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                UNITED STATES SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

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

                                  FORM 10-KSB

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

FOR THE FISCAL YEAR ENDED: FEBRUARY 28, 1999
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

FOR THE TRANSITION PERIOD FROM: ____________ TO ____________

                         COMMISSION FILE NUMBER 0-21781

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

                                 SERACARE, INC.

                 (Name of Small Business Issuer in its charter)

<TABLE>
<S>                  <C>
     DELAWARE            95-4343492
     (State of        (I.R.S. Employer
  Incorporation)     Identification No.)

 1925 CENTURY PARK
 EAST, SUITE 1970
   LOS ANGELES,
    CALIFORNIA
    (Address of             90067
     principal           (Zip code)
executive offices)
</TABLE>

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

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

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

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

                         Common Stock, $.001 Par Value

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

                                (Title of Class)

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

    Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. /X/

    The issuer's revenue for its fiscal year ended February 28, 1999 was
$49,698,207.

    As of April 30,1999, the aggregate market value of the issuers voting shares
held by non-affiliates was approximately $27,941,000 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, 1999, the issuer had 7,644,418 shares of its common stock,
$.001 par value issued and outstanding.

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

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                                     PART I

ITEM 1. BUSINESS

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

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

DESCRIPTION OF THE BUSINESS

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

    COMPANY HISTORY.  The Company as it is currently organized has evolved over
the last three years since February 6, 1996, when a new management team with a
strategic plan for expansion and growth began guiding the Company. During that
three year period, the Company has grown from six plasma collection centers to a
total of thirty two centers as of February 28, 1999, both through acquisition
and by establishing new startup centers. In addition, the Company made two key
acquisitions in Western States Group, Inc. (herein referred to as "Western
States") and Consolidated Technologies (herein referred to as "CTI"); and
recruited some of the leading experts in the industry to join the board of
directors and direct the operations of the Company's three divisions. SeraCare,
Inc. went public in May 1996 on the OTC Bulletin Board and is now listed on the
American Stock Exchange under the symbol SRK.

    PRINCIPAL BUSINESS OPERATIONS.  Organizationally, the Company consists of
three divisions: Consolidated Technologies Division; Western States Plasma
Division; and Biologics Division. With the acquisitions of Western States and
CTI, the Company became a fully integrated collector; manufacturer and marketer
of plasma based diagnostic products and tests. Western States has provided
expanded worldwide marketing with its domestic customer base and an extensive
European and Asian presence. In addition, the Company's Biologics Division
continues to be a factor in the business of collecting and selling source plasma
to manufacturers of pharmaceutical and diagnostic products (called
Fractionators). While the primary product of the Company's Biologics Division
continues to be source plasma, the Company also collected and sold
Cytomegalovirus Antibody Plasma (CMV), Tetanus Antibody Plasma and HbSag
(hepatitus positive) plasma during the fiscal year ended February 28, 1999. 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

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hemophiliac victims), normal serum albumin (used for shock, trauma and burn
victims), diagnostic test kits for hepatitis and allergies, and blood bank
typing reagents. The Company also initiated various other specialty plasma
programs during the period, and while these programs are only in the early
stages of development, initial results coordinated through the efforts of
Western States and CTI have been promising.

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

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

CURRENT OPERATIONS.

    BIOLOGICS DIVISION.  The Biologics Division currently conducts its business
through five wholly-owned subsidiaries: AVRE, Inc., a Nevada corporation, Binary
Associates, Inc., a Colorado corporation, BHM Labs, Inc., an Arkansas
corporation, American Plasma, Inc. a Texas corporation, and SeraCare
Acquisitions, Inc., a Nevada corporation. During FY 1998, the Biologics
Division: opened newly established centers in Pasco, Washington, Toledo, Ohio
and Pocatello, Idaho; became fully licensed by the FDA and QPP certified in a
startup center in Clearfield Utah; completed an Asset Exchange with
Serologicals, Inc. whereby the Company acquired Reno Plasma, Inc. located in
Reno, Nevada and Simi Biological Resources, Inc. plasma collection center
located in Ft. Smith Arkansas and $250,000 in cash in exchange for a two (2)
plasma collection centers located in Colorado Springs, Colorado and one center
located in Pueblo, Colorado. On November 29, 1997, the Biologics Division
completed an Asset Purchase Agreement whereby it acquired five operating plasma
collection centers from American Plasma Management, Inc. which were located in
South Bend, Indiana; Kalamazoo, Michigan; Boise, Idaho; Reno, Nevada; and Salt
Lake City, Utah. During FY 1999, the Biologics Division opened new centers in
Wilmington, Delaware, Savannah, Georgia, Port Arthur, Texas, Lancaster,
Pennsylvania, and Reading, Pennsylvania; became fully licensed by the FDA and
QPP certified in startup centers in Raleigh, North Carolina, Macon, Georgia and
Toledo, Ohio; completed the acquisition of a center in Baton Rouge, Louisiana;
and, effective July 6, 1998, completed the acquisition of American Plasma Inc.
which added eleven mature centers. As of April 30, 1999, the Pasco and Reading
centers 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 locations ability to comply with FDA
Regulations. Such centers are however, precluded from selling any of the
collected plasma until final approval of its license application. Historically,
it has taken approximately twelve to eighteen months from date of filing to
obtain final FDA approval on a new license application. The Company's customers
require both an FDA license and QPP Certification under all current contracts.
QPP Certification for such centers is requested when the FDA license application
has been approved and can take six to eight weeks to obtain.

    As of April 30, 1999, the Company had thirty two plasma collection centers
in operation which were located in: Las Vegas, Nevada; Clarkesville, Tennessee;
Phoenix, Arizona; Ft. Smith, Arkansas; Clearfield, Utah; Raleigh, North
Carolina; Pasco, Washington; Toledo, Ohio; Macon, Georgia; Savannah, Georgia;
Reno, Nevada; 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;

                                       3
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Pasadena Texas; Mesa, Arizona; Phoenix, Arizona; Baton Rouge, Louisiana; Port
Arthur, Texas; Wilmington, Delaware; Lancaster, Pennsylvania; and Reading,
Pennsylvania. During the fourth quarter of FY 1999, such centers were collecting
plasma at an annualized rate of about 530,000 liters.

    The Company is also in the initial stages of establishing four new centers
which are expected to be operational during the next two to six months.

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

    During the fiscal year ended February 28, 1999 about 54 percent of the
revenue derived from the Biologics Division was from Grupo Grifols, S.A. the
leading fractionator in Spain. Effective January 1, 1999, Grupo Grifols, S.A.
and the Company signed a new two-year contract which extends through the year
2000 and expands the plasma requirements by one-third for the year 2000. About
20 percent of the revenue derived from plasma collection operations was from
sales to Alpha Therapeutic, a subsidiary of Yashi Tomi Pharmaceutical ("Alpha").
Alpha and the Company signed new two-year agreements covering production from
ten of the centers acquired on July 6, 1998. About 11 percent of revenue derived
from plasma collection operations was from North American Biologics, Inc.
("NABI"). Startup centers including Clearfield, Utah; Raleigh, North Carolina;
Macon, Georgia; Toledo, Ohio; and Pasco, Washington were contractually committed
to North American Biologics, Inc. contingent upon final approval of the FDA
license applications and QPP certifications for those centers. The Company
received final FDA license approval and QPP certification for Clearfield during
FY 1998, for Macon and Raleigh during FY 1999, and for Toledo in March 1999. As
of April 30, 1999, final FDA approval and QPP certification was pending for
Pasco. About 15 percent of plasma revenue was from other entities including
inter-divisional sales.

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

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

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

    The Western States Plasma Division operates through Western States Group,
Inc., and is located in Oceanside, California. Western States is an FDA licensed
worldwide marketing organization for therapeutic based blood plasma products,
diagnostic test kits, specialty plasma and bulk materials, with offices in
Helsinki, London, Milan, Tel Aviv, Seoul and Hong Kong. Western States is a
vendor-approved supplier to 507 pharmaceutical and other healthcare companies,
including being listed as an Exclusive Supplier in many customers regulatory
applications with the FDA. Western States has also helped certain customers
develop internal protocols and standards used to establish quality control
benchmarks and has performed various other value-added services for its'
customers in order to establish solid relationships. This

                                       4
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Division's primary focus is on multinational biotech, pharmaceutical and
technology products. Western States generally sells its plasma under purchase
order agreements, but is also active in the spot market. During FY 1999, Western
States also established itself as a major supplier of plasma based products to
several major domestic pharmaceutical companies.

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

    The Consolidated Technologies Division operates through SeraCare Technology,
Inc., a Nevada corporation and consists essentially of the operating assets
acquired in the Consolidated Technologies, Inc. transaction. Located in Austin,
Texas, Consolidated Technologies is a biomedical company which currently
manufacturers over 200 plasma based diagnostic products consisting primarily of
proficiency test specimens, controls and calibrators. Consolidated Technologies
supplies two of the leading proficiency testing services in the United States
who use these products to test members of their respective organizations.
Laboratories and other healthcare companies use controls, calibrators and
standards to assess the accuracy and precision of laboratory test methods and
instruments. Consolidated Technologies' products include biological materials
and private-labeled products for manufacturing or laboratory use. Products have
applications in most laboratory test disciplines, including serum chemistry,
urine chemistry, toxicology, immunology/serology, coagulation, and infectious
disease. In joining SeraCare, Consolidated Technologies has established itself
as a diagnostic products manufacturer with an in-house supply of specialty
plasma via the Company's Biologics Division. This "Closed Loop" cycle from donor
to end product is expected to significantly improve quality control, turnaround
time and the cost of delivering the final product to customers. During FY 1999,
CTI announced the formation of Innovative SeraCare, a joint venture whereby CTI
will manufacture diagnostic controls and calibrators for clients of the joint
venture. Innovative Diagnostics functions as the marketing group for the joint
venture. Initial multi-year contracts from customers of the joint venture are
estimated at between $10--$15 million.

COMPETITION

    The Company's Biologics Division competes for donors with pharmaceutical
companies which collect plasma for their own use, several other commercial
plasma collection companies, and non-profit organizations, such as the American
Red Cross and community blood banks, which solicit the donation of whole blood.
A number of these competitors have access to greater financial, marketing and
other resources than the Company. If the Company is unable to maintain and
expand its donor base, its business and future prospects will be adversely
affected.

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

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

                                       5
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TRADEMARKS

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

REGULATORY ISSUES

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

FEDERAL GOVERNMENT

    FOOD AND DRUG ADMINISTRATION:

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

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

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

       informed consent,
       medical supervision,
       donor suitability,
       collection of blood for source plasma,
       plasmapheresis (the actual procedure of collecting plasma),
       required laboratory tests,
       processing of plasma,
       general requirements,
       labeling of containers,
       manufacturing responsibility,
       records,
       reporting of donor reactions,
       modification of source plasma and
       shipping and storage of plasma.

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

    To ensure compliance, the FDA, through their various regional offices,
conduct unannounced inspections of all plasma and blood centers. These
inspections are usually annual and the results are kept on record at CBER, FDA.
The inspectors generally examine records, equipment, facilities, review the
training documents for personnel, review the physical examination procedures and
observe the various procedures being accomplished. These inspections typically
last from two to five days and may involve

                                       6
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more than one inspector. The observations of an inspector are recorded on a Form
483, a copy of which is given to the local manager. These observations must be
responded to within a two week period, detailing what, if any, actions have been
taken to correct the observation. The regional office generally makes a
determination together with CBER as to whether these responses properly address
the issues. If the observations were considered serious enough; or, if the
answers were not considered adequate, CBER will issue a REGULATORY LETTER. This
is considered a "red flag" in the industry and if not responded to in a timely
and appropriate manner, can result in CBER taking further action, including
actually closing the center.

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

    SeraCare has established the position of "Director of Compliance". This
position serves as the communication link between the company and the FDA. The
Director of Compliance makes periodic unannounced compliance inspections at the
centers, simulating the FDA inspections. Fractionators (manufacturers to whom we
sell the plasma) also conduct compliance inspections in our centers on an annual
basis. Because some of our products find their way into Europe and Asia, the
Company is also periodically inspected by members of other country's regulatory
equivalent to the FDA. The focus of all inspections and review processes is to
ensure that each of the Company's centers are in compliance with all customer,
European or FDA regulations that protect the integrity of the products and the
safety of the donors.

CLINICAL LABORATORY IMPROVEMENT ACT OF 1988:

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

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

OCCUPATIONAL SAFETY AND HEALTH ADMINISTRATION:

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

STATE GOVERNMENTS

    NEVADA:

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

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ALL OTHER STATES

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

INDUSTRY STANDARDS

    AMERICAN BLOOD RESOURCES ASSOCIATION:

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

       Donors must have permanent addresses with 150 miles of the center.
       The rates of viral marker tests must be within set national limits.
       A record of all employee training must be available along with the
       training procedure.
       A program of donor drug testing must be implemented.
       All new donors must be checked with the National Donor Deferral Registry.
       The facility must meet all published standards, including location and
       neighborhood.

