reporting on the Costs of Start-Up Activities" (SOP 98-5) issued by the
American Institute of Certified Public Accountants. SOP 98-5 is effective for
fiscal years beginning after December 15, 1998, and requires that the costs of
start-up activities be expensed as incurred. Accordingly, the Company wrote off
$719,903 (net of $44,634 of tax benefit) of start-up costs that had been
previously capitalized and was included in other assets as of February 28, 1999.
In accordance with SOP 98-5, the write-off of such costs is being reported as a
cumulative effect of a change in accounting method and prior periods have not
been restated.

NET INCOME

As a result of the above, there was a net loss for the fiscal year ended
February 29, 2000 of $578,171 compared to an income of $2,705,002 in 1999.

18
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES

As of February 29, 2000, the Company's current assets exceeded current
liabilities by, $8,126,398 compared to $9,723,584 in the year earlier date. The
use of cash during the year was consistent with the Company's strategic plan for
strong growth and the Company feels that progress has been made during the
period. With a continuation of a strategic focus on growth, the short-term
impact on the Company's earnings and cash flow has been to defer profitability
and positive cash flows. The Company believes, however, that the acquisitions of
American Plasma, Inc. in July 1998 and the purchase of certain of the operating
assets of Amex Plasma Management, Inc. in October 1998, the continuing ramp-up
of the newly established centers and the newly established strategic alliance
with Centeon Bio-Services, Inc. represent substantial progress toward becoming a
significant company within the plasma products industry. While the increased
costs related to FDA and regulatory compliance have had a significant impact on
profitability during the current year, demand for plasma and plasma based
products continues to be strong and the Company expects pricing for plasma to
improve.

The Company believes that industry wide, plasma pricing and plasma products
demand will continue to strengthen in future periods as a result of the evolving
shortage of plasma and the continued expansion of the uses and demand for plasma
based products. Increased plasma pricing from the Company's principal customers
are expected to combine with more favorable pricing on softgoods and testing to
generate improved profit margins. The Company continues to believe that demand
for plasma and plasma products will continue to accelerate through calendar 2000
and 2001 and has accordingly positioned itself in a strong growth posture in
order to be able to benefit from the strong increased demand. The Company
believes that recent occurrences in the plasma industry such as the "Mad Cow"
disease in Great Britain, and the recent restoration of fractionation capacity
throughout the world have added significantly to the expected shortage of
supply. With this background, the Company continues to focus on growth in the
volume of plasma collected in order to capitalize on the anticipated market
conditions. The Company continues to benefit from the acquisition of the Western
States Division which has provided worldwide marketing of plasma and plasma
products in both the therapeutic and diagnostic segments of the plasma products
industry. The plasma collection center startups and acquisitions during the past
two years are reflective of the Company's commitment to growth. Meanwhile, the
Company's projected capital requirements for the coming year include the
establishment of at least two more plasma centers and the establishment of a
manufacturing facility within Western States for the manufacture of bulk plasma
products and serums. The sale of substantially all of the operating assets of
Consolidated Technologies on February 29, 2000 was a strategic decision in order
to reduce long-term debt and restructure the Company along business segment
lines.

Net cash used in operating activities during the fiscal year ended
February 29, 2000 was $812,477 compared to $7,184,767 during the same prior year
period. This was due primarily to the increases in inventory partially offset by
the increases in accounts payable.

Cash flows provided by investing activities for the fiscal year ending
February 29, 2000 was $9,116,433 compared to $12,752,787 used in the comparable
prior year period. The cash provided was primarily the result of the sale of
CTI, while the prior year amount used was primarily the result of the
acquisition of American Plasma, Inc.

Cash flow used in financing activities was $7,861,514 for the current year
period compared to $15,283,256 provided in the comparable prior period. The
current year amount was primarily the result of the repayment of debt with the
proceeds from the sale of CTI. The prior year amount provided was primarily the
borrowing required for the acquisition of American Plasma, Inc.

The Company had net operating loss carry-forwards of approximately
$.7 million as of February 29, 2000, which will expire in various amounts
through the year 2019. Certain of these loss carry-forwards have resulted in a
deferred tax asset of approximately $.3 million. Based upon historical operating
results, management has determined it cannot conclude it is more likely than not
that the deferred tax is

19
<PAGE>
realizable. Accordingly, a 100% valuation reserve allowance has been provided
against the deferred tax asset.

In conjunction with the sale of Consolidated Technologies on February 29,
2000, the Company used $4.5 million to repay the subordinated debt and
$6.0 million to repay the term portion of the senior debt. $1.675 million is
being held in escrow in accordance with certain adjustment provisions in the
Asset Purchase Agreement. The balance of the proceeds were used for working
capital and to reduce the amount of the revolving credit facility.

As a result of the increased costs of collecting plasma and the increased
difficulty in attracting new donors to both the startup and mature plasma
collection centers due in part to the strong economy, the Company may experience
cash flow shortfalls from time to time. While the long-term prognosis is for
steadily improving prices which will ultimately exceed the increased cost of
collecting plasma, there can be no guarantees that internally generated cash
flow and the existing $15 million senior credit facility will be sufficient to
meet the Company's working capital requirements for fiscal 2001. As of
February 29, 2000, the Company had $1.8 million available under the current
senior credit facility. Any significant expansion or acquisitions beyond those
currently budgeted will need to be funded by a combination of internally
generated cash flows, short-term bridge financing, private placements, and/or a
possible public offering. In addition, the Company is continuing to evaluate
various alternatives for restructuring its current debt position and enhancing
shareholder value. See Note 6 for future payments of long-term debt.

As of February 29, 2000 the Company was in violation of one covenant
pertaining to the senior credit facility and is in dicussions with this lender
regarding obtaining a waiver.

In addition, on February 29, 2000, the Company was not in compliance with
the covenants relating to the subordinated debentures. The lender has waived the
covenant default as of February 29, 2000 and has indicated the covenants would
be amended so that the Company would be in compliance with the note agreements
in the future.

INFLATION

Management believes that inflation generally causes an increase in sales
prices with an offsetting unfavorable effect on the cost of products sold and
other operating expenses. Accordingly, with the possible impact on interest
rates, management believes that inflation will have no significant effect on the
Company's results of operations or financial condition.

YEAR 2000

The year 2000 issue is the result of computer programs being written using
two digits rather than four digits to define the applicable year. This could
result in a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices or engage in other normal business activities. The Company
experienced no problems as a result of the year 2000 issue. However, there can
be no assurance that there will be no problems in the future.

ITEM 7. FINANCIAL STATEMENTS.

All financial statements required to be filed herewith are attached hereto
following the signature page.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

Not applicable

20
<PAGE>
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES

The Company is headquartered in Los Angeles, California and operates with a
corporate office staff of eight people.

The present term of office of each director will expire at the next Annual
Meeting of Shareholders. Executive Officers of the Company are elected annually
at the first meeting of the Company's Board of Directors held after the annual
meeting of shareholders. Each executive officer will hold office until his or
her successor is duly elected and qualified or until his or her death or
resignation or until he or she shall have been removed in the manner provided in
the Company's Bylaws. The name and position with the Company and age of each
officer and director, and the period during which each director has served are
as follows:

<TABLE>
<CAPTION>
DIRECTOR
NAME AGE POSITION SINCE
---- -------- ----------------------------------------- --------------
<S> <C> <C> <C>
Barry D. Plost....................... 54 Chairman of the Board, President and CEO 1996

Jerry L. Burdick..................... 60 Executive Vice President, Chief Financial 1995
Officer, Secretary and a Director

Sam Anderson......................... 63 Director 1996

Ezzat Jallad......................... 37 Director 1996

Nelson Teng.......................... 53 Director 1997

Robert J. Cresci..................... 56 Director April 15, 1998

Michael F. Crowley................... 56 Director April 15, 1998

William J. Cone...................... 49 Director April 15, 1998
</TABLE>

BARRY D. PLOST began serving as Chairman, President and Chief Executive
Officer of the Company on February 6, 1996. Prior to joining the Company, he was
a Management Consultant with the management consulting firm of David
Barrett, Inc. for the period January 1995 until February 6, 1996. Mr. Plost was
President and Chief Executive Officer of Country Wide Transport Services, Inc.,
a trucking company, from February 1991 through June 1994, and President and
Chief Operating Officer of Freymiller Trucking, Inc., a trucking company, from
November 1979 through August 1991.

JERRY L. BURDICK has served as Executive Vice President, Secretary and a
Director since December 1, 1995 and served as Chief Financial Officer from
December 1, 1995 through September 8, 1999, as Acting Chief Financial Officer
from November 30, 1999 through December 31, 1999 and was reappointed Chief
Financial Officer effective January 1, 2000. From August 1993 through
March 1995, Mr. Burdick was a consultant to SeraCare, Inc. and served as acting
Controller and Chief Financial Officer. Mr. Burdick is a Certified Public
Accountant in the State of California and has held senior financial positions
with various companies including International Rectifier Corporation and Getty
Oil Company.

SAM ANDERSON was elected a Director effective April 16, 1996. Since April of
1996, Mr. Anderson has also been a consultant to SeraCare, Inc. in the areas of:
finding and evaluating potential acquisitions; helping the Company in developing
a strategic plan for increasing the volume of hyperimmune plasma collected
including targeting the particular type of hyperimmune the company should
target; and advising the Chief Executive Officer of the Company on industry
trends and potential changes in regulations and the ramifications thereof.
Mr. Anderson's role is strictly advisory and he has no direct reports within
SeraCare, Inc. Since March 1991, Mr. Anderson has served as a consultant to
various companies in the plasma business and specifically in pharmaceutical
products, fractionation and hyperimmune plasma. From March 1990 to March 1991,
Mr. Anderson served as president of Trancel, Inc., a start-up bio-tech
development company in the area of insulin dependent diabetes and prior to that
served as Chairman and Chief Executive Officer of Alpha Therapeutic Corporation,
a manufacturer of pharmaceutical products

21
<PAGE>
and also the largest plasma collection company and fractionator in the world,
until he retired in February 1990.

EZZAT JALLAD was elected a Director effective October 28, 1996. Mr. Jallad
has been Chairman and President of Softpoint, Inc., which develops and markets
point of sale software and hardware for the fast food and retail markets since
June 1995. Previously, he was Executive Vice President of FCIM Corporation, a
financial consulting firm, from April 1988 to May 1995.

DR. NELSON TENG was elected a Director effective January 29, 1997. Dr. Teng
has been the Director of Gynecologic Oncology and Associate Professor of
Gynecology and Obstretrics at Stanford University School of Medicine since 1981.
Dr. Teng also co-founded ADEZA Biomedical in 1984, and UNIVAX Biologics in 1988.
In addition, Dr. Teng has served as a scientific advisor and consultant to
several biotechnology companies and venture capital firms and has authored over
100 publications and 15 patents. Dr. Teng serves on several other boards of
directors.

MICHAEL F. CROWLEY, SR. was elected a Director effective April 15, 1998 and
has also served as President of the Western States Plasma Division of the
Company since February 1998. Mr. Crowley founded Western States Group in 1983.
Prior to that, Mr. Crowley worked for 12 years for Baxter International, Inc.
from 1970 to 1982 and served first as Sales and Operations Manager in Baxter's
international division in England and later as Director of Operations for
Baxter's diagnostic division, Hyland Laboratories, a pharmaceutical company.

WILLIAM J. CONE was elected a Director effective April 15, 1998 and has also
served as President of the Consolidated Technologies Division of the Company
since February 1998. Mr. Cone joined Consolidated Technologies, Inc. in 1972
(three years after his father founded the company in 1969) and was President and
sole shareholder of the company from 1988 until February 1998. Mr. Cone attended
Southwest Texas State University where he majored in microbiology. On April 19,
2000, Mr. William J. Cone resigned his position as a director of SeraCare, Inc.

ROBERT J. CRESCI was elected a Director effective April 15, 1998.
Mr. Cresci has been a Managing Director of Pecks Management Partners Ltd., an
investment management firm, since September 1990. Mr. Cresci currently serves on
boards of Bridgeport Machines, Inc., EIS International, Inc., Sepracor, Inc.,
Arcadia Financial, Ltd., Hitox, Inc., Garnet Resources Corporation, Film
Roman, Inc., Educational Medical, Inc, Source Media, Inc., Castle Dental
Centers, Inc., Candlewood Hotel Co., and several private companies.

