<PAGE>

                  UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                 FORM 10 - KSB 

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

For the fiscal year ended  FEBRUARY 28, 1998 

( )   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
incorporation or organization)                     Identification No.)

1925 Century Park East, Suite 1970
Los Angeles, California                                   90067
-------------------------------                      --------------
(Address of principal executive offices)                (Zip Code)

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. (X) Yes ( ) 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 28, 1998 was 
$12,410,970.

As of April 30,1998, the aggregate market value of the issuers voting shares 
held by non-affiliates was  approximately  $46,993,222 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 30, 1998, the issuer had 7,335,539 shares of its common stock, 
$.001 par value issued and outstanding, of which 125,000 shares were deemed.

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.  SeraCare, Inc. emerged from a Chapter 11 reorganization in 
February of 1996 under a new management team and with a strategic plan for 
expansion and growth.  In the two years since such emergence, the Company 
has: made several key acquisitions including Western States Group, Inc. 
(herein referred to as "Western States") and Consolidated Technologies (herein 
referred to as "CTI"); expanded its plasma collection centers from six 
locations to eighteen; and recruited some of the leading experts in the 
industry to join the board of directors and direct the operations of the 
Company's three divisions. 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 Organizationally, the Company consists of three 
divisions: Consolidated Technologies Division; Western States Plasma 
Division; and Biologics Division. With the acquisitions of Western States and 
CTI, SeraCare has become a fully integrated collector, manufacturer and 
marketer of plasma based diagnostic products and tests. Western 


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States has also provided expanded worldwide marketing with its domestic 
customer base and an extensive European and Asian presence.  In addition, the 
Company's Biologics Division continues to be a factor in the business of 
collecting and selling source and hyperimmune plasma to manufacturers of 
pharmaceutical and diagnostic products (called Fractionators).  During the 
fiscal year ended February 28, 1998, the Company collected and sold two 
hyperimmune plasmas, Cytomegalovirus Antibody Plasma (CMV) and Tetanus 
Antibody Plasma.  Of the Company's total volume of plasma, about 85% 
consisted of Source Plasma and approximately 15% represented hyperimmune 
plasma.  The Company's customers process plasma into such 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 has also initiated specialty plasma programs. 
While these programs are only in the early stages of development, initial 
results coordinated through the efforts of Western States and CTI 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.  Pursuant to FDA rules, a donor can donate 
plasma up to twice per week or 104 times per year.

The Company currently sells the source plasma it collects primarily to 
fractionators under one to three 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.

CURRENT OPERATIONS.

BIOLOGICS DIVISION. The Biologics Division currently conducts its business 
through four wholly-owned subsidiaries: AVRE, Inc., a Nevada corporation, 
Binary Associates, Inc., a Colorado corporation, BHM Labs, Inc., an Arkansas 
corporation, and SeraCare Acquisitions, Inc., a Nevada corporation. On April 
1, 1997 and May 1, 1997 the Company opened newly established centers in 
Pasco, Washington and Toledo, Ohio respectively. In June 1997, the 
Clearfield, Utah center became fully licensed by the FDA and QPP certified.  
On August 13, 1997, the Company completed an Asset Exchange with 
Serologicals, Inc. whereby it received: Reno Plasma, Inc. located in Reno, 
Nevada; the Simi Biological Resources, Inc. plasma collection center located 
in Ft. Smith Arkansas; and $250,000 in cash in exchange for two (2) plasma 
collection centers located in Colorado Springs, Colorado and one center 
located in Pueblo, Colorado. In September 1997 the Company opened a plasma 
collection center in Pocatello, Idaho. On November 29, 1997, the Company 
completed an Asset Purchase Agreement whereby it acquired five operating 
plasma collection centers from American Plasma Management, Inc. which were 
located in South Bend, Indiana; Kalamazoo, Michigan; Boise, Idaho; Reno, 
Nevada; and Salt Lake City, Utah. The Company has also opened new centers in 
Raleigh, North Carolina, which opened on December 17, 1996; Macon, Georgia, 
which opened on December 18, 1996; and Savannah, Georgia which opened on 
March 1, 1998.  The Macon, Raleigh, Pasco and Toledo centers are operating 
under a Reference Number from the FDA pending approval of its license 
application. Collection centers which have not received FDA approval of its 
license application are allowed 


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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 twelve to 
eighteen months from date of filing to obtain final FDA approval. 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 takes approximately six to 
eight weeks. 

As of  May 1, 1998, the Company had seventeen plasma collection centers in 
operation which were located in:  Las Vegas, Nevada;  Clarkesville, 
Tennessee; Phoenix, Arizona; Ft. Smith, Arkansas; Clearfield, Utah;  Raleigh, 
North Carolina; Pasco, Washington;  Toledo, Ohio; Macon, Georgia; Savannah, 
Georgia; Reno, Nevada (2); South Bend, Indiana; Kalamazoo, Michigan; Boise, 
Idaho; Pocatello, Idaho; and Salt Lake City, Utah.  As of  May 1, 1998, such 
centers were collecting plasma at an annualized rate of about 285,000 liters.

The Company has also completed the construction phase for a plasma center 
which is expected to open about June 1, 1998 in Wilmington, Delaware.

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 28, 1998 about forty nine percent of 
plasma revenue was from Grupo Grifols, S.A. the leading fractionator in 
Spain. These sales were made under a renewable contract, the initial term of 
which expires December 31, 1998.  About twenty three percent of plasma 
revenue was from sales to Alpha Therapeutic, a subsidiary of Green Cross 
Corporation of Japan ("Alpha").  Alpha and the Company terminated the plasma 
contracts effective July 31, 1997.  About fifteen percent of plasma revenue 
was from sales to DCI Management Group, Inc.  Such sales were under an 
agreement for CMV plasma which was terminated effective December 31, 1997. 

In addition, there is 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.    

Recently opened centers including Clearfield, Utah; Raleigh, North Carolina; 
Toledo, Ohio; Macon, Georgia; and Pasco, Washington have been contractually 
committed to North American Biologics, Inc. contingent upon final approval of 
the FDA license applications and QPP certifications for those centers. 
Clearfield received final FDA license approval and QPP certification 
effective June 1, 1997.  As of February 28, 1998, final FDA approval and QPP 
certification was pending for Raleigh, Macon, Pasco and Toledo. 

Most of the Company's revenue is derived under contracts and relationships 
which once established continue to be renewed.  The plasma collected by the 
Company 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 


                                            4

<PAGE>

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.

WESTERN STATES PLASMA DIVISION.  Effective January 1, 1998 SeraCare acquired 
all of the stock of The Western States Group, Inc., a California corporation 
(herein referred to as "Western States").  In the acquisition, SeraCare 
acquired all of the operating assets of Western States which included but are 
not limited to: cash; trade accounts receivable; inventories; certain 
furniture and fixtures; all machinery and equipment; all leasehold 
improvements; all licenses and other intangible properties including 
certifications, FDA licenses and trademarks; and all rights and interests 
arising under or in connection with any contracts with customers to which 
Western States is a party. See Note 1 of Notes to Consolidated Financial 
Statements for further information on the acquisition.

The Western States Plasma Division operates through Western States Group, 
Inc., and is located in Fallbrook, 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, London, Milan, Tel Aviv, Seoul and Hong Kong.  Western 
States is a vendor approved supplier to 507 pharmaceutical and other 
healthcare companies, including being listed as an Exclusive Supplier in 
several 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 
and has been successful in sourcing and distributing plasma based products in 
time sensitive situations.   

CONSOLIDATED TECHNOLOGIES DIVISION. Effective January 1, 1998, the Company 
acquired substantially all of the operating assets of Consolidated 
Technologies, Inc., a Texas corporation and Conco Associates, Inc. (dba Cone 
Biotech), a Texas corporation (collectively herein referred to as "CTI" ) 
located in Austin, Texas.  Under terms of the Asset Purchase Agreement, the 
assets acquired included but are not limited to: certain real property; all 
furniture and fixtures; all machinery and equipment; all leasehold 
improvements; all licenses and other intangible properties including 
certifications, FDA licenses and trademarks; all inventories;  and all rights 
and interests arising under or in connection with any contracts with 
customers or potential customers to which CTI is a party.  See Note 1 of 
Notes to Consolidated Financial Statements for further information on the 
acquisition.

 The Consolidated Technologies Division operates through SeraCare Technology, 
Inc., a Nevada corporation and consists essentially of the operating assets 
acquired in the Consolidated Technologies, Inc. transaction.  Located in 
Austin, Texas, Consolidated Technologies is a biomedical company which 
currently 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 


                                         5

<PAGE>

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.  In 
joining SeraCare, Consolidated Technologies has established itself as a 
diagnostic products manufacturer with an in-house supply of specialty plasma. 
This "Closed Loop" cycle from donor to end product is expected to 
significant improve quality control, turnaround time and the cost of 
delivering the final products to customers.  

COMPETITION
The Company 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 the Company.  If the Company is unable to maintain and expand 
its donor base, its business and future prospects will 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.

      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: 


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          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".  At this time, the Company has no 
unresolved compliance issues relating to its ongoing operations.

SeraCare has established the position of  "Director of Compliance". This 
position serves as the communication link between the company and the FDA.  
The Director of Compliance makes periodic unannounced compliance inspections 
at the centers, simulating the FDA inspections. Fractionators (manufacturers 
to whom we sell the plasma) also conduct compliance inspections in our 
centers on an annual basis. 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. The focus of all 
inspections and review processes is to ensure 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 the donors. 


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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.

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 


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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 four centers 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.  In addition, each of our customers (fractionators) has 
its own STANDARD OPERATING PROCEDURES which SeraCare, Inc. is obligated to 
follow. These procedures which are prepared and provided by the fractionator, 
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 inventory and destroyed. In most cases, the 
fractionator operates the laboratory which performs these tests. 

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.


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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;

              -    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
     in the 1960's. Between 1970 and 1979, the crude incidence fell from 40.5
     cases to 14.3 cases per 10,000 total births. 

     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. 
     Time series studies have shown a dramatic decline


                                      11

<PAGE>

     in the incidence of Rh isoimmunization, from 13-17% in the      
     mid-1960's to 0.3-1.9% in the mid-1970's. In Canada, where compliance      
     with prophylaxis was maximized, Rh isoimmunization fell from 10.3 per      
     1000 births and 55 deaths in 1964 to 3.4 per 1000 births and 1 death      
     in 1975.
     
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 
   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 
   $3,500 per liter. The average spot price (free market price) of source 
   plasma is currently approximately $90. 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 
   Red Cross and 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 such as plasma collection 
   centers. This "for-profit" commercial sector consists of plasma collection 
   operations which collect plasma from paid


                                      12

<PAGE>

   donors and sell the  plasma to Fractionators, who  produce plasma 
   derivative products or fractions that are used in therapeutics.

   Plasma is collected at centers owned by both foreign and U.S. 
   fractionators and by independent companies who sell to diagnostic 
   companies and other fractionators.

   Plasma collection centers are found in most states throughout the United 
   States as presented in the following illustration:

                   DISTRIBUTION OF PLASMA CENTERS BY STATE - 1996

                                  
    [MAP OF THE UNITED STATES SHOWING THE NUMBER OF PLASMA CENTERS BY STATE]


                    SOURCE: AMERICAN BLOOD RESOURCES ASSOCIATION


   PLASMA MARKET 

   The source plasma industry has experienced a number of fluctuations in the 
   supply and demand cycles. The market factors driving the plasma industry 
   have included:

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

              -    The worldwide plasma shortage.

              -    Extensive public concern over the safety of blood products.

              -    An increase in domestic and foreign regulatory control over
                   the collection and testing of plasma.

   A worldwide shortage of plasma began in 1991, driven partially by the 
   increased need for plasma components to treat larger and older 
   populations, and partially by a diminished pool of donors that resulted 
   from more restrictive testing and screening requirements imposed by 
   regulatory authorities. In 1991, the FDA required mandatory screening for 
   hepatitis C, thereby disqualifying donations from a significant portion of 
   the then existing donor base. Another market factor has been increasing 
   public concern over HIV and other viruses which has lead to increased 
   testing and tighter scrutiny.

