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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-K

|/x/ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended February 28, 2001

|/ / | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from  to

Commission file number 1-13977

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SERACARE, INC.(Exact name of Registrant as specified in its charter)

Delaware(State or other jurisdiction of
incorporation or organization)

95-4343492(I.R.S. Employer
Identification No.)1925 Century Park East, Suite 1970
Los Angeles, California(Address of principal executive offices)

90067(Zip Code)


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

Securities registered under Section 12(b) of the Exchange Act: Common Stock, $.001 Par Value(Title of Class)

Securities
to be registered under Section 12(g) of the Exchange Act:None

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Indicate
by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes /x/  No / /

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

As
of April 30, 2001, the aggregate market value of the registrants voting and non-voting common equity held by non-affiliates was approximately $51,554,000 based
on the last price per share of such common stock at which the stock was sold on such date as reported by the AMEX.

As
of April 30, 2001, the registrant had 9,741,016 shares of its common stock, $.001 par value, issued and outstanding.

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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 factors described under "Risk Factors" on page 14.

DESCRIPTION OF THE BUSINESS

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

Company History.The Company as it is currently organized has evolved based upon a strategic plan for expansion and
growth. During the five year period since February 6, 1996, the Company has grown from six plasma collection centers to a total of forty two centers as of February 28, 2001, both through
acquisition and by establishing new startup centers. In January 1998, the Company acquired Western States Group, Inc. (herein referred to as "Western States") and Consolidated
Technologies (herein referred to as "CTI"). On February 29, 2000, the Company sold substantially all of the operating assets
of CTI in a strategic move to reduce debt and reorganize the company along business lines. SeraCare went public in May 1996 on the OTC Bulletin Board and is now listed on the American Stock
Exchange under the symbol SRK.

Principal Business Operations.During the fiscal year just ended, the Company was organized by business segment and
consisted of two segments: the Therapeutics Products Segment ("Therapeutics"), which consists primarily of the plasma collection operations, and the Diagnostics Products Segment ("Diagnostics"), which
encompasses the manufacturing and sale of various products for diagnostic applications. Certain of the Company's segment information as of and for fiscal 2001, 2000 and 1999 is found in Note 17
to the Company's Consolidated Financial Statements. The Company's plasma collection operation has become a significant factor in the business of collecting and selling source plasma to manufacturers
of pharmaceutical and diagnostic products (called fractionators). While the primary product of the Company's Therapeutics segment continues to be source plasma, the Company also collected and sold
Cytomegalovirus Antibody Plasma (CMV), Tetanus Antibody Plasma, HbSag (hepatitus positive) plasma and various other antibody positive and negative plasma during the fiscal year ended
February 28, 2001. The Company's customers process source 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
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

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blood. According to FDA rules, a donor can donate plasma up to twice per week or 104 times per year.

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

With
the establishment of the Specialty Plasma Program during the prior fiscal year, the establishment of serum manufacturing and the signing of the Quest Diagnostics Collaboration
which focuses on rare and valuable antibodies and reactive units, the Diagnostics segment has made significant progress toward providing a full spectrum of reactive and antibody plasmas to
manufacturers of diagnostic products.

Therapeutics Products Segment.The Therapeutics Products Segment consists primarily of the Company's plasma collection
operations plus certain of the Company's distribution operations.

The
plasma collection operations are currently conducted through five wholly-owned subsidiaries: AVRE, Incorporated, a Nevada corporation, Binary Associates, Inc., a
Colorado corporation, BHM Labs, Inc., an Arkansas corporation, American Plasma, Inc. a Texas corporation, and SeraCare Acquisitions, Inc., a Nevada corporation. During fiscal
2001, the Company opened new centers in Providence, Rhode Island and Danville, Virginia. In addition, in November, the Company acquired six mature centers located in Everett, Washington; North
Seattle, Washington; South Seattle, Washington; Yakima, Washington; Topeka, Kansas; and, Dallas, Texas. As of April 30, 2001, the startup centers located in Danville and Providence were
operating under a Reference Number from the FDA pending approval of license applications. Collection centers which have not received FDA approval of its license application are allowed to operate
under a Reference Number and process donors in order to develop sufficient training and records for review by FDA inspectors to establish the location's ability to comply with FDA Regulations. Such
centers are, however, precluded from selling any of the collected plasma until final approval of its license application. Historically, it has taken approximately six to eighteen months from date of
filing to obtain final FDA approval on a new license application. The Company's customers require both an FDA license and QPP Certification under all current contracts. QPP Certifications are
requested when the FDA license application has been approved and can take six to eight weeks to obtain.

As
of April 30, 2001, the Company had forty two plasma collection centers in operation which were located in: Las Vegas, Nevada; Clarkesville, Tennessee; Phoenix, Arizona (2);
Ft. Smith, Arkansas; Clearfield, Utah; Raleigh, North Carolina; Pasco, Washington; Toledo, Ohio; Macon, Georgia; Savannah, Georgia; Reno, Nevada; South Bend, Indiana; Kalamazoo, Michigan; Boise,
Idaho; Pocatello, Idaho; Salt Lake City, Utah; Amarillo, Texas; Beaumont, Texas; Longview, Texas; Houston, Texas (4); Casa Grande, Arizona; Pasadena, Texas; Mesa, Arizona; Baton Rouge, Louisiana; Port
Arthur, Texas; Wilmington, Delaware; Lancaster, Pennsylvania; Reading, Pennsylvania; Allentown, Pennsylvania; Laredo, Texas; Danville, Virginia; Providence, Rhode Island; Dallas, Texas; Seattle,
Washington (2); Topeka, Kansas; Everett, Washington and Yakima, Washington. During fiscal 2001, such centers processed about 773,000 donations.

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

During
fiscal 2001 about 65 percent of the revenue derived from the plasma collection operations was from Grupo Grifols, S.A. the leading fractionator in Spain. The Company's
contract with Grupo Grifols was amended on November 19, 1999. The amended contract expanded the prior plasma requirements by one-third.

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Approximately 14 percent of the revenue derived from plasma collection operations was from sales to Aventis Bio-Services, Inc. ("Aventis"). In
September 1999, the Company announced a Marketing and Distribution Strategic Alliance with Aventis. Under terms of the Plasma Purchase and Management Services Agreement, Aventis agreed to
provide management services relating to certain specified centers and to purchase all of the plasma collected at such centers. Aventis Bio-Services, Inc. is a wholly owned
subsidiary of Centeon L.L.C., a joint venture of Hoechst AG and Rhone-Poulenc Rorer Inc., and is the world's largest, fully integrated plasma collection company with offices, laboratories,
logistics centers and collection centers throughout the United States and Germany.

Approximately
18 percent of the revenue derived from plasma collection operations was from sales to Alpha Therapeutic, a subsidiary of Yashi Tomi Pharmaceutical ("Alpha") under
agreements covering production from five plasma collection centers, four of which expired on April 30, 2001. The contract for the remaining center will expire on July 30, 2001. About
6 percent of plasma revenue was from other entities.

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

In
response to increasing demands by the FDA, the Company established the position of "Director of Quality". This position serves as the communication link between the Company and the
FDA, in addition to having responsibility for insuring that the Company maintains a high level of compliance. In addition, six manager positions (five "Quality Managers" and one "Audit Manager") were
developed in support of the Director of Quality to provide appropriate focus and control over the centers. Each Quality Manager responds to day-to-day issues encountered by the
various centers and are frequently on site during FDA audits to insure that any issues are addressed and corrected timely. The Audit Manager coordinates and oversees all FDA audits. The Company has
also established full time Quality Assurance positions in each of the 42 plasma collection centers with the ongoing responsibility of insuring compliance within the center. In order to verify that the
Company's commitment to compliance is being adhered to, the Company from time to time retains an independent compliance auditor to perform periodic unannounced compliance inspections at the centers,
simulating FDA inspections, with the audit results being sent directly to the president of the plasma operations and the President of the Company. The focus of all inspections and review processes is
to insure that each of the Company's centers are in compliance with all customer, European or FDA regulations that protect the integrity of the products and the safety of donors and employees.

Diagnostics Products Segment.During fiscal 2001,the Diagnostics
segment operated through Western States, located in Oceanside, California. Western States is an FDA licensed worldwide marketing organization for therapeutic based blood plasma products, diagnostic
test kits, specialty plasma and bulk materials. Western States is a vendor-approved supplier to over 500 pharmaceutical and other healthcare companies, including being listed as an exclusive supplier
in many customers' regulatory applications with the FDA. Western States has also helped certain customers develop internal protocols and standards used to establish quality control benchmarks and has
performed various other value-added services for its customers in order to establish solid relationships. The primary focus of the Company's Diagnostics operation is on multinational biotech,
pharmaceutical and technology products companies dealing in diagnostic products. During fiscal 2000, Western States also

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established itself as a major supplier of plasma based diagnostic products to several major domestic pharmaceutical companies and signed a significant distribution agreement with the largest producer
of bovine products in the world. Additionally, this marketing organization cultivated alternative diagnostic applications for traditionally therapeutic products as an alternative to animal based
mediums and established itself as a manufacturer of bulk plasma based products and serums. During fiscal 2001, Western States continued to expand its product technology and began operating under a
collaboration agreement with Quest Diagnostics to advance its goal of providing a full spectrum of reactive and antibody plasmas to manufacturers of diagnostic products throughout the world.

Certain
information regarding the geographic concentration of the Company's net sales is set forth in Note 13 of the Company's Consolidated Financial Statements.

Consolidated Technologies Division

On February 29, 2000 the Company sold substantially all of the operating assets of SeraCare Technology, Inc., (dba Consolidated Technologies), a
Nevada corporation located in Austin, Texas to Consolidated Technologies, Inc., a Minnesota corporation, which is a subsidiary of Sybron International, Inc.. The sale of the operating
assets of CTI was a strategic move to reduce debt and reorganize the Company along business lines.

COMPETITION

The Company's Therapeutics operations compete for donors with pharmaceutical companies that 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.

The
Company's Diagnostics operations compete with fractionators in the sale of plasma products and other plasma collection companies in the sale of specialty plasma. Long term
international and domestic relationships serve as the cornerstone of the Diagnostics operations' competitive edge. In addition, the Company believes that its ability to work with customers in
developing SOP's and formulations for FDA approval is unique within the industry. However, if the Company is not able to sustain its relationships, or if more pharmaceutical companies decide to buy
directly from fractionators, its business and future growth could be adversely affected.

TRADEMARKS

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

REGULATORY ISSUES

The plasma collection and derivative industry is one of the most heavily regulated in the United States. Federal, state and local regulations are designed to
protect the health of the donors as well as the integrity of the products. The Food and Drug Administration (the "FDA") administers the federal regulations across the country. Failure to comply with
FDA regulations, or state and local regulations, may result in the forced closure of a collection center or monetary fines or both, depending upon the

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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 humanSource 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:



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, conducts 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. The Company responds to these observations 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

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the issues. If the observations were considered serious enough; or, if the answers were not considered adequate, CBER will issue aRegulatory Letter.
This is considered a "red flag" in the industry and if not responded to in a timely and appropriate manner, can result in CBER taking further action, including actually closing the center.

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

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

During
fiscal years 2000 and 2001, the Company has responded to the challenge of issues raised by the FDA and has made several changes which the Company believes are necessary in
order to be successful in this highly regulated industry. The Company has established the position of "Director of Quality". This position serves as the communication link between the Company and the
FDA, in addition to having responsibility for insuring that the Company maintains a high level of compliance. Six manager positions have been established in support of the Director of Quality (five
"Quality Manager" positions and one "Audit Manager" position) to provide appropriate focus and control over the centers. Each Manager of Quality Assurance responds to
day-to-day issues encountered by the various centers and are frequently on site during FDA audits to insure that any issues are addressed and corrected timely. The Company has
also established full time Quality Assurance positions in each of the 42 plasma collection centers with the ongoing responsibility of insuring compliance within the center. In order to verify that the
Company's commitment to compliance is being adhered to, the Company has from time to time retained an independent compliance auditor to perform periodic unannounced compliance inspections at the
centers, simulating FDA inspections, with the audit results being sent directly to the president of the plasma operations and the President of the Company.

The
Company has also established a full time Manager of Compliance position in its Oceanside location to insure compliance by the Diagnostics operations.

The
focus of all inspections and review processes is to insure that each of the Company's centers are in compliance with all customer, European or FDA regulations that protect the
integrity of the products and the safety of donors and employees.

CLINICAL
LABORATORY IMPROVEMENT ACT OF 1988:

In
1988, the U.S. Department of Public Health introduced an updated set of laboratory regulations. One of the many areas covered by this regulation is the definition of the education
level of personnel required to perform clinical laboratory tests as well as 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. These CLIA inspections also provide state authorities the opportunity to review compliance with any
applicable state 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.

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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 often 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 which requires six
months of experience, a completed application and payment of a fee.

INDUSTRY
STANDARDS

AMERICAN
BLOOD RESOURCES ASSOCIATION:

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



All
of the Company's operating centers are QPP certified with the exception of the two 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.

Since
inception, the QPP program has created an increasingly 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 QPP program 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,

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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 plasmais 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 asplasmapheresis. 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.

PLASMA DERIVED PRODUCTS

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

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

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

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None of the source plasma or hyperimmune plasma collected by the Company 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 each donor signs an informed consent form. The Company does extensive training of employees in order to insure the safety of its donors.

INJECTABLE PLASMA PRODUCTS

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





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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:



SPECIALTY PLASMAS

Specialty Plasmas generally contain high concentrations of specific antibodies and are used primarily to manufacture immune globulin therapeutic products that
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 $300 to over $6,000 per liter. Most reactive 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 plasma collection operations have worked with the Diagnostics operations to develop a program that emphasizes the collection of specialty plasmas by identifying potential
specialty plasma donors through various screening and testing procedures. The plasma operations also provide services for the newly established collaboration between Quest Diagnostics and the
Diagnostics operations.

THE PLASMA INDUSTRY

The blood resource industry can be divided into two industry segments. One is the non-profit or voluntary sector, which is commonly, thought of as
the American Red Cross and various independent non-profit blood centers. This "non-profit" sector is primarily concerned with providing whole blood and components of whole
blood for transfusion in medical applications at hospitals. The other is the commercial or "for-profit" segment and is composed primarily of plasma collection centers. This
"for-profit" commercial sector currently consists of about 400 plasma collection centers throughout the United States, which collect plasma from paid donors and sell the plasma to
fractionators, who produce plasma derivative products or fractions that are used in therapeutics. These plasma collection centers are owned by both foreign and U.S. fractionators and by independent
companies such as the Company, which sell to diagnostic companies and fractionators.

PLASMA MARKET

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



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The
Company believes that a significant worldwide shortage of plasma has developed which could last three to five years. This accelerating shortage is being driven by a series of
factors including: the shutdown of plasma collection in England resulting from "Mad Cow" disease issues; the expanding fractionation capacity worldwide resulting from the increased need for plasma
components to treat larger and older populations; and a diminished pool of donors that resulted from more restrictive testing and screening requirements imposed by regulatory authorities. In 1998, the
FDA introduced the "Applicant Donor Program", which required first time donors to donate a second time before the first donation can be sold. This new requirement has caused a decrease in liters of
source plasma available for sale. Another market factor has been increasing public concern over HIV and other viruses, which has led to increased testing and tighter screening processes. And finally,
the Company believes that there is a direct correlation between the economy and the donor pools, whereby when the economy improves, it becomes harder to maintain donor pools and attract new donors.