Effective April 19, 2000, the Board of Directors consists of seven
directors: Barry D. Plost, Chairman, President and Chief Executive Officer;
Jerry L. Burdick, Executive Vice President, Chief Financial Officer and
Secretary; Michael F. Crowley, Sr., President of the Western States Plasma
Division; Sam Anderson, outside Director; Robert J. Cresci, outside Director;
Ezzat Jallad, outside Director; and Dr. Nelson Teng, outside Director.

ITEM 10. EXECUTIVE COMPENSATION

The Company has key man insurance on Barry D. Plost and Michael F. Crowley,
Sr. SAM ANDERSON, an outside Director, has a consulting agreement with the
Company which runs through March 31, 2002 at $50,000 per year plus fully vested
options to purchase 30,000 shares of the Company's common stock at $1.50 per
share which expire in five years. Mr. Anderson also was granted fully vested,
five year options to purchase 20,000 shares of the Company's common stock at
$1.00 per share in conjunction with a $100,000 bridge loan Mr. Anderson made to
the Company on July 2, 1996 and on August 27,1997 was granted fully vested five
year options to purchase 100,000 shares at $2.25, and on December 31, 1998 was
granted fully vested five year options to purchase 15,000 shares at $4.25.
DR. NELSON TENG was granted fully vested, five year options to purchase 50,000
shares of the Company's common stock at $1.50 per share in January 1997. He was
also granted fully vested, five year options to purchase 15,000 shares at $2.25
on August 27, 1997

22
<PAGE>
and fully vested, five year options to purchase 15,000 shares at $4.25 on
December 28, 1998. EZZAT JALLAD was granted fully vested five-year options to
purchase 15,000 shares at $2.25 on August 27, 1997 and fully vested five-year
options to purchase 15,000 shares at $4.25 on December 28, 1998. ROBERT CRESCI
was granted fully vested five-year options to purchase 15,000 shares at $4.25 on
December 28, 1998.

The following table sets forth the cash compensation and other consideration
paid by the Company to its executive officers whose cash compensation exceeded
$100,000.

<TABLE>
<CAPTION>
PAID PAID PAID
FISCAL FISCAL FISCAL
NAME AND PRINCIPAL POSITION 2000 1999 1998 OPTIONS OTHER
--------------------------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
(8)Barry D. Plost, President, $311,947 $225,000 $172,115 156,147(1) (7)(6)
Chairman and CEO.....................
150,000(2)
100,000(3)
130,000(4)
1,697,511(5)
(9)Jerry L. Burdick, $174,690(11) $140,000 $125,000 124,110(10) (7)(6)
Executive V. P., Secretary and CFO...
</TABLE>

------------------------

(1) Of these, 56,147 are fully vested five-year options granted on February 6,
1996 at a price of $1.25 and 100,000 are fully vested five-year options
granted on August 27, 1997 at a price of $3.00.

(2) These options were granted on February 6, 1996. The prices are 50,000 at
$1.00, 50,000 at $2.00, and 50,000 at $3.00 per share. These options were
fully vested in January 1997 and expire January 2002.

(3) These options were granted on February 6, 1996 and are fully vested at
$1.00 per share which expire at the end of five years.

(4) Mr. Plost was granted on July 2, 1996 and July 17 1996 fully vested three
year options to purchase 130,000 shares of the Company's common stock at
and exercise price of $1.00 per share in conjunction with a $400,000 bridge
loan Mr. Plost made to the Company on July 2, 1996 and a $50,000 bridge
loan he made to the Company on July 17, 1996. The options granted
represented 100% of the options granted employees in the year 1997.

(5) Mr. Plost was granted at various times throughout fiscal year 1998 and on
March 24, 1999 fully vested options to purchase 1,697,511 of the Company's
common stock at prices ranging from $2.00 to $4.25 which were the fair
market value of the shares on the grant date. These options were granted in
conjunction with various bridge loans made by Mr. Plost to the Company.

(6) The Company has established a discretionary Management Bonus Pool for
executive management during fiscal 2000. Under such plan $61,947 was paid
to Mr. Plost and $34,690 was paid to Mr. Burdick.

(7) To the extent that quarterly earnings before taxes exceed $100,000, the
excess will be paid on a pro-rata basis to all officers up to an annual
maximum of $10,000 each.

(8) Effective on February 6, 1996, the Company signed an employment agreement
with Mr. Plost through February 5, 1999. The agreement was extended through
February 5, 2002. Mr. Plost's current annual salary is $250,000. Mr. Plost
also participates in the Management Bonus Pool on the same basis as other
officers of the Company during the term of his agreement and also received
certain options as indicated. Mr. Plost was not an employee prior to
February 6, 1996.

(9) Effective on February 6, 1996, the Company signed an employment agreement
with Mr. Burdick through February 5, 1999. The agreement was extended
through February 6, 2003. Mr. Burdick's current annual salary is $140,000.
Mr. Burdick also participates in the Management Bonus Pool on

23
<PAGE>
the same basis as other officers of the Company during the term of his
agreement and also received stock options as indicated above.

(10) Of these, 42,110 are fully vested five year options granted on
February 6, 1996 at a price of $1.25; 25,000 are fully vested five year
options granted on April 10, 1997 at a price of $2.00; 32,000 are fully
vested five year options granted on December 28, 1998 at a price of $4.25;
and 25,000 are fully vested five year options granted on March 24, 1999 at
a price of $5.25.

(11) Excludes auto allowance of $9,000.

AGGREGATE OPTIONS / SAR EXERCISES IN LAST FISCAL YEAR AND FY- END OPTION/SAR
VALUES

<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
SHARES ACQUIRED VALUE OPTIONS AT OPTIONS AT
NAME AND PRINCIPAL POSITION ON EXERCISE REALIZED YEAR-END(1) YEAR-END(1)
--------------------------- --------------- -------- ---------------- ------------
<S> <C> <C> <C> <C>
Barry D. Plost, President,................ NA NA 2,233,658 $3,106,203
Jerry L. Burdick, Executive V. P.,
Secretary and CFO....................... NA NA 124,110 $ 178,352
</TABLE>

------------------------

(1) As of February 29, 2000, there were no options which were unexercisable.

OPTIONS / SAR GRANTS LAST FISCAL YEAR

During the current year Mr. Jerry L. Burdick was granted 25,000 fully vested
five year options on March 24, 1999 at a price of $5.25 which represented 100%
of the individual grants to employees during the year. During the preceding
year, Mr. Jerry L. Burdick was granted 32,000 fully vested five-year options to
purchase shares at $4.25 on December 28, 1998 which represented 52% of the
individual grants during the year. On March 24, 1999, Mr. Plost was granted
839,011 fully vested five year warrants at a price of $4.25 in conjunction with
certain bridge loans Mr. Plost made to the Company.

EMPLOYMENT AGREEMENTS

The Company had employment agreements with each of the executive officers of
the Company, consisting of: Mr. Barry D. Plost, Chairman, President and Chief
Executive Officer; and Mr. Jerry L. Burdick, Executive Vice President, Chief
Financial Officer and Secretary. The employment agreements with both Mr. Plost
and Mr. Burdick were effective on February 6, 1996. The contract of Mr. Plost
was extended to February 5, 2002. Mr. Plost is currently receiving a base salary
of $250,000. Mr. Burdick's contract was extended through February 6, 2003.
Mr. Burdick is currently receiving a base salary of $140,000. Both Mr. Plost and
Mr. Burdick are eligible to participate in the management incentive bonus plan.

Discretionary compensation awards for executives, including stock options
are made solely by the Board of Directors.

ITEM 11. SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITYHOLDERS

The following table sets forth certain information known to the Company
regarding beneficial ownership of the Company's common shares at February 29,
2000 of each present director, all officers, all

24
<PAGE>
officers and directors as a group and each beneficial owner of more than 5% of
the Company's common stock.

<TABLE>
<CAPTION>
PRESENTLY
EXERCISABLE
% OF COMMON OPTIONS
INDIVIDUAL / GROUP CLASS SHARES AND WARRANTS
------------------ -------- -------- ------------
<S> <C> <C> <C>
Barry D. Plost, President & Chairman........................ 23.2% 263,239 2,233,658
Jerry L. Burdick, Exe VP, CFO & Dir......................... 1.6% 18,001 124,110
Nelson Teng, Director....................................... 4.6% 315,000 80,000
Samual Anderson, Director................................... 3.3% 121,932 165,000
Ezzat Jallad, Director...................................... 0.6% 25,000 30,000
Robert Cresci............................................... 0.2% 15,000
All Officers and Directors.................................. 30.6% 743,172 2,647,768
Other beneficial owners:
Joseph Russo.............................................. 5.9% 500,000
Pecks Management Partners, Ltd............................ 20.8% -- 2,328,218
Consolidated Technologies, Inc............................ 5.1% 436,364
</TABLE>

Of the issued and outstanding shares as of May 1, 2000, no person or entity
owns or controls 10% or more of the company's common stock.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

BRIDGE LOANS TO THE COMPANY FROM RELATED PARTIES.

In September 1998, the Company entered into an agreement with a related
party, approved by the Board of Directors, which provided for a bridge loan of
$1,250,000. Interest was payable monthly at eleven and one-half percent per
annum. In December 1998, the bridge loan was repaid in full and the company
issued 193,750 five-year warrants to purchase shares at $4.50 per share in
accordance with the terms of such bridge loan.

In January 1998, the Company entered into agreements with related parties,
approved by the Board of Directors, which provided for bridge loans totaling
$599,000. The related parties consisted of: Sam Anderson, a director who loaned
$133,000; Dr. Nelson Teng, a director who loaned $130,000; Chang Ming Teng,
father of Dr. Nelson Teng who loaned $50,000; Ezzat Jallad, a director who
loaned $50,000; Stranco Investments Ltd, an investment fund managed by Ezzat
Jallad a director which loaned $200,000; and Peggy Burdick, wife of Jerry
Burdick an officer and director who loaned $36,000. Interest was payable monthly
at ten percent per annum. In connection with the 1998 bridge loans, the Company
granted the holders warrants to purchase 599,000 shares of restricted common
stock at an exercise price of $3.50 per share, which approximated the fair
market value of the shares on the date of grant. In February 1998, these
warrants were exchanged for 299,500 shares of restricted common stock. Except
for $80,000 to Nelson Teng and $43,000 to Samuel Anderson, the loans were repaid
in May 1998.

At various times during the year ended February 28, 1998, the Company
entered into agreements with Mr. Barry Plost, the Company's president, which
provided for loans totaling $1,125,000, which were all outstanding at
February 28, 1998. These loans were due upon demand, and were secured by all the
assets of the Company. The loans accrued interest at ten and twelve percent per
annum. In connection with these loans, the Company granted options to its
president to purchase 742,500 and 116,000 shares of restricted common stock at
$2.00 and $3.00 per share, which was at the then fair market value,
respectively. In addition, in conjunction with the January 1998 bridge, the
Company's president made a bridge loan to the Company totaling $200,000. Terms
of the bridge loan agreement were exactly the same as the terms other bridge
loans made by related parties in January 1998 (see above). In February 1998 the
warrants received in connection with the bridge loan were exchanged for 100,000
shares of restricted stock. In May 1998, the

25
<PAGE>
Company repaid $1.0 million of such loans and in July 1998 repaid an additional
$250,000. In December 1998 in conjunction with the newly obtained senior debt
facility with Brown Brothers & Harriman and State Street Bank, Mr. Plost signed
a subordination agreement relating to $472,500, whereby Mr. Plost agreed to
forego payment until all senior debt had been paid in full. As of February 29,
2000, $472,500 was outstanding. The currently outstanding balance is subject to
a subordination agreement whereby such amount cannot be repaid until the senior
lenders have been paid in full.

On March 24, 1999, the Company issued to Mr. Plost 839,011 fully vested 5
year warrants with an exercise price of $4.25 in conjunction with various bridge
loans made to the Company.