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

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

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

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                          THE INDUSTRY AND THE MARKET

THE PRODUCT

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

PLASMA DERIVED PRODUCTS

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

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

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

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

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

    Donor safety is very important to the Company. Accordingly, operating
procedures require that donors have the process thoroughly explained, including
the hazards and side effects and that an informed

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consent form be signed by each donor The Company does extensive training of
employees in order to insure the safety of its donors.

INJECTABLE PLASMA PRODUCTS

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

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

    - to treat shock due to trauma or hemorrhage;

    - to treat fluid loss due to severe burns;

    - in cardiovascular surgery;

    - to treat liver and kidney diseases; and

    - as a carrier for many other injectable solutions.

    IMMUNE GLOBULINS, which are used to strengthen the immune system in order to

    fight off common diseases such as:

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

    other immune deficiencies;

    - Hepatitis B;

    - Tetanus;

    - Rabies, whooping cough, measles and polio; and

    - Other immune related diseases.

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

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

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

                                       10
<PAGE>
NON-INJECTABLE PLASMA PRODUCTS

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

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

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

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

SPECIALTY PLASMAS

    Specialty Plasmas generally contain high concentrations of specific
antibodies and are used primarily to manufacture immune globulin therapeutic
products which bolster the immunity of patients to fight a particular infection
or to treat certain immune system disorders. Following advances in intravenous
therapy in the mid-1980s, use of specialty plasmas for therapeutic purposes
significantly increased. Among the current uses for specialty plasmas are the
production of products to prevent hepatitis, Rh incompatibility in newborns,
tetanus and rabies. Specialty plasmas are also widely used for diagnostic and
tissue culture purposes. Depending on the rarity of the antibody or medical
history of the donor, the pricing for specialty plasmas currently ranges from
$95 to about $6,000 per liter. The average spot price (free market price) of
source plasma is currently approximately $93. Most specialty plasma is derived
serendipitously (not the result of stimulation) which poses no abnormal risk to
the plasma collector.

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

                                       11
<PAGE>
                              THE PLASMA INDUSTRY

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

PLASMA MARKET

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

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

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

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

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

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

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

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

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

                                       12
<PAGE>
FRACTIONATORS

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

    The four leading fractionators in the United States are:

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

CENTEON PHARMACEUTICALS       a subsidiary of Rhone-Poulenc-Rorer, a French
                              government owned pharmaceutical conglomerate

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

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

                               CURRENT OPERATIONS

CURRENT PLASMA CENTERS

    As of April 30, 1999, the Company had thirty two plasma collection centers
in operation which were located in: Las Vegas, Nevada; Clarkesville, Tennessee;
Phoenix, Arizona; Ft. Smith, Arkansas; Clearfield, Utah; Raleigh, North
Carolina; Pasco, Washington; Toledo, Ohio; Macon, Georgia; Savannah, Georgia;
Reno, Nevada; South Bend, Indiana; Kalamazoo, Michigan; Boise, Idaho; Pocatello,
Idaho; Salt Lake City, Utah; Amarillo, Texas; Beaumont, Texas; Longview, Texas;
Houston, Texas (4); Casa Grande, Arizona; Pasadena Texas; Mesa, Arizona;
Phoenix, Arizona; Baton Rouge, Louisiana; Port Arthur, Texas; Wilmington,
Delaware; Lancaster, Pennsylvania; and Reading, Pennsylvania. The Company is
also in the initial stages of establishing four new centers which are expected
to be operational during the next two to six months. During the fourth quarter
of fiscal year 1999, such centers were collecting plasma at an annualized rate
of about 530,000 liters.

    As of May 1, 1998, the Biologics Division had seventeen plasma centers in
operation and was collecting plasma at an annualized rate of about 285,000
liters.

    The Company collected approximately 423,000 liters of plasma during the
fiscal year ended February 28, 1999 an increase of 96% from the 215,600 liters
of plasma collected in the same 1998 period. The Company collected approximately
142,000 liters during the same 1997 period.

DONORS

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

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

                                       13
<PAGE>
MARKETING/DONOR RECRUITMENT

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

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

    - by providing outstanding customer service to its donors.

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

    - by encouraging regular participation in its donor programs.

    - by providing incentives to encourage donors to return.

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

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

DONOR PROCESSING

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

QUALITY AND OPERATIONAL CONTROLS

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

TRAINING

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

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

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

EMPLOYEES

    As of May 1, 1999, the Company employed 543 full time employees and 48 part
time employees. The Biologics Division employed 476 full time and 45 part time
employees. Each location in the Biologics Division has at least one nurse and/or
nurse substitute and the balance are cross-trained as technicians, receptionists
and phlebotomists. The Western States Plasma Division employed 18 full time
employees and one part time employee. The Consolidated Technologies Division
employed 49 full time employees and two part time employees. Corporate office
consisted of seven full time employees as of May 1, 1999.

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

ITEM 2. PROPERTIES

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

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

ITEM 3. LEGAL PROCEEDINGS.

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

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

    Not Applicable.

                                       15
<PAGE>
                                    PART II

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

(A) MARKET INFORMATION:

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

<TABLE>
<CAPTION>
                                                                                                          HIGH          LOW
                                                                                                          -----         ---
<S>                                                                                                    <C>          <C>
For the period March 1, 1997 through May 31, 1997....................................................       3 1/4            2
For the period June 1, 1997 through August 31, 1997..................................................       5 1/8        1 7/8
For the period September 1, 1997 through November 30, 1997...........................................      6 7/16        2 1/2
For the period December 1, 1997 through February 28, 1998............................................      7 5/16       6 1/16

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

(B) HOLDERS:

<TABLE>
<CAPTION>
                                                                                             APPROXIMATE NUMBER OF
                                                                                              RECORD HOLDERS (AS
TITLE OF CLASS                                                                                OF APRIL 30, 1999)
------------------------------------------------------------------------------------------  -----------------------
<S>                                                                                         <C>
Common Stock, $.001 par value.............................................................             400(1)
</TABLE>

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

(1) Certain of the Company's shareholders hold shares under "street name" and
    are not identified individually. Accordingly, the Company estimates that it
    has a total of approximately 500 beneficial shareholders.

(C) DIVIDENDS:

    The Company has never paid cash dividends on its Common Stock. Pursuant to
the terms and conditions of the $16 million subordinated debenture and the $17
million senior credit facility, the Company may not declare or pay dividends,
except that SeraCare, Inc. may issue warrants, options, stock, rights or any
other form of equity security as a dividend. The declaration and payment of
dividends in the form of equity securities by the Company's board of directors
will depend, among other factors, on earnings as well as the operating and
financial condition of the Company. At the present time, the Company does not
expect to declare or issue any dividends within the foreseeable future.

(D)  In December 1998, the Company sold 22,500 shares of Series C Preferred
Stock and issued warrants to purchase 281,500 shares of common stock at $4.50
per share for $2,250,000. The shares are convertible into 500,000 shares of
common stock. In conjunction with this private placement, the Company paid
$135,000 and issued 25,000 shares of common stock as a placement fee.

                                       17
<PAGE>
ITEM 6. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
  OF OPERATIONS.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

    Except for historical information contained herein, the statements in this
report (including without limitation, statements indicating that the Company
"expects," "estimates," "anticipates," or "believes" and all other statements
concerning future financial results, product offerings or other events that have
not yet occurred) are forward-looking statements that are made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995,
Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A
of the Securities Act of 1933, as amended. Forward-looking statements involve
known and unknown factors, risks and uncertainties which may cause the Company's
actual results in future periods to differ materially from forecasted results.
Those factors, risks and uncertainties include, but are not limited to: the
positioning of the Company's products in the Company's market segment; the
Company's ability to effectively manage its various businesses in a rapidly
changing environment; new competition for donors and customers; the inability of
the Company to obtain FDA approval of newly established centers; and the
introduction of synthetic products which could eliminate the need for plasma
products.

                             RESULTS OF OPERATIONS

      FISCAL YEAR ENDING FEBRUARY 28, 1999 AS COMPARED TO FISCAL YEAR 1998

REVENUE

    Revenue increased by $37,287,237 to $49,698,207, an increase of three
hundred percent. The primary factors reflected in those results were: the
acquisition of the Western States Plasma Division and the Consolidated
Technologies Division effective January 1, 1998, which added $9.6 million and
$5.6 million respectively to revenue during the period and the increased revenue
from plasma collections which added $22.1 million to revenue. The Company
collected about 423,000 liters of plasma during the year ended February 28, 1999
compared to about 215,000 for the comparable prior period or an increase of
ninety eight percent. The increased volumes were the result of: the acquisition
of twelve mature centers during the current year; the acquisitions of the five
operating plasma collection centers from American Plasma Management, Inc. in
November 1997; and, the revenue generated by the FDA approval of newly
established centers in Macon and Raleigh. The newly established center in Pasco
was operating under a Reference Number from the FDA during 1998 and was thus not
allowed to sell or ship plasma during the period, although they were collecting
plasma during the period.

GROSS PROFIT

    Gross profit increased by $8.9 million or 546 percent in 1999 to $10,569,814
primarily due to the acquisitions of the Western States Plasma Division and the
Consolidated Technologies Division effective January 1, 1998 which contributed
$3,769,000 and $3,928,000, respectively. Also contributing to the increase in
gross margin was the Biologics Division which contributed $2,873,000 to gross
margin as a result of an increase in revenue which was mostly offset by
increased operating costs. As a result of the aforementioned, the gross profit
percentage increased from 13.2% in fiscal 1998 to 21.3% in fiscal 1999.

GENERAL AND ADMINISTRATIVE EXPENSES

    General and Administrative expenses for 1999 were higher by $2,700,864 or
182 percent. This increase was primarily due to the acquisition of the Western
States Plasma Division and Consolidated Technologies Division effective January
1, 1998; higher legal and professional fees; increased travel expenses;
increased salary and related benefits expenses; and, higher general insurance
costs.

                                       18
<PAGE>
INTEREST EXPENSE/NON-CASH INTEREST EXPENSE

    Combined interest including non-cash interest expense increased by
$3,761,197 in fiscal 1999 as a result of the increased debt during the year,
including: the senior debt facility which was initially established at $10.0
million in April 1998 and was subsequently increased to $17.0 million in
December 1998; the $16 million in subordinated debentures issued February 1998;
various bridge loans in conjunction with acquisitions; and the $600,000 note
associated with the purchase of the five operating plasma collection centers on
November 29, 1997. The non-cash interest for the current year consists of the
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 $534,000 from the sale of certain
properties during the year. Other income for the prior year includes $801,215
from a one-time non-operating gain realized from the sale of salvage plasma
material.

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.

NET INCOME

    As a result of the above, there was a net income for the year ended February
28, 1999 of $2,705,002 compared to $453,853 in 1998.

                                       19
<PAGE>
                        LIQUIDITY AND CAPITAL RESOURCES

    As of February 28, 1999, the Company's current assets exceeded current
liabilities by, $9,723,584 compared to $9,444,126 on the year earlier date. The
use of cash during the year was consistent with the Company's strategic plan for
strong growth and the Company feels that progress has been made during the
period. With a continuation of a strategic focus on growth, the short-term
impact on the Company's earnings and cash flow has been to defer profitability
and positive cash flows. The Company believes, however, that the acquisitions of
American Plasma, Inc., Western States Group, Inc., the operating assets of
Consolidated Technologies, Inc., the November 1997 acquisition of centers
located in: Salt Lake City, Utah; Reno, Nevada; Kalamazoo, Michigan; South Bend,
Indiana; and Boise, Idaho; and the continuing ramp-up of the newly established
centers located in: Pasco, Washington; Toledo, Ohio; Raleigh, North Carolina;
Macon, Georgia; Clearfield, Utah; Pocatello, Idaho; Savannah, Georgia;
Wilmington, Delaware; Port Arthur, Texas; Lancaster, Pennsylvania; and, Reading,
Pennsylvania represent substantial progress toward becoming a major supplier of
plasma and plasma products to the diagnostic and therapeutic industry. The
Company believes that industry wide, plasma pricing and plasma products demand
will continue to strengthen in future periods as a result of the evolving
shortage of plasma and the continued expansion of the uses and demand for plasma
based products. In the Biologics Division, the Company opened new centers on
April 1, 1997, May 1, 1997, September 23, 1997, March 1, 1998, June 1998,
September 1998, January 1999 and March 1999 and is planning four additional
openings within the next six months. In addition, the Company acquired five (5)
operating plasma centers in November 1997and eleven operating plasma centers in
July 1998. As a result of this expansion, the Company's current annualized rate
for collections is 530,000 liters of plasma compared to 285,000 a year ago. New
plasma contracts with Grupo Grifols and Alpha Therapeutic have combined with
more favorable pricing on softgoods and testing to generate improved profit
margins. Partially offsetting those benefits, has been the establishment of a 60
day hold on plasma shipments to Spain and a slower than expected process of
receiving final FDA license approval for the newly opened centers. The Company
continues to believe that demand for plasma and plasma products will continue to
accelerate through calendar 1999 and 2000 and has accordingly established itself
in a strong growth posture in order to be able to benefit from the strong
increased demand. The Company believes that recent occurrences in the plasma
industry such as the "Mad Cow" disease in Great Britain and the destruction of
over 300,000 liters of plasma by domestic fractionators due to quality control
issues have added significantly to the expected shortage of supply. With this
background, the Company continues to focus on growth in the volume of plasma
collected in order to capitalize on the anticipated market conditions. The
Company continues to benefit from the acquisitions of the Western States
Division which has provided worldwide marketing of plasma and plasma products in
both the therapeutic and diagnostic segments of the blood products industry and
the acquisition of the Consolidated Technologies Division which has expanded
both its' product line and customer base with corresponding increases in its
profit contribution. The plasma collection center startups and acquisitions
during the past two years are reflective of the Company's commitment to growth.
Meanwhile, the Company's projected capital requirements for the coming year
include the establishment of and/or acquisition of more plasma centers in
addition to continuing the expansion of both the Consolidated Technologies
Division and the Western States Division.