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

FRACTIONATORS

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

The
four leading fractionators in the United States are:

Alpha Therapeutic Corporation

a subsidiary of Yashi Tomi PharmaceuticalAventis Bio-Services, Inc.

a subsidiary of Rhone-Poulenc-Rorer, a French government owned pharmaceutical conglomerateBayer Corporation

a division of Germany's Bayer A.G.Baxter, Inc.

a division of Baxter, Inc., an $8.1 billion revenue U.S. company


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CURRENT OPERATIONS

Current Plasma Centers

As of April 30, 2001, the Company had forty two plasma collection centers in operation which were located in: Las Vegas, Nevada; Clarkesville,
Tennessee; Phoenix, Arizona (2); Ft. Smith, Arkansas; Clearfield, Utah; Raleigh, North Carolina; Pasco, Washington; Toledo, Ohio; Macon, Georgia; Savannah, Georgia; Reno, Nevada; South Bend, Indiana;
Kalamazoo, Michigan; Boise, Idaho; Pocatello, Idaho; Salt Lake City, Utah; Amarillo, Texas; Beaumont, Texas; Longview, Texas; Houston, Texas (4); Casa Grande, Arizona; Pasadena, Texas; Mesa, Arizona;
Baton Rouge, Louisiana; Port Arthur, Texas; Wilmington, Delaware; Lancaster, Pennsylvania; Reading, Pennsylvania; Allentown, Pennsylvania; Laredo, Texas; Danville, Virginia; Providence, Rhode Island;
Dallas, Texas; Seattle, Washington (2); Topeka, Kansas; Everett, Washington and Yakima, Washington. During fiscal 2001, such centers processed about 773,000 donations.

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:



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 that 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

13

---

and is asked a number of screening questions which he must audibly answer. In addition, each time he visits, the donor is tested for: blood pressure; temperature; pulse; weight; hematocrit; total
proteins; HIV; hepatitis B and C; and liver enzymes.

QUALITY AND OPERATIONAL CONTROLS

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

TRAINING

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

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

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

EMPLOYEES

As of April 30, 2001, the Company employed 608 full time employees and 138 part time employees. The plasma collection operations employed 558 full time
and 135 part time employees. Each plasma center has at least one nurse and/or nurse substitute and the balance are cross-trained as technicians, receptionists and phlebotomists. The Diagnostics
operations employed 22 full time employees. The Company's testing laboratory in Austin, Texas employed 17 full time employees and three part time employees. Corporate office consisted of eleven full
time employees as of April 30, 2001.

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.

RISK FACTORS

You should carefully consider the risks described below and other information in this annual report. The Company's business, financial
condition and operating results could be seriously harmed if any of these risks materialize. The trading price of the Company's common stock may also decline due to any of these
risks.

The Company has a History of Operating Losses and its Future Profitability Remains Uncertain

In January of 1994, the Company filed for bankruptcy protection under Chapter 11 of the federal Bankruptcy Code. The Company completed its reorganization in
February 1996. As of February 28,

14

---

2001, the Company's current assets exceeded current liabilities by $11,632,912. The Company's total liabilities as of February 28, 2001 were $42,501,132.

Although
the Company recorded net income of $1,997,004 for the year ended February 29, 2001, the Company cannot assure you that the Company will be able to sustain its
profitability or that it will not incur significant operating losses in the future.

The Company May Not Be Able to Successfully Implement its Growth Strategy

The Company intends to continue its strategy of growth through acquisitions and expansion into new markets, including the diagnostics market. However, the
Company's ability to successfully implement this strategy depends on a number of factors, including the Company's access to capital, its ability to obtain applicable governmental approvals and its
ability to integrate acquired businesses into its existing operations. For example, the Company began manufacturing operations for bulk serums at its plant in Oceanside, California, in
February 2000; and any problems with manufacturing or licensing of this facility could severely curtail the Company's sales to biologics companies. The Company cannot assure you that it will be
successful in expanding its operations, continuing its present rate of expansion or entering new markets.

The Company May Need Additional Capital

In order to implement its growth strategy, the Company will need to obtain additional capital. Such capital may include debt and equity financings or
additional bank borrowings (subject to contractual restrictions imposed by the Company's creditors and investors on the Company's ability to issue debt or equity securities). However, the Company
cannot assure you that it will be able to obtain additional capital on acceptable terms. If the Company borrows more money it may become subject to additional restrictive covenants. If the Company
raises money through the issuance of equity securities, the Company's stock ownership will be diluted.

Market Demand for Plasma Fluctuates

The demand for plasma depends in large part on the number and uses of products which require plasma components for their manufacture or production. Most of the
plasma which the Company collects and sells is 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 reduce the demand for plasma.

Additionally,
the demand for plasma depends on the available processing capacity of the fractionation facilities used in the Company's industry to process plasma. In the event of a
reduction of the available processing capacity at such fractionation facilities, whether as a result of manufacturing problems, regulatory compliance issues or otherwise, the demand for plasma could
decrease and as a result, the demand for the Company's products and the prices paid for the Company's products would be adversely affected.

The Company Makes a Large Percentage of its Sales to One Customer

For the year ended February 28, 2001, approximately 47% of the Company's sales were to Grupo Grifols, S.A., of Spain. If the Company were to lose this
customer, or if any major customer were to materially reduce its purchases of the Company's plasma, the Company's business and results of operations would be materially adversely affected.

15

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An Interruption in the Supply of Diagnostics Products that the Company Purchases from Third Parties Could Cause a Decline in the Company's Sales

The Company purchases diagnostics products that are used in the manufacture and testing of its plasma products from third parties, such as Grupo Grifols and
other companies. Any significant interruption in the supply of these diagnostics products could cause a decline in the Company's plasma sales, unless and until the Company is able to replace them. The
Company also depends on these third parties to provide their products on a timely and cost-effective basis and to deliver high quality products, enhance their current products, develop new
products, and respond to emerging industry standards and other technological changes. The failure of these third parties to meet these criteria could harm the Company's business.

The Prices the Company Charges are Relatively Fixed, but the Company's Costs are Subject to Change

The Company generally sells its plasma under contracts ranging from one to three years which allow for annual pricing renegotiations. The Company generally
agrees upon the price for its products prior to the beginning of the contract year, and these prices are fixed for that year. Accordingly, any unforeseen increases in the cost of collecting and
selling plasma during the contract year could materially adversely affect the Company's operating results.

The Company's Business is Highly Competitive

The Company competes for donors with pharmaceutical companies which may collect plasma for their own use, 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 does. If the Company is unable to maintain and expand its donor base, its business and future prospects will be adversely affected.

The Company is Subject to Significant Government Regulation

The Company's business is heavily regulated in the United States by federal, state and local regulations. Although the Food and Drug Administration (FDA)
administers the particulars of the Code of Federal Regulations across the country, various state and local regulations also apply and can be, in some cases, more restrictive.

In
recent years, the FDA has increased its focus on plasma centers and blood banks and has through legal action closed a number of blood banks and plasma centers in the U.S. If the
Company is unable to comply with the FDA standards, it will be subject to fines, penalties and even closure.

As
of February 28, 2001, the Company had obtained FDA licenses and QPP Certification (a certification by the American Blood Resources Association which has become the worldwide
standard for plasma involving both procedural and donor qualification standards) for all but two of the Company's current centers. If the Company is unable to obtain or maintain FDA licenses or if the
Company experiences delays in obtaining FDA licenses, the Company's ability to continue to operate these centers will be adversely affected. If the Company is unable to obtain or maintain QPP
Certification or if it experiences delays in obtaining QPP Certification, the Company's ability to find customers for its plasma will be adversely affected. Industry implementation of the QPP
Certification program has resulted in a decrease in qualified donors due to the higher standards required for QPP Certification. If the Company is unable to locate an adequate pool of donors, its
operations could be adversely affected.

Collection
centers which have not received FDA approval of their license applications are allowed to operate under a Reference Number and process donors in order to develop sufficient
training and

16

---

records for FDA review. However, these centers, are precluded from selling any of the collected plasma until final approval of their license applications. Historically, it has taken approximately six
to eighteen months from date of filing to obtain final FDA approval for a new license application. In addition, the Company may be subject to other measures or standards in the future which may
adversely affect its operations.

As
of the date of this annual report, the Company believes that it is in compliance in all material respects with laws, rules and regulations applicable to the Company's business.
However, the Company cannot assure you that it will be able to continue to comply with all applicable laws, rules and regulations or that violations will not occur. In addition, the Company cannot
assure you that more restrictive laws, rules and regulations or enforcement policies will not be adopted in the future which
could make compliance more difficult or expensive or otherwise adversely affect the Company's business or prospects. The Company also cannot assure you that any new plasma collection centers that the
Company develops or acquires will receive certification from the FDA.

The Company's Business is Subject to Governmental Reforms and the Adequacy of Reimbursement

Healthcare reform is a priority of many elected and appointed officials. Some reform measures, if adopted, could adversely affect the pricing of therapeutic
products which are made from plasma or the amount of reimbursement available for therapeutic products from government agencies, third party payers and other organizations.

The Company is Dependent on its Key Personnel

The Company's success depends on its ability to attract, retain and motivate the qualified personnel that will be essential to its current plans and future
development. The competition for such personnel is substantial, and the Company can not assure you that it will successfully retain its key employees or attract and retain any required additional
personnel.

In
particular, the Company's success depends to a significant extent upon the continued services of Barry Plost, its Chairman and Chief Executive Officer. The Company maintains key
person life insurance coverage with respect to Mr. Plost.

The Company's Principal Shareholder Exerts Significant Influence On the Company

As of April 30, 2001, the Company's principal shareholder and chief executive officer, Barry Plost, beneficially owned approximately 21.1% of the
Company's Common Stock (which number includes options exercisable by Mr. Plost to purchase shares of the Company's Common Stock). Therefore, he has the power to exert significant influence on
the Company's management and the Company's policies.

The Company Has Significant Amounts of Options, Warrants and Convertible Preferred Stock Outstanding

As of April 30, 2001, the Company has outstanding:



Certain
of these equity securities are also subject to anti-dilution and other adjustments, which would require the Company to adjust the number of shares of the Company's
stock that would be issuable upon the exercise or conversion of such equity securities if such adjustment provisions were triggered. Triggering events include the issuance of equity below certain
prices and the achievement of (or failure to achieve) certain financial targets.

17

---

In addition, the Company has reserved for issuance 300,000 shares of the Company's Common Stock upon exercise of options to be granted under the Company's 1997 Informal Stock
Compensation Plan, and an additional 1,000,000 shares of the Company's Common Stock issuable upon exercise of options to be granted under the Company's 1998 Stock Option Plan. To date, the Company has
issued 100,000 options under the 1997 Informal Stock Compensation Plan and 455,002 options under the 1998 Stock Option Plan.

Holders
of the Company's warrants and options are likely to exercise them if the Company can obtain additional capital on terms more favorable than those provided in the warrants and
options. Further, while these warrants and options are outstanding, the Company's ability to obtain additional financing on favorable terms may be adversely affected.

If the Shares of the Company's Common Stock Eligible for Future Sale Are Sold, the Market Price of the Company's Common Stock May be Adversely Affected

If the Company's existing security holders sell significant amounts of the Company's Common Stock in the public market, the market price of the Company's
Common Stock could be adversely affected, and the Company may find it more difficult to sell its Common Stock in the future at times and for prices the Company considers appropriate. As of
April 30, 2001, 9,741,016 shares of the Company's Common Stock were issued and outstanding, and an additional 11,081,107 shares were issuable upon the exercise or conversion of certain
warrants, options and other convertible securities that the Company had previously issued. Several of the Company's security holders have registration rights pursuant to agreements under which they
could require the Company to register and sell their shares in an underwritten public offering.

The
Company currently has on file with the Securities and Exchange Commission three registration statements on Form S-3: Registration
No. 333-57943, with respect to the potential resale by the selling security holders named therein of up to 10,383,502 shares of the Company's Common Stock; Registration
No. 333-74663, with respect to the potential resale by the selling security holders named therein of up to 1,497,175 shares of the Company's Common Stock, held by them or issuable
to them upon exercise or conversion of certain warrants, options and other convertible securities which the Company had previously issued; and Registration No. 333-55576, with
respect to the potential resale by selling security holders named therein of up to 881,301 shares of the Company's Common Stock.

The Company's Stock Price is Volatile

The market price of the Company's Common Stock has historically been volatile, and that volatility is likely to continue. The Company believes that future
announcements concerning the Company, its competitors, governmental regulations, litigation or unexpected losses, or the failure to meet or exceed analysts projections of financial performance, may
cause the market price of the Company's Common Stock to fluctuate substantially in the future. Sales of substantial amounts of the Company's outstanding Common Stock in the public market could also
materially adversely affect the market price of the Company's Common Stock. These fluctuations, as well as general economic, political and market conditions, may materially adversely affect the market
price of the Company's Common Stock.

Investment in the Company's Common Stock May be Relatively Illiquid

The trading volume in the Company's Common Stock has historically been relatively low. Accordingly, investments in the Company's Common Stock may be relatively
illiquid, and investors in the Company's Common Stock must be prepared to bear the economic risks of such investment for an indefinite period of time.

18

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We Cannot Assure You that the Company's Common Stock Will Continue to be Listed on the American Stock Exchange

The American Stock Exchange retains discretion over whether to continue listing the Company's Common Stock. While the Company believes that it currently meets
the American Stock Exchange's guidelines for continued listing, it cannot assure you that it will continue to meet the American Stock Exchange's guidelines for continued listing or that the Company's
Common Stock will remain listed on the American Stock Exchange. If the Company's Common Stock is delisted from the American Stock Exchange, its shares may become significantly less liquid and may
decline significantly in price.

The Company is Dependent Upon its Subsidiaries

The Company conducts its operations through subsidiaries. Therefore, a principal internal source of the Company's cash and the Company's ability to service its
debt depends in part upon the earnings of its subsidiaries and the distribution of those earnings to the Company, or upon loans or other payments of funds by those subsidiaries to the Company. The
Company's subsidiaries are separate and distinct legal entities and have no obligation to pay or make funds available to the Company. In addition, the payment of dividends by the Company's
subsidiaries and the making of loans and advances by the Company's subsidiaries to the Company are subject to statutory and contractual restrictions.

The Company Does Not Plan on Paying Cash Dividends on its Common Stock

The Company has not paid any cash dividends on its Common Stock since the Company's inception and, because of the Company's contemplated capital needs, it does
not anticipate paying any cash dividends on its Common Stock in the foreseeable future. The Company anticipates that any earnings which may be generated from the Company's operations will be used to
finance its operations and to repay its debt. In addition, the Company's loan documents with its current lenders prohibit the Company and its subsidiaries from paying dividends or making other types
of restricted payments.

The Company May Issue Preferred Stock in the Future

The Company is authorized to issue up to 25,000,000 shares of preferred stock, of which 22,500 shares of Series C Convertible Preferred Stock are
currently issued and outstanding. The Company may issue additional shares of preferred stock in one or more new series. The Company's Board of Directors may determine the terms of the preferred stock
without further action by the Company's stockholders. These terms may include voting rights, preferences as to dividends and liquidation, conversion and redemption rights, and sinking fund provisions.
Although the Company has no present plans to issue additional shares of preferred stock or to create new series of preferred stock, if the Company does issue additional preferred stock, it could
affect the rights, or even reduce the value, of the Company's Common Stock.

Certain Provisions of Delaware Law May Affect the Price of the Company's Common Stock

The Company is incorporated in the State of Delaware. Certain provisions of Delaware law applicable to the Company, including Section 203 of the
Delaware General Corporation Law, could have the effect of delaying, deterring or preventing a change of control in the Company or the Company's management and may discourage bids for the Company's
Common Stock at a premium over the
market price of the Company's Common Stock. As a result, the price of the Company's Common Stock may be adversely affected.