SERIES A WARRANTS

The Company issued 940,000 Series A Warrants in connection with the two
private placements dated June 1, 1996 and October 1, 1996. Each warrant allows
the holder to purchase one share of common stock of the Company at $2.75. The
Series A Warrants were exercisable immediately and will terminate on the earlier
of six years from the date of issuance or three years from the date of the
initial effectiveness of an "Initial Registration Statement" under Securities
Act of 1933. The Initial Registration Statement is required to register the
shares issued in conjunction with both private placements and the common stock
underlying Series A Warrants. The Series A Warrants provide for adjustments
consisting of a reduction of the exercise price of each Series A Warrant by $.10
upon the 270th day following the October 23, 1996 and for each subsequent month
thereafter until the Company effectuates such registration. Such reduction is
subject to a floor of $1.50. The Warrants are redeemable by the Company at $.01
per share, upon thirty days notice, if the common stock is publicly traded and
the average of the closing price per share of the common stock for each of the
twenty consecutive trading days immediately prior to the mailing of such
notification and for each day thereafter until the redemption date shall have
exceeded 133.3% of the then existing exercise price. No call for redemption can
be made unless the Company has an effective registration statement on file
relating to the common stock issued in conjunction with the private placements
and the common stock underlying Series A Warrants. During the year ended
February 28, 1998, the Company offered the holders of these warrants a cashless
exchange of one share of stock for two warrants. Holders of 615,000 warrants
(230,000 of which were held by officers and directors of the Company), elected
to receive 307,500 shares of restricted common stock (115,000 were received by
officers and directors of the Company). As of February 28, 1998, 325,000
warrants remained outstanding. In July 1998, the holders of the remaining
325,000 Series A Warrants exercised their option and acquired 325,000 shares of
the Company's common stock.

26
<PAGE>
PART IV

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

<TABLE>
<S> <C>
(a)(1) THE FOLLOWING FINANCIAL STATEMENTS ARE BEING FILED AS
PART OF THIS REPORT:

SERACARE, INC. AND SUBSIDIARIES

Report of Independent Certified Public Accountants--BDO
Seidman, LLP

Consolidated Statements of Operations--Year ended
February 29, 2000
--Year ended
February 28, 1999

Consolidated Balance Sheets--February 29, 2000 and
February 28, 1999

Consolidated Statements of Stockholders' Equity--Year
ended February 29, 2000
--Year ended
February 28, 1999

Consolidated Statements of Cash Flows--Year ended
February 29, 2000
--Year ended
February 28, 1999

Summary of Accounting Policies

Notes to Consolidated Financial Statements

(a)(2) THE FOLLOWING EXHIBITS WERE FILED AS A PART OF THIS
REPORT AND WILL BE PROVIDED UPON REQUEST.
</TABLE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
--------------------- -----------------------
<C> <S>
23.1 Consent of Independent Certified Accountants.
</TABLE>

<TABLE>
<S> <C>
(a)(3) THE FOLLOWING EXHIBITS HAVE BEEN PREVIOUSLY FILED
WITH THE COMMISSION AND ARE HEREBY INCORPORATED
HEREIN BY REFERENCE THERETO.
</TABLE>

INDEX OF DOCUMENTS PREVIOUSLY FILED AS PART OF REGISTRATION STATEMENT ON
FORM 10SB FILED WITH THE COMMISSION ON NOVEMBER 21, 1996:

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
--------------------- -----------------------
<C> <S>
2.1 Restated Articles of Incorporation filed on February 6,
1996.

2.2 By-laws of American Blood Institute, Inc. (now known as
SeraCare, Inc.) dated June 10, 1992.

3.1 Certificate of Designation of Series A Preferred Stock filed
on July 10, 1996.

4.9 Revolving Term Note between Brown Brothers Harriman & Co and
SeraCare, Inc. dated April 24, 1998.

4.10 Revolving Loan and Security Agreement between Brown Brothers
Harriman & Co and SeraCare, Inc. dated April 24, 1998.

4.11 Subordination Agreement between Brown Brothers Harriman & Co
and SeraCare, Inc. dated April 24, 1998.

4.12 Borrowing and Agency Agreement between Brown Brothers
Harriman & Co and SeraCare, Inc. dated April 24, 1998.

4.13 Cross-Guaranty Agreement between Brown Brothers Harriman &
Co and SeraCare, Inc. dated April 24, 1998.

4.14 Warrant To Purchase Common Stock of SeraCare, Inc. issued to
Brown Brothers Harriman & Co. dated April 24, 1998.

6.1 Employment Agreement dated February 5, 1996 between the
Company and Barry D. Plost.
</TABLE>

27
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
--------------------- -----------------------
<C> <S>
6.2 Employment Agreement dated November 14, 1995 between the
Company and Jerry L. Burdick.

6.3 Employment Agreement dated November 14, 1995 between the
Company and Brian Olson.

6.4 Employment Agreement dated September 3, 1996 between the
Company and Brad Rabe.

6.5 Consulting Agreement dated July 2, 1996 between the Company
and Samuel Anderson.

6.6 Bridge Note Agreement dated July 2, 1996 between the Company
and Barry D. Plost.

6.7 Bridge Note Agreement dated July 17, 1996 between the
Company and Barry D. Plost.

6.8 Bridge Note Agreement dated July 2, 1996 between the Company
and Samuel Anderson.

6.9 Asset Purchase Agreement dated September 3, 1996 between the
Company and Brad Rabe.

6.10 Asset Exchange Agreement dated July 2, 1996 between the
Company and Silver State Plasma Products, Inc.

6.10(a) Note payable dated July 2, 1996 between the Company and
Silver State Plasma Products, Inc.

6.11 Amended and Restated Loan Agreement between the Company and
CVD Financial Corporation.

6.11(a) Note payable dated February 6, 1996 between the Company and
CVD Financial Corporation.

6.12 Contract for Exchange of Corporate Stock date July 9, 1996
between the Company and Mr. Burt H. McGhee.

6.13 Series A Warrant Agreement dated September 4, 1996.

6.14 Series A Warrant Agreement dated October 23, 1996.

6.15 Registration Rights Agreement dated September 4, 1996.

6.16 Registration Rights Agreement dated October 23, 1996.

6.17 Dealer Warrant Agreement dated September 4, 1996.

6.18 Dealer Registration Rights Agreement September 4, 1996.

6.19 Motion for Order Confirming Third Amended Joint Plan of
Reorganization of American Blood Institute, Inc., AVRE, Inc.
and Binary Associates, Inc. dated January 24, 1996.

6.19(a) Order Confirming Third Amended Joint Plan of Reorganization
of American Blood Institute, Inc., AVRE, Inc. and Binary
Associates, Inc. dated and filed January 24, 1996.

10.1 Subsidiaries of Registrant.

INDEX OF DOCUMENTS PREVIOUSLY FILED AS PART OF FORM 10KSB FOR THE FISCAL YEAR
ENDED FEBRUARY 28, 1999 AND FILED WITH THE COMMISSION ON May 26, 1999:

3.2 Certificate of Designation of Series C Preferred Stock filed
on March 9, 1999.

4.15 Revolving Term Note by and between SeraCare, Inc., Avre
Incorporated, Binary Associates, Inc., SeraCare
Acquisitions, Inc., BHM Labs, Inc., SeraCare Technology,
Inc.,Western States Group, Inc., American Plasma, Inc.
("Obligors") and Brown Brothers Harriman & Co. and State
Street Bank and Trust Company ("Lenders") and Brown Brothers
Harriman & Co. as Administrative Agent for Lenders dated
December 21, 1998.

4.16 Amended and Restated Cross-Guaranty Agreement between
"Lenders" and

4.17 "Obligors" Dated December 21, 1998.
</TABLE>

28
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
--------------------- -----------------------
<C> <S>
4.18 Amended and Restated Revolving Term Note between and
SeraCare, Inc. and Brown Brothers Harriman & Co. dated
December 21, 1998.

4.19 Revolving Term Note between and SeraCare, Inc. and State
Street Bank & Trust Company dated December 21, 1998.

4.20 Term Promissory Note and SeraCare, Inc. and Brown Brothers
Harriman & Co. dated December 21, 1998.

4.21 Term Promissory Note between and SeraCare, Inc. and State
Street Bank & Trust Company dated December 21, 1998.

4.22 Amended and Restated Borrowing and Agency Agreement between
SeraCare, Inc. and Brown Brothers Harriman & Co. Dated
December 21, 1998.

4.23 Amended and Restated Subordination Agreement between Holders
of the 12% Senior Subordinated Debentures due 2005 of
SeraCare, Inc. And Brown Brothers Harriman & Co. and State
Street Bank & Trust Company ("Lenders") dated December 21,
1998.

4.24 Subordination Agreement between Barry D. Plost And Brown
Brothers Harriman & Co.and State Street Bank & Trust Company
("Lenders") dated December 21, 1998.

4.25 Warrant To Purchase Common Stock of SeraCare, Inc. issued to
Brown Brothers Harriman & Co. dated December 21, 1998.

4.26 Warrant To Purchase Common Stock of SeraCare, Inc. issued to
State Street Bank dated December 21, 1998.

4.27 Asset Purchase Agreement By and Between AMEX Plasma
Management, Inc. and SeraCare, Inc. dated October 30, 1998.

23.1 Consent of Independent Certified Public Accountants
</TABLE>

(b) REPORTS ON FORM 8-K

On February 29, 2000, the Company filed a Current Report on Form 8K with
respect to the sale of substantially all of the operating assets of Consolidated
Technologies.

On April 19, 2000, the Company filed a Current Report on Form 8K with
respect to the resignation of Mr. William Cone as a director of SeraCare, Inc.

29
<PAGE>
GLOSSARY OF TERMS

<TABLE>
<S> <C>
ALBUMIN................................... A large molecule found in abundance in plasma which
assists in maintaining the body's fluid levels.

ANTIBODY.................................. A protein molecule produced in response to a specific
foreign substance to which the antibody may bind and
destroy to protect the body from foreign invasion.

ANTIGEN................................... A foreign substance such as a virus, bacteria or toxin
which stimulates the production of antibodies.

CLOTTING FACTORS.......................... A series of protein substances involved in the clotting
processes. The most frequently used are referred to as
Factors VIII and IX.

CYTOMEGALOVIRUS........................... A virus commonly infecting various populations,
resulting in flu-like symptoms and the development of
CMV antibodies in an otherwise healthy person. If it
infects a person with a compromised immune system, it
has much more severe consequences, including causing
death.

HEMOPHILIA................................ Any of several blood-coagulation disorders in which the
blood fails to clot normally because of a deficiency or
an abnormality of one of the clotting factors.

HEPATITIS................................. Inflammation of the liver caused by infectious or toxic
agents and characterized by jaundice, fever, liver
enlargement and abdominal pain. There are various forms
of viral hepatitis, including hepatitis A, B, and C,
which cause different disease conditions.

HIV....................................... Human Immunodeficiency Virus, a virus that causes AIDS.

IMMUNE GLOBULINS.......................... A group of proteins which contains antibodies.

ORPHAN DRUG STATUS........................ A designation given by FDA to a drug which treats
relatively rare diseases or diseases affecting fewer
than 200,000 persons in the United States at the time of
the application for such status. The company to first
receive orphan drug status and receive FDA marketing
approval is entitled to a seven-year exclusive marketing
period in the United States.

PLASMA.................................... Liquid portion of blood which contains various proteins,
as distinguished from formed elements of the blood such
as red blood cells, white blood cells and platelets.
Plasma also contains antibodies.

PLASMAPHERESIS............................ A process in which plasma is removed from whole blood
and the remaining components of the whole blood are
returned to the donor.

PLATELETS................................. Cells in blood which promote blood clotting.

RED BLOOD CELLS........................... Principal cell found in whole blood, containing
hemoglobin, the primary carrier of oxygen to the body.
</TABLE>

30
<PAGE>
<TABLE>
<S> <C>
SOURCE PLASMA............................. The proper name of a product defined as a liquid portion
of human blood collected by plasmapheresis meeting the
FDA criteria or "source plasma" and intended as source
material for further manufacturing use. Source plasma is
sometimes referred to as normal plasma.

SPECIALTY PLASMA.......................... Plasma collected to provide specific antibodies to
manufacture immune globulins for specific diseases or
collected according to special specifications for
further manufacturing either into therapeutic or
diagnostic products.

WHITE BLOOD CELLS......................... Several types of specialized cells found in whole blood
that are a critical part of the defense of the body
against disease and infections.
</TABLE>

31
<PAGE>
SIGNATURES

In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.