   The Company has generally sold its plasma under contracts ranging from one 
   to three 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


                                       13

<PAGE>

   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 batches of 7,500 to 10,000 
   liter units from many different donor sources.

   The  four leading fractionators in the  United States are:

          ALPHA THERAPEUTIC           a subsidiary of The Green Cross Corp.   
          CORPORATION                 of Japan

          CENTEON                     a subsidiary of Rhone-Poulenc-Rorer, a  
          PHARMACEUTICALS             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.



                                 CURRENT OPERATIONS

   CURRENT PLASMA CENTERS 

   As of  May 1, 1998, the Biologics Division had seventeen plasma centers in 
   operation located in: Las Vegas, Nevada; Clarkesville, Tennessee; Phoenix, 
   Arizona; Ft. Smith, Arkansas; Clearfield, Utah; Raleigh, North Carolina; 
   Pasco, Washington; Toledo, Ohio; Reno, Nevada (2); South Bend, Indiana; 
   Kalamazoo, Michigan; Boise, Idaho; Pocatello, Idaho; Savannah, Georgia; 
   Salt Lake City, Utah; and  Macon, Georgia. As of May 1, 1998, such centers 
   were collecting plasma at an annualized rate of about 285,000 liters. The 
   Raleigh, Macon, Pasco, and Toledo, centers which opened December 17, 1996, 
   December 18, 1996, April 1, 1997 and May 1, 1997 respectively were 
   operating under Reference Numbers pending FDA approval of license 
   applications and were not allowed to sell or ship plasma during the 
   period, although they were collecting plasma during the period.

   The Company has also completed the construction phase for a plasma center 
   which is expected to open about June 1, 1998 in Wilmington, Delaware.

   The Company collected approximately 215,600 liters of plasma in the fiscal 
   year ending February 28, 1998.  This represented a 52%, or approximately 
   74,100 liters, increase over the same 1997 period.  The actual total 
   liters collected includes the impact of the asset exchange with 
   Seralogicals, Inc in August 1997 and the acquisition of the five operating 
   centers from American Plasma Management, Inc. on November 29, 1997.  The 
   liters collected also includes plasma collections from six newly 
   established centers which opened for business in November 1996, December 
   1996 (2), April 1997, May 1997 and September 1997. Accordingly, the 
   current collection rate on an annualized basis would be about 285,000 
   liters.


                                      14

<PAGE>

   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.

   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. 


                                      15

<PAGE>

   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.

   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 May 1, 1998, the Company employed 322 full time employees and 64 
   part time employees.  The Biologics Division employed 249 full time, of 
   which 22 were nurses, one was a doctor and the balance were cross-trained 
   as technicians, receptionists and phlebotomists.  The Biologics Division 
   also employed 64 part time employees of which 16 were nurses and balance 
   were cross-trained as technicians, receptionists and phlebotomists.  The 
   Western States Plasma Division employed 14 full time employees, the 
   Consolidated Technologies Division employed 54 full time employees and the 
   corporate office consisted of five full time employees as of May 1, 1998.

   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

   The Company currently occupies twenty five locations 
   with executive offices at 1925 Century Park East, Suite 1970, in Los 
   Angeles; Western States Division in Fallbrook, California; Consolidated 
   Technologies Division in Austin, Texas; and twenty two plasma center 
   locations in: Las Vegas, Nevada (2 locations); Clarkesville, Tennessee; 
   Phoenix, Arizona; Colorado Springs, Colorado; Pueblo, Colorado; Ft. Smith, 
   Arkansas (2 locations); Clearfield, Utah; Raleigh, North Carolina; Macon, 
   Georgia; Pasco, Washington; Toledo, Ohio; Savannah, Georgia; South Bend, 
   Indiana; Kalamazoo, Michigan; Pocatello, Idaho; Boise, Idaho; Salt Lake 
   City, Utah; Reno, Nevada (2 locations); and Wilmington, Delaware.   Salt 
   Lake City, Kalamazoo, and South Bend were acquired in the American Plasma 
   Management acquisition and are owned locations. The balance of the 
   indicated locations are leased. All of the Company's leased property, 
   comprising twenty two locations and approximately 136,000 square feet, is 
   leased from unaffiliated parties under leases expiring through 2006. 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. One of the Company's  leases is on a month-to-month basis. The 
   Company believes that in the normal course of its business it will be able 
   to renew or replace


                                      16

<PAGE>

   its existing leases. The Company believes that the space it occupies is 
   adequate for its existing operations.

   The Company's plasma collection centers range in size from approximately 
   2,950 to 5,500 square feet and generally are located in population centers 
   of 60,000 to 1,000,000 people.

   The Company also owns two parcels totaling approximately one acre of land 
   in Fort Worth, Texas which was obtained in the purchase of the original 
   six plasma centers.  These parcels are currently listed for sale and are 
   not being considered for plasma collection center development.

   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.



                                      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 emerged from bankruptcy on 
   February 6, 1996 and began 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.

   The Company's Common Stock was not traded on any market prior to May 1996.


<TABLE>
<CAPTION>

   <S>                                                           <C>      <C>
                                                                 High      Low
                                                                 -----    -----
   For the period May 1, 1996 through May 31, 1996               1 1/2    1
   For the period June 1, 1996 through August 31, 1996           1 3/4    1/2
   For the period September 1, 1996 through November 30, 1996    2        1/2 
   For the period December 1, 1996 through February 28, 1997     3 9/16   1 1/8


   For the period March 1, 1997 through May 31, 1997             3 1/4    2
   For the period June 1, 1997 through August 31, 1997           5 1/8    1 7/8
   For the period September 1, 1997 through November 30, 1997    6 7/16   2 1/2
   For the period December 1, 1997 through February 28, 1998     7 5/16   6 1/16

</TABLE>


                                      17

<PAGE>

   (b)  HOLDERS:
                                 Approximate Number of 
                                  Record Holders (as 
   Title of Class                 of April 30, 1998)
   --------------                 -------------------
   Common Stock, $.001 par value        413 (1)


   ---------------------------
   (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 460 beneficial shareholders.

   (c)  DIVIDENDS:

   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 $10 million revolving line of credit, 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.


                                      18
<PAGE>

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

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 
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.

                              1998 AS COMPARED TO 1997
                               RESULTS OF OPERATIONS
SALES

Net sales increased by $5,749,291 to $12,410,970, an increase of eighty six 
percent. The primary factors reflected in those results were: the acquisition 
of the Western States Plasma Division and the Consolidated Technologies 
Division effective January 1, 1998, which added $3.1 million and $.8 million 
respectively to revenue during the period and the increased volumes of plasma 
which added $1.8 million to revenue. The Company collected about 215,569 
liters of plasma during the year ended February 28, 1998 compared to about 
140,540 for the comparable prior period or an increase of fifty three 
percent.  The increased volumes were the result of the acquisitions of the 
five operating plasma collection centers from American Plasma Management, 
Inc. and revenue generated by the FDA approval of newly established centers 
in Clearfield and Pocatello. The newly established centers in Raleigh, Macon, 
Pasco and Toledo were operating under a Reference Number from the FDA during 
1998 and were thus not allowed to sell or ship plasma during the period, 
although they were collecting plasma during the period.

GROSS PROFIT

Gross profit increased by $1,123,713 or 219 percent in 1998 to $1,636,572 
primarily due to the acquisition of the Western States Plasma Division and 
the Consolidated Technologies Division  effective January 1, 1998 which 
contributed $649,876 and $396,865, respectively. Also contributing to the 
increase in gross margin was the Biologics Division which contributed $76,972 
as a result of increased revenue mostly offset by increased operating costs. 
As a result of the aforementioned, the gross profit percentage increased  
from 7.7% in fiscal 1997 to 13.2% in fiscal 1998.  

                                      19

<PAGE>

GENERAL AND ADMINISTRATIVE EXPENSES

General and Administrative expenses for 1998 were higher by $726,117 or 96 
percent.  This increase was primarily due to the acquisition of the Western 
States Plasma Division and Consolidated Technologies Division effective 
January 1, 1998; higher legal and professional fees; increased travel 
expenses; increased salary expense; higher general insurance costs; and 
increased consulting fees; partially offset by lower non-cash general and 
administrative expenses. 

INTEREST EXPENSE / NON-CASH INTEREST EXPENSE

Interest expense increased by  $250,464 in fiscal 1998 as a result of the 
increased debt during the year, including the $2.6 million in bridge loans 
which were acquired at various times throughout the year; the $16 million in 
subordinated debentures issued February 1998 and the $600,000 note associated 
with the purchase of the five operating plasma collection centers on November 
29, 1997.  Partially offsetting was a decrease in non-cash interest expense 
of $25,614.  The current year consists primarily of the amortization of the 
original issue discount related to the issuance of the $16 million 
subordinated debentures. 

OTHER ITEMS

Other income includes $801,215 from a one-time non-operating gain realized 
from the sale of salvage plasma material.

INCOME TAXES

State income taxes were higher by $9,000 due to the profitability of certain 
operations and minimum state taxes in certain states.   
                                          
NET INCOME

As a result of the above, there was a net income for the year ended February 
28, 1998 of $453,853 compared to a net loss of $511,108 in 1997.
                                          
                          LIQUIDITY AND CAPITAL RESOURCES

As of February 28, 1998, the Company's current assets exceeded current 
liabilities by $9,444,126, an improvement of $9,834,761 when compared to the 
year earlier date of February 28, 1997, at which time the Company's current 
liabilities exceeded current assets by $390,635.  This improvement was 
primarily due to the issuance of $16 million in subordinated debt on February 
13, 1998 and the proceeds of $5,425,216 from various private placements of 
the Company's common and preferred stock.  Also contributing were the 
acquisitions of the Western States Division and the Consolidated Technologies 
Division which contributed $2.0 million and $.9 million respectively to 
working capital.   

In the Biologics Division, the Company opened new centers on April 1, 1997, 
May 1, 1997, September 23, 1997 and March 1, 1998 and is planning an 
additional opening on June 1, 1998.  In addition, the Company acquired five 
(5) operating plasma centers in November 1997.  As a result of this 
expansion, the Company's current annualized rate for collections is 285,000 
liters of plasma compared to 191,000 a year ago.  New plasma contracts with 
Grupo Grifols and North

                                     20

<PAGE>

American Biologics, Inc. combined with more favorable pricing on softgoods 
and testing have resulted in improved margins.  Partially offsetting those 
benefits, has been the establishment of a 60 day hold on plasma shipments to 
Spain and  a slower than expected process of receiving final FDA license 
approval for the newly opened centers. The Company continues to believe that 
demand for plasma and plasma products will continue to accelerate through 
calendar 1998 and 1999 and has accordingly established itself in a strong 
growth posture in order to be able to meet the strong increased demand. The 
Company believes that recent occurences in the plasma industry such as the 
"Mad Cow" disease in Great Britain and the destruction of over 300,000 liters 
of plasma by domestic fractionators due to quality control issues have 
eliminated excess inventories and will add significantly to the expected 
increase in demand. With this background, the Company is focused on growth in 
the volume of plasma collected in order to capitalize on the anticipated 
market conditions. The acquisition of the Western States Division has 
provided worldwide marketing of plasma and plasma products in both the 
therapeutic and diagnostic segments of the blood products industry and the 
acquisition of the Consolidated Technologies Division will utilize the 
Biologics Division to establish itself as a diagnostic products manufacturer 
with an in-house supply of specialty plasma.  This "Closed Loop" cycle from 
donor to end product is expected to significantly improve quality control, 
turnaround time and the cost of delivering end products to customers.  These 
two acquisitions are reflective of the Company's commitment to growth.  
Meanwhile, the Company's projected capital requirements for the coming year 
include the establishment of and/or acquisition of more plasma centers in 
addition to expansion of both the Consolidated Technologies Division and the 
Western States Division. 