19

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ITEM 2. PROPERTIES

As of April 30, 2001, the Company occupied forty six operating locations with executive offices at 1925 Century Park East, Suite 1970, in Los Angeles,
California; the Diagnostics operations headquartered in Oceanside, California; the plasma testing laboratory in Austin, Texas; the plasma center operations headquarters in Colorado Springs, Colorado;
and forty two plasma collection centers located in: Las Vegas, Nevada; Clarkesville, Tennessee; Phoenix, Arizona (2); Ft. Smith, Arkansas; Clearfield, Utah; Raleigh, North Carolina; Pasco, Washington;
Toledo, Ohio; Macon, Georgia; Savannah, Georgia; Reno, Nevada; South Bend, Indiana; Kalamazoo, Michigan; Boise, Idaho; Pocatello, Idaho; Salt Lake City, Utah; Amarillo, Texas; Beaumont, Texas;
Longview, Texas; Houston, Texas (4); Casa Grande, Arizona; Pasadena, Texas; Mesa, Arizona; Baton Rouge, Louisiana; Port Arthur, Texas; Wilmington, Delaware; Lancaster, Pennsylvania; Reading,
Pennsylvania; Allentown, Pennsylvania; Laredo, Texas; Danville, Virginia; Providence, Rhode Island; Dallas, Texas; Seattle, Washington (2); Topeka, Kansas; Everett, Washington and Yakima, Washington.
All of the Company's facilities are leased from unaffiliated parties under leases expiring through 2010 and comprising approximately 231,000 square feet. Most of these leases contain renewal options
which permit the Company to renew the leases for periods of from two to five years at the then fair rental value. The Company believes that in the normal course of its business it will be able to
renew or replace its existing leases. The Company believes that the space it occupies is adequate for its current operations.

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

ITEM 3. LEGAL PROCEEDINGS.

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

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

There were no matters submitted to a vote of security holders during the fourth quarter of fiscal 2001.

20

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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's Common Stock began initial trading on the Bulletin Board in
May 1996. On March 25, 1998 the Company's Common Stock began trading on the American Stock Exchange (AMEX). The following table sets forth the high and low sales prices for the Common
Stock during the periods indicated.

High

LowFiscal 20011st Qtr

41/2

22nd Qtr

37/8

21/43rd Qtr

37/8

215/164th Qtr

51/4

3Fiscal 20001st Qtr

6

45/162nd Qtr

63/8

43/43rd Qtr

53/16

31/84th Qtr

43/4

21/2


(b)  Holders:

Title of Class

Approximate Number of Record Holders (as of April 30, 2001)Common Stock, $.001 par value

370(1
)


---

(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, the
$15 million senior credit facility which was in effect on February 28, 2001 and the $20 million senior facility which was effective April 10, 2001, the Company may not declare or
pay dividends on its Common Stock, except that the Company 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 on its Common Stock within the foreseeable future.

(d)  Recent Sales of Unregistered Securities:

In November and December of 2000, the Company issued to the following persons the following number of shares of Common Stock at a price of $2.50 per share:
William H. Hitchcock (80,000 shares), Catalysis Partners, L.L.C. (20,000 shares), Strome Hedgecap, L.P. (300,000 shares), Bradley

21

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Resources Company (40,000 shares), Sands Point Partners LP (100,000 shares), Kenneth R. Levine (20,000 shares), Teton Capital Partners, L.P. (20,000 shares), Global Undervalued Securities Fund, L.P.
(80,000 shares), Robert S. Krieger (20,000 shares), Samuel Anderson, Jr. (11,368 shares), Samuel and Mary Ann Anderson Trust (13,835 shares), Ann Stevenson (14,798 shares), J.E. McConnaughy (100,000
shares), Jerry L. Burdick (22,000 shares), and Stanley Becker (26,000 shares). In connection with this private placement, the Company also issued the following number of shares of Common Stock to the
following finders under the terms of an agreement with such finders: Kenneth R. Levine (6,650 shares) and Marshall M. Becker (6,650 shares). The sale and issuance of the securities described in this
paragraph were exempt from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act"), by virtue of Section 4(2) of the Securities Act and
Regulation D thereunder.

In
connection with the collaboration agreement entered into in January 2001, the Company issued a warrant to purchase 1,748,605 shares of Common Stock at an exercise price of
$4.01 per share to Quest Diagnostics in connection with entering into a collaboration agreement with Quest. The sale and
issuance of the securities described in this paragraph were exempt from the registration requirements of the Securities Act by virtue of Section 4(2) of the Securities Act and
Regulation D thereunder.

In
February 2001, the Company issued to the following persons promissory notes in the following principal amounts along with 5 year warrants to purchase the following number of
shares of Common Stock, exercisable at $3.75 per share: Kenneth R. Levine ($250,000 promissory note and warrant to purchase 100,000 shares), Marshall M. Becker ($50,000 promissory note and warrant to
purchase 20,000 shares), Stanley Becker ($200,000 promissory note and warrant to purchase 80,000 shares), Sue Ann B. Holland ($100,000 promissory note and warrant to purchase 40,000 shares), James A.
Holland ($100,000 promissory note and warrant to purchase 40,000 shares), Robert E. and Marsha Holland ($150,000 promissory note and warrant to purchase 60,000 shares), Dr. Nelson Teng
($200,000 promissory note and warrant to purchase 80,000 shares), Stranco Investments LTD ($149,979 promissory note and warrant to purchase 59,992 shares) and Samuel and Mary Ann Anderson Trust
($200,000 promissory note and warrant to purchase 80,000 shares). The sale and issuance of the securities described in this paragraph were exempt from the registration requirements of the Securities
Act by virtue of Section 4(2) of the Securities Act and Regulation D thereunder.

22

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ITEM 6.  SELECTED FINANCIAL DATA

The table below presents selected consolidated financial data of the Company as of and for the five years ended February 28 (29), 2001, 2000, 1999, 1998
and 1997. This data has been derived from the historical audited consolidated financial statement of the Company and should be read in conjunction with the Company's "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and Consolidated Financial Statements, including the notes thereto, included elsewhere herein. The historical results are not necessarily
indicative of results to be expected for any future period.

|                                                               |                                                                                        | For the Year ended February 28(29) |           
|-------------------------------------------------------------- | -------------------------------------------------------------------------------------- | ---------------------------------- | ----------
|
|STATEMENT OF OPERATIONS DATA:                                  |                                                                                        |                                    |           
|Revenues                                                       |                                                                                        |                                    |           
|Net sales                                                      |                                                                                        | $                                  | 69,451,998
|Income from joint venture                                      |                                                                                        |                                    | 0         
|                                                               |                                                                                        |                                    |           
|                                                               | Total revenue                                                                          |                                    |           
|Cost of sales                                                  |                                                                                        |                                    | 57,019,555
|                                                               |                                                                                        |                                    |           
|                                                               | Gross profit                                                                           |                                    |           
|General and administrative expenses                            |                                                                                        |                                    | 6,252,747 
|                                                               |                                                                                        |                                    |           
|                                                               | Operating income                                                                       |                                    |           
|Interest expense (including non-cash interest)                 |                                                                                        |                                    | (4,314,356
|Other income, net                                              |                                                                                        |                                    | 395,854   
|                                                               |                                                                                        |                                    |           
|                                                               | Income (loss) before income taxes and cumulative effect of change in accounting method |                                    |           
|Income taxes                                                   |                                                                                        |                                    | 264,190   
|                                                               |                                                                                        |                                    |           
|                                                               | Income (loss) before cumulative effect of change in accounting method                  |                                    |           
|Cumulative effect of change in accounting method, net          |                                                                                        |                                    | 0         
|                                                               |                                                                                        |                                    |           
|                                                               | Net income (loss)                                                                      |                                    | $         
|                                                               |                                                                                        |                                    |           
|PER SHARE DATA:                                                |                                                                                        |                                    |           
|Basic                                                          |                                                                                        |                                    |           
|Income before cumulative effect of change in accounting method |                                                                                        | $                                  | 0.20      
|Cumulative effect of change in accounting method, net          |                                                                                        |                                    | 0.00      
|                                                               |                                                                                        |                                    |           
|                                                               | Net Income (loss)                                                                      |                                    | $         
|                                                               |                                                                                        |                                    |           
|Diluted                                                        |                                                                                        |                                    |           
|Income before cumulative effect of change in accounting method |                                                                                        | $                                  | 0.15      
|Cumulative effect of change in accounting method, net          |                                                                                        |                                    | 0.00      
|                                                               |                                                                                        |                                    |           
|                                                               | Net Income (loss)                                                                      |                                    | $         
|                                                               |                                                                                        |                                    |           
|WEIGHTED AVERAGE SHARES OUTSTANDING:                           |                                                                                        |                                    |           
|                                                               | Basic                                                                                  |                                    |           
|                                                               | Diluted                                                                                |                                    |           
|                                                               |                                                                                        |                                    |           
|SELECTED BALANCE SHEET DATA:                                   |                                                                                        |                                    |           
|                                                               | Working capital (deficiency)                                                           |                                    | $         
|                                                               | Total assets                                                                           |                                    |           
|                                                               | Long-term obligations                                                                  |                                    |           
|                                                               | Redeemable preferred stock (liquidation value)                                         |                                    |           
|                                                               | Common stockholders' equity                                                            |                                    | $         
|                                                               |                                                                                        |                                    |           

23

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ITEM 7.  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 factors described in "Risk Factors" above.

RESULTS OF OPERATIONS

Fiscal Year Ending February 28, 2001 Vs. Fiscal Year Ending February 29, 2000

REVENUE

Revenue increased by $6,680,995 to $69,451,998, an increase of 11 percent. The primary contributors to the increase were: (i) the plasma
collection operations due to an increase in the volume of plasma collected during the current fiscal year, and to a lesser extent due to improved pricing for plasma due to the shortage of plasma
available for fractionators, and (ii) the distribution operations, which contributed an improvement of $3,444,280 due to the impact of a significant number of new plasma products and customers.
These increases were partially offset by the sale of Consolidated Technologies on February 29, 2000, which contributed revenues of $6,943,730 to the prior year period. The Company collected
about 618,000 liters of plasma during the year ended February 28, 2001 compared to about 502,000 for the comparable prior period, an increase of approximately 23 percent. The increased
volumes were mainly the result of the continued ramp-up of newly established centers, increases in certain mature centers as a result of donor promotions, production incentives and the
acquisition of six mature centers in November 2001.

GROSS PROFIT

Gross profit increased by $0.5 million, or 4 percent, in 2001 to $12,432,443. The plasma collection operations contributed an increase of
$0.7 million due primarily to the increased volume of plasma collected mostly offset by an increase in the direct cost of operating plasma collection centers, while the distribution and
manufacturing operations contributed an increase of $2.4 million due to the increased sales and improved margins resulting from a focus on higher profit margin products. Offsetting the
improvements was the sale of Consolidated Technologies which contributed gross profit of $2.6 million to the prior year period. As a result of the aforementioned, the gross profit percentage
decreased from 19 percent in fiscal 2000 to 18 percent in fiscal 2001.

GENERAL AND ADMINISTRATIVE EXPENSES

General and Administrative expenses for fiscal 2001 decreased by $616,855, or 9 percent, to $6,252,747. This decrease was primarily due to the sale of
Consolidated Technologies which accounted for expenses of $1.0 million in the prior year period and lower legal and professional fees at the corporate level. Partially offsetting these
decreases in expenses were increased costs related to compliance and quality assurance in the plasma collection operations.

24

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INTEREST EXPENSE/NON-CASH INTEREST EXPENSE

Interest expense decreased by $848,848 in fiscal 2001 as a result of lower debt resulting from the use of proceeds from the sale of Consolidated Technologies.
Included in interest expense is $1,127,316 of amortization of the deferred bond offering costs related to the issuance of the $16 million subordinated debentures.

OTHER ITEMS

Other income for the current year includes $131,700 of interest on funds escrowed in conjunction with the sale of Consolidated Technologies. Other income for
the prior year includes a $269,212 gain from the sale of CTI.

INCOME TAXES

The increased taxes primarily reflects an increase in the various states income taxes paid due to higher taxable income.

INCOME BEFORE CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING METHOD

As a result of the above, income before the cumulative effect of a change in accounting method for the fiscal year ended February 28, 2001 was
$1,997,004 compared to $141,732 for the same prior year period.

CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING METHOD

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

NET INCOME

As a result of the above, there was a net income for fiscal 2001 of $1,997,004 compared to a net loss of $578,171 in fiscal 2000.

Fiscal Year Ending February 29, 2000 Vs. Fiscal Year Ending February 28, 1999

REVENUE

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

25

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GROSS PROFIT

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

GENERAL AND ADMINISTRATIVE EXPENSES

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

INTEREST EXPENSE/NON-CASH INTEREST EXPENSE

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

OTHER ITEMS

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

INCOME TAXES

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

INCOME BEFORE CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING METHOD

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

CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING METHOD

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

26

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NET INCOME

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

LIQUIDITY AND CAPITAL RESOURCES

As
of February 28, 2001, the Company's current assets exceeded current liabilities by $11,632,912 compared to $8,126,398 in the year earlier date. The use of cash during the
year was consistent with the Company's strategic plan for growth. With a continuation of a strategic focus on growth, the short-term impact on the Company's earnings and cash flow has been
to defer profitability and positive cash flows. The Company believes, however, that the acquisition of six mature centers in November 2000 and the continuing ramp-up of the newly
established centers represent progress toward increasing the volume of plasma collected. While the increased costs related to FDA and regulatory compliance have had a significant impact on
profitability during the current year, demand for plasma and plasma based products continues to be strong.

The
Company believes that industry wide, plasma pricing and plasma products demand will continue to strengthen if the shortage of plasma and the expansion of the uses and demand for
plasma based products continues. The Company continues to believe that demand for plasma and plasma products will continue to accelerate through the current calendar year. The Company plans to
continue to focus on growth in the volume of plasma collected in order to capitalize on expected market conditions and to expand its distribution operations into the diagnostics industry. The recent
collaboration agreement with Quest Diagnostics is a reflection of the Company's commitment to the higher profit margin reactive and rare antibody plasma products used in diagnostic applications. The
sale of substantially all of the operating assets of Consolidated Technologies on February 29, 2000 was a strategic decision in order to reduce long-term debt and restructure the
Company along more strategic business lines.

Net
cash used in operating activities during fiscal 2001 was $5,753,258 compared to $812,477 during the same prior year period. This was due primarily to an increase in inventory
levels associated with the specialty plasma program and a decrease in accounts payable.

Cash
flows provided by investing activities for fiscal 2001 was $1,343,800 compared to $9,116,433 used in the comparable prior year period. The cash provided was primarily the result
of the sale of CTI.

Cash
flow from financing activities was $6,221,261 for the current year period compared to $7,861,514 used in the comparable prior period. The prior year amount was primarily the
result of the repayment of debt with proceeds from the sale of CTI.

The
Company had net operating loss carry-forwards of approximately $2.3 million as of February 28, 2001, which will expire in various amounts through the year 2019.

In
conjunction with the sale of Consolidated Technologies on February 29, 2000, the Company used $4.5 million to reduce the subordinated debt and $6.0 million to
repay the term portion of the senior debt. The balance of the proceeds were used for working capital and to reduce the amount of the revolving credit facility.

In
April 2001, the Company executed a $20 million Senior Secured Revolving Line with Sanwa Bank of California and Brown Brothers Harriman & Co. This new senior
line of credit replaced the $15 million line of credit with Brown Brothers Harriman which was in place as of February 28, 2001. Although increased costs of collecting plasma and
increased difficulty in attracting new donors to both the startup and mature plasma collection centers have proved troublesome, the Company believes that the new credit facility will be sufficient to
bridge temporary cash flow shortfalls which may occur from

27

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time to time. While the Company believes that the long-term prognosis is for improving plasma prices which will ultimately exceed the increased cost of collecting plasma, there can be no
guarantee that internally generated cash flow and the Company's existing $20 million credit facility will be sufficient to meet the Company's working capital requirements for fiscal 2002. As of
February 28, 2001, the Company had a balance due under its revolving credit facility of $16 million. Any significant expansion or acquisition beyond those currently budgeted will need to
be funded by a combination of internally generated cash flows, short-term bridge financing, or by some other means. As of the date of this filing, the Company is in full compliance with
all debt its covenants.

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 exception of the impact on interest rates, management believes that inflation will have no significant effect on the Company's results of operations
or financial condition.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company's revolving credit facility has variable interest rates which fluctuate with established market rates. The Company does not believe that such
fluctuations will have a material adverse affect on the Company's operations.