<TABLE>
<S> <C> <C>
SERACARE, INC.
(Registrant)

Dated May 29, 2000 By: /s/ BARRY D. PLOST
----------------------------------------
Barry D. Plost, PRESIDENT & CEO

By: /s/ JERRY L. BURDICK
----------------------------------------
Jerry L. Burdick
PRINCIPAL ACCOUNTING AND
FINANCE OFFICER
</TABLE>

In accordance with Section 12 of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Company and in
the capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<C> <S> <C>
/s/ BARRY D. PLOST Chairman of the Board and CEO May 29, 2000
------------------------------------
Barry D. Plost

/s/ JERRY L. BURDICK Executive Vice President and CFO May 29, 2000
------------------------------------
Jerry L. Burdick

/s/ SAMUEL ANDERSON Director May 29, 2000
------------------------------------
Samuel Anderson

/s/ ROBERT J. CRESCI Director May 29, 2000
------------------------------------
Robert J. Cresci

/s/ EZZAT JALLAD Director May 29, 2000
------------------------------------
Ezzat Jallad

/s/ DR. NELSON TENG Director May 29, 2000
------------------------------------
Dr. Nelson Teng

/s/ MICHAEL F. CROWLEY, SR. Director May 29, 2000
------------------------------------
Michael F. Crowley, Sr.

/s/ WILLIAM J. CONE Director May 29, 2000
------------------------------------
William J. Cone
</TABLE>

32
<PAGE>
SERACARE, INC. AND SUBSIDIARIES

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S> <C>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS.......... F-2

CONSOLIDATED FINANCIAL STATEMENTS

Statements of Operations.................................. F-3

Balance Sheets............................................ F-4

Statements of Stockholders' Equity........................ F-5

Statements of Cash Flows.................................. F-6

Summary of Accounting Policies............................ F-8

Notes to Consolidated Financial Statements................ F-12
</TABLE>

F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

The Board of Directors and Stockholders
SeraCare, Inc.

We have audited the accompanying consolidated balance sheets of SeraCare, Inc.
and subsidiaries as of February 29, 2000 and February 28, 1999 and the related
consolidated statements of operations, stockholders' equity and cash flows for
the years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the financial
statements. 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 SeraCare, Inc. and
subsidiaries as of February 29, 2000 and February 28, 1999 and the results of
their operations and their cash flows for the years then ended, in conformity
with generally accepted accounting principles.

As discussed in the Summary of Accounting Policies, in fiscal 2000 the Company
changed its method of accounting for the costs of start-up activities.

BDO Seidman, LLP

Los Angeles, California
May 25, 2000

F-2
<PAGE>
SERACARE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
FEBRUARY 29, 2000 FEBRUARY 28, 1999
------------------ ------------------
<S> <C> <C>
Revenues
Net sales (Notes 13 and 14)............................... $62,040,052 $49,010,389
Income from joint venture................................. 730,951 687,818
----------- -----------
Total revenue........................................... 62,771,003 49,698,207
Cost of sales............................................... 50,828,932 39,128,393
----------- -----------
Gross profit............................................ 11,942,071 10,569,814
General and administrative expenses......................... 6,869,602 4,180,160
----------- -----------
Operating income........................................ 5,072,469 6,389,654
Interest expense (including noncash interest of $2,296,805
and $1,387,157)........................................... (5,163,204) (4,294,302)
Other income, net (Note 15)................................. 320,065 626,664
----------- -----------
Income before income taxes and cumulative effect of
change in accounting method........................... 229,330 2,722,016
Income taxes (Note 11)...................................... 87,598 17,014
----------- -----------
Income before cumulative effect of change in accounting
method................................................ 141,732 2,705,002
Cumulative effect of change in accounting method, net....... (719,903) --
----------- -----------
Net income (loss)....................................... $ (578,171) $ 2,705,002
=========== ===========

Earnings (loss) per common share (Note 16)
Basic
Income (loss) before cumulative effect of change in
accounting method..................................... $ (.01) $ 0.37
Cumulative effect of change in accounting method, net... (.09) 0.00
----------- -----------
Net Income (loss)....................................... $ (.10) $ 0.37
=========== ===========

Diluted
Income (loss) before cumulative effect of change in
accounting method..................................... $ (.01) $ 0.24
Cumulative effect of change in accounting method, net... (.09) 0.00
----------- -----------
Net Income (loss)....................................... $ (.10) $ 0.24
=========== ===========

Weighted average shares outstanding (Note 16)
Basic..................................................... 8,101,336 7,365,212
=========== ===========
Diluted................................................... 8,101,336 11,103,186
=========== ===========
</TABLE>

See accompanying summary of accounting policies and notes to consolidated
financial statements.

F-3
<PAGE>
SERACARE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
AS OF AS OF
FEBRUARY 29, 2000 FEBRUARY 28, 1999
------------------ ------------------
<S> <C> <C>
Assets (Notes 3, 4, 5 and 6)
Current Assets
Cash and cash equivalents................................. $ 1,285,668 $ 843,226
Cash held in escrow (Note 15)............................. 5,406,515 --
Accounts receivable (Note 14)............................. 11,963,823 13,619,739
Inventory................................................. 17,283,525 10,659,226
Prepaid expenses and other current assets................. 634,668 580,883
----------- -----------
Total Current Assets.................................... 36,574,199 25,703,074
----------- -----------
Property and equipment--net (Note 2)........................ 6,856,167 4,632,159
FDA licenses, less accumulated amortization of $372,015 and
$145,716.................................................. 8,110,229 7,836,942
Donor base and records, less accumulated amortization of
$414,496 and $171,914..................................... 4,684,367 4,376,488
Reorganization value in excess of amounts allocated to
identifiable assets, less accumulated amortization of
$155,771 and $117,203..................................... 615,682 654,250
Goodwill, less accumulated amortization of $716,662 and
$770,946.................................................. 6,626,489 11,798,511
Deferred bond offering cost, less accumulated amortization
of $1,807,235 and $1,234,954 (Note 6)..................... 4,919,268 7,091,952
Other assets................................................ 1,192,514 2,482,886
----------- -----------
Total Assets................................................ $69,578,915 $64,576,262
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities
Line of credit (Note 3)................................... 13,184,000 8,840,000
Accounts payable.......................................... 10,494,088 2,535,050
Accrued payroll and related expenses...................... 484,281 366,475
Accrued expenses.......................................... 3,487,405 2,219,957
Deferred income........................................... 278,429 397,353
Bridge loans from related parties (Note 4)................ 0 123,000
Notes payable (Note 5).................................... 288,447 297,746
Current portion of long-term debt (Notes 3 and 6)......... 231,151 1,199,909
----------- -----------
Total Current Liabilities................................... 28,447,801 15,979,490
----------- -----------
Long-term Debt, less current portion (Notes 4, 5 and 6)..... 13,087,563 22,895,014

Series A redeemable preferred stock, $.001 par value,
25,000,000 shares authorized; 0 shares and 400 shares
issued and outstanding.................................... -- 60,107
Commitments and contingencies (Notes 12 and 15)
Stockholders' equity
Series B convertible preferred stock, $.001 par value,
15,000 shares authorized. 0 and 15,000 were issued and
outstanding. Liquidation value $100 per share........... -- 15
Series C convertible preferred stock, $.001 par value,
22,500 shares authorized and outstanding. Liquidation
value $100 per share, 10% cumulative dividend........... 22 22
Common stock, $.001 par value, 25,000,000 shares
authorized, 8,519,418 and 7,644,418 issued and
outstanding............................................. 8,519 7,644
Additional paid-in capital................................ 26,224,316 22,982,605
Retained earnings......................................... 1,810,694 2,651,365
----------- -----------
Total stockholders' equity.................................. 28,043,551 25,641,651
----------- -----------
Total Liabilities and Stockholders' Equity.................. $69,578,915 $64,576,262
=========== ===========
</TABLE>

See accompanying summary of accounting policies and notes to consolidated
financial statements.

F-4
<PAGE>
SERACARE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
PREFERRED STOCK
-----------------------------------------
SERIES B SERIES C COMMON STOCK ADDITIONAL
------------------- ------------------- -------------------- PAID-IN
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL
-------- -------- -------- -------- --------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, MARCH 1, 1998......................... 15,000 $ 15 -- $ -- 7,210,585 $7,210 $20,293,232
Common stock issued for (Note 7)
Acquisition of plasma center................. -- -- -- -- 50,000 50 149,177
Exercise of Series A warrants................ -- -- -- -- 325,000 325 487,175
Finders' fees on private placement........... -- -- -- -- 25,000 25 (25)
Prior private placement, adjustment of
shares..................................... -- -- -- -- 33,833 34 (34)
Issuance of Series C Convertible Preferred
Stock, net of $135,000 of issuance costs,
issued in a private placement................ -- -- 22,500 22 -- -- 2,114,978
Warrants issued................................ -- -- -- -- -- -- 45,097
Subsequent costs relating to private
placement.................................... -- -- -- -- -- -- (106,995)
Net income for the year........................ -- -- -- -- -- -- --
------- ---- ------ ---- --------- ------ -----------
BALANCE, FEBRUARY 28, 1999..................... 15,000 15 22,500 22 7,644,418 7,644 22,982,605
Conversion of preferred stock to common
stock........................................ (15,000) (15) -- -- 375,000 375 (360)
Issuance of stock to acquire plasma centers.... -- -- -- -- 500,000 500 2,358,875
Warrants and options issued during the year.... -- -- -- -- -- -- 883,196
Dividend to preferred shareholders............. -- -- -- -- -- -- --
Net loss for the year.......................... -- -- -- -- -- -- --
------- ---- ------ ---- --------- ------ -----------
Balance, February 29, 2000..................... -- $ -- 22,500 $ 22 8,519,418 $8,519 $26,224,316
======= ==== ====== ==== ========= ====== ===========

RETAINED
EARNINGS
(DEFICIT) TOTAL
---------- -----------
<S> <C> <C>
BALANCE, MARCH 1, 1998......................... $ (53,637) $20,246,820
Common stock issued for (Note 7)
Acquisition of plasma center................. -- 149,227
Exercise of Series A warrants................ -- 487,500
Finders' fees on private placement........... -- --
Prior private placement, adjustment of
shares..................................... -- --
Issuance of Series C Convertible Preferred
Stock, net of $135,000 of issuance costs,
issued in a private placement................ -- 2,115,000
Warrants issued................................ -- 45,097
Subsequent costs relating to private
placement.................................... -- (106,995)
Net income for the year........................ 2,705,002 2,705,002
---------- -----------
BALANCE, FEBRUARY 28, 1999..................... 2,651,365 25,641,651
Conversion of preferred stock to common
stock........................................ -- --
Issuance of stock to acquire plasma centers.... -- 2,359,375
Warrants and options issued during the year.... -- 883,196
Dividend to preferred shareholders............. (262,500) (262,500)
Net loss for the year.......................... (578,171) (578,171)
---------- -----------
Balance, February 29, 2000..................... $1,810,694 $28,043,551
========== ===========
</TABLE>

See accompanying summary of accounting policies and notes to consolidated
financial statements.

F-5
<PAGE>
SERACARE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
FEBRUARY 29, FEBRUARY 28,
2000 1999
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)......................................... $ (578,171) $ 2,705,002
Adjustments to reconcile net income (loss) to cash
provided by (used in) operating activities:
Cumulative effect of change in accounting method........ 719,903 --
Depreciation and amortization........................... 2,203,657 1,823,730
Income from joint venture............................... (730,951) (687,818)
Gain on sale of assets.................................. (269,212) (539,769)
Non-cash interest expense............................... 2,296,805 1,387,157
Non-cash general and administrative expense............. 21,420 3,215
(Increase) decrease from changes, net of business
acquisitions:
Accounts receivable................................... (382,549) (8,808,192)
Inventory............................................. (11,275,292) (2,535,950)
Prepaid expenses and other current assets............. (87,845) (224,820)
Other assets.......................................... (1,182,432) (557,697)
Accounts payable...................................... 7,852,176 (104,904)
Accrued payroll and related expenses.................. 141,883 136,001
Accrued expenses...................................... 577,055 953,103
Deferred income....................................... (118,924) (733,825)
------------ ------------
Net cash used in operating activities....................... (812,477) (7,184,767)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of CTI assets, net of $5,406,515 held
in escrow............................................... 11,438,772 --
Purchases of property and equipment....................... (1,542,268) (1,219,402)
Cash paid to purchase subsidiaries, net of cash
acquired................................................ -- (9,062,667)
Distributions from unconsolidated subsidiary.............. 620,800 675,000
Additions to FDA licenses................................. (788,226) (1,175,772)
Additions to donor base and records....................... (550,460) (947,720)
Additions to other intangible assets...................... (62,185) (1,022,226)
------------ ------------
Net cash provided by (used in) investing activities......... 9,116,433 (12,752,787)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings under line of credit........................... 5,844,000 8,840,000
Repayments of borrowings under line of credit............. (1,500,000) --
Proceeds from notes payable............................... -- 2,000,000
Repayments of notes payable............................... -- (3,008,500)
Proceeds from long-term debt.............................. -- 7,000,000
Repayments of long-term debt.............................. (11,759,907) (346,750)
Proceeds from bridge loans from related parties........... -- 1,250,000
Repayments of bride loans from related parties............ (123,000) (2,776,000)
Payments on redemption of preferred stock................. (60,107) (170,998)
Dividends to preferred shareholders....................... (262,500) --
Proceeds from issuance of preferred and common shares..... -- 2,495,504
------------ ------------
Net cash provided by (used in) financing activities......... (7,861,514) 15,283,256
------------ ------------
Net increase (decrease) in cash and cash equivalents........ 442,442 (4,654,298)
Cash and cash equivalents, beginning of period.............. 843,226 5,497,524
------------ ------------
Cash and cash equivalents, end of period.................... $ 1,285,668 $ 843,226
============ ============
</TABLE>

See accompanying summary of accounting policies and notes to consolidated
financial statements.