Net cash used in operations totaled  $5,103,631 for fiscal 1998 as compared 
to $745,309 for fiscal 1997.  The increase in cash used in operations was 
primarily related to: extended payment terms of the Company's primary 
customer; the 60 day holding period requirement of the Company's primary 
customer; and the increased inventory and accounts receivable associated with 
the 53% increase in volume of plasma collected.  Partially offsetting were: a 
net income in the 1998 period compared to a net loss for the comparable prior 
year period; an increase in accounts payable and accrued expenses related to 
the increased number of plasma collection centers and the direct costs 
related to the increased volumes; and an increased cash flow benefit from 
depreciation and amortization expense.  Cash flow from investing activities 
for the year ended February 28, 1998 resulted in net cash used of  
$12,871,130 compared to $1,584,401 for the comparable prior year period.  
This increase in cash used resulted from the acquisitions of Consolidated 
Technologies, Inc., Western States Group, Inc. and American Plasma 
Management, Inc. and from the capital requirements of the newly established 
plasma collection centers in Pasco, Toledo, Pocatello, Savannah and 
Wilmington. Cash flows provided by financing activities was $22,928,208 for 
the current period compared to $2,293,311 for the comparable prior year 
period. This increase was primarily due to the issuance $16 million in 
subordinated debentures in February 1998; the multiple private placements of 
$5,425,216 of the Company's common and preferred stock; the proceeds from 
bridge loans from officers and directors which totaled $1,924,000; and the 
proceeds from various other notes which totaled $1,946,947. This was 
partially reduced by repayments made on long-term debt and the notes payable.

The year ended February 28, 1998 was a year of continued consolidation, 
growth and of solidifying the financial position of the Company through the 
issuance $16 million in

                                    21

<PAGE>

subordinated debentures in February 1998 and the multiple private placements 
of $5,425,216 of the Company's common and preferred stock. 

SUBSEQUENT EVENT

Effective April 24, 1998, the Company consummated a $10 million, two-year 
revolving line of credit with Brown Brothers Harriman & Co. Proceeds from the 
financing will be used for general working capital.  Under the terms of the 
agreement, interest will accrue at the Bank of Boston prime rate plus .75 
base points and will be payable quarterly.  The agreement contains various 
covenants relating to : minimum effective capital; maximum ratio of total 
liabilities divided effective capital; a minimum current ratio; a minimum 
ratio of EBITDA divided by interest expense plus capital; and various other 
non-financial covenants relating to restrictions on additional indebtedness; 
guarantees and cross guarantees of indebtedness; limitations on investments; 
and restrictions on asset sales, mergers, changes in control, divestitures, 
acquisitions, dividends and distributions.  

As part of  this transaction, the Company agreed to pay to Brown Brothers 
Harriman a placement fee of $25,000 plus certain costs of the closing such as 
legal fees and agreed to maintain a minimum cash balance of $150,000.  The 
Company also delivered to the lender warrants to purchase an aggregate of 
13,793 shares of the Company's common shares at any time at an exercise price 
of $.01 per share.  Brown Brothers & Harriman is secured by all the assets of 
the Company as the senior lender ahead of all other lenders.     

In connection with this transaction, the Company also paid Sutro & Co. a 
finders fee and certain related expenses totaling $161,175.  

Management believes that the new revolving line of credit combined with 
internally generated cash flows will be sufficient to meet the ongoing 
working capital requirements of the Company.  Any significant acquisitions or 
major expansions, however, may require additional financing which could 
require additional debt, private placements or a public offering.  

NEW ACCOUNTING PRONOUNCEMENTS

Statement of Financial Accounting Standard No. 129, "Disclosure of 
Information about Capital Structure," ("SFAS 129") issued by the FASB is 
effective for financial statements with fiscal years ending after December 
31, 1997.  The new standard reinstates various securities disclosure 
requirements previously in effect under Accounting Principles Board Opinion 
No. 15, which has been superceded by SFAS No. 128.  The Company adopted SFAS 
No. 129 on December 15, 1997 and it did not have any material effect on its 
financial position or results of operations.

Statement of Financial Accounting Standard No. 130, "Reporting Comprehensive 
Income," ("SFAS 130") issued by the FASB is effective for financial 
statements with fiscal years beginning after December 15, 1997. Earlier 
application is permitted.  SFAS 130 establishes standards for reporting and 
display of comprehensive income and its components in a full set of 
general-purpose financial statements.  The Company does not expect adoption 
of SFAS 130 to have any material effect on its financial position or results 
of operations.

Statement of Financial Accounting Standard No. 131, "Disclosure about 
Segments of an Enterprise and Related Information" ("SFAS 131") issued by the 
FASB is effective for financial statements with fiscal years beginning after 
December 15, 1997.  SFAS 131 requires that public companies

                                     22

<PAGE>

report certain information about operating segments, products, services and 
geographical areas in which they operate and their major customers.  The 
Company does not expect adoption of SFAS 131 to have a material effect on its 
financial position or results of operations.

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 
is effective for financial statements beginning after December 15, 1998.  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.  The Company anticipates that adoption of SOP 98-5 will 
have an effect on its results of operations but has not yet determined the 
amount of such effect.

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 has invested in the latest hardware and software and accordingly 
management believes the Company is in full compliance with year 2000 
standards and anticipates no problems in maintaining this compliance into 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

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES

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

                                    23

<PAGE>

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>                                                   <S>
Barry D. Plost..........   52   Chairman of the Board, President and CEO                        1996
Jerry L. Burdick........   58   Executive Vice President, Chief Financial Officer,              1995
                                 Secretary and a Director
Sam Anderson............   61   Director                                                        1996
Ezzat Jallad............   35   Director                                                        1996
Nelson Teng.............   51   Director                                                        1997
Robert J. Cresci........   54   Director                                              April 15, 1998
Michael F. Crowley......   54   Director                                              April 15, 1998
William J. Cone.........   47   Director                                              April 15, 1998
Susan Preston (1).......   42   Director                                                        1996
</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 was appointed Executive Vice President, Chief Financial 
Officer, Secretary and a Director effective December 1, 1995. From  August 
1993 through March 1995, Mr. Burdick was a consultant to SeraCare, Inc. in 
the areas of financing, internal controls, cost accounting and was 
specifically requested to evaluate the whole blood operations of the Company 
and make recommendations for correcting the increasing losses.  When the 
Company filed for protection under Chapter 11 of the Federal Bankruptcy Code, 
Mr. Burdick was asked to provide guidance to the  Controller and financial 
staff on appropriate bankruptcy filings and regulations.  Mr. Burdick also 
drafted the first proposed Reorganization Plan and accompanying Private 
Placement Memorandum for SeraCare, Inc. during that period.  During that 
period, Mr. Burdick had no direct reports and acted only in an advisory 
capacity reporting to the President of the Company. In October 1994, the 
Company hired Mr. Burdick as an accountant. In March 1995, the Company 
determined to terminate the Controller and Chief Financial Officer (same 
person) and have Mr. Burdick fill that role on an acting basis during the 
remaining tenure of the bankruptcy, through  February 6, 1996. Mr. Burdick 
previously operated his own consulting practice from March 1988 through 
August 1993. Mr. Burdick is a Certified Public Accountant in the State of 
California.  At the time the Company filed for protection under Chapter 11 of 
the Federal Bankruptcy Code, Mr. Burdick was a consultant to the Company.  
Mr. Burdick has also participated in various other Chapter 11 restructurings 
as a consultant, and for about one year as controller of a company which was 
in bankruptcy when he joined the 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

                                     24

<PAGE>

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

M. 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 SCIM 
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.

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.

SUSAN PRESTON was elected a Director effective April 16, 1996.  Ms. Preston 
has been a practicing attorney for the law firm of Weiss, Jensen, Ellis & 
Howard in Seattle, Washington since May 1994 and previously served as 
corporate counsel for various other companies.  Susan Preston resigned as a 
director effective April 15, 1998.

                                     25

<PAGE>

Effective April 15, 1998, the Board of Directors consists of eight 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; 
William J. Cone, President of the Consolidated Technologies 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, Michael F. Crowley, Sr., 
and William J. Cone. 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 three years.  Mr. Anderson 
also was granted fully vested, three 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. SUSAN PRESTON was granted fully vested, three year options 
to purchase 15,000 shares of the Company's common stock  at $1.50 per share 
on April 16, 1996 and fully vested, five year options to purchase 15,000 
shares at $2,25 on August 27, 1997.  Susan Preston resigned as a director 
effective April 15, 1998.  DR. NELSON TENG was granted fully vested, three 
year options to purchase 50,000 shares of the Company's common stock at $1.50 
per share in January 1997 and fully vested, five year options to purchase 
15,000 shares at $2,25 on August 27, 1997.   Ezzat Jallad was granted fully 
vested five-year options to purchase 15,000 shares at $2,25 on August 27, 
1997.  

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                1998          1997            1996       Options        Other
---------------------------              --------      --------      --------      ---------       -----
<S>                                      <C>           <C>           <C>           <C>             <C>
(8)Barry D. Plost, President,            $172,115      $124,167      $  4,327        156,147(1)    (7)(6)
     Chairman and CEO                                                                150,000(2)
                                                                                     100,000(3)
                                                                                     130,000(4)
                                                                                   1,058,500(5)
(9)Jerry L. Burdick,                      125,576       125,000        83,749         67,110(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. 

                                     26

<PAGE>

(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 fully 
     vested options to purchase 1,058,500 of the Company's common stock at 
     prices ranging from $2.00 to $3.50 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 Management Bonus Pool whereby ten percent 
     (10%) of earnings before taxes which are in excess of $920,549 in the year
     ending February 28, 1997; $2,590,160 in the year ending February 28, 1998,
     and $4,384,187 in the year ending February 28, 1999 will be allocated to a
     bonus pool to be paid pro rata to all officers of the Company on the basis
     of salaries.

(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 
     amended on February 13, 1998, providing for a current annual salary of 
     $225,000.  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 
     amended on February 13, 1998, providing for a current annual salary of 
     $140,000. Mr. Burdick 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 stock options as indicated above.  Mr. 
     Burdick functioned as an accountant and consultant to the Company prior 
     to February 6, 1996.

(10) Of these, 42,110 are fully vested five year options granted on February 
     6, 1996 at a price of  $1.25  and 25,000 are fully vested five year 
     options granted on April 10, 1997 at a price of  $2.00.  

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

<TABLE>
<CAPTION>
                                                          Number of Shares    Value of
                             Shares Acquired     Value       Underlying      Unexercised
Name and Principal Position    on Exercise     Realized     Unexercised      In-The-Money
---------------------------  ---------------   --------      Options at      Options at
                                                            Year-End (1)     Year-End(1)
                                                          ----------------  ------------
<S>                                <C>            <C>       <C>               <C>
Barry D. Plost, President,         NA             NA         56,147         $  322,845
Chairman and CEO                                            100,000         $  400,000
                                                            150,000         $  750,000
                                                            100,000         $  600,000
                                                            130,000         $  780,000
                                                            858,500         $4,176,500
Jerry L. Burdick,                  NA             NA         67,110         $  367,133
Executive V. P., Secretary and CFO 
</TABLE>
(1) As of February 28, 1998, there were no options which were unexercisable.

                                     27

<PAGE>

OPTIONS / SAR GRANTS LAST FISCAL YEAR
During the current year Mr. Barry D. Plost, the President and CEO, was granted
100,000  fully vested five-year options on August 27, 1997 at a price of $3.00
which represented 80% of the individual grants during the year  and Mr. Jerry L.
Burdick was granted 25,000  fully vested five year options on April 10, 1997 at
a price of  $2.00 which represented 20% of the individual grants during the
year.  There were no individual grants during the preceding year.

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 28, 
1998 of each present director, all officers, all 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                     Series A
Individual / Group                                Class       Shares         Options     Warrants
------------------                                -----      ---------      ---------    --------
<S>                                               <C>        <C>            <C>          <C>
Barry D. Plost, President & Chairman              20.8%        393,034      1,394,647        -  
Brad Rabe, Executive VP & COO(1)                   5.2%        308,889            -       72,500
J.L. Burdick, Executive, CFO & Director            2.1%         82,546         67,110        -  
Brian Olson, VP Operations(1)                       .1%         45,777         28,073        -  
Nelson Teng, Director                              5.2%        315,000         65,000        -  
Samual Anderson, Director                          4.7%        191,932        150,000
Susan Preston, Director                            0.4%            -           30,000        -  
Ezzat Jallad, Director                             0.6%         25,000         15,000        -  
All Officers and Directors                        35.3%      1,362,178      1,749,830     72,500
Other Beneficial owners:
   Brad Gaspard                                    7.5%        358,500                   200,000
   Pecks Management Partners, Ltd                 22.6%                     2,100,572
   Consolidated Technologies, Inc.                 6.1%        436,364

</TABLE>

(1) Mr. Rabe and Mr. Olson resigned as an officer of the Company in March 1998.