ITEM 8.  FINANCIAL STATEMENTS.

The information called for by this Item 8 is hereby incorporated by reference from the Company's Financial Statements and Auditors' Report beginning at page
F-1 of this Form 10-K.

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

None.

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS

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

|Name               |  | Age |  | Position                                                                    |  | Director
Since
|------------------ |  | --- |  | --------------------------------------------------------------------------- |  | --------------
|Barry D. Plost     |  | 55  |  | Chairman of the Board, President and Chief Executive Officer                |  | 1996          
|Jerry L. Burdick   |  | 61  |  | Executive Vice President, Chief Financial Officer, Secretary and a Director |  | 1995          
|Samuel Anderson    |  | 64  |  | Director                                                                    |  | 1996          
|Ezzat Jallad       |  | 38  |  | Director                                                                    |  | 1996          
|Dr. Nelson Teng    |  | 54  |  | Director                                                                    |  | 1997          
|Robert J. Cresci   |  | 57  |  | Director                                                                    |  | 1998          
|Dr. Bernard Kasten |  | 54  |  | Director                                                                    |  | 2001          

28

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Barry D. Plostbegan 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. Mr. Plost also serves on the board of Chilly Up, Inc.

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

Samuel Andersonwas elected a Director effective April 16, 1996. Since April of 1996, Mr. Anderson has also been a
consultant to the Company in the areas of finding and evaluating potential acquisitions, helping the Company in developing a strategic plan for increasing the volume of hyperimmune plasma collected
including targeting the particular type of hyperimmune the company should target, and advising the Chief Executive Officer of the Company on industry trends and potential changes in regulations and
the ramifications thereof. Mr. Anderson's role is strictly advisory. 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. Mr. Anderson also
serves on the boards of Hycor Biomedical, Inc. and Cypress Bioscience, Inc.

Ezzat Jalladwas elected a Director effective October 28, 1996. For the last five years, Mr. Jallad has been an investor
and financial consultant. Previously, he was Executive Vice President of FCIM Corporation, a financial consulting firm, from April 1988 to May 1995. Mr. Jallad also serves on the board of
Chilly Up, Inc.

Dr. Nelson Tengwas 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.

Robert J. Cresciwas 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 the boards of Sepracor, Inc., Aviva Petroleum Ltd.,
Film Roman, Inc., Castle Dental Centers, Inc., j2 Global Communications, Inc., Candlewood Hotel Co., Inc., E-Stamp Corporation and several private companies.
Pursuant to the Securities Purchase Agreement signed by the Company in February 1998, and related to the subordinated debentures, Pecks Management
Partners Ltd received the right to nominate one member to the Company's Board of Directors. Mr. Cresci has served as the Pecks Management Partners Ltd nominee since April 15, 1998.

29

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Dr. Bernard Kastenwas elected a Director effective March 30, 2001. Dr. Kasten is Vice President of Business
Development for Medicine and Science for Quest Diagnostics, Inc., a position he has held since 1996. Dr. Kasten also serves on the Scientific Advisory Board of Structural Bio
Informatics Inc., a company which specializes in genomic based protein modeling and therapeutic drug design. Pursuant to the collaboration agreement with Quest Diagnostics signed on
January 24, 2001, Quest Diagnostics received the right to nominate one member to the Company's Board of Directors. Dr. Kasten is currently serving as Quest Diagnostics' nominee.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires the Company's directors and executive officers, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in ownership of Common Stock and other
equity securities of the Company. Executive officers, directors and greater than ten percent shareholders are required by Securities and Exchange Commission regulation to furnish the Company the
copies of all Section 16(a) forms they file. To the Company's knowledge, based solely on its review of the copies of such reports furnished to the Company during the fiscal year ended
February 28, 2001, all Section 16(a) filing requirements applicable to its executive officers, directors and greater than ten percent shareholders have been satisfied.

30

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ITEM 11. EXECUTIVE COMPENSATION AND OTHER INFORMATION

Summary of Executive Compensation

The following table sets forth the cash compensation and other consideration paid by the Company to its Chief Executive Officer and all other executive
officers whose cash compensation exceeded $100,000 (the "Named Executive Officers").

|                 |                                       | Annual Compensation(1) |      |   |         |         | 
|---------------- | ------------------------------------- | ---------------------- | ---- | - | ------- | ------- | 
|
|Barry D. Plost   |                                       | 2001                   |      | $ | 251,923 |         | 
|                 | President and Chief Executive Officer |                        | 2000 |   | $       | 250,000 | 
|                 |                                       | 1999                   |      | $ | 225,000 |         | 
|Jerry L. Burdick |                                       | 2001                   |      | $ | 141,346 |         | 
|                 | Executive Vice President and          |                        | 2000 |   | $       | 140,000 | 
|                 | Chief Financial Officer               |                        | 1999 |   | $       | 140,000 | 

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Option Grants During Fiscal 2001

The following table sets forth information regarding options to purchase Common Stock granted during fiscal 2001 to each of the Named Executive Officers. The
Company does not have any outstanding stock appreciation rights.

|                 |  |         |  |    |   |   |      |  |         | Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation for
Option Term(1)
|---------------- |  | ------- |  | -- | - | - | ---- |  | ------- | -------------------------------------------------------------------------------------------------
|
|
|
|
|Barry D. Plost   |  | 200,000 |  | 34 | % | $ | 3.25 |  | 1-12-11 |                                                                                                  
|Jerry L. Burdick |  | 100,000 |  | 17 | % | $ | 3.25 |  | 1-12-11 |                                                                                                  

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Option Exercises in Fiscal 2001 and Fiscal Year End Option Values

The following table contains information regarding the Named Executive Officers' unexercised options as of February 28, 2001. None of the Named
Executive Officers exercised any options during fiscal 2001.

|Name             |  | Number of Shares
Underlying Unexercised
Options as of
February 28, 2001(#)
Exercisable/Unexercisable |  | Value of Unexercised
in-the-Money
Options as of
February 28, 2001($)(1)
Exercisable/Unexercisable
|---------------- |  | ---------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------
|Barry D. Plost   |  | 2,233,658/200,000                                                                                    |  | $                                                                                                
|Jerry L. Burdick |  | 124,110/100,000                                                                                      |  | $                                                                                                

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Employment Agreements

The Company is party to employment agreements with Mr. Plost, the Company's President and Chief Executive Officer, and Mr. Burdick, the Company's
Executive Vice President and Chief Financial Officer.

Under
Mr. Plost's employment agreement, as amended, Mr. Plost is entitled, effective February 1, 2001, to base annual compensation of $300,000 plus an auto
allowance of $750 per month. The term of Mr. Plost's employment under this agreement expires on February 5, 2002. In addition, under a February 2001 amendment to
Mr. Plost's employment agreement, the Company agreed to grant Mr. Plost an option to purchase 200,000 shares of the Company's Common Stock at an exercise price of $3.25
per share, subject to cliff vesting at the end of seven years. Such vesting may accelerate based on the performance of the Company. Such option will accelerate upon a change of control of the Company.

32

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Mr. Burdick's employment agreement, as amended, provides that, effective February 1, 2001, Mr. Burdick is entitled to an annual salary of $175,000 and an
automobile allowance of $750 per month. The term of Mr. Burdick's employment under this agreement expires on February 6, 2003. In addition, under a February 2001 amendment to
Mr. Burdick's employment agreement, the Company agreed to grant Mr. Burdick an option to purchase 100,000 shares of the Company's Common Stock at an exercise price of $3.25 per share,
subject to cliff vesting at the end of seven years. Such vesting may accelerate based upon certain criteria including the performance of the Company. Such option will accelerate upon a change of
control of the Company. Mr. Burdick's agreement contains a provision whereby he will be entitled to receive all compensation he is otherwise entitled to under the agreement if his position is
eliminated after a change of control.

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

Compensation of Directors

Samuel Anderson, an outside director, has a consulting agreement with the Company which runs through March 31, 2002 at $70,000 per year. In addition,
Mr. Anderson was granted compensatory options as follows: 5 year options to purchase 15,000 shares @ $4.25 in December 1998.

Dr. Nelson
Teng, an outside director, was granted compensatory options as follows: 5 year options to purchase 15,000 shares at $4.25 per share in December 1998.

Ezzat
Jallad, an outside director, was granted compensatory options as follows: 5 year options to purchase 15,000 shares at $4.25 per share in December 1998.

Robert
Cresci, an outside director, was granted compensatory options as follows: 5 year options to purchase 15,000 shares at $4.25 per share in December 1998.

Compensation Committee Interlocks and Insider Participation

The Company's Compensation Committee consists of two directors, Messrs. Jallad and Anderson. No member of the Compensation Committee is either an
officer or employee of the Company.

ITEM 12. 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 Stock at April 30, 2001
of each present director, all Named Executive Officers, all executive officers and directors as a group and each beneficial owner of more

33

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than 5% of the Company's Common Stock. Beneficial ownership includes both voting and investment power with respect to the shares shown.

|Individual / Group         |                                                                               | % of
Class |      | Common
Shares |   | Presently
Exercisable
Options(1)
|-------------------------- | ----------------------------------------------------------------------------- | ---------- | ---- | ------------- | - | --------------------------------
|Barry D. Plost             |                                                                               | 21.1       | %    | 263,239       |   | 2,271,158                       
|Jerry L. Burdick           |                                                                               | 1.9        | %    | 42,001        |   | 146,610                         
|Dr. Nelson Teng            |                                                                               | 4.8        | %    | 315,000       |   | 160,000                         
|Samuel Anderson            |                                                                               | 4.4        | %    | 173,867       |   | 270,000                         
|Ezzat Jallad,              |                                                                               | 0.6        | %    | 25,000        |   | 30,000                          
|Robert Cresci              |                                                                               | 0.2        | %    |              |   | 15,000                          
|Dr. Bernard Kasten         |                                                                               |           |      |              |   |                                
|All officers and directors |                                                                               | 29.9       | %    | 819,107       |   | 2,992,768                       
|Other beneficial owners:   |                                                                               |            |      |               |   |                                 
|                           | Pecks Management Partners, Ltd
One Rockefeller Plaza
New York, New York 10020 |            | 27.3 | %             |  |                                 

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

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

In
January 1998, the Company entered into agreements with related parties, approved by the Board of Directors, which provided for bridge loans totaling $599,000. The related
parties consisted of: Sam Anderson, a director who loaned the Company $133,000; Dr. Nelson Teng, a director who loaned the Company $130,000; Chang Ming Teng, father of Dr. Nelson Teng,
who loaned the Company $50,000; Ezzat Jallad, a director who loaned the Company $50,000; Stranco Investments Ltd, an investment fund managed by Ezzat Jallad, a director, which loaned the
Company $200,000; and Peggy Burdick, wife of Jerry Burdick, an executive officer and director, who loaned the Company $36,000. Interest was payable monthly at ten percent per annum. In connection with
the 1998 bridge loans, the Company granted the holders warrants to purchase 599,000 shares of 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 Common Stock. Except for $80,000 to Nelson Teng and $43,000 to Samuel Anderson, the loans were repaid in
May 1998.

At
various times during the year ended February 28, 1998, the Company entered into agreements with Mr. Barry Plost, the Company's president, which provided for loans
totaling $1,325,000, of which $472,500 were still outstanding as of February 28, 2001. These loans were due upon demand, and were secured by all the assets of the Company. The loans accrued
interest at ten and twelve percent per annum. In connection with these loans, the Company granted options to Mr. Plost to purchase 742,500 and 116,000 shares of restricted Common Stock at $2.00
and $3.00 per share, which was at the then fair market value, respectively. In addition, in conjunction with the January 1998 bridge loan, Mr. Plost made a bridge loan to the Company
totaling $200,000. Terms of the bridge loan agreement were exactly the same as the terms other bridge loans made by related parties in January 1998 (see above). In

34

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February 1998 the warrants received in connection with the bridge loan were exchanged for 100,000 shares of Common Stock. During 1998, the Company repaid $1.250 million of such loans. In
December 1998 in conjunction with a senior debt facility with Brown Brothers & Harriman and State Street Bank, Mr. Plost signed a subordination agreement relating to $472,500,
whereby Mr. Plost agreed to forego payment until all senior debt had been paid in full. As of February 28, 2001, $472,500 was outstanding. In November 2000 Mr. Plost made a bridge
loan to the Company totaling $150,000 and received 37,500 warrants to purchase Common Stock at $3.125 which was the market value on such date. As of February 28, 2001 such amount was still
outstanding.

In
November 2000 Mr. Anderson and Mr. Burdick made bridge loans of $100,000 and $90,000 respectively and received 25,000 and 22,500 warrants to purchase Common Stock at
$3.125 which was the market value on such date. These amounts were still outstanding as of February 28, 2001.

On
February 16, 2001, Mr. Anderson and Mr. Teng made bridge loans of $200,000 each to the Company and each director received 80,000 warrants to purchase Common
Stock at $3.75 which was the market value on such date. These amounts were still outstanding as of February 28, 2001.

In
December 2000, in connection with the private placement of Common Stock, the Company issued shares of Common Stock to Samuel Anderson, a director of the Company, and Jerry Burdick,
a director and executive officer of the Company.

In
February 2001, in connection with the private placement of notes and warrants, the Company issued notes and warrants to Stranco Investments Ltd, an affiliate of Ezzat Jallad, a
director of the Company. See Part II, item 5 "Recent Sales of Unregistered Securities".

PART IV

ITEM 14. EXHIBITS AND REPORTS ON FORM 8-K



Report of Independent Certified Public Accountants

BDO
Seidman, LLP

Consolidated
Statements of Income



Consolidated
Balance Sheets



Consolidated
Statements of Stockholders Equity



Consolidated
Statements of Cash Flows



Summary
of Accounting Policies

Notes
to Consolidated Financial Statements

35

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On
January 25, 2001, the Company filed a Current Report on Form 8K with respect to establishing a plasma donor collaboration with Quest Diagnostics, Inc.

On
April 12, 2001, the Company filed a Current Report on Form 8K with respect to the secured revolving line of credit with Sanwa Bank of California and Brown Brothers
Harriman & Co.