F-6
<PAGE>
SERACARE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

Supplemental disclosure of cash flow information:

(a) Cash paid for:

<TABLE>
<S> <C> <C>
Interest............................................ $2,474,890 $2,517,113
State income taxes.................................. 174,078 17,014
</TABLE>

(b) Non-cash investing and financing activities:

During the fiscal year ended February 29, 2000, the Company issued
500,000 shares of common stock with a fair value of $2,359,375 to
acquire six plasma centers.

In August, 1999, all 15,000 shares of Series B Convertible Preferred
Stock, $.001 par value, were converted into 375,000 shares of common
stock.

During the fiscal year ended February 29, 2000, the Company issued
warrants to purchase 127,646 shares of common stock to the holders of
the senior subordinated debentures in accordance with a provision under
the Securities Purchase Agreement, which allowed the Company to borrow
additional funds relating to the deferral of two quarterly interest
payments. The fair value of these warrants of $377,102 was capitalized
as additional deferred bond offering cost.

In addition, in February, 2000, the Company issued warrants to purchase
100,000 shares of common stock to the holders of the senior subordinated
debentures in exchange for renegotiating covenants in the Securities
Purchase Agreement. The fair value of these of warrants of $230,000 was
capitalized as additional deferred bond offering cost.

During fiscal 1999, the Company entered agreements for the sale of four
real estate properties for a combined selling price of $975,000. In
conjunction with such sales, the acquiring company assumed a mortgage of
$173,109 and the Company retained a note receivable of $608,169.

On October 31, 1998, the Company acquired a plasma collection center in
exchange for 50,000 shares of common stock and 50,000 warrants which
were valued at $149,227 for purposes of accounting for the transaction.

See accompanying summary of accounting policies and notes to consolidated
financial statements.

F-7
<PAGE>
SERACARE, INC. AND SUBSIDIARIES

SUMMARY OF ACCOUNTING POLICIES

ORGANIZATION

SeraCare, Inc. (the "Company"), a Delaware corporation, was formed on
November 8, 1991. The business of the Company is currently carried out through
its wholly-owned subsidiaries AVRE, Inc., a Nevada corporation, BHM Labs, Inc.,
an Arkansas corporation, Binary Associates, Inc., a Colorado corporation,
SeraCare Acquisitions, Inc., a Nevada corporation, Western States, Inc., a
California corporation, SeraCare Technology, Inc. ("STI"), a Nevada corporation
and American Plasma, Inc., a Texas corporation. STI owned the assets known as
CTI which were sold on February 29, 2000 (see Note 15).

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. The operating results of CTI are included
with those of the Company for the two-year period ended February 29, 2000. All
significant intercompany transactions and balances have been eliminated in
consolidation.

REVENUE RECOGNITION

The Company's policy is to record revenue upon shipment of its products. The
Company generally sells its plasma to fractionators under long-term contracts. A
fractionator is a company that manufactures pharmaceutical and diagnostic
products by processing the raw source plasma into a variety of derivative
products. The Company receives advance payments from customers. The revenue
related to these advance payments has been deferred until actual shipment of the
plasma and is presented as deferred income in the accompanying consolidated
balance sheet.

INVENTORY

Inventory, which primarily consists of blood plasma collected from donors,
is valued at the lower of cost or market (net realizable value). Cost is
determined by the first-in, first-out (FIFO) method.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost and are depreciated using the
straight-line method over the estimated useful lives of five to ten years.
Leasehold improvements are recorded at cost and are amortized using the
straight-line method, over the lesser of the estimated useful lives of the
property or the lease term, not to exceed ten years.

INVESTMENT IN JOINT VENTURE

The Company had a 50% interest in a joint venture, which it accounted for
using the equity method of accounting This joint venture recorded sales of
$6.2 million and $5.8 million and net income of $1.5 million and $1.4 million
for the years ended February 29, 2000 and February 28, 1999, respectively. The
interest in the joint venture was included in the sale of the CTI assets on
February 29, 2000.

INCOME TAXES

Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax basis. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which

F-8
<PAGE>
SERACARE, INC. AND SUBSIDIARIES

SUMMARY OF ACCOUNTING POLICIES (CONTINUED)

those temporary differences are expected to be recovered or settled. A valuation
allowance is provided when management cannot determine whether or not it is more
likely that the net deferred tax asset will be realized. The effect on deferred
tax assets and liabilities of a change in the rates is recognized in income in
the period that includes the enactment date.

CASH AND CASH EQUIVALENTS

For purposes of the statement of cash flows, the Company considers all
highly liquid investments with an original maturity of three months or less to
be cash equivalents.

REORGANIZATION VALUE IN EXCESS OF AMOUNTS ALLOCABLE TO IDENTIFIABLE ASSETS

Under the principles of "fresh-start" reporting, the Company allocated total
reorganization value among identifiable tangible and intangible assets on the
basis of their estimated fair values. The remaining amount is classified as
reorganization value in excess of amounts allocable to identifiable assets and
is being amortized over twenty years. The Company evaluates and assesses the
overall recoverability of this asset by determining if the unamortized balance
can be recovered through undiscounted future operating cash flows.

FDA LICENSES

Food and Drug Administration ("FDA") licenses which are required to operate
a plasma center, are assigned a value based on either the fair market value of
acquiring a FDA license or the incremental costs incurred during the FDA
licensing approval process, not to exceed the fair market value. The Company
evaluates and assesses the overall recoverability of an FDA license by
determining if the unamortized balance can be recovered through undiscounted
future operating cash flows. Management believes that as long as the Company
continues to demonstrate compliance, an FDA license has an unlimited useful
life. Accordingly, the FDA licenses are being amortized using the straight-line
method over forty years.

DONOR BASE AND RECORDS

Donor base and records arise from business combinations or from the costs
incurred in establishing a donor base and the required records of a new center.
These costs consist of incremental costs directly related to the processing of
new donors. The value assigned to donor base and records is established by the
Company based upon the costs incurred, not to exceed the fair market value. The
Company evaluates and assesses the overall recoverability of donor base and
records by determining if the unamortized balance can be recovered through
undiscounted future operating cash flows. Donor base and records are being
amortized using the straight-line method over an estimated useful life of twenty
years.

GOODWILL

Goodwill represents the excess of the purchase price over the fair value of
net assets of businesses acquired and is amortized using the straight-line
method over a period of twenty years. The Company assesses the recoverability of
its goodwill periodically by evaluating the expected undiscounted future cash
flows for individual centers to determine whether they are sufficient to support
recorded goodwill. If undiscounted cash flows are not sufficient to support the
recorded asset, an impairment loss is recognized to reduce the carrying value of
the goodwill based on the expected discounted cash flows of the center.

F-9
<PAGE>
SERACARE, INC. AND SUBSIDIARIES

SUMMARY OF ACCOUNTING POLICIES (CONTINUED)

DEFERRED FINANCING COSTS

Included in other assets as of February 29, 2000 and February 28, 1999, are
deferred financing costs of $113,626 and $383,204, respectively. These costs
relate to the fair value of options and warrants issued together with bridge
loans and notes payable. These costs are amortized over the anticipated life of
the respective financial instruments.

EARNINGS PER SHARE

The Company calculates basic and diluted earnings per share in accordance
with Statement of Financial Accounting Standards No. 128, "Earnings per Share"
("SFAS 128"). Basic earnings per share includes no dilution and is computed by
dividing net income available to common shareholders by the weighted average
number of common shares outstanding for the period. Diluted earnings per share
reflects the potential dilution of securities that could occur if securities or
other contracts (such as stock options, warrants, convertible debentures or
convertible preferred stock) to issue common stock were exercised or converted
into common stock.

DEFERRED BOND OFFERING COSTS

Deferred bond offering costs represents the fair value of the warrants
issued to debenture holders and an investment banker in connection with the
$16 million debentures issued on February 13, 1998 and the related costs and
expenses of such issuance. The deferred bond offering costs are being amortized
over the seven year term of such debentures on a straight-line basis using the
bonds outstanding method.

STOCK-BASED COMPENSATION

The Company estimates a fair value method of accounting for stock-based
compensation in accordance with Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation" (SFAS 123). In accordance
with SFAS 123, the Company has chosen to continue to account for employee
stock-based compensation utilizing the intrinsic value method. Accordingly,
compensation cost for stock options is measured as the excess, if any, of the
fair market price of the Company's stock at the date of grant over the amount an
employee must pay to acquire the stock.

Also, in accordance with SFAS 123, the Company has provided footnote
disclosure with respect to stock-based employee compensation. The cost of
stock-based employee compensation is measured at the grant date based on the
value of the award and is recognized over the service period. The value of the
stock based award is determined using a pricing model whereby compensation cost
is the excess of the fair value of the stock as determined by the model at grant
date or other measurement date over the amount an employee must pay to acquire
the stock.

The Company accounts for non-employee stock based compensation by
establishing a fair value for stock options granted. Compensation cost is
measured as the excess, if any, of the fair value of the Company's stock over
the amount the non-employee must pay to acquire the stock and is recognized over
the anticipated service period.

ACCOUNTING ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the

F-10
<PAGE>
SERACARE, INC. AND SUBSIDIARIES

SUMMARY OF ACCOUNTING POLICIES (CONTINUED)

reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.

FAIR VALUE OF LONG-TERM DEBT

The fair value of the Company's long-term debt, which approximates the
carrying value, is estimated based on the quoted market prices for the same or
similar issues.

IMPAIRMENT OF LONG-LIVED ASSETS

Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of",
established guidelines regarding when impairment losses on long-lived assets,
which include plant and equipment and certain identifiable intangible assets,
should be recognized and how impairment losses should be measured. The Company
periodically reviews such assets for possible impairment and expected losses, if
any, are recorded currently.

RECLASSIFICATIONS

Certain reclassifications have been made to the prior year amounts to
conform to the current year presentation.

NEW ACCOUNTING PRONOUNCEMENT

Effective March 1, 1999, the Company adopted Statement of Position 98-5,
"Reporting on the Costs of Start-up Activities," (SOP 98-5) issued by the
American Institute of Certified Public Accountants. SOP 98-5 requires that the
costs of start-up activities, including organization costs, be expensed as
incurred. Start-up activities are defined broadly as those one-time activities
related to opening a new facility, introducing a new product or service,
conducting business in a new territory, conducting business with a new class of
customer (excluding ongoing customer acquisition costs, such as policy
acquisition costs and loan origination costs) or beneficiary, initiating a new
process in an existing facility, or commencing some new operation.

As of March 1, 1999, the Company wrote off the approximate $720,000 (net of
$44,600 of tax benefits) of start-up costs that had been previously capitalized
and included in other assets. In accordance with SOP 98-5, the write-off of
costs is being reported as a cumulative effect of a change in accounting method
and prior periods have not been restated.

F-11
<PAGE>
SERACARE, INC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BUSINESS OPERATIONS

GENERAL

COMPANY HISTORY

During fiscal 2000, the Company consisted of three divisions: Consolidated
Technologies Division ("CTI") which is a manufacturer of controls and
calibrators; Western States Plasma Division which is a "Value Added Distributor"
with worldwide marketing including a European and Asian presence; and, the
Biologics Division which collects and sells source plasma to manufacturers of
therapeutic and diagnostic products.

ACQUISITIONS

AMERICAN PLASMA, INC.