Of the issued and outstanding shares as of May 1, 1998,  no  person or entity 
owns or controls 10% or more of the company's common stock.

Pursuant to the acquisition agreement dated September 2, 1996, Mr. Brad Rabe 
may receive up to 125,000 additional shares if certain earnings performance 
criteria are met.  These additional shares are not reflected in the above 
table.
                                                       
PRICE AND EXERCISE DATE OF  SERIES A WARRANTS LISTED ABOVE.

A. Brad Rabe - Previously Executive Vice President and COO 72,500  Series A 
   Warrants 

   Mr. Rabe  acquired 25 Units of the October 1, 1996 Private Placement for 
   $187,500 and the Marvin S. Rabe Trust for which Mr. Rabe is a Trustee 
   acquired 4 Units of the October 1, 1996 Private Placement for $30,000.  
   Each Unit consisted of 5,000 shares of common stock and 2,500 Series A  
   warrants to purchase one share of the company's common stock at $2.75.  
   The Series A warrants are exercisable immediately and terminate on the 
   earlier of (i) six years  from the date of  issuance and (ii) three years 
   from the date of the initial effectiveness of the 


                                        28
<PAGE>

   "Initial Registration Statement".  The Series A warrants are redeemable by 
   the Company at $.01 per share, upon 30 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 20 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 existing exercise price. 
   Mr. Rabe resigned as an officer of the Company in March 1998

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

BRIDGE LOANS TO THE COMPANY FROM RELATED PARTIES.

In January 1998, the Company entered into agreements with related parties, 
approved by the Board of Directors, which provided for bridge loans of 
$599,000. Interest is payable monthly at ten percent per annum.  At February 
28, 1998, $599,000 of these bridge loans were outstanding. These loans are 
due April 12, 1998.  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, 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.

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, which are all outstanding at February 28, 1998.  These 
loans are due upon demand, and are secured by all the assets of the Company.  
The loans accrue 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. 

During 1997, the Company entered into agreements with related parties, 
approved by the Board of Directors, which provided for bridge loans of 
$550,000.  The bridge loans are due on demand and are secured by all of the 
assets of SeraCare's consolidated operations.  The loans accrue interest at 
twelve percent per annum.  During the year ended February 28, 1997, $332,500 
of the bridge loans were converted to equity in private placements. The 
holders received 221,667 shares of common stock and warrants to purchase 
112,500 shares of common stock at an exercise price of $2.75.  At February 
28, 1998, $197,500 of these bridge loans was outstanding.  In connection with 
the 1997 bridge loans, the Company granted three-year options to purchase 
150,000 shares of common stock at an exercise price of $1.00.  The Company 
calculated $100,000 as the value (original issue discount) of the options 
issued in conjunction with the bridge loans, which estimated fair market 
value in excess of the exercise price of these options at the date of issue.  
The entire original issue discount was amortized to interest expense during 
the year ended February 28, 1997.  

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 


                                        29
<PAGE>

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. 

                                     PART IV

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

(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 Balance Sheets - February 28, 1998 and February 28, 1997

   Consolidated Statements of Operations - Year ended February 28, 1998
                                         - Year ended February 28, 1997

   Consolidated Statements of Stockholders Equity - Year ended February 28, 1998
                                                  - Year ended February 28, 1997

   Consolidated Statements of Cash Flows - Year ended February 28, 1998
                                         - Year ended February 28, 1997

   Summary of Accounting Policies

   Notes to Consolidated Financial Statements


                                        30
<PAGE>

(a)(2) THE FOLLOWING EXHIBITS ARE BEING FILED AS PART OF THIS REPORT. 

   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.

(a)(3) THE FOLLOWING EXHIBITS HAVE BEEN PREVIOUSLY FILED WITH THE COMMISSION AND
       ARE HEREBY INCORPORATED HEREIN BY REFERENCE THERETO.

         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
-------           -----------------------
<S>        <C>
  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.
          
  6.1      Employment Agreement dated February 5, 1996 between the Company and Barry D. Plost
          
  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 


                                        31
<PAGE>

           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

</TABLE>

(b)      REPORTS ON FORM 8 - K
 

          On March 3, 1997, the Company filed  a Current Report on Form - 8K 
with respect to a material contract between the Company and North American 
Biologicals, Inc. ("NABI") for plasma from startup  plasma collection centers 
established or to be established in Clearfield, Utah; Raleigh, North 
Carolina; Macon, Georgia; Pasco, Washington; and Toledo, Ohio.  Included with 
such filing was a copy of the agreement relating to the Clearfield, Raleigh 
and Macon locations. 

     On November 29, 1997, the Company filed a Current Report on Form 8k with 
respect to the acquisition of substantially all of the operating assets of 
American Plasma Management, Inc., American Plasma Systems, Inc., and American 
Plasma Reno, Inc.

     On January 16, 1998,  the Company filed a Current Report on Form 8k with 
respect to the establishment of an Audit Committee.

     On February 13, 1998, the Company filed a Current Report on Form 8K with 
respect to the Acquisition of substantially all of the operating assets of 
Consolidated Technologies Inc.,  the acquisition of the stock of Western 
States Group, Inc. and the issuance of $16.0 million in Senior Subordinated 
Debentures due 2005 to Pecks Management Partners, Ltd.  

                                        32
<PAGE>


                                GLOSSARY OF TERMS
     

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.

                                        33
<PAGE>

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.


                                        34
<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.

                                  SERACARE, INC.
                                   (Registrant)

Dated May 28, 1997                      By: /s/  Barry D. Plost
                                            -----------------------------
                                            Barry D. Plost, President & CEO

                                        By: /s/  Jerry L. Burdick
                                            -----------------------------
                                            Jerry L. Burdick
                                            Principal  Accounting and 
                                            Finance Officer

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.

SIGNATURES                                TITLE                      DATE
-------------------------               ---------                    ----

/s/ BARRY D. PLOST            CHAIRMAN OF THE BOARD AND CEO      MAY 28, 1998
-------------------------
BARRY D. PLOST

/s/ JERRY L. BURDICK          EXECUTIVE VICE PRESIDENT AND CFO   MAY 28, 1998
-------------------------
JERRY L. BURDICK

/s/ SAMUEL ANDERSON           DIRECTOR                           MAY 28, 1998
-------------------------
SAMUAL ANDERSON

/s/ ROBERT J. CRESCI          DIRECTOR                           MAY 28, 1998
-------------------------
ROBERT J. CRESCI

/s/ EZZAT JALLAD              DIRECTOR                           MAY 28, 1998
-------------------------
EZZAT JALLAD

/s/ DR. NELSON TENG           DIRECTOR                           MAY 28, 1998
-------------------------
DR. NELSON TENG

/s/ MICHAEL F. CROWLEY, SR.   DIRECTOR                           MAY 28, 1998
-------------------------
MICHAEL F. CROWLEY, SR,

/s/ WILLIAM J. CONE           DIRECTOR                           MAY 28, 1998
-------------------------
WILLIAM J. CONE



                                         35
<PAGE>

                           SERACARE, INC. AND SUBSIDIARIES

                            INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>

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

CONSOLIDATED FINANCIAL STATEMENTS

     Balance Sheets                                                        F-3

     Statements of Operations                                              F-5

     Statements of Stockholders' Equity                                    F-7

     Statements of Cash Flows                                              F-8

     Summary of Accounting Policies                                       F-12

     Notes to Consolidated Financial Statements                           F-18

</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 28, 1998 and February 28, 1997 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 28, 1998 and February 28, 1997 and the 
results of their operations and their cash flows for the years then ended, in 
conformity with generally accepted accounting principles.


                                             BDO Seidman, LLP
Los Angeles, California

May 21, 1998

                                     F-2
<PAGE>

                          SERACARE, INC. AND SUBSIDIARIES

                            CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                              
                                                            February 28,     February 28,
                                                                1998             1997
                                                            ------------     ------------
<S>                                                      <C>               <C>
ASSETS (Notes 1, 2, 3, 4 and 5)

CURRENT ASSETS
  Cash and cash equivalents                                 $  5,497,524      $  544,077
  Accounts receivable                                          4,612,968         236,571
  Inventory                                                    7,644,601         342,504
  Prepaid expenses and other current assets                      243,785          62,269
                                                            ------------     ------------

Total current assets                                          17,998,878       1,185,421

PROPERTY AND EQUIPMENT, net (Note 2)                           2,780,850         890,153

FDA LICENSES, less accumulated amortization
  of $57,351 and $26,250                                       2,759,999       1,321,745

DONOR BASE AND RECORDS, less accumulated 
  amortization of  $61,149 and $35,000                         1,688,762         879,008
REORGANIZATION VALUE IN EXCESS OF AMOUNTS ALLOCATED 
  TO IDENTIFIABLE ASSETS, less accumulated amortization 
  of $78,635 and $53,022                                         692,818         969,447
GOODWILL, less accumulated amortization of $84,292 and
  $73,171                                                      9,748,357         901,487
DEFERRED BOND DISCOUNT, less accumulated amortization
  of $49,349                                                   8,241,225               -

OTHER ASSETS, including start-up costs of $739,171
  and $29,225                                                  1,318,483         175,939
                                                            ------------     ------------
                                                           $  45,229,372    $  6,323,200
                                                            ------------     ------------
                                                            ------------     ------------

</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>

                                                                  
                                                           February 28,     February 28,
                                                               1998             1997   
                                                           ------------     ------------
<S>                                                     <C>               <C>
LIABILITIES AND STOCKHOLDERS' EQUITY 

CURRENT LIABILITIES 
Accounts payable                                           $  2,495,588     $  605,492 
Accrued payroll and related expenses                            230,474        177,995 
Accrued expenses                                              1,241,854        162,711 
Deferred income                                               1,131,178
Income taxes payable (Note  10)                                  25,000
Bridge loans from related parties (Note 3)                    1,296,947         197,500
Notes payable (Note 4)                                        2,121,500
Current portion of long-term debt (Notes 1 and 5)                12,211         432,358
                                                          -------------     ------------

Total current liabilities                                     8,554,752       1,576,056
                                                          -------------     ------------

LONG-TERM DEBT (Notes 1 and 5)                               16,196,670         678,484
                                                          -------------     ------------
SERIES A REDEEMABLE PREFERRED STOCK, $.001 par value, 
  25,000,000 shares authorized; 1,600 issued and 
  outstanding (Notes 1 and 7)                                   231,130         389,047
                                                          -------------     ------------

COMMITMENTS (Notes 9, 11 and 12)

STOCKHOLDERS' EQUITY (Notes 1, 6, and 8)
  Series B convertible preferred stock, $.001 par value,
  15,000 shares authorized and outstanding.  Liquidation
  value $100 per share                                               15
  Common stock, $.001 par value, 25,000,000 shares 
  authorized; 7,210,585 (including 125,000 to be 
  issued) and 4,149,387 issued and outstanding                    7,210           4,149
  Additional paid-in capital                                 20,293,232       4,182,954
  Retained earnings (deficit)                                   (53,637)       (507,490)
                                                          -------------     ------------

Total stockholders' equity                                   20,246,820       3,679,613
                                                          -------------     ------------

                                                            $45,229,372    $  6,323,200
                                                          -------------     ------------
                                                          -------------     ------------

</TABLE>

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


                                     F-4
<PAGE>

                       SERACARE, INC. AND SUBSIDIARIES

                    CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>

                                                                       


                                                  February 28,     February 28,
                                                      1998             1997     
                                                  ------------     ------------
<S>                                              <C>              <C>
REVENUES
Net sales (Note 12)                                $12,291,396      $6,661,679
Income from joint venture                              119,574
                                                  ------------     ------------
                                                    12,410,970       6,661,679
COST OF SALES                                       10,774,398       6,148,820
                                                  ------------     ------------