    Net cash used in operating activities during the fiscal year ended February
28, 1999 was $7,184,767 compared to $5,103,631 during the same prior year
period. This was due primarily to the increases in accounts receivable and
inventory partially offset by the increases in accrued expenses attributable to
the acquisitions of American Plasma, Inc., Western States Plasma Group, Inc.,
Consolidated Technologies and the five plasma centers from American Plasma
Management, Inc. et al. Also contributing was an increase in inventory and
accounts receivable resulting from the terms of certain sales agreements and an
increase in inventory due to the Applicant Donor program initiated by ABRA and
effective July 1, 1998.

    Cash flows used in investing activities for the fiscal year ending February
28, 1999 was $12,752,787 compared to $12,871,130 for the comparable prior year
period. This increase resulted primarily from the

                                       20
<PAGE>
acquisition of American Plasma, Inc. and capital requirements of the newly
established plasma collection centers in Raleigh, Macon, Pasco, Toledo,
Pocatello, Wilmington, Savannah, Port Arthur, Lancaster and Reading.

    Cash flow provided by financing activities was $15,283,256 for the current
year period compared to $22,928,208 for the comparable prior period. The prior
year amount was primarily the result of the issuance of $16 million in
subordinated debentures in February 1998. The current year amount is primarily
the result of the senior debt financing obtained initially from Brown Brothers
Harriman & Co. in April 1998 and the replacement senior debt financing with
Brown Brothers Harriman & Co. and State Street Bank which was obtained in
September 1998. The proceeds from the expanded senior debt was used primarily
for the acquisition of American Plasma, Inc. and to repay certain bridge loans
which were made to the Company in conjunction with such acquisition. Also
contributing was a private placement of Preferred Stock Series A in December
1998 and various bridge loans which were made during the year, most of which
were repaid during the year and which were used in part to finance acquisitions
and partially to provide working capital for the newly acquired and start-up
operations.

    The senior debt agreement contains various covenants. The Company was in
violation of a covenant and obtained a waiver of the violation subsequent to
year end.

    The Company had net operating loss carry-forwards of approximately $4.4
million as of February 28, 1999, which will expire in various amounts through
the year 2018. Certain of these loss carry-forwards have resulted in a deferred
tax asset of approximately $1.7 million. Based upon historical operating
results, management has determined it cannot conclude it is more likely than not
that the deferred tax is realizable. Accordingly, a 100% valuation reserve
allowance has been provided against the deferred tax asset.

    As a result of the Company's strategic upgrading of its customer base,
management believes that internally generated cash flow and the existing $17
million restructured senior credit facility may not be sufficient to meet the
Company's working capital requirements for fiscal 2000. As of February 28, 1999,
the Company had $1.2 million available under the current senior credit facility.
The Company is in the process of expanding the senior debt with the current
lenders to provide an additional $3.0 to $5.0 million in availability. With the
additional availability to be provided by the expanded line, Management believes
a combination of internal cash flow and the expanded senior debt facility will
be sufficient to meet the Company's working capital requirements. However, any
significant expansion or acquisition may need to be funded by a combination of
internally generated cash flows, short-term bridge financing, private
placements, and/or a possible public offering. In addition, the Company is
continuing to evaluate various alternatives for restructuring its current debt
position. See Note 6 for future payments of long-term debt.

SUBSEQUENT EVENT

    The Company has reached a verbal agreement with NABI to cancel the supply
contracts on the Clearfield, Raleigh, Macon, Toledo and Pasco centers effective
April 30, 1999. This cancellation is by mutual agreement with both parties
believing that they will benefit from the agreement. Under terms of the
agreement, the Company will repay monies advanced on production from Pasco and
Toledo and purchase approximately 48,000 liters of plasma from the NABI
inventory.

NEW ACCOUNTING PRONOUNCEMENTS

    Statement of Financial Accounting Standard No. 130, "Reporting Comprehensive
Income," ("SFAS 130") issued by the FASB is effective for financial statements
with fiscal years beginning after December 15, 1997. Earlier application is
permitted. SFAS 130 establishes standards for reporting and display of
comprehensive income and its components in a full set of general--purpose
financial statements. The Company adopted SFAS 130 for the year ending
2-28-1999. Such adoption did not have any material

                                       21
<PAGE>
effect on its financial position or results of operations, but has resulted in
additional disclosures as required by the Statement.

    Statement of Financial Accounting Standard No. 131, "Disclosure about
Segments of an Enterprise and Related Information" ("SFAS 131") issued by the
FASB is effective for financial statements with fiscal years beginning after
December 15, 1997. SFAS 131 requires that public companies report certain
information about operating segments, products, services and geographical areas
in which they operate and their major customers. The Company adopted SFAS 131
for the year ending 2-28-1999. Such adoption did not have any material effect on
its financial position or results of operations.

    Statement of Position 98-5, "Reporting on the Costs of Start-up Activities,"
(SOP 98-5) issued by the American Institute of Certified Public Accountants is
effective for financial statements beginning after December 15, 1998. SOP 98-5
requires that the costs of start-up activities, including organization costs, be
expensed as incurred. Start-up activities are defined broadly as those one-time
activities related to opening a new facility, introducing a new product or
service, conducting business in a new territory, conducting business with a new
class of customer (excluding ongoing customer acquisition costs, such as policy
acquisition costs and loan origination costs) or beneficiary, initiating a new
process in an existing facility, or commencing some new operation. The Company
anticipates adoption of SOP 98-5 for the fiscal year beginning March 1, 1999.
The adoption of SOP 98-5 will result in a "one time charge" cumulative effect of
a change in accounting principle of about $483,000 tax effected at the statutory
rate. To the extent that the Company establishes new startup centers, the
inability to defer startup 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 our growth
objectives.

INFLATION

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

YEAR 2000

    The year 2000 issue is the result of computer programs being written using
two digits rather than four digits to define the applicable year. This could
result in a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices or engage in other normal business activities. The Company has
invested in the latest hardware and software and has been informed by the
seller's that the programs are year 2000 compliant. Accordingly management
believes the Company has addressed compliance with year 2000 standards. However,
there can be no assurances that there will be no disruptions from the year 2000
issue in the event its customers or vendors are not compliant.

ITEM 7. FINANCIAL STATEMENTS.

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

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

    Not applicable

                                       22
<PAGE>
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES

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

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

<TABLE>
<CAPTION>
                                                                                                             DIRECTOR
NAME                              AGE                                POSITION                                 SINCE
----------------------------      ---      ------------------------------------------------------------  ----------------
<S>                           <C>          <C>                                                           <C>
Barry D. Plost..............          53   Chairman of the Board, President and CEO                                  1996
Jerry L. Burdick............          59   Executive Vice President, Chief Financial Officer, Secretary              1995
                                             and a Director
Sam Anderson................          62   Director                                                                  1996
Ezzat Jallad................          36   Director                                                                  1996
Nelson Teng.................          52   Director                                                                  1997
Robert J. Cresci............          55   Director                                                        April 15, 1998
Michael F. Crowley..........          55   Director                                                        April 15, 1998
William J. Cone.............          48   Director                                                        April 15, 1998
</TABLE>

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

    JERRY L. BURDICK was appointed Executive Vice President, Chief Financial
Officer, Secretary and a Director effective December 1, 1995. From August 1993
through November 1995, Mr. Burdick was a consultant to SeraCare, Inc. in the
areas of financing, internal controls, profitability analysis, financial
reporting and strategic planning. He also was acting controller and Chief
Financial Officer during the period. Mr. Burdick previously operated his own
consulting practice from March 1988 through August 1993. Mr. Burdick is a
Certified Public Accountant in the State of California.

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

                                       23
<PAGE>
    EZZAT JALLAD was elected a Director effective October 28, 1996. Mr. Jallad
has been Chairman and President of Softpoint, Inc., which develops and markets
point of sale software and hardware for the fast food and retail markets since
June 1995. Previously, he was Executive Vice President of FCIM Corporation, a
financial consulting firm, from April 1988 to May 1995.

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

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

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

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

    Effective April 15, 1998, the Board of Directors consists of eight
directors: Barry D. Plost, Chairman, President and Chief Executive Officer;
Jerry L. Burdick, Executive Vice President, Chief Financial Officer and
Secretary; Michael F. Crowley, Sr., President of the Western States Plasma
Division; William J. Cone, President of the Consolidated Technologies Division;
Sam Anderson, outside Director; Robert J. Cresci, outside Director; Ezzat
Jallad, outside Director; and Dr. Nelson Teng, outside Director.

ITEM 10. EXECUTIVE COMPENSATION

    The Company has key man insurance on Barry D. Plost, Michael F. Crowley,
Sr., and William J. Cone. SAM ANDERSON, an outside Director, has a consulting
agreement with the Company which runs through March 31, 2002 at $50,000 per year
plus fully vested options to purchase 30,000 shares of the Company's common
stock at $1.50 per share which expire in five years. Mr. Anderson also was
granted fully vested, five year options to purchase 20,000 shares of the
Company's common stock at $1.00 per share in conjunction with a $100,000 bridge
loan Mr. Anderson made to the Company on July 2, 1996 and on August 27,1997 was
granted fully vested five year options to purchase 100,000 shares at $2.25, and
on December 31, 1998 was granted fully vested five year options to purchase
15,000 shares at $4.25. DR. NELSON TENG was granted fully vested, five year
options to purchase 50,000 shares of the Company's common stock at $1.50 per
share in January 1997. He was also granted fully vested, five year options to
purchase 15,000 shares at $2.25 on August 27, 1997 and fully vested, five year
options to purchase 15,000 shares at $4.25 on December 28, 1998. EZZAT JALLAD
was granted fully vested five-year options to purchase 15,000 shares at $2.25 on
August 27, 1997 and fully vested five-year options to purchase 15,000 shares at

                                       24
<PAGE>
$4.25 on December 28, 1998. ROBERT CRESCI was granted fully vested five-year
options to purchase 15,000 shares at $4.25 on December 28, 1998.

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

<TABLE>
<CAPTION>
                                                         PAID        PAID        PAID
                                                        FISCAL      FISCAL      FISCAL
NAME AND PRINCIPAL POSITION                              1999        1998        1997      OPTIONS      OTHER
----------------------------------------------------  ----------  ----------  ----------  ----------  ---------
<S>                                                   <C>         <C>         <C>         <C>         <C>
(8)Barry D. Plost, President, Chairman and CEO......  $  225,000  $  172,115  $  124,167     156,147(1)    (7)(6)
                                                                                             150,000(2)
                                                                                             100,000(3)
                                                                                             130,000(4)
                                                                                           1,058,500(5)
(9)Jerry L. Burdick, Executive V. P., Secretary and
  CFO...............................................  $  140,000 11) $  125,000 $   83,749     99,110 10)    (7)(6)
</TABLE>

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

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

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

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

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

(5) Mr. Plost was granted at various times throughout fiscal year 1998 fully
    vested options to purchase 1,058,500 of the Company's common stock at prices
    ranging from $2.00 to $3.50 which were the fair market value of the shares
    on the grant date. These options were granted in conjunction with various
    bridge loans made by Mr. Plost to the Company.

(6) The Company has established a Management Bonus Pool whereby ten percent
    (10%) of earnings before taxes which are in excess of $920,549 in the year
    ending February 28, 1997; $2,590,160 in the year ending February 28, 1998,
    and $4,384,187 in the year ending February 28, 1999 will be allocated to a
    bonus pool to be paid pro rata to all officers of the Company on the basis
    of salaries.