In July, 1998, the Company acquired all of the capital stock of American
Plasma, Inc. ("American") located in Houston, Texas. American operates eleven
plasmapheresis centers located in: Houston, Texas (4), South Houston, Texas;
Beaumont, Texas; Longview, Texas; Casa Grande, Arizona; Phoenix, Arizona; Mesa,
Arizona; and Amarillo, Texas. The total purchase price was $9,611,102.

AMEX PLASMA MANAGEMENT, INC.

During fiscal 2000, the Company acquired six plasma centers from Amex Plasma
Management, Inc. for a total of 500,000 shares of common stock. These
transactions were valued at $2,359,375, based upon the fair value of the shares
on the dates issued.

In October 1998, the Company acquired the operating assets of a plasma
center in Baton Rouge, Louisiana from Amex Plasma Management, Inc. for 50,000
shares of common stock and a five-year warrant to purchase 50,000 shares of
common stock at $6.00 per share. This transaction was valued at $149,227, the
fair value of the shares and warrants at that date.

All acquisitions were accounted for using the purchase method of accounting.
Accordingly, the results of operations are reported as of the effective dates of
acquisition. The purchase price has been allocated to the net assets acquired
based upon fair market values at the date of acquisition. The excess purchase
price over the net assets acquired was recorded as goodwill and is being
amortized over twenty years

F-12
<PAGE>
SERACARE, INC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1. BUSINESS OPERATIONS (CONTINUED)
The unaudited proforma results of operations, assuming the acquisition of
American Plasma, Inc. occurred as of the beginning of the respective period for
revenue, net income and income per share, is as follows:

<TABLE>
<CAPTION>
YEAR ENDED
FEBRUARY 28, 1999
-----------------
<S> <C>
Revenue..................................................... $53,717,000
Net income.................................................. 2,762,000
Income per common share
Basic....................................................... .37
Diluted..................................................... .25
</TABLE>

The unaudited proforma results are not necessarily indicative of the results
which would have been obtained had these acquisitions actually occurred as of an
earlier date, nor are they indicative of future results.

2. PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

<TABLE>
<CAPTION>
FEBRUARY 29, FEBRUARY 28,
2000 1999
------------ ------------
<S> <C> <C>
Buildings and improvements........................... $ -- $ 117,255
Furniture and equipment.............................. 2,313,435 1,769,846
Leasehold improvements............................... 6,215,074 3,573,973
---------- ----------
8,528,509 5,461,074
Less: accumulated depreciation and amortization...... 1,672,342 828,915
========== ==========
Property and equipment, net.......................... $6,856,167 $4,632,159
========== ==========
</TABLE>

Depreciation and amortization expense on property and equipment was $908,453
and $538,247 for the years ending February 29, 2000 and February 28, 1999,
respectively.

3. LINE OF CREDIT

During December, 1998, the Company obtained a senior credit facility of
$17 million. As restructured, $7 million was established as a term loan
(Note 6) and $10 million was established as a revolving line of credit. In July,
1999, the revolving line of credit was increased to $15 million. Draws under the
revolving line of credit are limited to the sum of (a) 75% of qualifying
accounts receivable plus 50% of inventory value. At February 29, 2000,
$13,184,000 had been drawn under this line of credit. Interest accrues at a per
annum rate equal to the Wall Street Journal Prime Rate plus .75% through
July 15, 1999 and .25% thereafter and is payable quarterly. The Company may also
elect at its option to have interest calculated based upon LIBOR plus 2.75%. The
interest rate charged the Company by the senior lender at February 29, 2000 was
9.0%. The restructured facility is secured by all the assets of the Company. The
new Note Agreement contains various covenants relating to: maintaining minimum
tangible capital base, current ratio and coverage ratio; senior indebtedness to
EBITDA; and restrictions on additional indebtedness, investments, asset sales,
mergers or other changes of control, divestitures, acquisitions, dividends and
distributions. As of February 29, 2000, the Company was in violation of one
covenant. The Company is

F-13
<PAGE>
SERACARE, INC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. LINE OF CREDIT (CONTINUED)
currently in discussions with this lender regarding obtaining a waiver. The
agreement calls for restrictions on cash of $150,000. This senior credit
facility has a term ending December 1, 2000.

4. BRIDGE LOANS FROM RELATED PARTIES

During the year ended February 28, 1999, the Company entered into an
agreement with a related party to provide a bridge loan of $1,250,000 to the
Company to purchase the stock of American Plasma, Inc. (Note 1). Interest was
payable at 11.5 percent per annum. In connection with this loan, the Company
granted the holder warrants to purchase 193,750 shares of restricted common
stock at an exercise price of $4.50, which approximated the fair value of the
shares on the date of grant. The Company paid $25,000 of loan origination fees
related to this loan. This loan was repaid prior to February 28, 1999.

In January 1998, the Company entered into agreements with related parties
which provided for bridge loans of $599,000. Interest is payable monthly at ten
percent per annum. These loans were repaid prior to February 29, 2000.

At various times during the year ended February 28, 1998, the Company
entered into agreements with the Company's president, which provided for loans
totaling $1,325,000. At February 29, 2000, $472,500 of these loans remain
outstanding. These loans are due upon demand, accrue interest at ten percent and
are secured by all the assets of the Company. The outstanding balance is subject
to a subordination agreement whereby such amount cannot be repaid until the
senior lenders have been paid in full. Accordingly, this obligation has been
classified in long-term debt on the balance sheet (see Note 9).

5. NOTES PAYABLE

In September 1998, the Company entered into an agreement, approved by the
Board of Directors, which provided $2.0 million to the Company in connection
with the acquisition of the stock of American Plasma, Inc. (Note 1). Interest
was payable at 11.5 percent per annum. In connection with this loan, the Company
granted the holder warrants to purchase 228,683 shares of restricted common
stock at an exercise price of $4.50, which approximated the fair value of the
shares on the date of grant. The Company paid $40,000 in loan origination fees
related to this loan. This loan was repaid prior to February 28, 1999.

During the year ended February 28, 1998, the Company entered into
agreements, approved by the Board of Directors, which provided for loans of
$808,500. These loans were due April 12, 1998. Interest was payable monthly at
ten percent per annum. $500,000 of these loans was repaid in 1998 and the
remaining $308,500 was repaid during 1999.

In conjunction with an acquisition in 1997, the Company was obligated under
a note payable for $600,000, which had an interest rate of eight percent and was
due on October 31, 1998. The note was repaid at that time.

At various times during the year ended February 28, 1998, the Company
entered into agreements, which provided for loans totaling $1,138,447. These
loans are due upon demand and are secured by all the assets of the Company. The
loans accrue interest at twelve percent per annum. At February 29, 2000 and
February 28, 1999, $288,447 and $297,746 of these loans was outstanding.

F-14
<PAGE>
SERACARE, INC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6. LONG-TERM DEBT

SENIOR SUBORDINATED DEBENTURES

On February 13, 1998, the Company issued $16,000,000 in Senior Subordinated
Debentures with interest payable quarterly at 12%. One-third of the then
outstanding balance is due on February 13, 2003, one-half of the then
outstanding balance is due on February 13, 2004 with the remaining balance due
on February 13, 2005. In the event of certain public offerings of the Company's
securities or a change in control (as defined), the Company is required to
prepay the outstanding balance of the debentures. In addition, the Company may
prepay the debentures at any time without penalty. The debentures are senior to
all other debt but are subordinate to the senior bank debt. The debentures are
secured by all of the assets of the Company.

During the fiscal year ended February 29, 2000, the Company issued warrants
to purchase 127,646 shares of common stock to the holders of the senior
subordinated debentures in accordance with a provision under the Securities
Purchase Agreement, which allowed the Company to borrow additional funds
relating to the deferral of two quarterly interest payments. The fair value of
these warrants of $377,102 was capitalized as additional deferred bond offering
cost.

On February 29, 2000, $4,500,000 of the proceeds from the sale of the CTI
assets was used to reduce the principal amount of the subordinated debentures.
At February 29, 2000, $12,474,400 remained outstanding.

As part of the Securities Purchase Agreement, the Company issued warrants to
the debenture holders to purchase 2,100,572 shares of common stock at $.01 per
share. These warrants were valued at the fair value at that date, which resulted
in a deferred offering cost of $7,410,400. As a result of the $4,500,000 payment
on February 29, 2000, $2,207,505 of deferred offering costs less related
accumulated amortization of $641,768 were charged against the proceeds from the
sale of CTI assets. The remaining discount is being amortized over the term of
the debt.

The Securities Purchase Agreement contains certain affirmative and negative
covenants, including maintenance of certain minimum funded debt and fixed charge
coverage ratios and restrictions on incurring certain indebtedness and liens,
making certain dividend payments, making certain loans and advances or
investments in other persons, selling a substantial amount of assets, entering
into certain mergers or business combinations or using securities which are
senior to or pari passu with these debentures. At February 29, 2000, the Company
was not in compliance with these covenants. The lender waived covenant defaults
as of February 29, 2000 and has indicated the covenants would be amended so that
the Company would be in compliance with the note agreements in the future. The
Company granted warrants to purchase 100,000 shares of common stock at $.01 per
share to this lender in exchange for renegotiation of these covenants at
February 29, 2000. The fair value of these warrants of $230,000 was recorded as
additional deferred offering costs and will be amortized over the remaining term
of the debt.

TERM LOAN

As discussed in Note 3, in December 1998, the senior credit facility was
restructured to include a $7.0 million term loan. Interest was payable quarterly
at a per annum rate equal to the Wall Street Journal Prime Rate plus .75%
through July 15, 1999 and .50% thereafter. Principal was payable over a three
year period ending December 1, 2001. The term loan was subject to the same
covenants as the credit facility (Note 3) and was secured by all the assets of
the Company. On February 29, 2000, $6.0 million of the proceeds from the sale of
CTI assets was used to pay in full the outstanding balance under this facility.

F-15
<PAGE>
SERACARE, INC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6. LONG-TERM DEBT (CONTINUED)
DEBT ACQUIRED IN PURCHASE OF AMERICAN PLASMA, INC.

American Plasma, Inc. entered into two notes payable in 1996 to purchase the
assets of four plasma centers. The notes are secured by all the assets of one of
the four plasma centers and certain other assets of the other centers. The first
note is due in 24 quarterly payments of $40,152, representing principal and
interest at 12% per annum. At February 29, 2000, $195,091 was outstanding on
this note payable. The second note payable is due in biweekly installments of
$2,974, representing principal and interest imputed at 12% per annum, through
May, 2002. At February 29, 2000, $159,866 was outstanding on this note payable.

KIER CORPORATION

On September 2, 1996, the Company assumed a $45,000 note payable to The Kier
Corporation, a lessor, in conjunction with an acquisition of the rights to the
Clearfield, Utah plasma collection center. The note payable accrues interest at
10.5% and is payable in monthly installments of $967. These monthly installments
have been added to the base rental payments and are paid monthly over a
five-year period. The first monthly installment of interest and principal
commenced on October 20, 1996 and the final installment is due on September 20,
2001. If the lease is terminated or the Company defaults on the lease, the
remainder of the loan is due in full immediately. At February 29, 2000, the
outstanding balance on the note payable was $16,857.

FUTURE MINIMUM PAYMENTS TO BE MADE, AS OF FEBRUARY 29, 2000:

<TABLE>
<CAPTION>
YEAR ENDING FEBRUARY 28, AMOUNT
------------------------ -----------
<S> <C>
2001 $ 231,151
2002 135,458
2003 5,206
2004 4,158,133
2005 4,158,133
Thereafter................................................ 4,630,633
-----------
13,318,714
Less current portion........................................ 231,151
-----------
$13,087,562
===========
</TABLE>

7. STOCKHOLDERS' EQUITY

COMMON STOCK

During the year ended February 29, 2000, the Company acquired six plasma
centers under various agreements in exchange for 500,000 shares of common stock,
valued at $2,359,375.

In connection with the acquisition of a plasma center in October 1998, the
Company issued 50,000 shares of restricted common stock in a transaction valued
at $149,227 (see Note 1).

In August and September, 1998, the holders of Series A warrants exercised
their warrants to purchase 325,000 shares of common stock at $1.50 per share.

F-16
<PAGE>
SERACARE, INC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7. STOCKHOLDERS' EQUITY (CONTINUED)

In November, 1998, the Company issued an additional 33,833 shares of common
stock in conjunction with the terms of a prior private placement.