GROSS PROFIT                                         1,636,572         512,859
                                     
GENERAL AND ADMINISTRATIVE EXPENSE                   1,468,596         674,199
                                     
NON-CASH GENERAL AND ADMINISTRATIVE  
                                     
EXPENSES (NOTE 6)                                       10,700          78,980
                                                  ------------     ------------
                                     
                                     
OPERATING INCOME (LOSS)                                157,276        (240,320)
                                     
INTEREST EXPENSE                                      (458,719)       (208,255)
                                     
NON-CASH INTEREST EXPENSE (NOTE 3)                     (74,386)       (100,000)
OTHER INCOME, NET (NOTE 14)                            854,682          53,467
                                                  ------------     ------------
                                     
                                     
INCOME (LOSS) BEFORE INCOME TAXES                      478,853        (495,108)
                                     
INCOME TAXES (NOTE 10)                                  25,000          16,000
                                                  ------------     ------------

NET INCOME (LOSS)                                   $  453,853     $  (511,108)
                                                  ------------     ------------
                                                  ------------     ------------

</TABLE>

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

                                     F-5
<PAGE>

                       SeraCare, Inc. and Subsidiaries

                    Consolidated Statements of Operations
                                 (Continued)

<TABLE>
<CAPTION>

                                                                 
                                                   February 28,    February 28, 
                                                       1998            1997
                                                   ------------    ------------
<S>                                              <C>              <C>
EARNINGS (LOSS) PER COMMON SHARE (NOTE 15)

  Basic                                                 $  .09         $  (.20)
                                                   ------------    ------------
                                                   ------------    ------------
  Diluted                                               $  .08         $  (.20)
                                                   ------------    ------------
                                                   ------------    ------------

WEIGHTED AVERAGE SHARES ISSUED
AND OUTSTANDING (NOTE 15)                                     

  Basic                                              4,818,313       2,509,042
                                                   ------------    ------------
                                                   ------------    ------------
  Diluted                                            5,706,405       2,509,042
                                                   ------------    ------------
                                                   ------------    ------------

</TABLE>

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

                                     F-6

<PAGE>

                           SERACARE, INC. AND SUBSIDIARIES

                   CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>

                                                                   PREFERRED STOCK                 COMMON STOCK   
                                                              ------------------------   ----------------------------
                                                                 SHARES       AMOUNT           SHARES         AMOUNT    
                                                              -----------   ----------   ---------------  -----------
<S>                                                           <C>           <C>          <C>              <C>
BALANCE, March 1, 1996                                                -          -           2,115,500      $2,115 

Common stock issued and to be issued for (Note 6):
  Private placements, net of costs of $255,309                        -          -           1,653,333       1,653 
  Conversion of debt                                                  -          -             221,667         222 
  Acquisition of plasma centers                                       -          -             119,875         120 
  Services                                                            -          -              38,889          39 
  Other                                                               -          -                 123           - 
Compensation expense related to non-employee 
  stock options (Notes 6 and 8)                                       -          -                   -           - 
Issuance of options in conjunction with the original issue 
  discount associated with the bridge loans (Note 3)                  -          -                   -           - 

Net loss for the year                                                 -          -                   -           - 
                                                               --------     ------       -------------     -------
BALANCE, February 28, 1997                                            -          -           4,149,387      $4,149 

Common stock issued for ( Note 6):
   Private placements, net of costs of $204,811                       -          -           1,136,396       1,136 
   Conversion of debt                                                 -          -             487,813         488 
   Services                                                           -          -              30,000          30 
   Acquisition of Western States subsidiary (Note 1)                  -          -             125,000         125 
   Acquisition of assets of CTI  (Note 1)                             -          -             436,364         436 
   Cashless exchange of warrants                                      -          -             840,500         841 
   Acqusition of plasma centers                                       -          -               5,125           5 
Compensation expense related to non-employee 
  stock options                                                       -          -                   -           - 
Issuance of options in conjunction with the original issue
  discount associated with the bridge loans                           -          -                   -           - 
Warrants issued in conjunction with subordinated bonds                -          -                   -           - 
Issuance of Series B Convertible Preferred Stock, net of
  $7,500 of  issuance costs, issued in a private placement       15,000        $15                   -           - 

Net income for the year                                               -          -                   -           - 
                                                               --------     ------       -------------     -------
BALANCE, February 28, 1998                                       15,000        $15           7,210,585      $7,210 
                                                               --------     ------       -------------     -------
                                                               --------     ------       -------------     -------




                                                                 ADDITIONAL            RETAINED                   
                                                                  PAID-IN              EARNINGS                   
                                                                  CAPITAL             (DEFICIT)            TOTAL  
                                                             -----------------     ---------------  -----------------
<S>                                                          <C>                   <C>              <C>
BALANCE, March 1, 1996                                         $  1,210,671            $  3,618       $  1,216,404 
                                                                                                     
                                                                                                     
Common stock issued and to be issued for (Note 6):                                                   
  Private placements, net of costs of $255,309                    2,223,038                   -          2,224,691 
  Conversion of debt                                                332,278                   -            332,500 
  Acquisition of plasma centers                                     179,693                   -            179,813 
  Services                                                           58,294                   -             58,333 
  Other                                                                   -                   -                  - 
Compensation expense related to non-employee                                                         
  stock options (Notes 6 and 8)                                      78,980                   -             78,980 
Issuance of options in conjunction with the original issue                                           
  discount associated with the bridge loans (Note 3)                100,000                   -            100,000 
                                                                                                     
Net loss for the year                                                     -            (511,108)          (511,108)
                                                               -------------        ------------      -------------
BALANCE, February 28, 1997                                     $  4,182,954         $  (507,490)      $  3,679,613 
                                                                                                     
Common stock issued for ( Note 6):                                                                   
   Private placements, net of costs of $204,811                   3,931,582                   -          3,932,718 
   Conversion of debt                                               996,840                   -            997,328 
   Services                                                           9,970                   -             10,000 
   Acquisition of Western States subsidiary (Note 1)                438,163                   -            438,288 
   Acquisition of assets of CTI  (Note 1)                         1,529,587                   -          1,530,023 
   Cashless exchange of warrants                                       (841)                  -                  - 
   Acqusition of plasma centers                                       7,682                   -              7,687 
Compensation expense related to non-employee                                                               
  stock options                                                     107,101                   -            107,101 
Issuance of options in conjunction with the original issue                                                 
  discount associated with the bridge loans                         187,009                   -            187,009 
Warrants issued in conjunction with subordinated bonds            7,410,700                   -          7,410,700 
Issuance of Series B Convertible Preferred Stock, net of                                                   
  $7,500 of  issuance costs, issued in a private placement        1,492,485                   -          1,492,500 
                                                                                                           
Net income for the year                                                                 453,853            453,853 
                                                               -------------       -------------     -------------
BALANCE, February 28, 1998                                      $20,293,232        $    (53,637)       $20,246,820 
                                                               -------------       -------------     -------------
                                                               -------------       -------------     -------------

</TABLE>


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


                                       F-7
<PAGE>

                        SERACARE, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

INCREASE (DECREASE) IN CASH                           FEBRUARY 28,
                                                1998               1997
                                                ----               ----
<S>                                         <C>                  <C>
Cash flows from operating activities
  Net income (loss)                         $   453,853          $(511,108)
  Adjustments to reconcile net income
   (loss) to cash provided by (used in)
   operating activities:
     Depreciation and amortization              461,182            185,560
     Income from joint venture                 (119,574)
     Non-cash interest expense                   74,386            100,000
     Non-cash general and administrative
      expenses                                   10,700             78,980
    Issuance of common stock in exchange
      for services                               10,000             58,333
    (Increase) decrease from changes in:
      Accounts receivable                    (3,503,367)            (7,911)
      Inventory                              (5,755,645)           (62,746)
      Prepaid expenses and other
        current assets                         (108,466)           (25,475)
      Other assets                               45,515           (133,299)
      Accounts payable                        1,340,823           (122,345)
      Accrued payroll and related expenses       27,591             50,152
      Accrued expenses                          803,193           (355,450)
      Deferred income                         1,131,178
      Income taxes payable                       25,000
                                            -----------          ---------
Net cash used in operating activities       $(5,103,631)         $(745,309)

</TABLE>


                                       F-8

<PAGE>

                        SERACARE, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

INCREASE (DECREASE) IN CASH                                          FEBRUARY 28,
                                                               1998             1997
                                                               ----             ----
<S>                                                        <C>             <C>
CASH FLOWS FROM INVESTING ACTIVITIES
  Purchases of property and equipment                      $   (800,955)   $   (861,079)
  Cash paid to purchase Western States subsidiary, net of
    cash acquired                                            (3,555,662)
  Assets of CTI, American Plasma and Serologicals 
    acquired for cash                                        (6,999,853)
  Cash acquired in acquisition                                  250,000         19,860
  Additions to FDA licenses                                    (569,355)      (297,995)
  Additions to donor base and records                          (435,903)      (214,008)
  Purchase of goodwill                                                        (176,838)
  Additions to other intangibles                               (759,402)       (54,341)
                                                           ------------    -----------
Net cash used in investing activities                       (12,871,130)    (1,584,401)
                                                           ------------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds from long-term debt, net of 
    issuance costs                                           15,120,125         45,000
  Repayment of long-term debt                                  (830,163)      (384,158)
  Net proceeds from private placements                        5,425,216      2,224,691 
  Payments on redemption of preferred stock                    (157,917)      (122,222)
  Proceeds from bridge loans - officers and 
    directors                                                 1,924,000        650,000
  Repayments on bridge loans - officers and 
    directors                                                                 (120,000)
  Proceeds from notes payable                                 1,946,947
  Repayments on notes payable                                  (500,000)
                                                           ------------    -----------

Net cash provided by financing activities                  $ 22,928,208    $ 2,293,311
                                                           ------------    -----------
                                                           ------------    -----------

</TABLE>


                                       F-9

<PAGE>

                        SERACARE, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (CONTINUED)

<TABLE>
<CAPTION>

INCREASE (DECREASE) IN CASH                                   FEBRUARY 28,
                                                          1998             1997
                                                          ----             ----
<S>                                                    <C>                <C>
NET INCREASE (DECREASE) IN CASH
  AND CASH EQUIVALENTS                                 $4,953,447         $(36,399)

CASH AND CASH EQUIVALENTS,
  beginning of year                                       544,077          580,476
                                                       ----------         --------
CASH AND CASH EQUIVALENTS,
  end of year                                          $5,497,524         $544,077            
                                                       ----------         --------
                                                       ----------         --------

</TABLE>

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

<TABLE>

<S>                                                    <C>                <C>
(a)  Cash paid for:
          Interest                                     $  402,861         $212,367
          State income taxes                                --            $  8,500

</TABLE>

(b)  Non-cash investing and financing activities

       Effective January 1, 1998, the Company acquired Western States Group, 
       Inc. in exchange for 125,000 shares of stock and $4,033,204 in cash 
       (Note 1).

       Effective January 1, 1998, the Company acquired substantially all of 
       the assets of Consolidated Technologies and an affiliate in exchange 
       for 436,364 shares of stock and $5,600,000 in cash (Note 1).

       On November 29, 1997, the Company acquired all assets, rights and 
       lease commitments to five plasma centers from American Plasma in 
       exchange for a $600,000 note payable and $1,250,000 in cash.  In 
       addition, the Company assumed the existing mortgage of $175,533 on one 
       of the plasma centers (Note 1).

       In conjunction with the Senior Subordinated Debentures (Note 5), the 
       Company issued 2,100,572 warrants to purchase common stock to the 
       debenture holders and 131,286 warrants to the referring investment 
       banker as part of a finders fee.

       During 1998, the holders of $997,328 of the Company's debt elected to 
       convert such debt into 487,813 restricted shares of common stock.

       During 1998, the holders of 615,000 of Series A warrants elected to 
       convert the warrants into 453,750 shares of restricted common stock in 
       a cashless exchange.


                                       F-10

<PAGE>

                        SERACARE, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (CONTINUED)

       In February 1998, the holders of warrants to purchase 907,500 shares 
       of common stock elected to convert the warrants into 307,500 shares of 
       restricted common stock in a cashless exchange.

       During 1998, the Company issued 30,000 shares of restricted common 
       stock in exchange for consulting services.