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

(8) Effective on February 6, 1996, the Company signed an employment agreement
    with Mr. Plost through February 5, 1999. The agreement was amended on
    February 13, 1998, providing for a current annual salary of $225,000. Mr.
    Plost also participates in the Management Bonus Pool on the same basis as
    other officers of the Company during the term of his agreement and also
    received certain options as indicated. Mr. Plost was not an employee prior
    to February 6, 1996.

(9) Effective on February 6, 1996, the Company signed an employment agreement
    with Mr. Burdick through February 5, 1999. The agreement was amended on
    February 13, 1998, providing for a current annual salary of $140,000. Mr.
    Burdick also participates in the Management Bonus Pool on the same basis as
    other officers of the Company during the term of his agreement and also
    received stock

                                       25
<PAGE>
    options as indicated above. Mr. Burdick functioned as an accountant and
    consultant to the Company prior to February 6, 1996.

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

(11) Excludes auto allowance of $10,000.

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

<TABLE>
<CAPTION>
                                                                                         NUMBER OF SHARES     VALUE OF
                                                                                            UNDERLYING      UNEXERCISED
                                                                                            UNEXERCISED     IN-THE-MONEY
                                                         SHARES ACQUIRED       VALUE        OPTIONS AT       OPTIONS AT
NAME AND PRINCIPAL POSITION                                ON EXERCISE       REALIZED       YEAR-END(1)       YEAR(1)
-----------------------------------------------------  -------------------  -----------  -----------------  ------------
<S>                                                    <C>                  <C>          <C>                <C>
Barry D. Plost, President, Chairman and                            NA               NA           56,147      $  259,680
  CEO................................................                                           100,000      $  287,500
                                                                                                150,000      $  581,250
                                                                                                100,000      $  487,500
                                                                                                130,000      $  633,750
                                                                                                858,500      $3,210,688
Jerry L. Burdick, Executive V. P., Secretary and                   NA               NA           99,110      $  343,634
  CFO................................................
</TABLE>

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

(1) As of February 28, 1999, there were no options which were unexercisable.

OPTIONS/SAR GRANTS LAST FISCAL YEAR

    During the current year Mr. Jerry L. Burdick was granted 32,000 fully vested
five year options on December 28, 1998 at a price of $4.25 which represented 52%
of the individual grants to employees during the year. During the preceding
year, Mr. Barry D. Plost, the President and CEO, was granted fully vested
five-year options to purchase shares at $3.00 on August 27, 1997 which
represented 80% of the individual grants during the year and Mr. Jerry L.
Burdick was granted fully vested five year options to purchase 25,000 shares at
a price of $2.00 on April 10, 1997, which represented 20% of the individual
grants during the year.

                                       26
<PAGE>
                             EMPLOYMENT AGREEMENTS

    The Company had employment agreements with each of the executive officers of
the Company, consisting of: Mr. Barry D. Plost, Chairman, President and Chief
Executive Officer; and Mr. Jerry L. Burdick, Executive Vice President, Chief
Financial Officer and Secretary. The employment agreements with both Mr. Plost
and Mr. Burdick were effective on February 6, 1996 and had terms expiring on
February 5, 1999. On January 27, 1999, the Board of Directors extended the
contract of Mr. Plost was extended three years to February 5, 2002. Mr. Plost is
currently receiving a base salary of $250,000. The Board of Directors also
extended the contract of Mr. Burdick for one year to February 5, 2000. Mr.
Burdick is currently receiving a base salary of $140,000. Both Mr. Plost and Mr.
Burdick are eligible to participate in the management incentive bonus plan if
the Company achieves certain performance objectives.

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

ITEM 11. SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN
       SECURITYHOLDERS

    The following table sets forth certain information known to the Company
regarding beneficial ownership of the Company's common shares at February 28,
1998 of each present director, all officers, all officers and directors as a
group and each beneficial owner of more than 5% of the Company's common stock.

<TABLE>
<CAPTION>
                                                                                                            PRESENTLY
                                                                                     % OF        COMMON     EXERCISABLE
INDIVIDUAL / GROUP                                                                   CLASS       SHARES      OPTIONS
--------------------------------------------------------------------------------     -----     -----------  ----------
<S>                                                                               <C>          <C>          <C>
Barry D. Plost, President & Chairman............................................        19.8%      393,034   1,394,647
Jerry L. Burdick, Exe VP, CFO & Dir.............................................         2.2%       72,647      99,110
Nelson Teng, Director...........................................................         5.1%      315,000      80,000
Samual Anderson, Director.......................................................         4.6%      191,932     165,000
Ezzat Jallad, Director..........................................................         0.7%       25,000      30,000
Robert Cresci...................................................................         0.2%                   15,000
All Officers and Directors......................................................        35.3%      998,863   1,783,757
Other beneficial owners:
    Brad Gaspard................................................................         5.8%      441,582
    Pecks Management Partners, Ltd..............................................        21.6%           --   2,100,572
    Consolidated Technologies, Inc..............................................         5.7%      436,364
</TABLE>

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

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

BRIDGE LOANS TO THE COMPANY FROM RELATED PARTIES.

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

    In January 1998, the Company entered into agreements with related parties,
approved by the Board of Directors, which provided for bridge loans totaling
$599,000. The related parties consisted of: Sam Anderson, a director who loaned
$133,000; Dr. Nelson Teng, a director who loaned $130,000; Chang Ming

                                       27
<PAGE>
Teng, father of Dr. Nelson Teng who loaned $50,000; Ezzat Jallad, a director who
loaned $50,000; Stranco Investments Ltd, an investment fund managed by Ezzat
Jallad a director which loaned $200,000; and Peggy Burdick, wife of Jerry
Burdick an officer and director who loaned $36,000. Interest was payable monthly
at ten percent per annum. In connection with the 1998 bridge loans, the Company
granted the holders warrants to purchase 599,000 shares of restricted common
stock at an exercise price of $3.50, which approximated the fair market value of
the shares on the date of grant. In February 1998, these warrants were exchanged
for 299,500 shares of restricted common stock. Except for $80,000 to Nelson Teng
and $43,000 to Samuel Anderson, the loans were repaid in May 1998.

    At various times during the year ended February 28, 1998, the Company
entered into agreements with Mr. Barry Plost, the Company's president, which
provided for loans totaling $1,125,000, which were all outstanding at February
28, 1998. These loans were due upon demand, and were secured by all the assets
of the Company. The loans accrued interest at ten and twelve percent per annum.
In connection with these loans, the Company granted options to its president to
purchase 742,500 and 116,000 shares of restricted common stock at $2.00 and
$3.00 per share, which was at the then fair market value, respectively. In
addition, in conjunction with the January 1998 bridge, the Company's president
made a bridge loan to the Company totaling $200,000. Terms of the bridge loan
agreement were exactly the same as the terms other bridge loans made by related
parties in January 1998 (see above). In February 1998 the warrants received in
connection with the bridge loan were exchanged for 100,000 shares of restricted
stock. In May 1998, the Company repaid $1.0 million of such loans and in July
1998 repaid an additional $250,000. In December 1998 in conjunction with the
newly obtained senior debt facility with Brown Brothers & Harriman and State
Street Bank, Mr. Plost signed a subordination agreement relating to $472,500,
whereby Mr. Plost agreed to forego payment until all senior debt had been paid
in full. As of February 28, 1999, $472,500 was outstanding.

SERIES A WARRANTS

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

                                       28
<PAGE>
                                    PART IV

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(A)(1) THE FOLLOWING FINANCIAL STATEMENTS ARE BEING FILED AS PART OF THIS
  REPORT:

    SERACARE, INC. AND SUBSIDIARIES

    Report of Independent Certified Public Accountants--
    BDO Seidman, LLP
    Consolidated Statements of Income    --Year ended February 28, 1999

                                         --Year ended February 28, 1998

    Consolidated Balance Sheets--February 28, 1999 and February 28, 1998

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

                                                  --Year ended February 28, 1998

    Consolidated Statements of Cash Flows--Year ended February 28, 1999
                                    --Year ended February 28, 1998

    Summary of Accounting Policies
    Notes to Consolidated Financial Statements

(A)(2) THE FOLLOWING EXHIBIT WAS FILED AS A PART OF THIS REPORT AND WILL BE
  PROVIDED UPON REQUEST.

<TABLE>
<C>        <S>
     23.1  Consent of Independent Certified Public Accountants
</TABLE>

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

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

<TABLE>
<CAPTION>
 EXHIBIT
 NUMBER                                            DESCRIPTION OF DOCUMENT
---------  -------------------------------------------------------------------------------------------------------
<C>        <S>

  2.1      Restated Articles of Incorporation filed on February 6, 1996.

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

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

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

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

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

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

                                       29
<PAGE>
<TABLE>
<CAPTION>
 EXHIBIT
 NUMBER                                            DESCRIPTION OF DOCUMENT
---------  -------------------------------------------------------------------------------------------------------
<C>        <S>
  4.13     Cross-Guaranty Agreement between Brown Brothers Harriman & Co and SeraCare, Inc. dated April 24, 1998.

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

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

  6.2      Employment Agreement dated November 14, 1995 between the Company and Jerry L. Burdick.

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

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

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

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

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

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

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

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

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

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

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

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

  6.13     Series A Warrant Agreement dated September 4, 1996.

  6.14     Series A Warrant Agreement dated October 23, 1996.

  6.15     Registration Rights Agreement dated September 4, 1996.

  6.16     Registration Rights Agreement dated October 23, 1996.

  6.17     Dealer Warrant Agreement dated September 4, 1996.

  6.18     Dealer Registration Rights Agreement September 4, 1996.

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

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

 10.1      Subsidiaries of Registrant.
</TABLE>

                                       30
<PAGE>
(B) REPORTS ON FORM 8-K

    None

                                       31
<PAGE>
                               GLOSSARY OF TERMS

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

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

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

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

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

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

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

HIV                 Human Immunodeficiency Virus, a virus that causes AIDS.

IMMUNE GLOBULINS    A group of proteins which contains antibodies.

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

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

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

PLATELETS           Cells in blood which promote blood clotting.

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

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

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

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

                                       32
<PAGE>
                                   SIGNATURES

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

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

                                By:              /s/ BARRY D. PLOST
                                     -----------------------------------------
Dated May 26, 1999                        Barry D. Plost, President & CEO

                                By:             /s/ JERRY L. BURDICK
                                     -----------------------------------------
                                                  Jerry L. Burdick
                                      Principal Accounting and Finance Officer
</TABLE>

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

<TABLE>
<CAPTION>
          SIGNATURES                      TITLE                    DATE
------------------------------  --------------------------  -------------------

<C>                             <S>                         <C>
      /s/ BARRY D. PLOST
------------------------------  Chairman of the Board and      May 26, 1999
        Barry D. Plost            CEO

     /s/ JERRY L. BURDICK
------------------------------  Executive Vice President       May 26, 1999
       Jerry L. Burdick           and CFO

     /s/ SAMUEL ANDERSON
------------------------------  Director                       May 26, 1999
       Samuel Anderson

     /s/ ROBERT J. CRESCI
------------------------------  Director                       May 26, 1999
       Robert J. Cresci

       /s/ EZZAT JALLAD
------------------------------  Director                       May 26, 1999
         Ezzat Jallad

     /s/ DR. NELSON TENG
------------------------------  Director                       May 26, 1999
       Dr. Nelson Teng

 /s/ MICHAEL F. CROWLEY, SR.
------------------------------  Director                       May 26, 1999
   Michael F. Crowley, Sr.

     /s/ WILLIAM J. CONE
------------------------------  Director                       May 26, 1999
       William J. Cone
</TABLE>

                                       33
<PAGE>
                        SERACARE, INC. AND SUBSIDIARIES
                         INDEX TO FINANCIAL STATEMENTS

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

CONSOLIDATED FINANCIAL STATEMENTS

    Statements of Income.............................................................  F-3

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

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

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

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

    Notes to Consolidated Financial Statements.......................................  F-13
</TABLE>

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

The Board of Directors and Stockholders
SeraCare, Inc.

    We have audited the accompanying consolidated balance sheets of SeraCare,
Inc. and subsidiaries as of February 28, 1999 and 1998 and the related
consolidated statements of income, stockholders' equity and cash flows for the
years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

    In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of SeraCare,
Inc. and subsidiaries as of February 28, 1999 and 1998 and the results of their
operations and their cash flows for the years then ended, in conformity with
generally accepted accounting principles.