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.                                                                                                                                                                                                                                

36

---

|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.                                                                                                                                                                 
|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.                                                                                                                            

37

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EXHIBIT INDEX

|Exhibit No. |  | Document Description                                                                                                                                                                                                                      
|----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1         |  | Restated Certificate of Incorporation filed on February 6, 1996 (incorporated by reference to Exhibit 2.1 of the Form 10 SB filed on November 21, 1996).                                                                                  
|3.2         |  | Certificate of Designation of Series A Preferred Stock of SeraCare, Inc., filed on July 10, 1996 (incorporated by reference to Exhibit 3.1 of the Form 10 SB filed on November 21, 1996).                                                 
|3.3         |  | Certificate of Designation of Series B Convertible Preferred Stock of SeraCare, Inc., filed on December 18, 1997 (incorporated by reference to Exhibit 3.2 of the Form S-3 filed on June 29, 1998).                                       
|3.4         |  | Certificate of Designation of Series C Convertible Preferred Stock of SRK, filed on March 9, 1999 (incorporated by reference to Exhibit 3.2 of the Form S-3 filed on March 18, 1999).                                                     
|3.5         |  | By-laws of American Blood Institute, Inc. (now known as SeraCare, Inc.) dated June 10, 1992 (incorporated by reference to Exhibit 2.2 of the Form 10 SB filed on November 21, 1996).                                                      
|10.1        |  | Promissory Note between SeraCare, Inc. ("Maker") and Barry D. Plost ("Holder") in the amount of $200,000.00, dated January 12, 1998 (filed herewith).                                                                                     
|10.2        |  | Secured Promissory Note between SeraCare, Inc. ("Maker") and Barry D. Plost ("Holder") in the amount of $150,000.00, dated October 15, 1997 (filed herewith).                                                                             
|10.3        |  | Secured Promissory Note between SeraCare, Inc. ("Maker") and Barry D. Plost ("Holder") in the amount of $150,000.00, dated October 6, 1997 (filed herewith).                                                                              
|10.4        |  | Promissory Note between SeraCare, Inc. ("Maker") and David Barrett Inc. ("Holder") in the amount of $150,000, dated November 10, 2000 (filed herewith).                                                                                   
|10.5        |  | Promissory Note between SeraCare, Inc. ("Maker") and Jerry L. Burdick ("Holder") in the amount of $90,000, dated November 10, 2000 (filed herewith).                                                                                      
|10.6        |  | Promissory Note between SeraCare, Inc. ("Maker") and Dr. Nelson Teng ("Holder") in the amount of $200,000, dated February 16, 2001 (filed herewith).                                                                                      
|10.7        |  | Promissory Note between SeraCare, Inc. ("Maker") and the Samuel A. and Mary Ann Anderson Trust ("Holder") in the amount of $200,000, dated February 16, 2001 (filed herewith).                                                            
|10.8        |  | Promissory Note between SeraCare, Inc. ("Maker") and the Samuel A. and Mary Ann Anderson Trust ("Holder") in the amount of $100,000, dated November 10, 2000 (filed herewith).                                                            
|10.9        |  | Purchase and Sale Agreement by and among Sybron Laboratory Products Corporation, SeraCare Technology, Inc. and SeraCare, Inc., dated February 29, 2000 (incorporated by reference to Exhibit 2.1 of the Form 8-K filed on
March 14, 2000).
|10.10       |  | Supply Agreement with Haemonetics Corporation, dated March 16, 2000 (filed herewith).                                                                                                                                                     
|10.11       |  | Equipment and Supplies Agreement by and between Haemonetics Corporation and SeraCare, Inc., dated December 9, 1998 (filed herewith).                                                                                                      
|10.12       |  | Warrant to Purchase Common Stock, issued by SeraCare, Inc. in favor of Quest Diagnostics Incorporated (incorporated by reference to Exhibit 99.1 of the Form 8-K filed on January 25, 2001).                                              

38

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|10.13   |  | Registration Rights Agreement for Quest Diagnostics Incorporated (incorporated by reference to Exhibit 99.2 of the Form 8-K filed on January 25, 2001).                                                                                                                                                                                                                                                                                                                                        
|------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.14   |  | Employment Agreement between American Blood Institute, Inc., Avre, Inc., Binary Associates, Inc. and Jerry L. Burdick, dated November 14, 1995 (incorporated by reference to Exhibit 6.2 of the Form 10 SB filed on November
21, 1996).*                                                                                                                                                                                                                                                       
|10.14.1 |  | Amendment to Employment Agreement between American Blood Institute, Inc., Avre, Inc., Binary Associates, Inc. and Jerry L. Burdick, dated January 12, 2001 (filed herewith).*                                                                                                                                                                                                                                                                                                                  
|10.15   |  | Employment Agreement between American Blood Institute, Inc. aka SeraCare, Inc. and Barry Plost, dated February 5, 1996 (incorporated by reference to Exhibit 6.1 of the Form 10 SB filed on November 21,
1996).*                                                                                                                                                                                                                                                                               
|10.15.1 |  | Amendment to Employment Agreement between American Blood Institute, Inc. aka SeraCare, Inc. and Barry Plost, dated January 12, 2001 (filed herewith).*                                                                                                                                                                                                                                                                                                                                         
|10.16   |  | Consulting Agreement between Mr. Sam Anderson and SeraCare, Inc., executed July 2, 1996 (incorporated by reference to Exhibit 6.5 of the Form 10 SB filed on November 21, 1996).                                                                                                                                                                                                                                                                                                               
|10.16.1 |  | Amendment to Consulting Agreement between Mr. Sam Anderson and SeraCare, Inc. effective April 16, 1998 (filed herewith).                                                                                                                                                                                                                                                                                                                                                                       
|10.17   |  | Credit Agreement dated April 10, 2001 among SeraCare, Inc., Sanwa Bank California as Administrative Agent, Sanwa Bank California as Issuing Bank, Sanwa Bank California as collateral Agent and the other Lenders referenced
therein (the "Credit Agreement") (incorporated by reference to Exhibit 99.1 of the Form 8-K, filed on April 12, 2001).                                                                                                                                            
|10.18   |  | Security Agreement dated April 10, 2001 by and between SeraCare, Inc., and Sanwa Bank California, as Collateral Agent for the Administrative Agent, the Issuing Bank and the Lenders under the Credit Agreement (incorporated
by reference to Exhibit 99.2 of the Form 8-K, filed on April 12, 2001).                                                                                                                                                                                          
|10.19   |  | Subsidiary Security Agreement dated April 10, 2001 by and among AVRE, Inc., Binary Associates, Inc., American Plasma, Inc., BHM LABS, Inc., SeraCare Acquisitions, Inc., SeraCare Technology, Inc., SeraCare Life Sciences,
Inc., the Western States Group, Inc. and Sanwa Bank California, as Collateral Agent for the Administrative Agent, the Issuing Bank and the Lenders under the Credit Agreement (incorporated by reference to Exhibit 99.3 of the Form 8-K, filed on
April 12, 2001).
|10.20   |  | Continuing Guaranty dated April 10, 2001 by and among AVRE, Inc., Binary Associates, Inc., American Plasma, Inc., BHM LABS, Inc., SeraCare Acquisitions, Inc., SeraCare Technology, Inc., SeraCare Life Sciences, Inc., the
Western States Group, Inc. and Sanwa Bank California, as Collateral Agent for the Administrative Agent, the Issuing Bank and the Lenders under the Credit Agreement (incorporated by reference to Exhibit 99.4 of the Form 8-K, filed on April 12,
2001).          
|10.21   |  | Securities Purchase Agreement among SeraCare, Inc., each subsidiary of SeraCare that becomes as Subsidiary Guarantor and each of the investors named on the signature pages thereto, dated February 13, 1998 ($16,000,000 12%
Senior Subordinated Debentures due 2005) (incorporated by reference to Exhibit 4.1 of the Form 8-K filed on February 27, 1998).                                                                                                                                  
|10.21.1 |  | Waiver and First Amendment to Securities Purchase Agreement effective December 21, 1998 by and among SeraCare, Inc., each of the subsidiaries of SeraCare named on the signature pages thereto, and each of the investors
named on the signature pages thereto (filed herewith).                                                                                                                                                                                                               

39

---

|10.21.2 |  | Waiver and Second Amendment to Securities Purchase Agreement dated April 10, 2001 among SeraCare, Inc., each of the subsidiaries of the SeraCare, Inc. named on the signature pages thereto and each of the investors named
on the signature pages thereto (incorporated by reference to Exhibit 99.5 of the Form 8-K, filed on April 12, 2001).           
|------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.22   |  | Subsidiary Guaranty Agreement made by Avre, Incorporated, Binary Associates, Incorporated, SeraCare Acquisitions, Inc., BHM Labs, Inc., SeraCare Technology, Inc. and Western States Group, Inc. in favor of the Guaranteed
Parties thereto, dated February 13, 1998 (incorporated by reference to Exhibit 4.6 of the Form 8-K filed on February 27, 1998).
|10.23   |  | Form of 12% Senior Subordinated Debenture due 2005 for Exhibit 10.21 (incorporated by reference to Exhibit 4.2 of the Form 8-K filed on February 27, 1998).                                                                                                                                                                                                
|10.24   |  | Form of Warrant Agreement to Purchase Common Stock for Exhibit 10.21 (incorporated by reference to Exhibit 4.3 of the Form 8-K filed on February 27, 1998).                                                                                                                                                                                                
|10.25   |  | Registration Rights Agreement among SeraCare and the Investors listed on the signature page thereto, dated February 13, 1998 (incorporated by reference to Exhibit 4.5 of the Form 8-K filed on February 27,
1998).                                                                                                                                        
|10.26   |  | Securityholders Agreement among SeraCare, Inc. and the Investors and Shareholders listed on the signature page thereto, dated February 13, 1998 (incorporated by reference to Exhibit 4.4 of the Form 8-K filed on February
27, 1998).                                                                                                                     
|10.27   |  | 1998 Stock Option Plan (incorporated by reference to Exhibit I of the Definitive Proxy Statement on Schedule 14A filed on September 3, 1998).*                                                                                                                                                                                                             
|10.28   |  | Plasma Supply Agreement dated October 23, 1997 by and between SeraCare, Inc. and Instituto Grifols, S.A. (filed herewith). (1)                                                                                                                                                                                                                             
|10.28.1 |  | Amendment Nr. 1 to Plasma Supply Agreement by and between SeraCare, Inc. and Instituto Grifols, S.A., dated December 3, 1998 (filed herewith). (1)                                                                                                                                                                                                         
|10.28.2 |  | Amendment Nr. 2 to Plasma Supply Agreement by and between SeraCare, Inc. and Instituto Grifols, S.A., dated November 19, 1999 (filed herewith). (1)                                                                                                                                                                                                        
|10.28.3 |  | Letter from SeraCare, Inc. to Grifols International, S.A. dated November 6, 2000 (filed herewith). (1)                                                                                                                                                                                                                                                     
|10.28.4 |  | Letter from Grupo Grifols, S.A. to SeraCare, Inc. dated November 7, 2000 (filed herewith). (1)                                                                                                                                                                                                                                                             
|21      |  | List of Subsidiaries (filed herewith).                                                                                                                                                                                                                                                                                                                     
|23      |  | Consent of Independent Certified Public Accountants (filed herewith).                                                                                                                                                                                                                                                                                      
|24      |  | Power of Attorney (included in signature page of this Report).                                                                                                                                                                                                                                                                                             

---

40

---



SIGNATURES

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

|                   |  | SERACARE, INC.(Registrant)
|------------------ |  | --------------------------
|Date: May 29, 2001 |  | By:                       
|                   |  | By:                       

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and
on the dates indicated. Each person whose signature appears below hereby authorizes and appoints Barry D. Plost and Jerry L. Burdick, or either of them, as attorneys-in-fact
and agents to execute and file with the applicable regulatory authorities any amendment to this report on his behalf individually and in each capacity stated below.

|Signatures                              |  | Title                                                          |  | Date        
|--------------------------------------- |  | -------------------------------------------------------------- |  | ------------
|/s/BARRY D. PLOSTBarry D. Plost         |  | Chairman of the Board,
Chief Executive Officer and Director    |  | May 29, 2001
|/s/JERRY L. BURDICKJerry L. Burdick     |  | Executive Vice President,
Chief Financial Officer and Director |  | May 29, 2001
|/s/SAMUEL ANDERSONSamuel Anderson       |  | Director                                                       |  | May 29, 2001
|/s/ROBERT J. CRESCIRobert J. Cresci     |  | Director                                                       |  | May 29, 2001
|/s/EZZAT JALLADEzzat Jallad             |  | Director                                                       |  | May 29, 2001
|/s/DR. NELSON TENGDr. Nelson Teng       |  | Director                                                       |  | May 29, 2001
|/s/DR. BERNARD KASTENDr. Bernard Kasten |  | Director                                                       |  | May 29, 2001

41

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SeraCare, Inc. and Subsidiaries

Index to Financial Statements

|Report of Independent Certified Public Accountants |                                            | F-2
|-------------------------------------------------- | ------------------------------------------ | ---
|Consolidated Financial Statements                  |                                            |    
|                                                   | Statements of Operations                   |    
|                                                   | Balance Sheets                             |    
|                                                   | Statements of Stockholders' Equity         |    
|                                                   | Statements of Cash Flows                   |    
|                                                   | Summary of Accounting Policies             |    
|                                                   | Notes to Consolidated Financial Statements |    

F1

---



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, 2001 and February 29, 2000 and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the years in the three year period then ended. These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based on our audits.

We
conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the 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, 2001 and February 29, 2000 and the results of their operations and their cash flows for each of the years in the three year period then ended, in conformity with accounting
principles generally accepted in the United States of America.

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



Los
Angeles, California
May 18, 2001

F2

---



SeraCare, Inc. and Subsidiaries    Consolidated Statements of Operations    (In whole $ except share data)

|                                                                                      |                                                                                 | Year Ended
February 28,
2001                                   |            | Year Ended
February 29,
2000 |            | Year Ended
February 28,
1999 |           
|------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------- | -------------------------------------------------------------- | ---------- | ---------------------------- | ---------- | ---------------------------- | ----------
|Revenues                                                                              |                                                                                 |                                                                |            |                              |            |                              |           
|                                                                                      | Net sales (Notes 13 and 14)                                                     |                                                                | $          | 69,451,998                   |            | $                            | 62,040,052
|                                                                                      | Income from joint venture                                                       |                                                                |            |                             |            |                              | 730,951   
|                                                                                      |                                                                                 |                                                                |            |                              |            |                              |           
|                                                                                      |                                                                                 | Total revenue                                                  |            |                              | 69,451,998 |                              |           
|Cost of sales                                                                         |                                                                                 |                                                                | 57,019,555 |                              |            | 50,828,932                   |           
|                                                                                      |                                                                                 |                                                                |            |                              |            |                              |           
|                                                                                      |                                                                                 | Gross profit                                                   |            |                              | 12,432,443 |                              |           
|General and administrative expenses                                                   |                                                                                 |                                                                | 6,252,747  |                              |            | 6,869,602                    |           
|                                                                                      |                                                                                 |                                                                |            |                              |            |                              |           
|                                                                                      |                                                                                 | Operating income                                               |            |                              | 6,179,696  |                              |           
|Interest expense (including noncash interest of $1,127,316 $2,296,805 and $1,387,157) |                                                                                 |                                                                | (4,314,356 | )                            |            | (5,163,204                   | )         
|Other income, net (Note 15)                                                           |                                                                                 |                                                                | 395,854    |                              |            | 320,065                      |           
|                                                                                      |                                                                                 |                                                                |            |                              |            |                              |           
|                                                                                      | Income before income taxes and cumulative effect of change in accounting method |                                                                |            | 2,261,194                    |            |                              | 229,330   
|Income taxes (Note 11)                                                                |                                                                                 |                                                                | 264,190    |                              |            | 87,598                       |           
|                                                                                      |                                                                                 |                                                                |            |                              |            |                              |           
|                                                                                      | Income before cumulative effect of change in accounting method                  |                                                                |            | 1,997,004                    |            |                              | 141,732   
|Cumulative effect of change in accounting method, net                                 |                                                                                 |                                                                |           |                              |            | (719,903                     | )         
|                                                                                      |                                                                                 |                                                                |            |                              |            |                              |           
|                                                                                      | Net income (loss)                                                               |                                                                |            | 1,997,004                    |            |                              | (578,171  
|Preferred shareholder dividends                                                       |                                                                                 |                                                                | 225,000    |                              |            | 225,000                      |           
|                                                                                      |                                                                                 |                                                                |            |                              |            |                              |           
|                                                                                      | Net income (loss) available to common shareholders                              |                                                                | $          | 1,772,004                    |            | $                            | (803,171  
|                                                                                      |                                                                                 |                                                                |            |                              |            |                              |           
|Earnings (loss) per common share (Note 16)                                            |                                                                                 |                                                                |            |                              |            |                              |           
|                                                                                      | Basic                                                                           |                                                                |            |                              |            |                              |           
|                                                                                      |                                                                                 | Income before cumulative effect of change in accounting method |            | $                            | 0.20       |                              | $         
|                                                                                      |                                                                                 | Cumulative effect of change in accounting method, net          |            |                              | 0.00       |                              |           
|                                                                                      |                                                                                 |                                                                |            |                              |            |                              |           
|Cashless exchange of warrants (nonemployee)                                           |                                                                                 | $                                                              | 0.20       |                              | $          | (0.10                        | )         
|                                                                                      |                                                                                 |                                                                |            |                              |            |                              |           
|                                                                                      | Diluted                                                                         |                                                                |            |                              |            |                              |           
|                                                                                      |                                                                                 | Income before cumulative effect of change in accounting method |            | $                            | 0.15       |                              | $         
|                                                                                      | Cumulative effect of change in accounting method, net                           |                                                                |            | 0.00                         |            |                              | (0.09     
|                                                                                      |                                                                                 |                                                                |            |                              |            |                              |           
|                                                                                      | Net Income (loss)                                                               |                                                                | $          | 0.15                         |            | $                            | (0.10     
|                                                                                      |                                                                                 |                                                                |            |                              |            |                              |           
|Weighted average shares outstanding (Note 16)                                         |                                                                                 |                                                                |            |                              |            |                              |           
|                                                                                      | Basic                                                                           |                                                                |            | 8,863,344                    |            |                              | 8,101,336 
|                                                                                      |                                                                                 |                                                                |            |                              |            |                              |           
|                                                                                      | Diluted                                                                         |                                                                |            | 12,018,901                   |            |                              | 8,101,336 
|                                                                                      |                                                                                 |                                                                |            |                              |            |                              |           