       During 1998, the Company issued  options to purchase 145,000 shares of 
       common stock to various directors, recognizing non-employee 
       compensation of $187,009.  At February 28, 1998, $162,009 is included 
       in other assets as deferred compensation expense.

       On July 2, 1996, the Company acquired the assets of Silver State 
       Plasma Center in exchange for a $300,000 note payable and $500,000 in 
       cash (Note 1).

       On July 9, 1996, the Company acquired BHM Labs, Inc. in exchange for 
       3,600 shares of the Company's Series A Redeemable Preferred Stock 
       (Notes 1 and 7).

       On September 3, 1996, the Company acquired the assets and rights of 
       two plasma centers in exchange for shares of common stock currently 
       estimated at $125,000 (Notes 1 and 6).

       During 1996, the Company converted $332,500 of its notes payable to 
       officers and directors to 221,667 shares of common stock and warrants, 
       which was in connection with the private placements  (Notes 3 and 6).


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


                                       F-11

<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, and SeraCare Acquisitions, Inc., a Nevada corporation, Western 
States, Inc., a California corporation and Seracare  Technology, Inc., a 
Nevada corporation.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company and 
its wholly owned subsidiaries.  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.  During the year, the Company received advance payments 
from a customer pending FDA licenses.  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 straight line 
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 has a 50% interest in a joint venture, included in other assets 
in the consolidated balance sheet, which it accounts for using the equity 
method of accounting.  The 50% interest in the joint venture's assets and 
equity is not material in relation to the Company.


                                     F-12
<PAGE>

                        SERACARE INC. AND SUBSIDIARIES

                        SUMMARY OF ACCOUNTING POLICIES
                                 (CONTINUED)

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 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 debt instruments 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.  Costs 
incurred during this process consist of salaries, occupancy costs, and other 
related expenses.  The value assigned to an FDA license acquired in a 
business combination is $150,000, which approximates 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.



                                     F-13
<PAGE>

                        SERACARE INC. AND SUBSIDIARIES

                        SUMMARY OF ACCOUNTING POLICIES
                                 (CONTINUED)

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 salaries, occupancy costs, and 
other costs directly related to the processing of new donors. The value 
assigned to the donor base and records acquired in a business combination is 
$100,000, which approximates fair market value.  The value assigned to donor 
base and records of new locations established by the Company is valued at 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.

START-UP COSTS

Start-up costs of $759,402 and $46,145 were included in other assets at 
February 28, 1998 and 1997, respectively.  These costs represent 
non-recurring expenditures directly related to and incurred during the 
start-up phase of the opening of the Company's newly established centers.  
Start-up costs consist primarily of direct labor and overhead associated with 
the start-up phase.  The start-up costs are being amortized on a 
straight-line basis over a period not to exceed three years.  Recoverability 
of these costs are assessed on an on-going basis.  Amortization of start-up 
costs during the year ended February 28, 1998 was $20,231. There was no 
amortization during the year ended February 28, 1997.

DEFERRED FINANCING COSTS

Included in other assets as of February 28, 1998, are deferred financing 
costs of $162,009.  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.




                                     F-14
<PAGE>

                        SERACARE INC. AND SUBSIDIARIES

                        SUMMARY OF ACCOUNTING POLICIES
                                 (CONTINUED)

EARNINGS PER SHARE

As of February 28, 1998, the Company adopted Statement of Financial 
Accounting Standards No. 128, "Earnings per Share" ("SFAS 128"). This 
pronouncement provides a different method of calculating earnings per share 
than was used in accordance with APB 15, "Earnings per Share".  SFAS 128 
provides for the calculation of Basic and Diluted earnings per share.  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.   None of the previous presented amounts 
required restatement.

DEFERRED BOND DISCOUNT

Deferred bond discount 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 discount is being amortized over the 7 year 
term of such debentures on a straight-line basis using the bonds outstanding 
method.

STOCK-BASED COMPENSATION

As of March 1, 1996, the Company adopted Statement of Financial Accounting 
Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS 123), 
which establishes a fair value method of accounting for stock-based 
compensation.  In accordance with SFAS 123, the Company has chosen to 
continue to account for employee stock-based compensation utilizing the 
intrinsic value method prescribed in APB 25. 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.






                                     F-15
<PAGE>

                        SERACARE INC. AND SUBSIDIARIES

                        SUMMARY OF ACCOUNTING POLICIES
                                 (CONTINUED)

STOCK-BASED COMPENSATION (CONTINUED)

The Company accounts for non-employee stock based compensation by 
establishing a fair value for stock options granted.  Compensation costs is 
measured as the excess, if any, of the fair value of the Company's stock at 
the date of grant 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 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 conform the prior year amounts to 
the current year presentation.

NEW ACCOUNTING PRONOUNCEMENTS

Statement of Financial Accounting Standard No. 129, "Disclosure of 
Information about Capital Structure," ("SFAS 129") issued by the FASB is 
effective for financial statements with fiscal years ending after December 
31, 1997.  The new standard reinstates various securities disclosure 
requirements previously in effect under Accounting Principles Board Opinion 
No. 15, which has been superceded by SFAS No. 128.  The Company adopted SFAS 
No. 129 on December 15, 1997 and it did not have any material effect on its 
financial position or results of operations.





                                     F-16
<PAGE>

                        SERACARE INC. AND SUBSIDIARIES

                        SUMMARY OF ACCOUNTING POLICIES
                                 (CONTINUED)

NEW ACCOUNTING PRONOUNCEMENTS (CONTINUED)

Statement of Financial Accounting Standard No. 130, "Reporting Comprehensive 
Income," ("SFAS 130") issued by the FASB is effective for financial 
statements with fiscal years beginning after December 15, 1997. Earlier 
application is permitted.  SFAS 130 establishes standards for reporting and 
display of comprehensive income and its components in a full set of 
general-purpose financial statements. The Company does not expect adoption of 
SFAS 130 to have any material effect on its financial position or results of 
operations.

Statement of Financial Accounting Standard No. 131, "Disclosure about 
Segments of an Enterprise and Related Information" ("SFAS 131") issued by the 
FASB is effective for financial statements with fiscal years beginning after 
December 15, 1997.  SFAS 131 requires that public companies report certain 
information about operating segments, products, services and geographical 
areas in which they operate and their major customers.  The Company does not 
expect adoption of  SFAS 131 to have a material effect on its financial 
position or results of operations; however, certain disclosures relating to 
these items may be expanded.

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 
is effective for financial statements beginning after December 15, 1998.  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.  The Company anticipates that adoption of SOP 98-5 will 
have an effect on its results of operations but has not yet determined the 
effect.




                                     F-17
<PAGE>

                        SERACARE INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   BUSINESS OPERATIONS

GENERAL

The Company was initially engaged in the business of whole blood collection 
and distribution.  After significant and accelerating losses, it changed the 
focus of the business from whole blood to plasma collection and distribution. 
The Company currently collects and sells source plasma and two hyperimmune 
plasmas.  On October 4, 1993, the Company acquired 100% of the outstanding 
common shares of AVRE, Inc. and Binary Associates, Inc., which owned and 
operated six plasma collection centers.  On January 7, 1994, the Company and 
its subsidiaries filed for protection under Chapter 11 of the U.S. Bankruptcy 
Code. The Company emerged from Chapter 11 effective February 6, 1996.  During 
fiscal 1997, the Company acquired additional centers and started new centers. 
At February 28, 1998, the Company was currently operating 16 centers, with 
four of those centers operating under reference numbers from the FDA pending 
approval of license applications.  Two additional centers are scheduled to 
open March 1, 1998 and June 1, 1998.  The plasma centers currently operated 
by the Company are operative under the trade name "SeraCare".  The name 
"SeraCare" is registered with the United States Patent and Trademark Office. 

ACQUISITIONS

Consolidated Technologies, Inc.

Effective January 1, 1998, the Company acquired substantially all of the 
operating assets of Consolidated Technologies, Inc. and an affiliate, both 
located in Austin, Texas.  Consolidated Technologies, Inc. is a biomedical 
manufacturing company specializing in the supply of products and services to 
the in-vitro diagnostic industry.  The total purchase price was valued at 
$7,130,023, consisting of $5,600,000 in cash and 436,364 shares of the 
Company's common stock. 

Western States Group, Inc.

Effective January 1, 1998, the Company acquired all of the stock of Western 
States Group, Inc. located in Fallbrook, California. Western States Group, 
Inc. is a worldwide marketing organization for therapeutic blood plasma 
products, diagnostic test kits, specialty plasma and bulk plasma.  The total 
purchase price was $4,471,492, consisting of $4,033,204 in cash and 125,000 
shares of the Company's common stock.




                                     F-18
<PAGE>

                        SERACARE INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (CONTINUED)

1.   BUSINESS OPERATIONS (CONTINUED)

ACQUISITIONS (CONTINUED)

American Plasma Management, Inc.

On November 29, 1997, the Company acquired substantially all of the operating 
assets of five plasma centers from American Plasma Management, Inc.  The 
total purchase price was $1,850,000, consisting of $1,250,000 in cash and 
$600,000 in a note payable, due October 31, 1998 (see Note 4).  In addition, 
the Company assumed the existing mortgage of $175,533 on one of the plasma 
centers.

Serologicals Corporation

On August 13, 1997, the Company acquired two plasma centers located in Reno, 
Nevada and Ft. Smith, Arkansas, plus $250,000 in exchange for three of the 
Company's plasma centers located in Colorado Springs (2) and Pueblo, 
Colorado.    

Acquisition of Development Stage Plasma Centers

On September 2, 1996, the Company acquired all the assets, rights and 
leasehold rights to two development stage plasma centers located in 
Clearfield, Utah and Raleigh, North Carolina in exchange for shares of the 
Company's common stock.  The purchase price was based upon a 
performance-based formula whereby a base quantity of 175,000 shares could be 
increased or decreased depending upon performance. At February 28, 1997, the 
Company determined that the estimated base shares to be issued under the 
agreement would be 119,875, valued at a fair market value of $179,813, and 
such amount was reflected in the financial statements at that time.  A final 
resolution was reached regarding such base shares, and 125,000 shares were 
issued.  Accordingly, an additional 5,125 shares, valued at $7,687, have been 
reflected in the fiscal 1998 financial statements.  

The agreement also includes contingent consideration of a maximum of 62,500 
shares for each of the two twelve-month periods following the acquisition if 
certain criteria are satisfied.  The criteria for the first twelve-month 
period was not satisfied, and management believes that it is unlikely that 
the criteria will be met for the second twelve-month period.

BHM Labs, Inc.

On July 9, 1996, the Company acquired BHM Labs, Inc., which owns and operates 
a plasma collection center in Ft. Smith, Arkansas in exchange for 3,600 
shares of the Company's Series A redeemable Preferred Stock.  The Company 
valued the acquisition at $490,800, based on the redemption value of the 
preferred stock (Note 7).






                                     F-19
<PAGE>

                        SERACARE INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (CONTINUED)

1.   BUSINESS OPERATIONS (CONTINUED)

ACQUISITIONS (CONTINUED)

Silver State Plasma Center

On July 2, 1996, the Company acquired the operating assets of Silver State 
Plasma Center in Las Vegas, Nevada for a purchase price of $800,000, which 
consisted of $500,000 in cash and a three year, $300,000 note payable with 
interest accruing at eight percent (see Note 5).

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.

The unaudited proforma results of operations, assuming the acquisitions 
occurred as of the beginning of the respective period for revenue, net income 
(loss) and income (loss) per share, is as follows: 

<TABLE>
<CAPTION>
                                Year ended          Year ended  
                                February 28         February 28,
                                   1998                1997
                                -----------         -----------
<S>                            <C>                 <C>
Revenue                        $28,028,623         $24,497,531
Net income (loss)                1,170,751             328,512
Income (loss)  per share
 Basic                                 .24                 .13
 Diluted                               .21                 .13
</TABLE>





                                     F-20
<PAGE>

                        SERACARE, INC. AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (CONTINUED)


2.   PROPERTY AND EQUIPMENT

<TABLE>
<CAPTION>

Property and equipment consist of the following:            February 28,
                                                        1998            1997  
                                                        ----            ----  
<S>                                                  <C>              <C>     
Land                                                 $   85,280       $   -   
Buildings and improvements                              458,375           -   
Furniture and equipment                               1,212,459        288,738
Leasehold improvements                                1,020,022        408,747
Construction-in-process                                 295,382        250,760
                                                     ----------       --------
                                                      3,071,518        948,245
Less: accumulated depreciation and amortization         290,668         58,092
                                                     ----------       --------
Property and equipment, net                          $2,780,850       $890,153
                                                     ----------       --------
                                                     ----------       --------

</TABLE>

Depreciation and amortization expense on property and equipment was $186,132 
and $57,230 for the years ending February 28, 1998 and 1997, respectively.