                                          BDO Seidman, LLP

Los Angeles, California
May 18, 1999

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

                       CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                                                      YEAR ENDED     YEAR ENDED
                                                                                     FEBRUARY 28,   FEBRUARY 28,
                                                                                         1999           1998
                                                                                     -------------  -------------
<S>                                                                                  <C>            <C>
Revenue
  Net sales (Notes 13 and 14)......................................................  $  49,010,389  $  12,291,396
  Income from joint venture........................................................        687,818        119,574
                                                                                     -------------  -------------
      Total Revenue................................................................     49,698,207     12,410,970
Cost of sales......................................................................     39,128,393     10,774,398
                                                                                     -------------  -------------
  Gross profit.....................................................................     10,569,814      1,636,572
General and administrative expenses................................................      4,180,160      1,479,296
                                                                                     -------------  -------------
  Operating income.................................................................      6,389,654        157,276
Interest expense...................................................................     (2,907,145)      (458,719)
Non-cash interest expense (Note 6).................................................     (1,387,157)       (74,386)
Other income, net (Note 15)........................................................        626,664        854,682
                                                                                     -------------  -------------
  Income before income taxes.......................................................      2,722,016        478,853
Income taxes (Note 11).............................................................         17,014         25,000
                                                                                     -------------  -------------
  Net income.......................................................................  $   2,705,002  $     453,853
                                                                                     -------------  -------------
                                                                                     -------------  -------------
Earnings per common share (Note 16)
  Basic............................................................................  $        0.37  $        0.09
                                                                                     -------------  -------------
                                                                                     -------------  -------------
  Diluted..........................................................................  $        0.24  $        0.08
                                                                                     -------------  -------------
                                                                                     -------------  -------------
Weighted average shares outstanding (Note 16)
  Basic............................................................................      7,365,212      4,818,313
                                                                                     -------------  -------------
                                                                                     -------------  -------------
  Diluted..........................................................................     11,103,186      5,706,405
                                                                                     -------------  -------------
                                                                                     -------------  -------------
</TABLE>

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

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

                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                         AS OF          AS OF
                                                                                     FEBRUARY 28,   FEBRUARY 28,
                                                                                         1999           1998
                                                                                     -------------  -------------
<S>                                                                                  <C>            <C>
ASSETS (NOTES 3, 4 AND 5)
CURRENT ASSETS
  Cash and cash equivalents........................................................  $     843,226  $   5,497,524
  Accounts receivable (Note 14)....................................................     13,619,739      4,612,968
  Inventory........................................................................     10,659,226      7,644,601
  Prepaid expenses and other current assets........................................        580,883        243,785
                                                                                     -------------  -------------
    Total Current Assets...........................................................     25,703,074     17,998,878
                                                                                     -------------  -------------
PROPERTY AND EQUIPMENT--NET (NOTE 2)...............................................      4,632,159      2,780,850
FDA licenses, less accumulated amortization of $145,716 and $57,351................      7,836,942      2,759,999
Donor base and records, less accumulated amortization of $173,834 and $61,149......      4,376,488      1,688,762
Reorganization value in excess of amounts allocated to identifiable assets, less
  accumulated amortization of $117,203 and $78,635.................................        654,250        692,818
Goodwill, less accumulated amortization of $770,946 and $84,292....................     11,798,511      9,748,357
Deferred bond offering cost, less accumulated amortization of $1,234,954 and
  $49,349 (Note 6).................................................................      7,091,952      8,241,225
Other assets, including start-up costs of $791,185 and $739,171....................      2,482,886      1,318,483
                                                                                     -------------  -------------
Total Assets.......................................................................  $  64,576,262  $  45,229,372
                                                                                     -------------  -------------
                                                                                     -------------  -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
  Accounts payable and accrued expenses............................................      2,535,050      2,495,588
  Accrued payroll and related expenses.............................................        366,475        230,474
  Accrued expenses.................................................................      2,219,957      1,266,854
  Deferred income..................................................................        397,353      1,131,178
  Line of credit...................................................................      8,840,000
  Bridge loans from related parties (Note 4).......................................        123,000      2,121,500
  Notes payable (Note 5)...........................................................        297,746      1,296,947
  Current portion of long-term debt (Notes 3 and 6)................................      1,199,909         12,211
                                                                                     -------------  -------------
  Total Current Liabilities........................................................     15,979,490      8,554,752
                                                                                     -------------  -------------
LONG-TERM DEBT (NOTES 4, 5 AND 6)..................................................     22,895,014     16,196,670

Series A redeemable preferred stock, $.001 par value, 25,000,000 shares authorized;
  400 shares and 1600 shares issued and outstanding................................         60,107        231,130
Commitments (Note 12)
STOCKHOLDERS' EQUITY
  Series B convertible preferred stock, $.001 par value, 15,000 shares authorized
    and outstanding. Liquidation value $100 per share..............................             15             15
  Series C convertible preferred stock, $.001 par value, 22,500 shares authorized
    and outstanding. Liquidation value $100 per share, 10% cumulative dividend.....             22
  Common stock, $.001 par value, 25,000,000 shares authorized, 7,644,418 and
    7,210,585 issued and outstanding...............................................          7,644          7,210
  Additional paid-in capital.......................................................     22,982,605     20,293,232
  Retained earnings (deficit)......................................................      2,651,365        (53,637)
                                                                                     -------------  -------------
Total stockholders' equity.........................................................     25,641,651     20,246,820
                                                                                     -------------  -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.........................................  $  64,576,262  $  45,229,372
                                                                                     -------------  -------------
                                                                                     -------------  -------------
</TABLE>

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

                                      F-4
<PAGE>
                        SERACARE, INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
                                                                             PREFERRED STOCK
                                                            --------------------------------------------------
                                                                                                                 COMMON
                                                                    SERIES B                  SERIES C            STOCK
                                                            ------------------------  ------------------------  ---------
                                                              SHARES       AMOUNT       SHARES       AMOUNT      SHARES
                                                            -----------  -----------  -----------  -----------  ---------
<S>                                                         <C>          <C>          <C>          <C>          <C>
BALANCE, MARCH 1, 1997....................................          --    $      --           --    $      --   4,149,387
Common stock issued for (Note 7):
  Private placement, net of costs of $204,811.............          --           --           --           --   1,136,396
  Conversion of debt......................................          --           --           --           --     487,813
  Services................................................          --           --           --           --      30,000
  Acquisition of Western States subsidiary (Note 1).......          --           --           --           --     125,000
  Acquisition of assets of CTI (Note 1)...................          --           --           --           --     436,364
  Cashless exchange of warrants...........................          --           --           --           --     840,500
  Acquisition of plasma centers...........................          --           --           --           --       5,125
Compensation expense related to non-employee stock
  options.................................................          --           --           --           --          --
Issuance of options in conjunction with the original issue
  discount associated with the bridge loans...............          --           --           --           --          --
Warrants issued in conjunction with subordinated bonds....          --           --           --           --          --
Issuance of Series B Convertible Preferred Stock, net of
  $7,500 of issuance costs, issued in a private
  placement...............................................      15,000           15           --           --          --
Net income for the year...................................          --           --           --           --          --
                                                            -----------         ---   -----------         ---   ---------
BALANCE, FEBRUARY 28,1998.................................      15,000           15           --           --   7,210,585

Common stock issued for (Note 7)
  Acquisition of plasma center............................          --           --           --           --      50,000
  Exercise of Series A warrants...........................          --           --           --           --     325,000
  Finders' fees on private placement......................          --           --           --           --      25,000
  Prior private placement, adjustment of shares...........          --           --           --           --      33,833
Issuance of Series C Convertible Preferred Stock, net of
  $135,000 of issuance costs, issued in a private
  placement...............................................          --           --       22,500           22          --
Warrants issued...........................................          --           --           --           --          --
Subsequent costs relating to private placement............          --           --           --           --          --
Net income for the year...................................          --           --           --           --          --
                                                            -----------         ---   -----------         ---   ---------
BALANCE, FEBRUARY 28,1999.................................      15,000    $      15       22,500    $      22   7,644,418
                                                            -----------         ---   -----------         ---   ---------
                                                            -----------         ---   -----------         ---   ---------

<CAPTION>

                                                                         ADDITIONAL  RETAINED
                                                                          PAID-IN    EARNINGS
                                                              AMOUNT      CAPITAL    (DEFICIT)    TOTAL
                                                            -----------  ----------  ---------  ----------
<S>                                                         <C>          <C>         <C>        <C>
BALANCE, MARCH 1, 1997....................................   $   4,149   $4,182,954  ($507,490) $3,679,613
Common stock issued for (Note 7):
  Private placement, net of costs of $204,811.............       1,136    3,931,582         --   3,932,718
  Conversion of debt......................................         488      996,840         --     997,328
  Services................................................          30        9,970         --      10,000
  Acquisition of Western States subsidiary (Note 1).......         125      438,163         --     438,288
  Acquisition of assets of CTI (Note 1)...................         436    1,529,587         --   1,530,023
  Cashless exchange of warrants...........................         841         (841)        --          --
  Acquisition of plasma centers...........................           5        7,682         --       7,687
Compensation expense related to non-employee stock
  options.................................................          --      107,101         --     107,101
Issuance of options in conjunction with the original issue
  discount associated with the bridge loans...............          --      187,009         --     187,009
Warrants issued in conjunction with subordinated bonds....          --    7,410,700         --   7,410,700
Issuance of Series B Convertible Preferred Stock, net of
  $7,500 of issuance costs, issued in a private
  placement...............................................          --    1,492,485         --   1,492,500
Net income for the year...................................          --           --    453,853     453,853
                                                            -----------  ----------  ---------  ----------
BALANCE, FEBRUARY 28,1998.................................       7,210   20,293,232    (53,637) 20,246,820
Common stock issued for (Note 7)
  Acquisition of plasma center............................          50      149,177         --     149,227
  Exercise of Series A warrants...........................         325      487,175         --     487,500
  Finders' fees on private placement......................          25          (25)        --          --
  Prior private placement, adjustment of shares...........          34          (34)        --          --
Issuance of Series C Convertible Preferred Stock, net of
  $135,000 of issuance costs, issued in a private
  placement...............................................          --    2,114,978         --   2,115,000
Warrants issued...........................................          --       45,097         --      45,097
Subsequent costs relating to private placement............          --     (106,995)        --    (106,995)
Net income for the year...................................          --           --  2,705,002   2,705,002
                                                            -----------  ----------  ---------  ----------
BALANCE, FEBRUARY 28,1999.................................   $   7,644   $22,982,605 $2,651,365 $25,641,651
                                                            -----------  ----------  ---------  ----------
                                                            -----------  ----------  ---------  ----------
</TABLE>

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

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

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                        FEBRUARY 28,  FEBRUARY 28,
                                                                                            1999          1998
                                                                                        ------------  ------------
<S>                                                                                     <C>           <C>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Cash flows from operating activities
  Net income..........................................................................   $2,705,002    $  453,853
  Adjustments to reconcile net income to cash provided by (used in) operating
    activities:
    Depreciation and amortization.....................................................    1,823,730       461,182
    Income from joint venture.........................................................     (687,818)     (119,574)
    Gain on sale of land and buildings................................................     (539,769)           --
    Non-cash interest expense.........................................................    1,387,157        74,386
    Non-cash general and administrative expense.......................................        3,215        10,700
    Issuance of common stock in exchange for services.................................           --        10,000
    (Increase) decrease from changes in:
      Accounts receivable.............................................................   (8,808,192)   (3,503,367)
      Inventory.......................................................................   (2,535,950)   (5,755,645)
      Prepaid expenses and other current assets.......................................     (224,820)     (108,466)
      Other assets....................................................................     (557,697)       45,515
      Accounts payable................................................................     (104,904)    1,340,823
      Accrued payroll and related expenses............................................      136,001        27,591
      Accrued expenses................................................................      953,103       828,193
      Deferred income.................................................................     (733,825)    1,131,178
                                                                                        ------------  ------------
Net cash used in operating activities                                                    (7,184,767)   (5,103,631)
                                                                                        ------------  ------------
CASH FLOWS FROM INVESTING ACTIVITIES
  Purchases of property and equipment.................................................   (1,219,402)     (800,955)
  Cash paid to purchase subsidiaries, net of cash acquired............................   (9,062,667)   (3,555,662)
  Assets of CTI, American Plasma and Serologicals acquired for cash...................           --    (6,999,853)
  Cash acquired in Acquisition........................................................           --       250,000
  Distributions from unconsolidated subsidiary........................................      675,000            --
  Additions to FDA licenses...........................................................   (1,175,772)     (569,355)
  Additions to donor base and records.................................................     (947,720)     (435,903)
  Additions to other intangible assets................................................   (1,022,226)     (759,402)
                                                                                        ------------  ------------
Net cash used in investing activities.................................................  (12,752,787)  (12,871,130)
                                                                                        ------------  ------------
CASH FLOWS FROM FINANCING ACTIVITIES
  Net borrowings under line of credit.................................................    8,840,000            --
  Proceeds from notes payable.........................................................    2,000,000     1,946,947
  Repayments of notes payable.........................................................   (3,008,500)     (500,000)
  Proceeds from long-term debt, net of issuance costs.................................    7,000,000    15,120,125
  Repayments of long-term debt........................................................     (346,750)     (830,163)
  Proceeds from bridge loans from related parties.....................................    1,250,000     1,924,000
  Repayments of bride loans from related parties......................................   (2,776,000)           --
  Payments on redemption of preferred stock...........................................     (170,998)     (157,917)
  Net Proceeds from issuance of preferred and common shares...........................    2,495,504     5,425,216
                                                                                        ------------  ------------
Net cash provided by financing activities.............................................   15,283,256    22,928,208
                                                                                        ------------  ------------
NET DECREASE IN CASH AND CASH EQUIVALENTS.............................................   (4,654,298)    4,953,447
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD........................................    5,497,524       544,077
                                                                                        ------------  ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD..............................................   $  843,226    $5,497,524
                                                                                        ------------  ------------
                                                                                        ------------  ------------
</TABLE>

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

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

               CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

<TABLE>
<S>                                                                     <C>        <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
(a) Cash paid for:
    Interest..........................................................  $2,517,113 $ 402,861
    State income taxes................................................  $  17,014  $  25,000
</TABLE>

(b) Non-cash investing and financing activities

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

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

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

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

    On November 29, 1997, the Company acquired substantially all of the
operating assets of American Plasma Management for $1,250,000 in cash and a note
for $600,000. In addition, the Company assumed an existing mortgage of $175,533
on one of the plasma centers (Note 1).