SERIES B PREFERRED STOCK

In December 1997, the Company issued 15,000 shares of the Company's
Series B Convertible Preferred Stock, par value $.001 per share, for $1,500,000
in a private placement, less issuance costs of $7,500. The Series B Convertible
Preferred Stock has no voting rights prior to conversion, does not accrue
interest or cash dividends and is redeemable by the Company beginning
January 1, 1999 at a premium to liquidation preference. During the year ended
February 29, 2000, all shares of Series B Preferred Stock were converted into
375,000 shares of common stock.

SERIES C PREFERRED STOCK

In December, 1998, the Company issued 22,500 shares of the Company's
Series C Convertible Preferred Stock, par value $.001 per share, plus warrants
to purchase 281,500 shares of common stock at $4.50 per share, for $2,250,000 in
a private placement, less issuance costs of $135,000. Such preferred stock is
convertible into 500,000 shares of common stock and has a $100 per share
liquidation preference. The Series C Convertible Preferred Stock has no voting
rights prior to conversion and accrues preferred dividends at the rate of 10% of
the liquidation value (payable quarterly in arrears). In connection with this
private placement, the Company issued 25,000 shares of common stock as
additional issuance costs. As of February 29, 2000 dividends in arrears were
approximately $37,500.

SERIES A WARRANTS

The Company issued 940,000 Series A Warrants in connection with the two
private placements dated June 1, 1996 and October 1, 1996. Each warrant allowed
the holder to purchase one share of common stock of the Company at $2.75, with
the exercise price dropping to $1.50 per share if the Company did not register
the sharess issued in conjunction with both private placements and the common
stock underlying Series A Warrants by August 7, 1998. During the year ended
February 28, 1998, the Company offered the holders of these warrants a cashless
exchange of one share of common stock for two warrants. Holders of 615,000
warrants elected to receive 307,500 shares of restricted common stock at that
time. The holders of the remaining 325,000 warrants exercised the warrants
during the year ended February 28, 1999 at the exercise price of $1.50 per
share.

OTHER WARRANTS

During the year ended February 29, 2000, the Company elected to capitalize
two quarterly interest payments related to the subordinated debentures. In
accordance with the terms of the subordinated debentures agreement, the Company
issued warrants to the debenture holders to purchase 127,646 shares of common
stock at an exercise price of $.01 per share (Note 6).

At February 29, 2000, the Company was in default of certain covenants under
the senior subordinated debentures agreement. The Company granted warrants to
purchase 100,000 shares of common stock at $.01 per share to the lender in
exchange for renegotiation of these covenants (Note 6).

In conjunction with the private placement of Series C preferred stock, the
Company issued warrants to purchase 281,250 shares of common stock at $4.50 per
share.

F-17
<PAGE>
SERACARE, INC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7. STOCKHOLDERS' EQUITY (CONTINUED)
In conjunction with a $1.25 million loan from a related party (see Note 4)
as well as a $2.0 million loan (see Note 5) both of which were related to the
acquisition of the stock of American Plasma, Inc., the Company issued warrants
to the loan holders to purchase 422,433 shares of common stock at $4.50 per
share.

In conjunction with the issuance of the $16 million in subordinated
debentures (see Note 6), the Company issued warrants to the debenture holders to
purchase 2,100,572 shares of common stock at $.01 per share. In addition, the
Company granted warrants to purchase 131,286 shares of its common stock at $3.00
per share as a finder's fee to the referring investment banker.

In connection with the acquisition of a plasma collection center in Baton
Rouge, LA, the Company issued 50,000 five year warrants to purchase the
Company's shares at $6.00 to Amex Plasma Management, Inc. in October 1998.

8. SERIES A REDEEMABLE PREFERRED STOCK

On July 7, 1996, the Company acquired BHM Labs, Inc. in exchange for 3,600
shares of the Company's Series A Preferred Stock. The preferred stock is
redeemable over three years, in 36 monthly installments with interest at the
rate of eight percent per annum starting June 1996. Upon receipt of each monthly
payment, the holder shall deliver to the Company, Series A Stock Certificates
representing 1/36th (one hundred shares) of the preferred stock initially issued
to the holder in connection with the acquisition. As of February 29, 2000, the
Company has redeemed all shares of the preferred stock for $511,269 in cash.

9. STOCK OPTIONS

The Company has entered into various employment and consulting agreements
with officers and directors of the Company. As part of the agreements the
officers and directors were granted stock options as follows:

In February 1996, the president and chief executive officer of the
Company was granted an option to purchase 100,000 shares of common stock of
the Company at a price of $1.00 per share. These options became fully vested
upon execution of the agreement and are exercisable until January 2001.

Additionally, the president and chief executive officer was granted the
following options, which are exercisable for a period of five years from the
vesting date, unless noted otherwise.

(1) In February 1996, the Company granted options to purchase 56,147
shares of common stock of the Company for the price of $1.25 per share.
The options became fully vested in October 1996.

(2) In conjunction with the employment agreement dated February 6,
1996, the Company granted options to purchase 150,000 shares of common
stock of the Company for prices ranging from $1.00 to $3.00 per share.
These options became fully vested in January 1997.

(3) In conjunction with certain Bridge loans made to the Company in
July 1996, the Company granted options to purchase 130,000 shares of
common stock of the Company at a price of $1.00 per share. These options
were fully vested on the date granted, and are exercisable for a period
of three years from the vesting date.

F-18
<PAGE>
SERACARE, INC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9. STOCK OPTIONS (CONTINUED)
(4) In conjunction with the $742,500 loans to the Company during
calendar 1997 (see Note 4), the Company granted options to purchase
742,500 and 116,000 shares of common stock at an exercise price of $2.00
and $3.00 per share, which was at the then fair market value,
respectively. These options were fully vested on the date granted, and
are exercisable for three years.

(5) In August 1997, the Board granted options to the Company's
president to purchase 100,000 shares of common stock at an exercise price
of $3.00 per share, which was above the fair market value at the time.
These options vested immediately and are exercisable for five years.

(6) In March, 1999, the Board granted options to the Company's
president to purchase 839,011 shares at $4.25 per share as additional
consideration for allowing $472,500 of loans due him to continue to be
subordinate to the subordinated debentures. These options vested
immediately and are exercisable for five years. The fair value of these
options on the date of issuance was $276,095 which was capitalized as
deferred financing cost.

In conjunction with the 1996 Plan of Reorganization, the Vice President
of Finance was granted options to purchase 42,110 shares of common stock of
the Company. These options became fully vested in October 1996 at an option
price set at $1.25 per share. These options are exercisable for a period of
five years from the vesting date.

In April 1997, the Board granted options to the Vice President of
Finance to purchase 25,000 shares of common stock at an exercise price of
$2.00 per share, which was at the then fair market value. These options
vested immediately and are exercisable for five years.

In December 1998, the Board granted options to the Vice President of
Finance to purchase 32,000 shares of common stock at an exercise price of
$4.25 per share, which was at the then fair market value. These options
vested immediately and are exercisable for five years.

In March, 1999, the Board granted options to the Vice President of
Finance to purchase 25,000 shares of common stock at an exercise price of
$5.25 per share, which was at the then fair market value. These options
vested immediately and are exercisable for five years.

In August 1997, various directors were granted options to purchase
145,000 shares of common stock of the Company at an exercise price of $2.25
per share, which was at the then fair market value. These options were fully
vested at the granting date and are exercisable for a period of five years.

In December 1998, various directors were granted options to purchase
60,000 shares of common stock of the Company at an exercise price of $4.25
per share, which was at the then fair market value. These options were fully
vested at the granting date and are exercisable for a period of five years.

During the year ended February 28, 1997, various directors were granted
options to purchase 20,000 and 95,000 shares of common stock of the Company
at an exercise price of $1.00 and $1.50, respectively. These options were
fully vested at the granting date and are exercisable for a period of five
years.

In connection with various loans made to the Company during the year
ended February 28, 1998, the Company granted options to purchase 1,580,473
shares of common stock at exercise prices ranging between $2.00 and $4.00
per share (including 349,000 granted at $3.50 per share to related parties).
These options were fully vested at the granting date and are exercisable for
a period of three years. In

F-19
<PAGE>
SERACARE, INC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9. STOCK OPTIONS (CONTINUED)
February 1998, 707,500 of these options were exchanged for 353,750 shares of
common stock in a cashless exchange (including 349,000 options exchanged for
174,500 shares of common stock by related parties).

During the year ended February 28, 1999, the Company granted options to
one employee to purchase 388,267 shares of common stock at an exercise price
of $6.31 per share. These options were fully vested at the granting date and
are exercisable for a period of 5 years.

During the year ended February 28, 1999, the Company granted options to
three employees to purchase 30,000 shares of common stock at an exercise
price of $4.25 per share. These options vest over three years and are
exercisable for a period of 3 years.

The following table summarizes all option/warrant activity for the years
ended February 29, 2000:

<TABLE>
<CAPTION>
NUMBER OF WEIGHTED
COMMON STOCK AVERAGE
WARRANTS/OPTIONS PRICE
---------------- --------
<S> <C> <C>
Outstanding as of March 1, 1998..................... 5,179,663 $ 1.40
Granted............................................. 1,288,855 4.99
Exercised........................................... (325,000) (2.75)
--------- ------
Outstanding as of February 28, 1999................. 6,143,518 2.08
Granted............................................. 1,091,657 3.39
--------- ------
Outstanding as of February 29, 2000................. 7,235,175 $ 2.28
========= ======
Exercisable as of February 29, 2000................. 7,215,175 $ 2.27
========= ======
</TABLE>

FASB Statement 123, "Accounting for Stock-Based Compensation," requires the
Company to provide pro forma information regarding net income and earnings per
share as if compensation cost for the Company's stock option plans had been
determined in accordance with the fair value based method prescribed in FASB
Statement 123. The Company estimates the fair value of each stock option, using
the Black Scholes method, at the weighted-average assumptions used for grants in
fiscal 2000 and 1999, dividend yield of zero percent; expected volatility of
14 percent and 13 percent; risk free interest rate of 5.24; and expected life of
5.0 years.

The weighted average fair value of options granted during the years ended
February 29, 2000 and February 28, 1999 was $.84 and $.13, respectively.

F-20
<PAGE>
SERACARE, INC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9. STOCK OPTIONS (CONTINUED)
Under the accounting provisions of FASB Statement 123, the Company's net
income (loss) and income (loss) per share for the years ended February 29, 2000
and February 28, 1999 would have been reduced to the pro forma amounts indicated
below:

<TABLE>
<CAPTION>
YEARS ENDED
-------------------------------------
FEBRUARY 29, 2000 FEBRUARY 28, 1999
----------------- -----------------
<S> <C> <C>
Net income (loss)
As reported................................... $(578,171) $2,705,002
Pro forma..................................... $(612,297) $2,677,632

Basic income (loss) per share
As reported................................... $ (.10) $ .37
Pro forma..................................... $ (.10) $ .36

Diluted income (loss) per share
As reported................................... $ (.10) $ .24
Pro forma..................................... $ (.10) $ .24
</TABLE>

The following table summarizes information about stock options outstanding
at February 29, 2000:

<TABLE>
<CAPTION>
OUTSTANDING EXERCISABLE
----------------------------------------------------------- --------------------------
WEIGHTED AVERAGE WEIGHTED AVERAGE
RANGE OF ------------------------------ --------------------------
EXERCISE PRICES SHARES LIFE (MONTHS) EXERCISE PRICE SHARES EXERCISE PRICE
--------------- --------- ------------- -------------- --------- --------------
<S> <C> <C> <C> <C> <C>
$0.01 2,353,123 Unlimited $0.01 2,353,123 $0.01
$1.00-$1.70 521,330 2.0 $1.18 521,330 $1.18
$2.00 1,011,726 6.8 $2.00 1,011,726 $2.00
$2.25-$4.00 1,221,035 6.5 $3.02 1,221,035 $3.02
$4.25-$4.50 1,664,694 47.0 $4.36 1,644,694 $4.35
$6.00-$6.31 463,267 38.0 $6.22 463,267 $6.22
--------- ----- --------- -----
7,235,175 $2.28 7,215,175 $2.27
========= ===== ========= =====
</TABLE>

10. LEASES

The Company is currently leasing its corporate office under a noncancelable
lease agreement, which expires in May 2002. The Company is also obligated under
various other lease agreements for other locations (primarily donor centers).
The remaining leases expire at various dates through July 2009. All of the
leases have renewal options.