3.   BRIDGE LOANS FROM RELATED PARTIES

In January 1998, the Company entered into agreements with related parties, 
approved by the Board of Directors, which provided for bridge loans of 
$599,000. Interest is payable monthly at ten percent per annum.  At February 
28, 1998, $599,000 of these bridge loans were outstanding. These loans are 
due April 12, 1998.  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, 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.

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, which are all outstanding at February 28, 1998.  These 
loans are due upon demand, and are secured by all the assets of the Company.  
The loans accrue 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.


                                       F-21

<PAGE>

                        SERACARE, INC. AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (CONTINUED)


3.    BRIDGE LOANS FROM RELATED PARTIES (CONTINUED)

During 1997, the Company entered into agreements with related parties, 
approved by the Board of Directors, which provided for bridge loans of 
$550,000.  The bridge loans are due on demand and are secured by all of the 
assets of SeraCare's consolidated operations.  The loans accrue interest at 
twelve percent per annum.  During the year ended February 28, 1997, $332,500 
of the bridge loans were converted to equity in private placements. The 
holders received 221,667 shares of common stock and warrants to purchase 
112,500 shares of common stock at an exercise price of $2.75.  At February 
28, 1998, $197,500 of  these bridge loans were outstanding.  In connection 
with the 1997 bridge loans, the Company granted three year options to 
purchase 150,000 shares of common stock at an exercise price of $1.00.  The 
Company calculated $100,000 as the value (original issue discount) of the 
options issued in conjunction with the bridge loans, which estimated fair 
market value in excess of the exercise price of these options at the date of 
issue.  All of the original issue discount was amortized to interest expense 
during the year ended February 28, 1997.

4.    NOTES PAYABLE

During 1998, the Company entered into agreements, approved by the Board of 
Directors, which provided for loans of $808,500.  These loans are due April 
12, 1998.  Interest is payable monthly at ten percent per annum.  The Company 
repaid $500,000 of these loans before year end.  At February 28, 1998, 
$308,500 of these bridge loans were outstanding.  In connection with these 
loans, the Company granted the holders warrants to purchase 308,500 shares of 
common stock at an exercise price of $3.50 per share and 285,000 shares at an 
exercise price of $4.00 per share, which approximated the fair market value 
of the shares on the dates of grant.  In February 1998, the warrants with an 
exercise price of $3.50 were exchanged for 154,250 shares of restricted 
common stock. 

In conjunction with the American Plasma acquisition, the Company is obligated 
under a note payable for $600,000, which is due October 31, 1998.  The note 
bears interest at eight percent per annum.

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.  In connection with these 
loans, the Company granted three-year options to purchase 487,978 shares of 
common stock at exercise prices ranging between $2.00 and $3.00 per share, 
which was at the then fair market value.  In December 1998, $750,000 of these 
loans were converted into 375,000 shares of restricted common stock.  At 
February 28, 1998, $388,447 of these loans was outstanding.


                                       F-22

<PAGE>

                        SERACARE, INC. AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (CONTINUED)


5.  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.

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 an original issue discount of $7,575,808.  This discount is being 
amortized as non-cash interest expense over the term of the debt.

The debentures are senior to all other debt but are subordinate to any future 
senior bank 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 28, 
1998, the Company was in compliance with these covenants.

In conjunction with these debentures, the Company paid a finder's fee to the 
referring investment banker, consisting of $640,000 in cash and warrants to 
purchase 131,286 shares of its common stock at $3.00 per share.  These 
warrants were valued at $69,599.

MORTGAGE PAYABLE

During the year ended February 28, 1998, the Company assumed the mortgage on 
one of the plasma centers in connection with the American Plasma acquisition. 
The mortgage, which amounts to $174,343 at February 28, 1998, is due in 
monthly installments of principal and interest of $1,830 through June 1, 
2005.  Interest is accrued at 10.5 percent per annum.


                                       F-23

<PAGE>

                        SERACARE, INC. AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (CONTINUED)


5.  LONG-TERM DEBT (CONTINUED)

SILVER STATE PLASMA PRODUCTS, INC.

On July 2, 1996, the Company acquired the operating assets of Silver State 
Plasma Center in Las Vegas, Nevada for $500,000 in cash and $300,000 in a 
note payable.  The note payable accrues interest at 8%. Principal and 
interest payments are due monthly through August 1999.  The note payable is 
secured by all the assets acquired in the Silver State Plasma Center 
acquisition.  During 1998, this note payable was converted into 112,813 
shares of restricted common stock.

CVD FINANCIAL CORPORATION

As of  February 28, 1997, the Company owed CVD Financial $821,432 under a 
loan agreement in the original amount of $1,150,000, with interest at 14% per 
annum payable monthly and principal payable quarterly.  The final principal 
and interest payment is due August 1, 1999. The loan is secured by all the 
assets of SeraCare, Inc.  During 1998, the Company repaid this loan.

KIER CORPORATION

On September 2, 1996, the Company assumed a $45,000 note payable to The Kier 
Corporation, a lessor, in conjunction with the Company's 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 28, 1998, the outstanding balance on the note 
payable was $34,538.

Future minimum payments to be made, as of February 28, 1998:

<TABLE>
<CAPTION>

     Year Ended February 28,                             Amount
     -----------------------                             ------
     <S>                                            <C>
           1999                                     $    12,211
           2000                                          13,557
           2001                                          15,051
           2002                                          11,786
           2003                                       5,339,160
           Thereafter                                10,817,116
                                                    -----------
                                                     16,208,881
     Less current portion                                12,211
                                                    -----------
                                                    $16,196,670
                                                    -----------
                                                    -----------

</TABLE>


                                       F-24

<PAGE>

                        SERACARE, INC. AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (CONTINUED)


6.   STOCKHOLDERS' EQUITY

COMMON STOCK

During 1998, the Company completed various private placements and received 
$3,932,718, net of $204,811 of related offering costs and expenses.  In 
connection with these offerings, the Company issued 1,136,396 shares of its 
restricted common stock.

In connection with the Silver State Plasma Products, Inc. acquisitions, the 
Company had a note payable with an outstanding balance of $247,328 on 
February 28, 1997.  During 1998, this note was converted into 112,813 shares 
of restricted common stock at the rate of $2.19 per share.

Additionally, during 1998 the Company received $750,000 of bridge loans, 
which were converted into 375,000 shares of restricted common stock (see 
Note 4).

In connection with the acquisition of Western States Group, Inc., the Company 
issued 125,000 shares of restricted common stock, in a transaction valued at 
$438,288 (see Note 1).

In connection with the acquisition of the assets of Consolidated 
Technologies, Inc., the Company issued 436,364 shares of restricted common 
stock, in a transaction valued at $1,530,023 (see Note 1).

In an effort to reduce the number of warrants outstanding prior to the 
issuance of the Senior Subordinated Debentures (see Note 5), the Company 
offered the holders of various warrants a cashless exchange of one share of 
common stock for two warrants. In conjunction with this offer, the holders of 
615,000 Series A warrants elected to receive 307,500 shares of restricted 
common stock.  In addition, the bridge loan holders elected to convert 
907,500 warrants to 453,750 shares of restricted common stock.  Dealer 
warrants were also exchanged for a total of 79,250 shares of restricted 
common stock.

On October 23, 1996, the Company completed the private placement offering 
dated June 1, 1996 and received net proceeds of $1,088,850. The net proceeds 
consisted of $1,047,500 in cash, and $227,500 in debt conversion, less 
$186,150 of related offering costs and expenses.  In connection with this 
offering the Company issued 850,000 shares of its common stock.  The offering 
also included Series A warrants to purchase 425,000 shares of common stock at 
an exercise price of $2.75 per share expiring on the earlier of six years 
from date of issuance or three years from effective date of the initial 
registration statement, discussed under Series A Warrants below. The proceeds 
of this offering were used to finance the expansion program of the Company 
and for working capital.


                                       F-25

<PAGE>

                        SERACARE, INC. AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (CONTINUED)


6.   STOCKHOLDERS' EQUITY (CONTINUED)

COMMON STOCK (CONTINUED)

During the period October 1, 1996 through February 28, 1997, the Company 
completed multiple closings related to the private placement offering dated 
October 1, 1996 and received net proceeds of $1,468,341. The net proceeds 
consisted of $1,432,500 in cash and $105,000 in debt conversion, less $69,159 
of related offering costs and expenses.  In connection with this offering the 
Company issued 1,025,000 shares of its common stock.  The offering also 
included Series A warrants to purchase 512,500 shares of common stock at an 
exercise price of $2.75 per share expiring on the earlier of six years from 
date of issuance or three years from effective date of the initial 
registration statement, discussed under Series A Warrants below.

During the October 1, 1996 private placement, two directors and an officer 
purchased 360,000 shares of the Company's common stock and Series A  Warrants 
to purchase 180,000 shares of common stock for cash of $540,000.  In 
conjunction with both the June 1, 1996 and October 1, 1996 private 
placements, two directors who were also bridge loan holders, converted 
$332,500 of bridge loans into 221,667 shares of the Company's common stock 
and Series A Warrants to purchase 112,500 shares of common stock (see Note 3).

On September 2, 1996, the Company acquired all the assets, rights and 
leasehold rights to two development stage plasma centers located in 
Clearfield, Utah and Raleigh, North Carolina in exchange for shares of the 
Company's common stock.  The purchase price was based upon a 
performance-based formula whereby a base quantity of 175,000 shares could be 
increased or decreased depending upon performance. At February 28, 1997, the 
Company determined that the estimated base shares to be issued under the 
agreement would be 119,875, valued at a fair market value of $179,813, and 
such amount was reflected in the financial statements at that time.  In March 
1998, a final resolution was reached regarding such base shares, and 125,000 
shares were issued.  Accordingly, at February 28, 1998, an additional 5,125 
shares, valued at $7,687, have been reflected in the financial statements.

On September 2, 1996, the Company entered into a contract for services 
whereby the contractor could be paid in cash or 38,889 shares of common stock 
for services rendered.  During the period, the Company recorded an expense of 
$58,333 to reflect the value of the services rendered.  As of February 28, 
1997, the contractor elected to receive the 38,889 shares of common stock.

The Company granted  options during fiscal 1998 and 1997 to various outside 
directors.  As a result, the Company recorded deferred compensation expense 
of $96,401 in 1998, included in other assets on the Consolidated Balance 
Sheets, and compensation expense of $10,700 in 1998 and $78,980 in 1997, 
included as non-cash general and administrative expenses on the Consolidated 
Statements of Operations (see Note 8).


                                       F-26

<PAGE>

                        SERACARE, INC. AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (CONTINUED)


6.   STOCKHOLDERS' EQUITY (CONTINUED)

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. Such preferred stock is 
convertible into 300,000 common shares and has a $100 per share liquidation 
preference. 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. The Company is required to redeem on December 31, 
2002 all shares of Series B Preferred Stock which remain outstanding on such 
date at a price equal to the liquidation preference.  As of February 28, 
1998, all 15,000 shares issued were still outstanding.

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 elected 
to receive 307,500 shares of restricted common stock.   As of February 28, 
1998, 325,000 warrants remained outstanding.

OTHER WARRANTS

In conjunction with the issuance of the $16 million in subordinated 
debentures (see Note 5), 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.


                                       F-27

<PAGE>

                        SERACARE, INC. AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (CONTINUED)


7.   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 28, 1998, the Company has redeemed 2,000 shares of the preferred 
stock for $280,139 in cash (1,200 shares in 1998 and 800 shares in 1997).  
The shares are redeemable at $208,755 and $61,106 during 1999 and 2000, 
respectively.