    In conjunction with the Senior Subordinated Debentures (Note 6), the Company
issued 2,100,572 warrants to purchase common stock to the debenture holders and
131,286 warrants to the referring investment banker as part of a finders fee.

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

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

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

                                      F-7
<PAGE>
                         SERACARE INC. AND SUBSIDIARIES

                         SUMMARY OF ACCOUNTING POLICIES

ORGANIZATION

    SeraCare, Inc. (the "Company"), a Delaware corporation, was formed on
November 8, 1991. The business of the Company is currently carried out through
its wholly-owned subsidiaries AVRE, Inc., a Nevada corporation, BHM Labs, Inc.,
an Arkansas corporation, Binary Associates, Inc., a Colorado corporation,
SeraCare Acquisitions, Inc., a Nevada corporation, Western States, Inc., a
California corporation, SeraCare Technology, Inc., a Nevada corporation and
American Plasma, Inc., a Texas corporation.

PRINCIPLES OF CONSOLIDATION

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

REVENUE RECOGNITION

    The Company's policy is to record revenue upon shipment of its products. The
Company generally sells its plasma to fractionators under long-term contracts. A
fractionator is a company that manufactures pharmaceutical and diagnostic
products by processing the raw source plasma into a variety of derivative
products. During 1997, the Company received advance payments from a customer
pending FDA licenses. The revenue related to these advance payments has been
deferred until actual shipment of the plasma and is presented as deferred income
in the accompanying consolidated balance sheet.

INVENTORY

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

PROPERTY AND EQUIPMENT

    Property and equipment are stated at cost and are depreciated 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 has a 50% interest in a joint venture, included in other assets
in the consolidated balance sheet, which it accounts for using the equity method
of accounting. The 50% interest in the joint venture's assets and equity is not
material in relation to the Company. This joint venture recorded sales of $5.8
million, net income of $1.4 million and had total assets of $.5 million as of
and for the year ended February 28, 1999.

INCOME TAXES

    Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax basis. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. A valuation allowance is provided when management
cannot determine whether or not it is more likely that the net deferred tax
asset will be

                                      F-8
<PAGE>
                         SERACARE INC. AND SUBSIDIARIES

                   SUMMARY OF ACCOUNTING POLICIES (CONTINUED)

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 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 the costs incurred, not to exceed the fair value. The Company evaluates
and assesses the overall recoverability of donor base and records by determining
if the unamortized balance can be recovered through undiscounted future
operating cash flows. Donor base and records are being amortized using the
straight-line method over an estimated useful life of twenty years.

GOODWILL

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

START-UP COSTS

    Start-up costs of $791,185 and $739,171 were included in other assets at
February 28, 1999 and 1998, respectively. These costs represent non-recurring
expenditures directly related to and incurred during the start-up phase of the
opening of the Company's newly established centers. Start-up costs consist
primarily

                                      F-9
<PAGE>
                         SERACARE INC. AND SUBSIDIARIES

                   SUMMARY OF ACCOUNTING POLICIES (CONTINUED)

of direct labor and overhead associated with the start-up phase. The start-up
costs are being amortized on a straight-line basis over a period not to exceed
three years. Recoverability of these costs are assessed on an on-going basis.
Amortization of start-up costs during the years ended February 28, 1999 and 1998
was $255,591 and $20,231, respectively.

DEFERRED FINANCING COSTS

    Included in other assets as of February 28, 1999 and 1998, are deferred
financing costs of $99,632 and $162,009, respectively. These costs relate to
loan fees 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

    As of February 28, 1998, the Company adopted Statement of Financial
Accounting Standards No. 128, "Earnings per Share" ("SFAS 128"). This
pronouncement provides a different method of calculating earnings per share than
was used in accordance with APB 15, "Earnings per Share". SFAS 128 provides for
the calculation of Basic and Diluted earnings per share. Basic earnings per
share includes no dilution and is computed by dividing net income available to
common shareholders by the weighted average number of common shares outstanding
for the period. Diluted earnings per share reflects the potential dilution of
securities that could occur if securities or other contracts (such as stock
options, warrants, convertible debentures or convertible preferred stock) to
issue common stock were exercised or converted into common stock.

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

    As of March 1, 1996, the Company adopted Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS 123), which
establishes a fair value method of accounting for stock-based compensation. In
accordance with SFAS 123, the Company has chosen to continue to account for
employee stock-based compensation utilizing the intrinsic value method
prescribed in APB 25. Accordingly, compensation cost for stock options is
measured as the excess, if any, of the fair market price of the Company's stock
at the date of grant over the amount an employee must pay to acquire the stock.

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

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

                                      F-10
<PAGE>
                         SERACARE INC. AND SUBSIDIARIES

                   SUMMARY OF ACCOUNTING POLICIES (CONTINUED)

Company's stock at the date of grant over the amount the non-employee must pay
to acquire the stock and is recognized over the anticipated service period.

ACCOUNTING ESTIMATES

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

FAIR VALUE OF LONG-TERM DEBT

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

IMPAIRMENT OF LONG-LIVED ASSETS

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

RECLASSIFICATIONS

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

NEW ACCOUNTING PRONOUNCEMENTS

    Statement of Financial Accounting Standard No. 130, "Reporting Comprehensive
Income," ("SFAS 130") issued by the FASB is effective for financial statements
with fiscal years beginning after December 15, 1997. Earlier application is
permitted. SFAS 130 establishes standards for reporting and display of
comprehensive income and its components in a full set of general--purpose
financial statements. The Company adopted SFAS 130 for the year ending
2-28-1999. Such adoption did not have any material effect on its financial
position or results of operations, but has resulted in additional disclosures as
required by the Statement.

    Statement of Financial Accounting Standard No. 131, "Disclosure about
Segments of an Enterprise and Related Information" ("SFAS 131") issued by the
FASB is effective for financial statements with fiscal years beginning after
December 15, 1997. SFAS 131 requires that public companies report certain
information about operating segments, products, services and geographical areas
in which they operate and their major customers. The Company adopted SFAS 131
for the year ending 2-28-1999. Such adoption did not have any material effect on
its financial position or results of operations.

    Statement of Position 98-5, "Reporting on the Costs of Start-up Activities,"
(SOP 98-5) issued by the American Institute of Certified Public Accountants is
effective for financial statements beginning after December 15, 1998. SOP 98-5
requires that the costs of start-up activities, including organization costs, be
expensed as incurred. Start-up activities are defined broadly as those one-time
activities related to opening a new facility, introducing a new product or
service, conducting business in a new territory, conducting

                                      F-11
<PAGE>
                         SERACARE INC. AND SUBSIDIARIES

                   SUMMARY OF ACCOUNTING POLICIES (CONTINUED)

business with a new class of customer (excluding ongoing customer acquisition
costs, such as policy acquisition costs and loan origination costs) or
beneficiary, initiating a new process in an existing facility, or commencing
some new operation. The Company anticipates adoption of SOP 98-5 for the fiscal
year beginning March 1, 1999. The adoption of SOP 98-5 will result in a "one
time charge" cumulative effect of a change in accounting principle of about
$483,000 tax effected at the statutory rate. To the extent that the Company
establishes new startup centers, the inability to defer startup costs will
result is 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 our growth objectives.

                                      F-12
<PAGE>
                         SERACARE, INC AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BUSINESS OPERATIONS

GENERAL

COMPANY HISTORY

    The Company as it is currently organized has evolved over the last three
years since February 6, 1996, with a strategic plan for expansion and growth.
During that three year period, the Company has grown from six plasma collection
centers to a total of thirty two centers as of February 28, 1999, both through
acquisition and by establishing new startup centers. In addition, the Company
made two key acquisitions in Western States Group, Inc. and Consolidated
Technologies. SeraCare, Inc. went public in May 1996 on the OTC Bulletin Board
and is now listed on the American Stock Exchange under the symbol SRK.

    Organizationally, the Company consists of: Consolidated Technologies
Division; Western States Plasma Division; and the Biologics Division. With the
acquisitions of Western States and CTI, the Company became a fully integrated
collector; manufacturer and marketer of plasma based diagnostic products.
Western States a "Value Added Distributor" has provided expanded worldwide
marketing with its domestic customer base and an extensive European and Asian
presence. In addition, the Company's Biologics Division continues provide the
Company's primary product of collecting and selling source plasma to
manufacturers of therapeutic and diagnostic products. The plasma centers
currently operated by the Company are operating under the trade name "SeraCare".
The name "SeraCare" is registered with the United States Patent and Trademark
Office.

ACQUISITIONS

AMERICAN PLASMA, INC.

    Effective July 6, 1998, the Company acquired all of the capital stock of
American Plasma, Inc. ("American") located in Houston, Texas. American operates
eleven plasmapheresis centers located in: Houston, Texas (4), South Houston,
Texas; Beaumont, Texas; Longview, Texas; Casa Grande, Arizona; Phoenix, Arizona;
Mesa, Arizona; and Amarillo, Texas. The total purchase price was $9,611,102.

AMEX PLASMA MANAGEMENT, INC.

    In October, 1998, the Company acquired certain of 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.

CONSOLIDATED TECHNOLOGIES, INC.

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

WESTERN STATES GROUP, INC.

    Effective January 1, 1998, the Company acquired all of the stock of Western
States Group, Inc. located in Fallbrook, California. Western States Group, Inc.
is a worldwide marketing organization for

                                      F-13
<PAGE>
                         SERACARE, INC AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1. BUSINESS OPERATIONS (CONTINUED)
therapeutic blood plasma products, diagnostic test kits, specialty plasma and
bulk plasma. The total purchase price was $4,471,492, consisting of $4,033,204
in cash and 125,000 shares of the Company's common stock. The Purchase Agreement
provides for future additional consideration if certain performance criteria are
met during the two years immediately after the acquisition.

AMERICAN PLASMA MANAGEMENT, INC.

    On November 29, 1997, the Company acquired substantially all of the
operating assets of five plasma centers from American Plasma Management, Inc.
The total purchase price was $1,850,000, consisting of $1,250,000 in cash and
$600,000 in a note payable, due October 31, 1998 (see Note 5). In addition, the
Company assumed the existing mortgage of $175,533 on one of the plasma centers.

SEROLOGICALS CORPORATION

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

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

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

<TABLE>
<CAPTION>
                                                                  YEAR ENDED     YEAR ENDED
                                                                   FEBRUARY       FEBRUARY
                                                                     1999           1998
                                                                 -------------  -------------
<S>                                                              <C>            <C>
Revenue........................................................  $  53,717,000  $  45,292,000
Net income.....................................................      2,762,000      1,754,000
Income per share
  Basic........................................................            .37            .33
  Diluted......................................................            .25            .21
</TABLE>

    These unaudited pro forma results are not necessarily indicative of actual
or future operating results.

                                      F-14
<PAGE>
                         SERACARE, INC AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. PROPERTY AND EQUIPMENT

    Property and equipment consist of the following:

<TABLE>
<CAPTION>
                                                                      FEBRUARY      FEBRUARY
                                                                        1999          1998
                                                                    ------------  ------------
<S>                                                                 <C>           <C>
Land..............................................................  $         --  $     85,280
Buildings and improvements........................................       117,255       458,375
Furniture and equipment...........................................     1,769,846     1,212,459
Leasehold improvements............................................     3,233,626     1,020,022
Construction-in-process                                                  340,347       295,382
                                                                    ------------  ------------
                                                                       5,461,074     3,071,518
Less: accumulated depreciation and amortization...................       828,915       290,668
                                                                    ------------  ------------
Property and equipment, net.......................................  $  4,632,159  $  2,780,850
                                                                    ------------  ------------
                                                                    ------------  ------------
</TABLE>

    Depreciation and amortization expense on property and equipment was $538,247
and $186,132 for the years ending February 28, 1999 and 1998, respectively.