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

F3

---

SeraCare, Inc. and Subsidiaries    Consolidated Balance Sheets    (In whole $)

|                                                                                                                                   |                                                                                                                     | As of
February 28, 2001                                   |            | As of
February 29, 2000
|---------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------- | ---------- | -----------------------
|Assets                                                                                                                             |                                                                                                                     |                                                           |            |                        
|Current Assets                                                                                                                     |                                                                                                                     |                                                           |            |                        
|                                                                                                                                   | Cash and cash equivalents                                                                                           |                                                           | $          | 3,097,471              
|                                                                                                                                   | Cash held in escrow (Note 15)                                                                                       |                                                           |            | 1,675,000              
|                                                                                                                                   | Accounts receivable, less allowance for doubtful accounts of $106,041 in 2001 (Note 13)                             |                                                           |            | 13,112,473             
|                                                                                                                                   | Inventory                                                                                                           |                                                           |            | 22,627,144             
|                                                                                                                                   | Prepaid expenses and other current assets                                                                           |                                                           |            | 669,849                
|                                                                                                                                   |                                                                                                                     |                                                           |            |                        
|                                                                                                                                   |                                                                                                                     | Total Current Assets                                      |            |                        
|                                                                                                                                   |                                                                                                                     |                                                           |            |                        
|Property and equipment  net (Note 2)                                                                                              |                                                                                                                     |                                                           | 7,173,472  |                        
|FDA licenses, less accumulated amortization of $591,775 and $372,015                                                               |                                                                                                                     |                                                           | 9,336,315  |                        
|Donor base and records, less accumulated amortization of $678,706 and $414,496                                                     |                                                                                                                     |                                                           | 5,231,651  |                        
|Reorganization value in excess of amounts allocated to identifiable assets, less accumulated amortization of $194,339 and $155,771 |                                                                                                                     |                                                           | 577,114    |                        
|Goodwill, less accumulated amortization of $1,087,228 and $716,662                                                                 |                                                                                                                     |                                                           | 6,255,922  |                        
|Deferred bond offering cost, less accumulated amortization of $2,791,088 and $1,807,235 (Note 6)                                   |                                                                                                                     |                                                           | 3,935,414  |                        
|Other assets                                                                                                                       |                                                                                                                     |                                                           | 1,584,588  |                        
|                                                                                                                                   |                                                                                                                     |                                                           |            |                        
|Total Assets                                                                                                                       |                                                                                                                     | $                                                         | 75,276,413 |                        
|                                                                                                                                   |                                                                                                                     |                                                           |            |                        
|Liabilities and Stockholders' Equity                                                                                               |                                                                                                                     |                                                           |            |                        
|                                                                                                                                   | Line of credit (Note 3)                                                                                             |                                                           | $          | 16,005,000             
|                                                                                                                                   | Accounts payable and accrued expenses                                                                               |                                                           |            | 7,589,507              
|                                                                                                                                   | Accrued payroll and related expenses                                                                                |                                                           |            | 707,594                
|                                                                                                                                   | Accrued expenses                                                                                                    |                                                           |            | 2,228,081              
|                                                                                                                                   | Deferred income                                                                                                     |                                                           |            | 239,187                
|                                                                                                                                   | Bridge loans from related parties (Note 4)                                                                          |                                                           |            | 740,000                
|                                                                                                                                   | Notes payable (Note 5)                                                                                              |                                                           |            | 1,904,385              
|                                                                                                                                   | Current portion of long-term debt (Note 6)                                                                          |                                                           |            | 135,271                
|                                                                                                                                   |                                                                                                                     |                                                           |            |                        
|                                                                                                                                   | Total Current Liabilities                                                                                           |                                                           |            | 29,549,025             
|                                                                                                                                   |                                                                                                                     |                                                           |            |                        
|Long-term Debt (Notes 4, 5 and 6)                                                                                                  |                                                                                                                     |                                                           | 12,952,107 |                        
|Redeemable preferred stock                                                                                                         |                                                                                                                     |                                                           |            |                        
|                                                                                                                                   | Series A redeemable preferred stock, $.001 par value, 25,000,000 shares authorized; 0 shares issued and outstanding |                                                           |            |                       
|                                                                                                                                   | Series C convertible preferred stock, $.001 par value, 22,500 shares authorized and outstanding.                    |                                                           |            |                        
|                                                                                                                                   |                                                                                                                     | Liquidation value $100 per share, 10% cumulative dividend |            |                        
|Commitments and contingencies (Notes 12 and 15)                                                                                    |                                                                                                                     |                                                           |            |                        
|Stockholders' equity                                                                                                               |                                                                                                                     |                                                           |            |                        
|                                                                                                                                   | Series B convertible preferred stock, $.001 par value, 15,000 shares authorized and outstanding.                    |                                                           |            |                        
|                                                                                                                                   |                                                                                                                     | Liquidation value $100 per share                          |            |                        
|                                                                                                                                   | Common stock, $.001 par value, 25,000,000 shares authorized, 9,741,016 and 8,519,418 issued and outstanding         |                                                           |            | 9,741                  
|                                                                                                                                   | Additional paid-in capital                                                                                          |                                                           |            | 27,067,842             
|                                                                                                                                   | Retained earnings                                                                                                   |                                                           |            | 3,582,698              
|                                                                                                                                   |                                                                                                                     |                                                           |            |                        
|Total stockholders' equity                                                                                                         |                                                                                                                     |                                                           | 30,660,281 |                        
|                                                                                                                                   |                                                                                                                     |                                                           |            |                        
|Total Liabilities and Stockholders' Equity                                                                                         |                                                                                                                     | $                                                         | 75,276,413 |                        
|                                                                                                                                   |                                                                                                                     |                                                           |            |                        

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

F4

---



SeraCare, Inc. and Subsidiaries    Consolidated Statements of Stockholders' Equity    (In whole $ except for share data)

|                                                                                                         |                                               | Preferred Stock
Series B |   |   |     |   |           |         |   |       |     |   |           
|-------------------------------------------------------------------------------------------------------- | --------------------------------------------- | ------------------------ | - | - | --- | - | --------- | ------- | - | ----- | --- | - | ----------
|
|
|
|Balance, March 1, 1998                                                                                   |                                               | 15,000                   |   | $ | 15  |   | 7,210,585 |         | $ | 7,210 |     | $ | 20,293,232
|Common stock issued for (Note 7)                                                                         |                                               |                          |   |   |     |   |           |         |   |       |     |   |           
|                                                                                                         | Acquisition of plasma center                  |                          |  |   |     |  |           | 50,000  |   |       | 50  |   |           
|                                                                                                         | Exercise of Series A warrants                 |                          |  |   |     |  |           | 325,000 |   |       | 325 |   |           
|                                                                                                         | Finders' fees on private placement            |                          |  |   |     |  |           | 25,000  |   |       | 25  |   |           
|                                                                                                         | Prior private placement, adjustment of shares |                          |  |   |     |  |           | 33,833  |   |       | 34  |   |           
|Warrants issued                                                                                          |                                               |                         |   |   |    |   |          |         |   |      |     |   | 45,097    
|Subsequent costs relating to private placement                                                           |                                               |                         |   |   |    |   |          |         |   |      |     |   | (106,995  
|Net income for the year                                                                                  |                                               |                         |   |   |    |   |          |         |   |      |     |   |          
|                                                                                                         |                                               |                          |   |   |     |   |           |         |   |       |     |   |           
|Balance, February 28, 1999                                                                               |                                               | 15,000                   |   |   | 15  |   | 7,644,418 |         |   | 7,644 |     |   | 20,867,627
|Conversion of preferred stock to common stock                                                            |                                               | (15,000                  | ) |   | (15 | ) | 375,000   |         |   | 375   |     |   | (360      
|Issuance of stock to acquire plasma centers                                                              |                                               |                         |   |   |    |   | 500,000   |         |   | 500   |     |   | 2,358,875 
|Warrants and options issued during the year                                                              |                                               |                         |   |   |    |   |          |         |   |      |     |   | 883,196   
|Dividend to preferred shareholders                                                                       |                                               |                         |   |   |    |   |          |         |   |      |     |   |          
|Net loss for the year                                                                                    |                                               |                         |   |   |    |   |          |         |   |      |     |   |          
|                                                                                                         |                                               |                          |   |   |     |   |           |         |   |       |     |   |           
|Balance, February 29, 2000                                                                               |                                               |                         |   |   |    |   | 8,519,418 |         |   | 8,519 |     |   | 24,109,338
|Common stock issued for (Note 7):                                                                        |                                               |                          |   |   |     |   |           |         |   |       |     |   |           
|                                                                                                         | Acqusition of six plasma centers              |                          |  |   |     |  |           | 75,000  |   |       | 75  |   |           
|                                                                                                         | Private placement                             |                          |  |   |     |  |           | 868,001 |   |       | 868 |   |           
|                                                                                                         | Finders' fees on private placement            |                          |  |   |     |  |           | 13,300  |   |       | 13  |   |           
|                                                                                                         | Exercise of warrants and options              |                          |  |   |     |  |           | 202,297 |   |       | 203 |   |           
|                                                                                                         | Cashless exchange of warrants (nonemployee)   |                          |  |   |     |  |           | 63,000  |   |       | 63  |   |           
|Warrants issued in conjunction with bridge loans                                                         |                                               |                         |   |   |    |   |          |         |   |      |     |   | 205,091   
|Fair value attributable to unvested warrants issued in connection with joint venture agreement (Note 20) |                                               |                         |   |   |    |   |          |         |   |      |     |   | 10,226    
|Dividend to preferred shareholders                                                                       |                                               |                         |   |   |    |   |          |         |   |      |     |   |          
|Net income for the year                                                                                  |                                               |                         |   |   |    |   |          |         |   |      |     |   |          
|                                                                                                         |                                               |                          |   |   |     |   |           |         |   |       |     |   |           
|Balance, February 28, 2001                                                                               |                                               |                         |   |   |    |   | 9,741,016 |         | $ | 9,741 |     | $ | 27,067,842
|                                                                                                         |                                               |                          |   |   |     |   |           |         |   |       |     |   |           

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

F5

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SeraCare, Inc. and Subsidiaries    Consolidated Statements of Cash Flows    (In whole $)

|Increase (decrease) in cash and cash equivalents     |                                                                                                | February 28,
2001                                |                                           | February 29,
2000 |           | February 28,
1999 |            
|---------------------------------------------------- | ---------------------------------------------------------------------------------------------- | ------------------------------------------------ | ----------------------------------------- | ----------------- | --------- | ----------------- | -----------
|Cash flows from operating activities                 |                                                                                                |                                                  |                                           |                   |           |                   |            
|                                                     | Net income (loss)                                                                              |                                                  | $                                         | 1,997,004         |           | $                 | (578,171   
|                                                     | Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities: |                                                  |                                           |                   |           |                   |            
|                                                     |                                                                                                | Cumulative effect of change in accounting method |                                           |                   |          |                   |            
|                                                     |                                                                                                | Depreciation and amortization                    |                                           |                   | 2,027,250 |                   |            
|                                                     |                                                                                                | Allowance for doubtful accounts                  |                                           |                   | 106,041   |                   |            
|                                                     |                                                                                                | Income from joint venture                        |                                           |                   |          |                   |            
|                                                     |                                                                                                | Gain on sale of assets                           |                                           |                   |          |                   |            
|                                                     |                                                                                                | Non-cash interest expense                        |                                           |                   | 1,127,316 |                   |            
|                                                     |                                                                                                | Non-cash general and administrative expense      |                                           |                   | 21,420    |                   |            
|                                                     |                                                                                                | (Increase) decrease from changes in:             |                                           |                   |           |                   |            
|                                                     |                                                                                                |                                                  | Accounts receivable                       |                   |           | (1,254,691        | )          
|                                                     |                                                                                                |                                                  | Inventory                                 |                   |           | (5,343,619        | )          
|                                                     |                                                                                                |                                                  | Prepaid expenses and other current assets |                   |           | (35,180           | )          
|                                                     |                                                                                                |                                                  | Other assets                              |                   |           | (418,956          | )          
|                                                     |                                                                                                |                                                  | Accounts payable                          |                   |           | (2,904,589        | )          
|                                                     |                                                                                                |                                                  | Accrued payroll and related expenses      |                   |           | 223,313           |            
|                                                     |                                                                                                |                                                  | Accrued expenses                          |                   |           | (1,259,325        | )          
|                                                     |                                                                                                |                                                  | Deferred income                           |                   |           | (39,242           | )          
|                                                     |                                                                                                |                                                  |                                           |                   |           |                   |            
|Net cash used in operating activities                |                                                                                                |                                                  | (5,753,258                                | )                 |           | (812,477          | )          
|                                                     |                                                                                                |                                                  |                                           |                   |           |                   |            
|Cash flows from investing activities                 |                                                                                                |                                                  |                                           |                   |           |                   |            
|                                                     | Proceeds from sale of CTI assets, net of $5,406, 515 held in escrow                            |                                                  |                                           |                  |           |                   | 11,438,772 
|                                                     | Funds released from escrow                                                                     |                                                  |                                           | 3,731,515         |           |                   |           
|                                                     | Cashless exchange of warrants (nonemployee)                                                    |                                                  |                                           | (1,373,863        | )         |                   | (1,542,268 
|                                                     | Cash paid to purchase six plasma collection centers                                            |                                                  |                                           | (200,000          | )         |                   |           
|                                                     | Cash paid to purchase subsidiaries, net of cash acquired                                       |                                                  |                                           |                  |           |                   |           
|                                                     | Distributions from unconsolidated subsidiary                                                   |                                                  |                                           |                  |           |                   | 620,800    
|                                                     | Additions to FDA licenses                                                                      |                                                  |                                           | (507,672          | )         |                   | (788,226   
|                                                     | Additions to donor base and records                                                            |                                                  |                                           | (306,180          | )         |                   | (550,460   
|                                                     | Additions to other intangible assets                                                           |                                                  |                                           |                  |           |                   | (62,185    
|                                                     |                                                                                                |                                                  |                                           |                   |           |                   |            
|Net cash used in investing activities                |                                                                                                |                                                  | 1,343,800                                 |                   |           | 9,116,433         |            
|                                                     |                                                                                                |                                                  |                                           |                   |           |                   |            
|Cash flows from financing activities                 |                                                                                                |                                                  |                                           |                   |           |                   |            
|                                                     | Borrowings under line of credit                                                                |                                                  |                                           | 2,821,000         |           |                   | 5,844,000  
|                                                     | Repayments of borrowings under line of credit                                                  |                                                  |                                           |                  |           |                   | (1,500,000 
|                                                     | Proceeds from notes payable                                                                    |                                                  |                                           | 999,979           |           |                   |           
|                                                     | Repayments of notes payable                                                                    |                                                  |                                           | (384,041          | )         |                   |           
|                                                     | Proceeds from long-term debt, net of issuance costs                                            |                                                  |                                           |                  |           |                   |           
|                                                     | Repayments of long-term debt                                                                   |                                                  |                                           | (231,336          | )         |                   | (11,759,907
|                                                     | Proceeds from bridge loans from related parties                                                |                                                  |                                           | 740,000           |           |                   |           
|                                                     | Repayments of bridge loans from related parties                                                |                                                  |                                           |                  |           |                   | (123,000   
|                                                     | Payments on redemption of preferred stock                                                      |                                                  |                                           |                  |           |                   | (60,107    
|                                                     | Dividends to preferred shareholders                                                            |                                                  |                                           | (225,000          | )         |                   | (262,500   
|                                                     | Proceeds from issuance of preferred and common shares                                          |                                                  |                                           | 2,500,659         |           |                   |           
|                                                     |                                                                                                |                                                  |                                           |                   |           |                   |            
|Net cash provided by financing activities            |                                                                                                |                                                  | 6,221,261                                 |                   |           | (7,861,514        | )          
|                                                     |                                                                                                |                                                  |                                           |                   |           |                   |            
|Net increase (decrease) in cash and cash equivalents |                                                                                                |                                                  | 1,811,803                                 |                   |           | 442,442           |            
|Cash and cash equivalents, beginning of period       |                                                                                                |                                                  | 1,285,668                                 |                   |           | 843,226           |            
|                                                     |                                                                                                |                                                  |                                           |                   |           |                   |            
|Cash and cash equivalents, end of period             |                                                                                                | $                                                | 3,097,471                                 |                   | $         | 1,285,668         |            
|                                                     |                                                                                                |                                                  |                                           |                   |           |                   |            

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

F6

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SeraCare, Inc. and Subsidiaries    Consolidated Statements of Cash Flows (Continued)

Supplemental disclosure of cash flow information:

Interest

$
3,590,577

$
2,474,890

$
2,517,113State income taxes


99,954


174,078


17,014


During
the year ended February 28, 2001, the Company issued 75,000 shares of common stock with a fair market value of $243,750, $200,000 in cash, and a $1.0 million note
payable to acquire six plasma centers.