8.   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 (see Note 3), 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-28

<PAGE>

                        SERACARE, INC. AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (CONTINUED)


8.   STOCK OPTIONS (CONTINUED)

     (4)  In conjunction with the $742,500 loans to the Company during calendar 
     1997 (see Note 3), 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 conjunction with a January 1998 bridge loan (see Note 3),  the 
     Company granted options to purchase 200,000 shares of common stock at 
     an exercise price of $3.50 per share, which was at the then fair market 
     value.  In February 1998, these options were exchanged for 100,000 
     shares of common stock in a cashless exchange.

     In conjunction with the 1996 Plan of Reorganization, the Vice President 
     of Finance and Vice President of Operations were granted options to 
     purchase 42,110 and 28,073 shares of common stock of the Company, 
     respectively. The option purchase price of the options related to the 
     Vice President of Operations is a mean price between $.74 and the 
     weighted average, as defined in the agreement.  The options related to 
     the Vice President of Finance 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.  The options related to 
     the Vice President of Operations vest one-third each year over a three 
     year period beginning in January 1997.

     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 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.

     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. 


                                       F-29

<PAGE>

                        SERACARE, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   CONTINUED

8.  STOCK OPTIONS (CONTINUED)

     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 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 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).

     The following table summarizes all option/warrant activity for the years 
ended February 28, 1998 and 1997:

<TABLE>
<CAPTION>

                                                     Number of          Weighted
                                                   Common Stock         Average 
                                                  Warrants/Options       Price
                                                  ----------------      ---------
     <S>                                             <C>                 <C>
     Outstanding as of March 1, 1996                    404,405          $1.50
     Granted                                          1,157,427           2.43
                                                  ----------------      ---------
     Outstanding as of February 28, 1997              1,561,832           2.22
     Granted                                          5,140,831           1.69
     Exercised                                       (1,523,000)         (3.20)
                                                  ----------------      ---------
     Outstanding as of February 28, 1998              5,179,663          $1.40
                                                  ----------------      ---------
                                                  ----------------      ---------
     Exercisable as of February 28, 1998              5,170,305          $1.40
                                                  ----------------      ---------
                                                  ----------------      ---------
</TABLE>


                                     F-30

<PAGE>

                        SERACARE, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   CONTINUED

8.  STOCK OPTIONS (CONTINUED)

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 assumption 
used for grants in fiscal 1998 and 1997 dividend yield of zero percent; 
expected volatility of 23 percent; risk free interest rate of 5.67; and 
expected life of 5.0 years.

The weighted average fair value of options granted during the years ended 
February 28, 1998 and 1997 was $.74 and $.27, respectively.

Under the accounting provisions of FASB Statement 123, the Company's net 
income (loss) and income (loss) per share for the years ended February 28, 
1998 and 1997 would have been reduced to the pro forma amounts indicated 
below:

<TABLE>
<CAPTION>

                                                      Years ended February 28,
                                                         1998          1997
                                                         ----          ----
     <S>                                              <C>            <C>
     Net income (loss)
     As reported                                       $453,853      $(511,108)
     Pro forma                                         $391,653      $(575,100)

     Basic income (loss) per share
     As reported                                         $  .09        $  (.20)
     Pro forma                                           $  .08        $  (.23)

     Diluted income (loss) per share
     As reported                                         $  .08        $  (.20)
     Pro forma                                           $  .07        $  (.23)

</TABLE>

The table on the following page summarizes information about stock options 
outstanding at February 28, 1998:


                                     F-31

<PAGE>

                        SERACARE, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   CONTINUED

8.  STOCK OPTIONS (CONTINUED)

<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                2,100,572       Unlimited         $0.01        2,100,572        $0.01
   $1.00-$1.50               521,330          27.0           $1.15          511,972        $1.15
      $2.00                1,011,726          30.8           $2.00        1,011,726        $2.00
   $2.25-$4.00             1,546,035          33.6           $2.97        1,546,035        $2.97
                           ---------                         -----        ---------        -----
                           5,179,663                         $1.40        5,170,305        $1.40
                           ---------                         -----        ---------        -----
                           ---------                         -----        ---------        -----
</TABLE>

9.   LEASES

The Company is currently leasing its corporate office under a noncancelable 
lease agreement, which expires in May 1999.  In addition, the Company leases 
office and manufacturing facilities in Austin, Texas under a noncancelable 
lease agreement expiring in November 1999.  The Company is also obligated 
under various other lease agreements for other locations (primarily donor 
centers) through four of its wholly-owned subsidiaries.  Two donor center 
locations are leased on a month-to-month basis.  The remaining leases expire 
at various dates ranging from August 1998 to September 2006.  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>
    1999                                                    $663,761
    2000                                                     519,085
    2001                                                     362,452
    2002                                                     297,691
    2003                                                     221,741
    Thereafter                                               128,234
                                                          ----------
                                                          $2,192,964
                                                          ----------
                                                          ----------
</TABLE>

Rent expense amounted to $571,508 and $319,751 for the years ended February 
28, 1998 and 1997, respectively.


                                     F-32
<PAGE>

                        SERACARE, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   CONTINUED


10.  INCOME TAXES

The provision for income taxes included in the accompanying consolidated 
statements of operations consists of the following components:

<TABLE>

                                                   Year ended February 28, 
                                                     1998          1997
                                                     ----          ----
     <S>                                            <C>           <C>
     Currently payable:
     Federal                                       $   -         $   -  
     State                                          25,000        16,000 

     Deferred taxes                                    -             -
                                                   -------        -------
     Total income tax provision                    $25,000        $16,000
                                                   -------        -------
                                                   -------        -------
</TABLE>

The effective tax rate on income before income taxes in fiscal 1998 differed 
from the federal statutory tax rate primarily due to state income tax expense 
of $25,000 and utilization of federal net operating loss carryforwards that 
were not previously recorded as deferred tax assets because the Company was 
unable to determine whether it was more likely than not that the deferred tax 
asset would be realized.

The effective tax rate on loss before income taxes in fiscal 1997 differed 
from the federal statutory tax rate primarily due to the increase in the 
valuation allowance for deferred tax assets, except for state income tax 
expense of $16,000.

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.  The tax effects of temporary 
differences for depreciation, amortization, and valuation allowances from 
current and prior periods and net operating loss carryforwards could give 
rise to the recording of deferred tax assets.  The Company is in the process 
of determining the amount of net operating loss carryforwards available to 
offset future taxable income. The Company was unable to determine whether it 
was more likely than not that the deferred tax assets would be realized, 
therefore a 100% valuation allowance was established.


                                     F-33

<PAGE>

                        SERACARE, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   CONTINUED

11.  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 two officers under three-year employment 
     agreements dated February 6, 1996.  The current annual salaries under 
     these agreements are $365,000.

     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 acquisitions of Consolidated Technology Group and 
     Western States Group, Inc., the Company is obligated under the terms of 
     four five-year employment agreements dated February 13, 1998. The 
     current annual salaries under these agreements are $522,000.

     The employment agreements also provide for a management bonus which will 
     allocate on the basis of salaries, 10% of pre-tax earnings to management 
     personnel in the event the Company achieves certain minimum annual 
     pre-tax earnings, as defined in the agreements.

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

During the year ended February 28, 1998, 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.  Failure to comply or correct deficiencies with applicable laws or 
regulations could subject the Company to enforcement action, including 
product seizures, recalls, center or 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.


                                      F-34
<PAGE>

                        SERACARE, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   CONTINUED

12.  CONCENTRATION OF CREDIT RISK, SIGNIFICANT CUSTOMERS AND SALES 
COMMITMENTS (CONTINUED)

The Company is required to obtain from each donor an informed consent 
regarding the donation procedure.  Failure of the Company to obtain an 
adequate consent could have a material adverse effect on the Company.

For the year ended February 28, 1998, 87% of the net sales (including 49% to 
a European customer) were made to three customers by the plasma operations.

During the year ended February 28, 1998, the Company terminated agreements 
with two customers which represented 28% and 15% of sales in fiscal 1998 and 
85% and 13% of sales in fiscal 1997 from the plasma operations and negotiated 
new agreements with a new customer for such plasma.  In addition, in November 
1997, the Company acquired five mature plasma collection centers from 
American Plasma Management, Inc. (see Note 1) and began to expand its 
customer base by selling the plasma from such centers to new customers.  
Further, effective January 1, 1998, the Company acquired Western States 
Group, Inc. and Consolidated Technologies, Inc., both of whom enjoy a broad 
customer base of complementary but not identical customers.

In November 1996, the Company entered into an agreement with one customer 
relating to three start-up facilities and in April 1997 added two additional 
start-up facilities whereby the Company committed to sell substantially all 
of the plasma collected from the indicated centers at various prices 
specified in the agreement.  The agreement expires January 31, 2000 and may 
be terminated if the plasma collection centers fail to comply with applicable 
FDA, QPP and customer initiated operating procedures.  In June 1997, one of 
the five centers subject to this agreement became licensed to ship plasma by 
FDA and QPP approval.  The four other centers, however, were operating under 
reference numbers from the FDA in order to establish compliance documentation 
sufficient for approval and had not yet received FDA and QPP approval to sell 
collected plasma.

13.  RELATED PARTY TRANSACTIONS                        

The Company has had various transactions with related parties.  These 
transactions are described in Notes 3, 6, 8 and 11.


                                     F-35
<PAGE>

                        SERACARE, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   CONTINUED

14.  OTHER INCOME

Other income includes $801,215 from a one-time non-operating gain realized 
from the sale of salvage plasma material.

15.  EARNINGS PER SHARE

The following table reconciles the numerators and denominators of the basis 
and diluted earnings per share computation:

<TABLE>
<CAPTION>

                                                               Year ending February 28, 
                                                                  1998          1997
                                                                  ----          ----
<S>                                                            <C>            <C>
Basic earnings (loss) per share
  Net income (loss)                                             $453,853      $(511,108)
                                                               ---------      ----------
                                                               ---------      ----------
  Income (loss) available to common stockholders (numerator)    $453,853      $(511,108)
                                                               ---------      ----------
                                                               ---------      ----------
  Weighted average common shares outstanding (denominator)     4,818,313      2,509,042
                                                               ---------      ----------
                                                               ---------      ----------
  Basic earnings (loss) per share                                  $0.09          $(.20)
                                                               ---------      ----------
                                                               ---------      ----------
Diluted earnings (loss) per share
  Income (loss) available to common stockholders (numerator)    $453,853      $(511,108)
                                                               ---------      
                                                               ---------      
  Weighted average common shares outstanding                   4,818,313      2,509,042
  Weighted average warrants/options outstanding                2,505,029          -
  Weighted average other dilutive securities                      75,000          -
  Stock acquired with proceeds                                (1,691,937)         -     
                                                               ---------      ----------  
  Weighted average common shares and assumed conversion
    outstanding (denominator)                                  5,706,405      2,509,042
                                                               ---------      ----------
                                                               ---------      ----------
  Diluted earnings (loss) per share                                $0.08          $(.20)
                                                               ---------      ----------
                                                               ---------      ----------
</TABLE>

Options and warrants to purchase  1,561,832 shares were outstanding during 
the fiscal year ended 1997 but were not included in the computation of 
diluted loss per common share because the effect would be anti-dilutive.

16.  SUBSEQUENT EVENTS 

Effective April 24, 1998, the Company consummated a $10 million, two-year 
committed credit facility with Brown Brothers Harriman & Co. Proceeds from 
the financing will be used for general working capital. Under the terms of 
the agreement, interest will accrue at Bank of Boston prime rate plus .75 
base points and will be payable quarterly.  The agreement contains various 
covenants relating to:  minimum effective capital; maximum total 
liabilities/effective capital; minimum current ratio; minimum EBITDA/interest 
expense + capital; and other nonfinancial covenants relating to restrictions 
on additional indebtedness, guarantees of indebtedness, limitations on 
investments, asset sales, mergers or other changes of control, divestitures, 
acquisitions, dividends and distributions.  As of May 15, 1998, $3 million 
had been drawn against the line.


                                     F-36

<PAGE>

                                 EXHIBIT INDEX

 THE FOLLOWING EXHIBITS ARE BEING FILED AS PART OF THIS REPORT. 

<TABLE>
<CAPTION>

<S>  <C>
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.

</TABLE>