Future minimum rental obligations under the aforementioned lease agreements
are as follows:

<TABLE>
<CAPTION>
FISCAL YEAR ENDED AMOUNT
----------------- ----------
<S> <C>
2001........................................................ $1,676,775
2002........................................................ 1,575,774
2003........................................................ 1,393,779
2004........................................................ 948,125
2005........................................................ 537,893
Thereafter.................................................. 933,000
----------
$7,065,346
==========
</TABLE>

F-21
<PAGE>
SERACARE, INC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10. LEASES (CONTINUED)

Rent expense amounted to $1,736,845 and $1,534,419 for the years ended
February 29, 2000 and February 28, 1999, respectively.

11. INCOME TAXES

The difference between the reported tax provision and the statutory rate
applied to the pre-tax income (loss) for the fiscal year ended February 29, 2000
and February 28, 1999 is primarily related to the realization of deferred tax
assets, primarily the utilization of net operating loss carryforwards.

Deferred income taxes reflect the impact of temporary differences between
the amount of assets and liabilities recognized for financial reporting purposes
and such amounts recognized for tax purposes. As of February 29, 2000 the
Company's net loss carryforwards resulted in deferred tax assets of
approximately $.3 million. Based upon historical earnings, management was unable
to determine that it was more likely than not that the deferred tax assets would
be realized, therefore a 100% valuation allowance was established.

As of February 29, 2000, the Company had approximately $.7 million of
federal and state net operating loss carryforwards, of which a portion is
subject to limitation under section 381 of the Internal Revenue Code. The loss
carryforwards expire in various amounts through the year 2019.

12. COMMITMENTS

The Company has entered into various employment and consulting agreements
with current and previous officers and directors of the Company. The following
describes certain terms and obligations provided by the agreements entered into
by the Company with such officers and directors:

The Company is obligated to the president under an agreement through
February 5, 2002. The Company is obligated to the executive vice president
under an agreement through February 6, 2003. The current annual salaries
under these agreements are $390,000.

Under the terms of a consulting agreement dated in April 1996, the Company
is obligated to pay an outside director $50,000 per year. In January 1998,
the term of such agreement was extended through March 2002.

In connection with the acquisition of Western States Group, Inc., the
Company is obligated under the terms of two five-year employment agreements
dated February 13, 1998. The current annual salaries under these agreements
are $255,000.

13. CONCENTRATION OF CREDIT RISK, SIGNIFICANT CUSTOMERS AND SALES COMMITMENTS

During the year ended February 29, 2000, the Company sold its primary
product, plasma, on credit mainly to fractionators in the health care industry.
The plasma is processed into various immune enhancing and other pharmaceutical
products which are then sold for therapeutic applications.

Plasma collection, storage, labeling and distribution activities are subject
to strict regulation and licensing by the U.S. Food and Drug Administration
("FDA"). The Company's facilities are subject to periodic inspection by the FDA.
The Company is required to obtain from each donor an informed consent regarding
the donation procedure. Failure to comply or correct deficiencies with
applicable laws or regulations could subject the Company to enforcement action,
including product seizures, recalls, center or

F-22
<PAGE>
SERACARE, INC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

13. CONCENTRATION OF CREDIT RISK, SIGNIFICANT CUSTOMERS AND SALES COMMITMENTS
(CONTINUED)
facility closure, license revocations and civil and criminal penalties, any one
or more could have a material adverse effect on the Company's business.

Laws and regulations with similar substantive and enforcement provisions are
also in effect in many of the states and municipalities where the Company does
business. Any change in existing federal, state or municipal laws or
regulations, or in the interpretation or enforcement thereof, or the
promulgation of any additional laws or regulations could have an adverse effect
on the Company's business.

For the years ended February 29, 2000 and February 28, 1999, approximately
42% and 32%, respectively, of the net sales were to Grupo Grifols, S.A., and
about 11% and 20%, respectively, were to Alpha Therapeutics. No other customer
represented ten percent or more of net revenue. Accounts receivable due from
Grupo Griffols, S.A. represented approximately 49% of accounts receivable as of
February 29, 2000 and 37% of accounts receivable as of February 28, 1999. One
additional customer represented 10% of accounts receivable as of February 29,
2000.

14. RELATED PARTY TRANSACTIONS

The Company has had various transactions with related parties. These
transactions are described in Notes 4, 7, 9, and 12. The Company had sales of
$629,547 to a related party in 1999, of which the outstanding balance at
February 28, 1999 was $623,899 and was included in the CTI assets sold on
February 29, 2000. There were no material related party transactions during the
fiscal year ended February 29, 2000.

15. OTHER INCOME

On February 29, 2000, pursuant to the terms of an Asset Purchase Agreement,
the Company sold substantially all of CTI's operating assets in an all cash
transaction for $17,406,515. In conjunction with this transaction, $5,406,515
was placed in escrow, of which $3,731,515 was converted to cash in March 2000.
The remaining $1,675,000 is being held pursuant to an adjustment provision in
the Asset Purchase Agreement. This sale resulted in a gain of $269,212, which is
included in other income. During the years ended February 29, 2000 and
February 28, 1999, revenues for CTI were $6,943,730 and $6,331,768 respectively.

Other income at February 28, 1999, includes approximately $534,000 of gain
realized from the sale of three properties acquired as part of the American
Plasma Management, Inc. acquisition. The underlying mortgage on one of the
properties was assumed by the buyer. The Company is leasing these properties
back under 5 and 10 -year leases.

F-23
<PAGE>
SERACARE, INC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

16. EARNINGS (LOSS) PER SHARE

The following table reconciles the numerators and denominators of the basic
and diluted earnings (loss) per share computation. The net income (loss)
available to common stockholders has been adjusted for dividends on preferred
stock.

<TABLE>
<CAPTION>
FISCAL YEARS ENDED
-----------------------
2000 1999
---------- ----------
<S> <C> <C>
Basic earnings (loss) per share
Net income before cumulative effect of change in
accounting method....................................... $ 141,732 $2,705,002
Dividends on preferred stock.............................. 225,000 37,500
---------- ----------
Net income available to common stockholders before
cumulative effect of change in accounting method........ (83,268) 2,667,500
Cumulative effect of change in accounting method.......... (719,903) 0
---------- ----------
Net income (loss) available to common stockholders
(numerator)............................................. $ (803,171) $2,667,500
========== ==========
Weighted average common shares outstanding
(denominator)........................................... 8,101,336 7,365,212
---------- ----------
Basic earnings (loss) per share........................... $ (0.10) $ 0.37
========== ==========
Diluted earnings (loss) per share
Net income (loss) available to common stockholders
(numerator)............................................. $ (803,171) $2,667,500
========== ==========
Weighted average common shares outstanding................ 8,101,336 7,365,212
Weighted average warrants/options outstanding............. 6,533,870 5,485,604
Weighted average other dilutive securities................ 674,658 425,000
Stock acquired with proceeds.............................. (2,993,267) (2,172,630)
---------- ----------
Weighted average common shares and assumed conversion
outstanding (denominator)............................... 12,316,597 11,103,186
========== ==========
Diluted earnings (loss) per share......................... $ (0.10) $ 0.24
========== ==========
</TABLE>

Diluted earnings (loss) per share has been calculated excluding the effect
of potentially dilutive securities as their inclusion would be antidilutive.

17. SEGMENT INFORMATION

Effective March 1, 1998, the Company adopted SFAS No. 131 for financial
reporting of its operating segments. The Company's business activities are
divided, managed and conducted in two basic business segments, the Therapeutic
Products segment and the Diagnostic Products segment. These two segments were
determined by management based upon the inherent differences in the end use of
the products, the inherent differences in the value added processes made by the
Company, the differences in the regulatory requirements and the inherent
differences in the strategies required to successfully market finished products.
Operations which do not fall into either of these two segments including
unallocated corporate overhead is reported in the category "Corporate and
Other".

The Therapeutic segment includes plasma collection and those other
activities involving the collection and/or sale of plasma to manufacturers whose
objective is the production of injectable plasma products such as albumin,
antihemophilic factors 8 and 9, and Rh Immune globulin. The Diagnostic segment
includes the manufacture and/or sale of non-injectable plasma products such as
proficiency tests, controls,

F-24
<PAGE>
SERACARE, INC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

17. SEGMENT INFORMATION (CONTINUED)
calibrators, reagents and specialty test kits. The Diagnostic segment also
includes the production and/or sale of monoclonal antibodies.

The Company utilizes multiple forms of analysis and control to evaluate the
performance of the segments and to evaluate investment decisions. In general,
gross margin and Earnings Before Interest Depreciation and Amortization (EBITDA)
are deemed to be the most significant measurements of performance, although
collection volumes and certain controllable costs also provide useful "early
warning signs" of future performance. The following segment financial statements
have been prepared on the same basis as the Company's consolidated financial
statements, utilizing the accounting policies described in the Summary of
Significant Accounting Policies.

The Company's segment information as of and for the years ended
February 29, 2000 and February 28, 1999 is as follows:

<TABLE>
<CAPTION>
THERAPEUTIC DIAGNOSTIC TOTAL CORPORATE CONSOLIDATED
SEGMENT SEGMENT SEGMENTS AND OTHER TOTAL
----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Net Sales--Third Party
Fy 1999..................... $36,596,599 $12,413,790 $49,010,389 $ $49,010,389
Fy 2000..................... 46,897,523 15,142,529 62,040,052 62,040,052

Income from Joint Venture
Fy 1999..................... 687,818 687,818 687,818
Fy 2000..................... 730,951 730,951 730,951

Net Sales--Inter-Segment
Fy 1999..................... 2,871,653 895,189 3,766,842 --
Fy 2000..................... 3,230,690 51,840 3,282,530 --

Gross Profit
Fy 1999..................... 3,944,378 6,625,436 10,569,814 10,569,814
Fy 2000..................... 7,145,894 4,796,177 11,942,071 11,942,071

Operating Income
Fy 1999..................... 2,823,535 5,007,803 7,831,338 (1,441,684) 6,389,654
Fy 2000..................... 5,911,320 1,379,372 7,290,692 (2,218,223) 5,072,469

Interest Expense--net
Fy 1999..................... 157,946 -- 157,946 4,136,356 4,294,302
Fy 2000..................... 31,323 -- 31,323 5,131,881 5,163,204

Other income
Fy 1999..................... 10,408 7,718 18,126 608,538 626,664
Fy 2000..................... 609 9,112 9,721 310,344 320,065

Taxes on Income
Fy 1999..................... 17,014 -- 17,014 -- 17,014
Fy 2000..................... 87,598 -- 87,598 -- 87,598
</TABLE>

F-25
<PAGE>
SERACARE, INC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

17. SEGMENT INFORMATION (CONTINUED)

<TABLE>
<CAPTION>
THERAPEUTIC DIAGNOSTIC TOTAL CORPORATE CONSOLIDATED
SEGMENT SEGMENT SEGMENTS AND OTHER TOTAL
----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Cumulative Effect of Change in
Accounting Method
Fy 1999..................... $ -- $ -- $ -- $ -- $ --
Fy 2000..................... (505,585) (214,318) (719,903) -- (719,903)

Net Income (loss)
Fy 1999..................... 2,675,997 5,015,521 7,691,518 (4,986,516) 2,705,002
Fy 2000..................... 5,287,423 1,174,166 6,461,589 (7,039,760) (578,171)

Identifiable Assets
Fy 1999..................... 39,962,338 17,769,324 54,731,662 9,844,600 64,576,262
Fy 2000..................... 46,943,953 13,668,422 60,612,375 8,966,540 69,578,915

Depreciation and Amortization
Fy 1999..................... 844,591 577,297 1,421,888 402,042 1,823,730
Fy 2000..................... 1,356,113 609,058 1,965,171 238,486 2,203,657

Capital Expenditures
Fy 1999..................... 1,349,818 1,342,777 2,692,595 295,520 2,988,115
Fy 2000..................... 3,296,688 609,103 3,905,791 -- 3,905,791
</TABLE>

"Corporate and Other" includes unallocated corporate overhead, interest
expense, and other income (expense) amounts which are not specifically
attributable to either segment. Identifiable assets of each segment consists
primarily of cash, accounts receivable, inventories, certain intangible assets,
and specifically attributable fixed assets including equipment. Corporate assets
includes corporate cash, certain notes receivable, deferred bond discount and
other assets not specifically allocable to either segment.

F-26