During
the year ended February 28, 2001, the Company issued 1,748,605 unvested warrants to consummated a joint venture collaboration agreement. The fair value of the unvested
warrants attributable to the year ended February 28, 2001 of $10,226 is recorded as additional paid in capital.

During
the year ended February 28, 2001, the Company issued 644,992 warrants in conjunction with bridge loans from related parties and notes payable. The fair value of these
warrants was $205,091 and is recorded as deferred financing costs.

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

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

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

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

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

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

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

F7

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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, Incorporated, a Nevada corporation, BHM Labs, Inc., an Arkansas corporation, Binary Associates, Inc., a Colorado corporation, SeraCare
Acquisitions, Inc., a Nevada corporation, Western States, Inc., a California corporation, SeraCare Technology, Inc. ("STI"), a Nevada corporation and American Plasma, Inc.,
a Texas corporation. STI owned the assets known as CTI which were sold on February 29, 2000 (see Note 15).

Principles of Consolidation

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

Revenue Recognition

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

Inventory

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

Property and Equipment

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

Investment in Joint Venture

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

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for future tax consequences
attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax

F8

---

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. The Company evaluates and assesses the overall recoverability
of an FDA license by determining if the unamortized balance can be recovered through undiscounted future operating cash flows. Management believes that as long as the Company continues to demonstrate
compliance, an FDA license has an unlimited useful life. Accordingly, the FDA licenses are being amortized using the straight-line method over forty years.

Donor Base and Records

Donor base and records arise from business combinations or from the costs incurred in establishing a donor base and the required records of a new center. These
costs consist of incremental costs directly related to the processing of new donors. The value assigned to donor base and records is established by the Company based upon the costs incurred, not to
exceed the estimated 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

F9

---

recognized to reduce the carrying value of the goodwill based on the expected discounted cash flows of the center.

Deferred Financing Costs

Included in other assets as of February 28, 2001 and February 29, 2000, are deferred financing costs of $187,678 and $113,626, respectively. These costs
relate to the fair value of options and warrants issued together with bridge loans and notes payable.
These costs are amortized over the anticipated life of the respective financial instruments.

Earnings Per Share

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

Deferred Bond Offering Costs

Deferred bond offering costs represents the fair value of the warrants issued to debenture holders and an investment banker in connection with the
$16 million debentures issued on February 13, 1998 and the related costs and expenses of such issuance. The deferred bond offering costs are being amortized over the 7 year term
of such debentures on a straight-line basis using the bonds outstanding method.

Stock-Based Compensation

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

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

The
Company accounts for non-employee stock based compensation by establishing a fair value for stock options granted. Compensation cost is measured as the excess, if any,
of the fair value of the Company's stock 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.

F10

---

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.

New Accounting Pronouncements

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

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

To
the extent that the Company establishes new start-up centers, the inability to defer start-up costs will result in a decrease in its results of operations.
The adoption of SOP 98-5 may also have a negative impact on the Company's strategic plan for expansion because of the inability to match the costs of establishing a new center with the
revenue derived from such center even when all production from the center has been contractually committed. The Company is currently evaluating alternative strategies for achieving its growth
objectives.

In
October 2000, the Company adopted Financial Accounting Standards Board SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement
establishes accounting and reporting standards requiring every derivative instrument, including certain derivative instruments embedded in other contracts, be recorded in the balance sheet as either
an asset or liability measured at its fair value. The statement also requires changes in the derivative's fair value to be recognized in

F11

---

earnings unless specific hedge accounting criteria are met. The adoption of SFAS 133 did not have a material impact on the consolidated financial statements.

In
December 1999, the Securities and Exchange Commission ("SEC") released Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial Statements," which
provides guidance on the recognition, presentation and disclosure of revenue in the financial statements filed with the SEC. Subsequently, the SEC released SAB 101B, which delayed the implementation
date of SAB 101 for registrants with fiscal years that begin between December 16, 1999 and March 15, 2000. The Company was required to be in conformity with the provisions of SAB 101, as
amended by SAB 101B, no later than October 1, 2000.

The
Company believes the adoption of SAB 101, as amended by SAB 101B, has not had a material effect on the financial position, results of operations or cash flows of the Company for
the year ended February 28, 2001.

In
March 2000, the FASB issued Interpretation No. 44, "Accounting for Certain Transactions Involving Stock Compensation, the Interpretation of APB Opinion No. 25"
(FIN44). The Interpretation is intended to clarify certain problems that have arisen in practice since the issuance of APB No. 25, "Accounting for Stock Issued to Employees." The effective date
of the Interpretation was July 1, 2000. The provisions of the Interpretation apply prospectively, but they will also cover certain events occurring after December 14, 1998 and after
January 12, 2000. The adoption of FIN 44 did not have a material adverse affect on the current and historical consolidated financial statements.

F12

---



SeraCare, Inc and Subsidiaries        Notes to Consolidated Financial Statements

1. Business Operations

General

Company History

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.

The
Company is organized along business lines. Organizationally, the Company now consists of two business segments, the Therapeutic Products Segment and the Diagnostic Products
Segment. The
Therapeutic Product Segment consists primarily of the plasma collection operations and certain of the distribution operations, which focus on the international markets for therapeutic products. The
Diagnostic Products Segment consists primarily of that portion of the distribution operation which focuses on the worldwide markets for diagnostic products and that portion of the plasma collection
operations which identifies and collects rare antibody and reactive units.

Acquisitions

In October, 2000, the Company acquired six plasma centers located in Dallas, Texas, Everett, Washington, Seattle (2), Washington, Topeka, Kansas and Yakima,
Washington from Alpha Therapeutic Corporation for $1,443,750. The purchase price was comprised of $200,000 of cash, $1.0 million of notes payable and 75,000 shares of common stock valued at the
then market value of $3.25 per share.

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

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

In
November 1999, the Company acquired six turnkey start-up plasma center locations from Amex Plasma Management, Inc. for a total of 500,000 shares of common
stock. These transactions were valued at $2,359,375, based upon the fair value of the shares on the dates issued.

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

F13

---

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

Year ended
February 28, 1999Revenue

$
53,717,000Net income


2,762,000Income per shareBasic


.37Diluted


.25


The
operations of the six centers acquired during the year ended February 28, 2001 were not material to the consolidated financial statements.

2. Property and Equipment

Property and equipment consist of the following:

February 28, 2001

February 29, 2000Furniture and equipment

$
2,922,427

$
2,313,435Leasehold improvements


7,014,629


6,215,0749,937,056


8,528,509Less: accumulated depreciation and amortization


2,763,584


1,672,342Property and equipment, net

$
7,173,472

$
6,856,167


Depreciation
and amortization expense on property and equipment was $1,058,489, $908,453 and $538,247 for the years ending February 28, 2001, February 29, 2000 and
February 28, 1999, respectively.

3. Line of Credit

On February 28, 2001 the Company had a $15 million line of credit. Draws under the revolving line of credit were limited to the sum of
(a) 75% of qualifying accounts receivable plus 50% of inventory value. At February 28, 2001, $16,005,000 had been drawn under this line of credit on a pre-approved overline advance.
Interest accrued at a per annum rate equal to the Wall Street Journal Prime Rate (8.5% at February 28, 2001) plus .75% through July 15, 1999 and .25% thereafter and is payable quarterly.
The Company could also elect at its option to have interest calculated based upon LIBOR plus 2.75%. The facility was secured by all the assets of the Company. The note agreement contained various
covenants relating to: maintaining minimum tangible capital base, current ratio and coverage ratio; senior indebtedness to EBITDA; and restrictions on additional indebtedness, asset sales,
investments, mergers or other changes of control, divestitures, acquisitions, dividends and distributions. The agreement called
for restrictions on cash of $150,000. Subsequent to year-end, the Company obtained a new revolving line of credit (see Note 18).

During
the year ended February 28, 2001, the Company issued 150,000 warrants to the lender for allowing the Company to draw a greater amount than the $15.0 million limit
on borrowings. The fair

F14

---

value of these warrants was capitalized as deferred financing costs and $1,062 was amortized to expense during fiscal 2001.

4. Bridge Loans from Related Parties

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

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

At
various times during the year ended February 28, 1998, the Company entered into agreements with the Company's president, which provided for loans totaling $1,325,000. At
February 28, 2001, $472,500 of these loans remains outstanding. These loans are due upon demand, accrue interest at ten percent and are secured by all the assets of the Company. The outstanding
balance is subject to a subordination agreement whereby such amount cannot be repaid until the senior lenders have been paid in full. Accordingly, this obligation has been classified in
long-term debt on the balance sheet.

During
November 2000, the Company entered into agreements with related parties, which provided for loans totaling $340,000. These loans are due on demand, accrue interest at
ten percent and are secured by all the assets of the Company. In connection with these loans, the Company granted warrants to purchase 85,000 shares of restricted common stock at an exercise price of
$3.125. The fair value of warrants issued of $6,118 was capitalized as deferred financing costs and was amortized over the term of the loans.

In
February 2001, the Company entered into agreements with related parties, which provided for loans totaling $549,979. These loans are due May 14, 2001 and accrue
interest at 12 percent. In connection with these loans, the Company granted warrants to purchase 219,992 shares of restricted common stock at an exercise price of $3.75. The fair value of
warrants issued of $56,547 was capitalized as deferred financing costs and was amortized over the term of the loans.

5. Notes Payable

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

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

F15

---

the assets of the Company. The loans accrue interest at twelve percent per annum. At February 29, 2000, $288,447 of these loans was outstanding. The remaining balance was repaid in August,
2000.

In
conjunction with the acquisition of six plasma centers in October 2000, the Company was obligated under six notes payable, totaling $1.0 million. Principal and
interest at 11 percent is due in monthly installments totaling $32,739 through September 15, 2001, at which time the unpaid principal is due. At February 28, 2001 $904,406 was
outstanding under these loans.

In
February 2001, the Company entered into agreements with various parties, which provided for loans totaling $999,979. These loans are due March 30, 2001 and accrue
interest at 12 percent. In connection with these loans, the Company granted warrants to purchase 399,992 shares of restricted common stock at an exercise price of $3.75. The fair value of
warrants issued of $141,364 was capitalized as deferred financing costs and is being amortized over the term of the loans. The loan agreement includes certain penalties if the loan is not repaid on
time. These loans were repaid subsequent to year-end, prior to the due date.

6. Long-Term Debt

Senior Subordinated Debentures

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

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

On
February 29, 2000, $4,500,000 of the proceeds from the sale of the CTI assets was used to reduce the principal amount of the subordinated debentures. At February 28,
2001 and February 29, 2000, $12,474,400 of principal remained outstanding.

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

The
Securities Purchase Agreement contains certain affirmative and negative covenants, including maintenance of certain minimum funded debt and fixed charge coverage ratios and
restrictions on incurring certain indebtedness and liens, making dividend payments on common stock, making certain loans and advances or investments in other persons, selling a substantial amount of
assets, entering into

F16

---

certain mergers or business combinations or using securities which are senior to orpari passuwith these debentures.

Term Loan

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

Debt Acquired in Purchase of American Plasma, Inc.

American Plasma, Inc. entered into two notes payable in 1996 to purchase the assets of four plasma centers. The notes are secured by all the assets of
one of the four plasma centers and certain other assets of the other centers. The first note is due in 24 quarterly payments of $40,152, representing principal and interest at 12% per annum. At
February 28, 2001, $51,408 was outstanding on this note payable. The second note payable is due in biweekly installments of $2,974, representing principal and interest imputed at 12% per annum,
through May, 2002. At February 28, 2001, $82,537 was outstanding on this note payable.

Kier Corporation

On September 2, 1996, the Company assumed a $45,000 note payable to The Kier Corporation, a lessor, in conjunction with an acquisition of the rights to
the Clearfield, Utah plasma collection center. The note payable accrues interest at 10.5% and is payable in monthly installments of $967. These monthly installments have been added to the base rental
payments and are paid monthly over a five-year period. The first monthly installment of interest and principal commenced on October 20, 1996 and the final installment is due on
September 20, 2001. If the lease is terminated or the Company defaults on the lease, the remainder of the loan is due in full immediately. At February 28, 2001, the outstanding balance
on the note payable was $6,533.

Future minimum payments to be made, as of February 29, 2000:

Year Ending February 28,

Amount2002

$
135,2712003


5,2082004


4,158,1332005


4,158,1332006


4,158,133Thereafter


472,50013,087,378Less current portion


135,271$
12,952,107


F17

---

7. Stockholders' Equity

Common Stock

During the year ended February 28, 2001, the Company received $2,108,238, net of $61,764 of offering costs from the issuance of 868,001 shares of common
stock (including 35,835 shares of common stock
to related parties) at $2.50 per share under a private placement. The Company issued 13,300 shares of common stock as a finders fee, the value of which was netted as additional offering costs.

In
connection with the acquisition of six plasma centers in November 2000, the Company issued 75,000 shares of restricted common stock valued at the then market value of $3.25
per share (see Note 1).

During
the year ended February 28, 2001, 202,297 shares of common stock were issued upon exercise by the holders of options to purchase common stock at exercise prices between
$1.50 and $2.00 per share.

During
the year ended February 28, 2001, 295,312 options at $2.50 per share and 98,437 at $3.00 per share were exchanged for 63,000 shares of common stock in a cashless
exchange.

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

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

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

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

During
the year ended February 28, 1999 the Company issued 25,000 shares of common stock as a finders fee for a prior private placement.

Series B Preferred Stock

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

Other Warrants

During the year ended February 28, 2001, as part of the refinancing agreement related to its line of credit, the Company issued warrants to purchase
150,000 shares of common stock at $3.00 per share.

During
the year ended February 29, 2000, the Company elected to capitalize two quarterly interest payments related to the subordinated debentures. In accordance with the terms
of the subordinated

F18

---

debentures agreement, the Company issued warrants to the debenture holders to purchase 127,646 shares of common stock at an exercise price of $.01 per share (Note 6).