3. LINE OF CREDIT

    During December, 1998, the Company obtained a senior credit facility of $17
million. As structured, $7 million was established as a term loan (Note 6) and
$10 million was established as a revolving line of credit. Draws under the
revolving line of credit are limited to the sum of (a) seventy-five percent of
qualifying accounts receivable plus fifty percent of inventory value. At
February 28, 1999, $8,840,000 had been drawn under this line of credit. Interest
accrues at a per annum rate equal to the Wall Street Journal Prime Rate plus
 .75% (8.5% at February 28, 1999) and is payable quarterly. The restructured
facility is secured by all the assets of the Company. The agreement calls for
restrictions on cash of $150,000. The new agreement contains various covenants
relating to: maintaining minimum tangible capital base, current ratio and
coverage ratio; senior indebtedness to EBITDA; and restrictions on additional
indebtedness, investments, asset sales, mergers or other changes of control,
divestitures, acquisitions, dividends and distributions. As of February 28,
1999, the Company was in violation of a covenant which was subsequently waived
by the lender. This senior credit facility has a term ending December 2000.

4. BRIDGE LOANS FROM RELATED PARTIES

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

    In January 1998, the Company entered into agreements with related parties,
approved by the Board of Directors, which provided for bridge loans of $599,000.
Interest is payable monthly at ten percent per annum. At February 28, 1999,
$123,000 of these bridge loans were outstanding. These loans are due on demand.
In connection with the 1998 bridge loans, the Company granted the holders
warrants to purchase 599,000 shares of restricted common stock at an exercise
price of $3.50, which approximated the fair value

                                      F-15
<PAGE>
                         SERACARE, INC AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4. BRIDGE LOANS FROM RELATED PARTIES (CONTINUED)
of the shares on the date of grant. In February 1998, these warrants were
exchanged for 299,500 shares of restricted common stock.

    At various times during the year ended February 28, 1998, the Company
entered into agreements with the Company's president, which provided for loans
totaling $1,325,000. These loans are due upon demand, and are secured by all the
assets of the Company. The loans accrue interest at ten and twelve percent per
annum. At February 28, 1999, $472,500 of these loans were outstanding and was
subject of 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. In connection with these
loans, the Company granted options to its president to purchase 742,500 and
116,000 shares of restricted common stock at $2.00 and $3.00 per share, which
was at the then fair value, respectively.

    During 1997, the Company entered into agreements with related parties,
approved by the Board of Directors, which provided for bridge loans of $550,000.
The bridge loans were due on demand and were secured by all of the assets of
SeraCare's consolidated operations. The loans accrue interest at twelve percent
per annum. The balance of these loans was $197,500 at February 28, 1998 and was
repaid during the year ended February 28, 1999.

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 is
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 by year end.

    During the year ended February 28, 1998, the Company entered into
agreements, approved by the Board of Directors, which provided for loans of
$808,500. These loans were due April 12, 1998. Interest was payable monthly at
ten percent per annum. $500,000 of these loans was repaid in 1998 and the
remaining $308,500 was repaid during 1999. In connection with these loans, the
Company granted the holders warrants to purchase 308,500 shares of common stock
at an exercise price of $3.50 per share and 285,000 shares at an exercise price
of $4.00 per share, which approximated the fair value of the shares on the dates
of grant. In February 1998, the warrants with an exercise price of $3.50 were
exchanged for 154,250 shares of restricted common stock.

    In conjunction with the American Plasma Management, Inc. acquisition, the
Company became obligated under a note payable for $600,000, which had an
interest rate of eight percent and was due on October 31, 1998. The note was
repaid prior to year end.

    At various times during the year ended February 28, 1998, the Company
entered into agreements, which provided for loans totaling $1,138,447. These
loans are due upon demand and are secured by all the assets of the Company. The
loans accrue interest at twelve percent per annum. In connection with these
loans, the Company granted three-year options to purchase 487,978 shares of
common stock at exercise prices ranging between $2.00 and $3.00 per share, which
was at the then fair value. In December 1997, $750,000 of these loans were
converted into 375,000 shares of restricted common stock. At February 28, 1999
and 1998 $288,447 and $388,447 respectively of these loans was outstanding.

                                      F-16
<PAGE>
                         SERACARE, INC AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6. LONG-TERM DEBT

SENIOR SUBORDINATED DEBENTURES

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

    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. This discount is being amortized as
non-cash interest expense over the term of the debt.

    The Securities Purchase Agreement contains certain affirmative and negative
covenants, including maintenance of certain minimum funded debt and fixed charge
coverage ratios and restrictions on incurring certain indebtedness and liens,
making certain dividend payments, making certain loans and advances or
investments in other persons, selling a substantial amount of assets, entering
into certain mergers or business combinations or using securities which are
senior to or PARI PASSU with these debentures. At February 28, 1999, the Company
was in compliance with these covenants.

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

MORTGAGE PAYABLE

    On November 29, 1997, the Company assumed the mortgage on one of the plasma
centers acquired in connection with the acquisition of the operating assets of
American Plasma Management. The mortgage was due in monthly installments of
principal and interest of $1,830 through June 1, 2005. Interest accrued at 10.5
percent per annum. During the year ended February 28, 1999, the Company sold the
underlying land and building and the buyer assumed this mortgage (see Note 15).

TERM LOAN

    As discussed in Note 3, $7 million of the newly negotiated senior credit
facility was restructured as a term loan. Interest is payable quarterly at a per
annum rate equal to the Wall Street Journal Prime Rate plus .75% (8.5% as of
February 28, 1999). Principal is payable over a three year period ending
December 1, 2001. The term loan is subject to the same covenants as the credit
facility (Note 3) and is secured by all the assets of the Company.

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 percent per annum. At February 28, 1999, $364,653 was outstanding
on this note payable. The second note payable is due in biweekly installments of
$2,974, representing principal and interest

                                      F-17
<PAGE>
                         SERACARE, INC AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6. LONG-TERM DEBT (CONTINUED)
imputed at 12 percent per annum, through May, 2002. At February 28, 1999,
$240,914 was outstanding on this note payable.

SILVER STATE PLASMA PRODUCTS, INC.

    On July 2, 1996, the Company acquired the operating assets of Silver State
Plasma Center in Las Vegas, Nevada for $500,000 in cash and $300,000 in a note
payable. Principal and interest are payable monthly with interest at 8%. During
1998, this note payable was converted into 112,813 shares of restricted common
stock.

CVD FINANCIAL CORPORATION

    As of February 28, 1997, the Company owed CVD Financial $821,432 under a
loan agreement in the original amount of $1,150,000, with interest at 14% per
annum payable monthly and principal payable quarterly. During 1998, the Company
repaid this loan.

KIER CORPORATION

    On September 2, 1996, the Company assumed a $45,000 note payable to The Kier
Corporation, a lessor, in conjunction with the Company's acquisition of the
rights to the Clearfield, Utah plasma collection center. The note payable
accrues interest at 10.5% and is payable in monthly installments of $967. These
monthly installments have been added to the base rental payments and are paid
monthly over a five-year period. The first monthly installment of interest and
principal commenced on October 20, 1996 and the final installment is due on
September 20, 2001. If the lease is terminated or the Company defaults on the
lease, the remainder of the loan is due in full immediately. At February 28,
1999, the outstanding balance on the note payable was $26,156. Future minimum
payments to be made, as of February 28, 1999:

<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY                                                                 AMOUNT
-------------------------------------------------------------------------------  -------------
<S>                                                                              <C>
  2000.........................................................................  $   1,199,909
  2001.........................................................................      2,725,636
  2002.........................................................................      3,687,954
  2003.........................................................................      5,342,257
  2004.........................................................................      5,333,333
  Thereafter...................................................................      5,805,833
                                                                                 -------------
                                                                                    24,094,922
Less current portion...........................................................      1,199,909
                                                                                 -------------
                                                                                 -------------
                                                                                 $  22,895,013
                                                                                 -------------
                                                                                 -------------
</TABLE>

7. STOCKHOLDERS' EQUITY

COMMON STOCK

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

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

                                      F-18
<PAGE>
                         SERACARE, INC AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7. STOCKHOLDERS' EQUITY (CONTINUED)

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

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

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

    Additionally, during 1998 the Company received $750,000 of bridge loans,
which were converted into 375,000 shares of restricted common stock (see Note
5).

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

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

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

    The Company granted options during fiscal 1998 to various outside directors.
As a result, the Company recorded deferred compensation expense of $96,401 in
1998, included in other assets on the Consolidated Balance Sheets, and
compensation expense of $21,420 in 1999 and $10,700 in 1998, included as general
and administrative expenses on the Consolidated Statements of Income.

SERIES B PREFERRED STOCK

    In December 1997, the Company issued 15,000 shares of the Company's Series B
Convertible Preferred Stock, par value $.001 per share, for $1,500,000 in a
private placement, less issuance costs of $7,500. Such preferred stock is
convertible into 300,000 common shares and has a $100 per share liquidation
preference. The Series B Convertible Preferred Stock has no voting rights prior
to conversion, does not accrue interest or cash dividends and is redeemable by
the Company beginning January 1, 1999 at a premium to liquidation preference.
The Company is required to redeem on December 31, 2002 all shares of Series B
Preferred Stock which remain outstanding on such date at a price equal to the
liquidation preference. As of February 28, 1999, all 15,000 shares were still
outstanding.

SERIES C PREFERRED STOCK

    In December, 1998, the Company issued 22,500 shares of the Company's Series
C Convertible Preferred Stock, par value $.001 per share, plus warrants to
purchase 281,500 shares of common stock at $4.50 per share, for $2,250,000 in a
private placement, less issuance costs of $135,000. Such preferred stock is
convertible into 500,000 shares of common stock and has a $100 per share
liquidation preference. The

                                      F-19
<PAGE>
                         SERACARE, INC AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7. STOCKHOLDERS' EQUITY (CONTINUED)
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. As of
February 28, 1999 dividends in arrears were approximately $37,500.

SERIES A WARRANTS

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

OTHER WARRANTS

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

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

8. SERIES A REDEEMABLE PREFERRED STOCK

    On July 7, 1996, the Company acquired BHM Labs, Inc. in exchange for 3,600
shares of the Company's Series A Preferred Stock. The preferred stock is
redeemable over three years, in 36 monthly installments with interest at the
rate of eight percent per annum starting June 1996. Upon receipt of each monthly
payment, the holder shall deliver to the Company, Series A Stock Certificates
representing 1/36th (one hundred shares) of the preferred stock initially issued
to the holder in connection with the acquisition. As of February 28, 1999, the
Company has redeemed 3,200 shares of the preferred stock for $451,162 in cash.
The shares are redeemable at $60,107 during fiscal year 2000.

                                      F-20
<PAGE>
                         SERACARE, INC AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9. STOCK OPTIONS

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

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

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

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

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

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

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

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

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

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

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

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

                                      F-21
<PAGE>
                         SERACARE, INC AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

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

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

    In connection with various loans made to the Company during the year ended
February 28, 1998, the Company granted options to purchase 1,580,473 shares of
common stock at exercise prices ranging between $2.00 and $4.00 per share
(including 349,000 granted at $3.50 per share to related parties). These options
were fully vested at the granting date and are exercisable for a period of three
years. In February 1998, 707,500 of these options were exchanged for 353,750
shares of common stock in a cashless exchange (including 349,000 options
exchanged for 174,500 shares of common stock by related parties).

    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.

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

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

    The following table summarizes all option/warrant activity for the years
ended February 28, 1999 and 1998:

<TABLE>
<CAPTION>
                                                                      NUMBER OF       WEIGHTED
                                                                     COMMON STOCK      AVERAGE
                                                                   WARRANTS/OPTIONS     PRICE
                                                                   ----------------  -----------
<S>                                                                <C>               <C>
Outstanding as of March 1, 1997..................................       1,561,832     $    2.22
Granted..........................................................       5,140,831          1.69
Exercised........................................................      (1,523,000)        (3.20)
                                                                   ----------------       -----
Outstanding as of February 28, 1998..............................       5,179,663          1.40
Granted..........................................................       1,288,855          4.99
Exercised........................................................        (325,000)        (2.75)
                                                                   ----------------       -----
Outstanding as of February 28, 1999..............................       6,143,518     $    2.08
                                                                   ----------------       -----
                                                                   ----------------       -----
Exercisable as of February 28, 1999..............................       6,120,185     $    2.07
                                                                   ----------------       -----
                                                                   ----------------       -----
</TABLE>

    FASB Statement 123, "Accounting for Stock-Based Compensation," requires the
Company to provide pro forma information regarding net income and earnings per
share as if compensation cost for the

                                      F-22
<PAGE>
                         SERACARE, INC AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9. STOCK OPTIONS (CONTINUED)
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 1999 and 1998 dividend
yield of zero percent; expected volatility of 13 percent and 23 percent; risk
free interest rate of 5.24 and 5.67; and expected life of 5.0 years.

    The weighted average fair value of options granted during the years ended
February 28, 1999 and 1998 was $.13 and $.74, respectively.

    Under the accounting provisions of FASB Statement 123, the Company's net
income and income per share for the years ended February 28, 1999 and 1998 would
have been reduced to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
                                                                      YEARS ENDED FEBRUARY 28,
                                                                      ------------------------
<S>                                                                   <C>           <C>
                                                                          1999         1998
                                                                      ------------  ----------
Net income
  As reported.......................................................  $  2,705,002  $  453,853
  Pro forma.........................................................  $  2,677,632  $  391,653
Basic income per share
  As reported.......................................................  $        .37  $      .09
  Pro forma.........................................................  $        .36  $      .08
Diluted income per share
  As reported.......................................................  $        .24  $      .08
  Pro forma.........................................................  $        .24  $      .07
</TABLE>

    The following table summarizes information about stock options outstanding
at February 28, 1999:

<TABLE>
<CAPTION>
                                                                    EXERCISABLE
                       OUTSTANDING                          ---------------------------
----------------------------------------------------------
   RANGE OF                        WEIGHTED AVERAGE              WEIGHTED AVERAGE
   EXERCISE                 ------------------------------  ---------------------------
    PRICES        SHARES    LIFE (MONTHS)  EXERCISE PRICE     SHARES    EXERCISE PRICE
--------------  ----------  -------------  ---------------  ----------  ---------------
<S>             <C>         <C>            <C>              <C>         <C>
    $0.01        2,125,477    Unlimited       $    0.01      2,125,477     $    0.01
 $1.00-$1.70       521,330      16.0          $    1.18        521,330     $    1.18
    $2.00        1,011,726      18.8          $    2.00      1,011,726     $    2.00
 $2.25-$4.00     1,221,035      18.5          $    3.02      1,221,035     $    3.02
 $4.25-$4.50       825,683      57.1          $    4.46        802,350     $    4.47
 $6.00-$6.31       438,267      49.8          $    6.27        438,267     $    6.27
                ----------                        -----     ----------         -----
                 6,143,518                    $    2.08      6,120,185     $    2.07
                ----------                        -----     ----------         -----
                ----------                        -----     ----------         -----
</TABLE>

                                      F-23
<PAGE>
                         SERACARE, INC AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10. LEASES

    The Company is currently leasing its corporate office under a noncancelable
lease agreement, which expires in May 1999. In addition, the Company leases
office and manufacturing facilities in Austin, Texas under a noncancelable lease
agreement expiring in November 1999. The Company is also obligated under various
other lease agreements for other locations (primarily donor centers) through
four of its wholly-owned subsidiaries. Two donor center locations are leased on
a month-to-month basis. The remaining leases expire at various dates through
August 2008. All of the leases have renewal options.

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

<TABLE>
<CAPTION>
FISCAL YEAR ENDED                                                                    AMOUNT
--------------------------------------------------------------------------------  ------------
<S>                                                                               <C>
  2000..........................................................................  $  1,802,173
  2001..........................................................................     1,377,260
  2002..........................................................................     1,238,901
  2003..........................................................................     1,084,822
  2004..........................................................................       683,377
  Thereafter....................................................................     1,484,317
                                                                                  ------------
                                                                                  $  7,670,850
                                                                                  ------------
                                                                                  ------------
</TABLE>

    Rent expense amounted to $1,534,419 and $571,508 for the years ended
February 28, 1999 and 1998, respectively.

11. INCOME TAXES

    The difference between the reported tax provision and the statutory rate
applied to the pre-tax income for fiscal year ended February 28, 1998 and 1999
is primarily related to the realization of deferred tax assets, primarily the
utilization of net operating loss carryforwards.

    Deferred income taxes reflect the impact of temporary differences between
the amount of assets and liabilities recognized for financial reporting purposes
and such amounts recognized for tax purposes. As of February 28, 1999, the
Company's net loss carryforwards resulted in deferred tax assets of
approximately $1.7 million. Based upon historical earnings, management was
unable to determine that it was more likely than not that the deferred tax
assets would be realized, therefore a 100% valuation allowance was established.

    As of February 28, 1999, the Company had approximately $4.4 million of
federal and state net operating loss carryforwards. Of that amount, about $3.6
million is subject to limitation under section 382 of the Internal Revenue Code.
The loss carryforwards expire in various amounts through the year 2018.

12. COMMITMENTS

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

        The Company is obligated to the president under a three-year extension
    of his employment agreement through dated February 5, 2002. The Company is
    obligated to the executive vice president under a one-year extension of his
    employment agreement through dated February 5, 2000.The current annual
    salaries under these agreements are $390,000.

                                      F-24
<PAGE>
                         SERACARE, INC AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

12. COMMITMENTS (CONTINUED)
        The Company is also obligated to the president of Biologics Division
    under a three year agreement through February 1, 2001. The current annual
    salary under this agreement is $160,000.

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

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

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

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

    During the year ended February 28, 1999, 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 year ended February 28, 1999, approximately 32% of the net sales
were to Grupo Grifols, S.A., the leading fractionator in Spain and about 20%
were to Alpha Therapeutics. No other customer represented ten percent or more of
net revenue. Accounts receivable due from Grupo Griffols, S.A. also represented
approximately 37% of accounts receivable as of February 28, 1999.

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

                                      F-25
<PAGE>
                         SERACARE, INC AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

13. CONCENTRATION OF CREDIT RISK, SIGNIFICANT CUSTOMERS AND SALES COMMITMENTS
(CONTINUED)
    In November 1996, the Company entered into an agreement with one customer
relating to three start-up facilities and in April 1997 added two additional
start-up facilities whereby the Company committed to sell substantially all of
the plasma collected from the indicated centers at various prices specified in
the agreement. The agreement expires January 31, 2000 and may be terminated if
the plasma collection centers fail to comply with applicable FDA, QPP and
customer initiated operating procedures. As of February 28, 1999, four of the
centers subject to this agreement were licensed to ship plasma by FDA and QPP
approval. The remaining center is operating under a reference number from the
FDA in order to establish compliance documentation sufficient for approval and
had not yet received FDA and QPP approval to sell collected plasma.

14. RELATED PARTY TRANSACTIONS

    The Company has had various transactions with related parties. These
transactions are described in Notes 4, 7, 9, 12 and 17. The Company had sales of
$629,547 to a related party of which the outstanding balance at February 28,
1999 was $623,899.

15. OTHER INCOME

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

    Other income at February 28, 1998, includes $801,215 from a one-time
non-operating gain realized from the sale of salvage plasma material.

                                      F-26
<PAGE>
                         SERACARE, INC AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

16. EARNINGS PER SHARE

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

<TABLE>
<CAPTION>
                                                                                        YEAR ENDED FEBRUARY 28,
                                                                                      ----------------------------
                                                                                          1999           1998
                                                                                      -------------  -------------
<S>                                                                                   <C>            <C>
Basic earnings per share
  Net income........................................................................  $   2,705,002  $     453,853
  Dividends on preferred stock......................................................         37,500             --
                                                                                      -------------  -------------
  Net income available to common stockholders (numerator)...........................  $   2,667,502  $     453,853
                                                                                      -------------  -------------
                                                                                      -------------  -------------
  Weighted average common shares outstanding (denominator)..........................      7,365,212      4,818,313
                                                                                      -------------  -------------
                                                                                      -------------  -------------
  Basic earnings per share..........................................................  $        0.37  $        0.09
                                                                                      -------------  -------------
                                                                                      -------------  -------------
Diluted earnings per share
  Net income available to common stockholders (numerator)...........................  $   2,667,502  $     453,853
                                                                                      -------------  -------------
                                                                                      -------------  -------------
  Weighted average common shares outstanding........................................      7,365,212      4,818,313
  Weighted average warrants/options outstanding.....................................      5,485,604      2,505,029
  Weighted average other dilutive securities........................................        425,000         75,000
  Stock acquired with proceeds......................................................     (2,172,630)    (1,691,937)
                                                                                      -------------  -------------
  Weighted average common shares and assumed conversion outstanding (denominator)...     11,103,186      5,706,405
                                                                                      -------------  -------------
                                                                                      -------------  -------------
  Diluted earnings per share........................................................  $        0.24  $        0.08
                                                                                      -------------  -------------
                                                                                      -------------  -------------
</TABLE>

17. SUBSEQUENT EVENTS

    The Company has reached a verbal agreement with NABI to cancel the supply
contracts on the Clearfield, Raleigh, Macon, Toledo and Pasco centers effective
April 30, 1999. This cancellation is by mutual agreement with both parties. The
Company believes that with the evolving shortage of plasma and the continuing
increase in pricing, they will benefit from the agreement. Under terms of the
agreement, the Company will repay monies advanced on production from Pasco and
Toledo and purchase approximately 48,000 liters of plasma from the NABI
inventory during the next three months.

    In March 1999, the Company granted 839,011 options to purchase shares of
common stock at an exercise price of $4.25 per share to Mr. Barry D. Plost in
connection with certain bridge loans made to the Company.

18. 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

                                      F-27
<PAGE>
                         SERACARE, INC AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

18. SEGMENT INFORMATION (CONTINUED)
overhead is reported in the category "Corporate and Other". Fiscal years ended
February 28, 1999 and 1998 are presented in compliance with the requirements of
SFAS No. 131.

    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, reagents and specialty test kits. The
Diagnostic segment also includes the production and/or sale 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,
1999 and 1998 is as follows:

<TABLE>
<CAPTION>
                                             THERAPEUTIC    DIAGNOSTIC      TOTAL       CORPORATE    CONSOLIDATED
                                               SEGMENT       SEGMENT       SEGMENTS     AND OTHER       TOTAL
                                             ------------  ------------  ------------  ------------  ------------
<S>                                          <C>           <C>           <C>           <C>           <C>
Net Sales--Third Party
  Fy 1998..................................     9,922,804     2,368,592    12,291,396                 12,291,396
  Fy 1999..................................    36,596,599    12,413,790    49,010,389                 49,010,389

Income from Joint Venture
  Fy 1998..................................            --       119,574       119,574                    119,574
  Fy 1999..................................            --       687,818       687,818                    687,818

Net Sales--Inter-Segment
  Fy 1998..................................            --        71,836        71,836                         --
  Fy 1999..................................     2,871,653       895,189     3,766,842                         --

Gross Profit
  Fy 1998..................................       755,951       880,621     1,636,572                  1,636,572
  Fy 1999..................................     3,944,378     6,625,436    10,569,814                 10,569,814

Operating Income
  Fy 1998..................................       668,967       634,615     1,303,582    (1,146,306)     157,276
  Fy 1999..................................     2,823,535     5,007,803     7,831,338    (1,458,698)   6,372,640

Interest Expense--net
  Fy 1998..................................            --            --            --       533,105      533,105
  Fy 1999..................................       157,946            --       157,946     4,136,356    4,294,302

Other income
  Fy 1998..................................       802,162            --       802,162        52,520      854,682
  Fy 1999..................................        10,408         7,718        18,126       608,538      626,664
</TABLE>

                                      F-28
<PAGE>
                         SERACARE, INC AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

18. SEGMENT INFORMATION (CONTINUED)

<TABLE>
<CAPTION>
                                             THERAPEUTIC    DIAGNOSTIC      TOTAL       CORPORATE    CONSOLIDATED
                                               SEGMENT       SEGMENT       SEGMENTS     AND OTHER       TOTAL
                                             ------------  ------------  ------------  ------------  ------------
<S>                                          <C>           <C>           <C>           <C>           <C>
Taxes on Income
  Fy 1998..................................        25,000            --        25,000            --       25,000
  Fy 1999..................................        17,014            --        17,014            --       17,014

Net Income
  Fy 1998..................................     1,446,129       634,615     2,080,744    (1,626,891)     453,853
  Fy 1999..................................     2,675,997     5,015,521     7,691,518    (4,986,516)   2,705,002

Identifiable Assets
  Fy 1998..................................    20,243,804    10,727,920    30,971,724    14,257,648   45,229,372
  Fy 1999..................................    36,962,339    17,769,323    54,731,662     9,844,600   64,576,262

Depreciation and Amortization
  Fy 1998..................................       297,647       109,547       407,194        53,988      461,182
  Fy 1999..................................       937,883       483,805     1,421,688       413,755    1,835,443

Capital Expenditures
  Fy 1998..................................     2,564,233            --     2,564,233         1,382    2,565,615
  Fy 1999..................................     1,349,818     1,342,777     2,692,595       295,525    2,988,120
</TABLE>

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

                                      F-29