At
February 29, 2000, the Company was in default of certain covenants under the senior subordinated debentures agreement. The Company granted warrants to purchase 100,000
shares of common stock at $.01 per share to the lender in exchange for renegotiation of these covenants. The fair value of these warrants of $230,000 was recorded as additional deferred offering costs
and is being amortized over the term of the debt.

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

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

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

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

8. Redeemable Preferred Stock

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

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

9. Stock Options

In 1998 the Company adopted the 1998 Employee Nonqualified Stock Option Plan.

F19

---

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:



F20

---



F21

---

The
following table summarizes all option/warrant activity for the three years ended February 28, 2001:

Number of Common Stock Options/Warrants1998 Stock
Option Plan

Other Stock
Plans

Weighted
Average
PriceOutstanding as of March 1, 1998



5,179,663

$
1.40Granted



1,288,855

$
4.99Exercised



(325,000
)
$
(2.75
)Outstanding as of February 28, 1999



6,143,518

$
2.08Granted



1,091,657

$
3.39Outstanding as of February 29, 2000



7,235,175

$
2.28Granted

455,002

2,673,597

$
3.74Exercised



(596,046
)
$
(2.39
)Expired/Cancelled



(70,000
)
$
(2.64
)Outstanding as of February 28, 2001

455,002

9,242,726

$
2.74Exercisable as of February 28, 2001



7,377,452

$
2.40


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 2001, 2000 and 1999 dividend yield of zero percent; expected volatility of 16 percent,
14 percent and 13 percent; risk free interest rate of 4.5, 5.24 and 5.24; and expected life of between 3 and 7 years.

The
weighted average fair value of options granted during the years ended February 28, 2001, February 29, 2000 and February 28, 1999 was $.95, $.84 and $.13,
respectively.

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

February 28, 2001

February 29, 2000

February 28, 1999Net income (loss)As reported

$
1,997,004

$
(578,171
)
$
2,705,002Pro forma

$
1,980,696

$
(612,297
)
$
2,677,632Basic income (loss) per shareAs reported

$
.20

$
(.10
)
$
.37Pro forma

$
.20

$
(.10
)
$
.36Diluted income (loss) per shareAs reported

$
.15

$
(.10
)
$
.24Pro forma

$
.15

$
(.10
)
$
.24


F22

---

The following table summarizes information about stock options and warrants outstanding at February 28, 2001:

Outstanding

ExercisableWeighted Average

Weighted AverageRange of
Exercise Prices

Shares

Life (Months)

Exercise Price

Shares

Exercise Price$0.01

2,353,123

Unlimited

$
0.01

2,353,123

$
0.01$1.00-$1.50

478,257

14


1.14

478,257


1.14$2.00

817,500

16


2.00

817,500


2.00$2.25-$4.00

2,192,282

48


3.34

1,620,611


3.38$4.01-$4.50

3,393,299

88


4.18

1,644,694


4.36$6.00-$6.31

463,267

26


6.22

463,267


6.229,697,728



$
2.74

7,377,452

$
2.40


10. Leases

The Company is currently leasing its corporate office under a noncancelable lease agreement, which expires in May 2002. The Company is also obligated
under various other lease agreements for other locations (primarily donor centers) through six of its wholly-owned subsidiaries. Two donor center locations are leased on a
month-to-month basis. The remaining leases expire at various dates through November 2010. All of the leases have renewal options.

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

Fiscal year ended

Amount2002

$
2,218,0442003


1,919,6252004


1,252,3522005


665,8622006


283,792Thereafter


1,023,842$
7,363,517


Rent
expense amounted to $2,148,299, $1,736,845 and $1,534,419 for the years ended February 28, 2001, February 29, 2000 and February 28, 1999, respectively.

F23

---

11. Income Taxes

The provision for income taxes consists of the following:

2001

2000

1999Current tax provisionsU. S. Federal

$
64,009

$


$
State


200,181


87,598


17,014Total current provision


264,190


87,598


17,014Deferred tax provisionU. S. Federal and state





(44,600
)

Provision for income taxes


264,190


42,998


17,014Tax benefit from cumulative change in accounting method





(44,600
)

Provision for income taxes, before cumulative change in accounting method

$
264,190

$
87,598

$
17,014


At
February 28, 2001, the Company has federal tax net operating carryforwards of $2,383,000 expiring on various dates through 2019.

The
provision based on income before taxes differs from the amount obtained by applying the statutory federal income tax rate to income before taxes as follows:

2001

2000

1999Computed provision for taxes based on income at a statutory rate of 34%

34.0
%
(34.0
%)
34.0
%Permanent differences

.9



State taxes

8.8

18.7

.6Valuation allowance

(32.0
)
34.0

(34.0
)Effective tax rate

11.7
%
18.7
%
.6
%


Deferred
income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used
for income tax

F24

---

purposes. Significant components of the Company's deferred tax assets (liabilities) as of February 28, 2001 and February 29, 2000 are as follows:

2001

2000Current deferred tax assets (liabilities)Allowance for doubtful accounts

$
198,000

$
Inventory reserve


155,000


666,000Accrued benefits


36,000


54,000State taxes


9,000


11,000Other


15,000


15,000Total current deferred tax assets


413,000


746,000Noncurrent deferred tax assets (liabilities)Net operating loss carryforwards


830,000


1,211,000AMT credit carryforwards


64,000


Depreciation and amortization


(1,307,000
)

(1,220,000
)Net noncurrent deferred tax assets (liabilities)


(413,000
)

(9,000
)Net deferred tax assets





737,000Valuation allowance





(737,000
)Net deferred tax assets (liabilities)

$


$



Based
upon historical earnings, in 2000 management was unable to determine that it was more likely than not that the deferred tax assets would be realized, therefore a 100% valuation
allowance was established.

12. Commitments

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



F25

---

13. Concentration of Credit Risk, Significant Customers and Sales Commitments

During the years ended February 28, 2001 and February 29, 2000, the Company sold its primary product, plasma, on credit mainly to fractionators
in the health care industry. The plasma is processed into various immune enhancing and other pharmaceutical products which are then sold for therapeutic applications.

Plasma
collection, storage, labeling and distribution activities are subject to strict regulation and licensing by the U.S. Food and Drug Administration ("FDA"). The Company's
facilities are subject to periodic inspection by the FDA. 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.

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 years ended February 28, 2001, February 29, 2000 and February 28, 1999, approximately 47%, 42% and 32%, respectively, of the net sales were to Grupo
Grifols, S.A., which is located in Spain, and about 13%, 11% and 20%, respectively, were to Alpha Therapeutics. In Fiscal 2001, Aventis Bio-Services represented 10% of net sales. No other customer
represented ten percent or more of net revenue. Accounts receivable due from Grupo Grifols, S.A. represented approximately 52% of accounts receivable as of February 28, 2001 and 49% of accounts
receivable as of February 29, 2000.

Information
regarding our geographical concentration is as follows:

Fiscal Years Ended2001

2000Net SalesUnited States

$
30,374,268

$
28,415,723Europe (primarily Spain)


30,897,015


28,043,132Other


8,180,715


5,581,197$
69,451,998

$
62,040,052


14. Related Party Transactions

The Company has had various transactions with related parties. These transactions are described in Notes 4, 7, 9, and 12. The Company had sales of $629,547 to
a related party in 1999. There were no other related party transactions during the fiscal years ended February 28, 2001 and February 29, 2000.

F26

---

15. Other Income

On February 29, 2000, pursuant to the terms of an Asset Purchase Agreement, the Company sold substantially all of CTI's operating assets in an all cash
transaction for $17,406,515. In conjunction with this transaction, $5,406,515 was placed in escrow, of which $3,731,515 was converted to cash in March 2000. The remaining balance of $1,675,000
was converted to cash in March 2001. This sale resulted in a gain of $269,212, which is included in other income. During the years ended February 29, 2000 and February 28, 1999,
revenues for CTI were $6,943,730 and $6,331,768 respectively.

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

16. Earnings (loss) per Share

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

|                                                                                                    |  | Fiscal Years Ended |           
|--------------------------------------------------------------------------------------------------- |  | ------------------ | ----------
|
|Basic earnings (loss) per share                                                                     |  |                    |           
|Net income before cumulative effect of change in accounting method                                  |  | $                  | 1,997,004 
|Dividends on preferred stock                                                                        |  |                    | 225,000   
|                                                                                                    |  |                    |           
|Net income available to common stockholders before cumulative effect of change in accounting method |  |                    | 1,772,004 
|Cumulative effect of change in accounting method                                                    |  |                    | 0         
|                                                                                                    |  |                    |           
|Net income (loss) available to common stockholders (numerator)                                      |  | $                  | 1,772,004 
|                                                                                                    |  |                    |           
|Weighted average common shares outstanding (denominator)                                            |  |                    | 8,863,344 
|                                                                                                    |  |                    |           
|Basic earnings (loss) per share                                                                     |  | $                  | 0.20      
|                                                                                                    |  |                    |           
|Diluted earnings (loss) per share                                                                   |  |                    |           
|Net income (loss) available to common stockholders (numerator)                                      |  | $                  | 1,772,004 
|                                                                                                    |  |                    |           
|Weighted average common shares outstanding                                                          |  |                    | 8,863,344 
|Weighted average warrants/options outstanding                                                       |  |                    | 4,996,167 
|Weighted average other dilutive securities                                                          |  |                    | 0         
|Stock acquired with proceeds                                                                        |  |                    | (1,840,610
|                                                                                                    |  |                    |           
|Weighted average common shares and assumed conversion outstanding (denominator)                     |  |                    | 12,018,901
|                                                                                                    |  |                    |           
|Diluted earnings (loss) per share                                                                   |  | $                  | 0.15      
|                                                                                                    |  |                    |           

Diluted
earnings per share for the year ended February 28, 2001 has been calculated excluding the effect of other dilutive securities as their inclusion would be antidilutive.
Diluted earnings (loss) per

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share for the year ended February 29, 2000 has been calculated excluding the effect of potentially dilutive securities as their inclusion would be antidilutive.

17. Segment Information

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

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

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

The
Company's segment information as of and for the years ended February 28, 2001, February 29, 2000 and February 28, 1999 is as follows:

Therapeutic
Segment

Diagnostic
Segment

Total
Segments

Corporate
and Other

Consolidated
TotalNet SalesThird PartyFy 1999

$
36,596,599

$
12,413,790

$
49,010,389

$


$
49,010,389Fy 2000


46,897,523


15,142,529


62,040,052





62,040,052Fy 2001


58,975,858


10,476,140


69,451,998





69,451,998Income from Joint VentureFy 1999





687,818


687,818





687,818Fy 2000





730,951


730,951





730,951Fy 2001














Net SalesInter-SegmentFy 1999


2,871,653


895,189


3,766,842





Fy 2000


3,230,690


51,840


3,282,530





Fy 2001


10,197,570





10,197,570








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Gross ProfitFy 1999


3,944,378


6,625,436


10,569,814





10,569,814Fy 2000


7,145,894


4,796,177


11,942,071





11,942,071Fy 2001


6,987,921


5,444,522


12,432,443





12,432,443Operating IncomeFy 1999


2,823,535


5,007,803


7,831,338


(1,441,684
)

6,389,654Fy 2000


5,911,320


1,379,372


7,290,692


(2,218,223
)

5,072,469Fy 2001


3,305,219


4,490,171


7,795,390


(1,615,694
)

6,179,696Interest ExpensenetFy 1999


157,946





157,946


4,136,356


4,294,302Fy 2000


31,323





31,323


5,131,881


5,163,204Fy 2001


14,058





14,058


4,300,298


4,314,356Other incomeFy 1999


10,408


7,718


18,126


608,538


626,664Fy 2000


609


9,112


9,721


310,344


320,065Fy 2001


238,390


4,310


242,700


153,154


395,854Taxes on IncomeFy 1999


17,014





17,014





17,014Fy 2000


87,598





87,598





87,598Fy 2001


264,190





264,190





264,190Cumulative Effect of Change in Accounting MethodFy 1999














Fy 2000


(505,585
)

(214,318
)

(719,903
)




(719,903
)Fy 2001














Net IncomeFy 1999


2,675,997


5,015,521


7,691,518


(4,986,516
)

2,705,002Fy 2000


5,287,423


1,174,166


6,461,589


(7,039,760
)

(578,171
)Fy 2001


3,265,361


4,494,481


7,759,842


(5,762,838
)

1,997,004Identifiable AssetsFy 1999


36,962,338


17,769,324


54,731,662


9,844,600


64,576,262Fy 2000


46,943,953


13,668,422


60,612,375


8,966,540


69,578,915Fy 2001


53,553,578


14,259,289


67,812,867


7,463,546


75,276,413Depreciation and AmortizationFy 1999


844,591


577,097


1,421,688


402,042


1,823,730Fy 2000


1,356,113


609,058


1,965,171


238,486


2,203,657Fy 2001


1,648,139


234,908


1,883,047


244,203


2,127,250Capital ExpendituresFy 1999


1,349,818


1,342,777


2,692,595


295,520


2,988,115Fy 2000


3,296,688


609,103


3,905,791





3,905,791Fy 2001


1,227,488


146,382


1,373,870





1,373,870


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

F29

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certain notes receivable, deferred bond discount and other assets not specifically allocable to either segment.

18. Subsequent Events

In April 2001, the Company obtained a new credit facility for $20 million with Sanwa Bank of California and Brown Brothers Harriman & Co. Draws
under the line of credit are limited to (a) 85% of qualifying accounts receivable plus (b) the lesser of 45% of qualifying inventory or $10,000,000. Interest accrues at LIBOR plus
21/2 percent or the bank's Reference Rate plus 1/2 percent, depending upon which option is chosen at each date an amount is drawn under the line of credit. The line of
credit matures on January 31, 2003 and is secured by all the assets of the Company. The line of credit agreement contains various covenants relating to: maintaining minimum tangible net worth,
leverage ratio, net profit and fixed charge coverage ratio and restrictions on additional indebtedness, mergers, acquisitions, and dividends. The holders of the subordinated debentures have agreed to
be subordinate to the new credit facility.

In
March 2001, the Company issued warrants to purchase a total of 1,320,382 shares of common stock at $.01 to the holders of the senior subordinated debentures in compliance with the
anti-dilution provisions of the Securities Purchase Agreement. The fair value of these warrants of $3,581,769 will be recorded as additional deferred bond costs and will be amortized over
the term of the debt.

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19. Summarized Quarterly Financial Data (Unaudited)

Summarized quarterly data was as follows.

|                                                                                  |                                   | Three months ended
|--------------------------------------------------------------------------------- | --------------------------------- | ------------------
|
|Year ended February 28, 2001                                                      |                                   |                   
|                                                                                  | Total revenue                     |                   
|                                                                                  | Net income from operations        |                   
|Income before income taxes and cumulative e effect of change in accounting method |                                   |                   
|Net income available to common shareholders                                       |                                   |                   
|Net income per common share(1)                                                    |                                   |                   
|                                                                                  | Basic                             |                   
|                                                                                  | Diluted                           |                   
|Year ended February 29, 2000                                                      |                                   |                   
|                                                                                  | Total revenue                     |                   
|                                                                                  | Net income (loss) from operations |                   
|Income before income taxes and cumulative f effect of change in accounting method |                                   |                   
|Net income (loss) available to common shareholders                                |                                   |                   
|Net income (loss) per common share(1)                                             |                                   |                   
|                                                                                  | Basic                             |                   
|                                                                                  | Diluted                           |                   

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20. Collaboration Agreement with Quest Diagnostics

On January 24, 2001, the Company signed a collaboration agreement with Quest Diagnostics whereby the Company will recruit donors with rare serologic findings.
This collaboration will result in the collection of plasma specimens containing various disease state antibodies from voluntary donors for use as controls and standards by in vitro diagnostic
manufacturers. In connection with the signing of this agreement, the Company issued Quest Diagnostics a warrant to purchase 1,758,605 shares of SeraCare common stock at $4.01 per share. This warrant
vests over 4 years. In addition, Quest Diagnostics received the right to nominate one member to the Company's board of directors.

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