##### Table of Contents





UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
  Form 10-K
  (Mark One)þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES  EXCHANGE ACT OF 1934For the fiscal year ended
    September 30, 2008ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES  EXCHANGE ACT OF 1934For the transition period
    from          to   Commission file number: 1-34105
 SeraCare Life Sciences,
    Inc.
 (Exact name of registrant as
    specified in its charter)
  Delaware(State or other
    jurisdiction
    of incorporation or organization)

33-0056054(I.R.S. Employer
    Identification No.)37 Birch Street
    Milford, Massachusetts(Address of principal
    executive offices)

01757(Zip
    Code)   Registrants telephone number, including area code:
 (508) 244-6400
  Securities registered pursuant to Section 12(b) of the
    Exchange Act:
  Common stock, $.001 Par
    Value Per Share

The NASDAQ Capital
    Market(Title of Class)

(Name of exchange on which
    registered)   Securities registered pursuant to Section 12(g) of the
    Exchange Act:
 None
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. o
  12b-2
  Large
    accelerated
    filer o
    Accelerated
    filer o
    Non-accelerated
    filer þ
    Smaller
    reporting
    company o   Rule 12b-2 o þ
  þ o
      Form 10-K.




---



##### 





TABLE OF
    CONTENTS
   
 PART IItem 1.


Business


1Item 1A.


Risk Factors


11Item 1B.


Unresolved Staff Comments


22Item 2.


Properties


22Item 3.


Legal Proceedings


23Item 4.


Submission of Matters to a Vote of Security
    Holders


23PART IIItem 5.


Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities


23Item 6.


Selected Financial Data


26Item 7.


Managements Discussion and Analysis of
    Financial Condition and Results of Operations


27Item 7A.


Quantitative and Qualitative Disclosures About
    Market Risk


38Item 8.


Financial Statements and Supplementary Data


39Item 9.


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


39Item 9A(T).


Controls and Procedures


39Item 9B.


Other Information


40PART IIIItem 10.


Directors and Executive Officers of the
    Registrant


40Item 11.


Executive Compensation


40Item 12.


Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


41Item 13.


Certain Relationships and Related Transactions
    and Director Independence


41Item 14.


Principal Accounting Fees and Services


41PART IVItem 15.


Exhibits, Financial Statement Schedules


42Signatures


44Index to Financial Statements


F-1Ex-10.2.1 Amended and Restated 2001 Stock Incentive Plan, as amendedEx-10.3 SeraCare Life Sciences, Inc. Fiscal 2009 Director Compensation ProgramEx-31.1 Section 302 Certification of Susan L.N. VogtEx-31.2 Section 302 Certification of Gregory A. GouldEx-32.1 Section 906 Certification of Susan L.N. Vogt and Gregory A. Gould




---



##### Table of Contents



PART I  CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
  We caution you that this document contains disclosures that
    are forward-looking statements within the meaning of the Private
    Securities Litigation Reform Act of 1995 about SeraCare Life
    Sciences, Inc. (SeraCare or the
    Company). All statements regarding our expected
    future financial position, results of operations, cash flows,
    dividends, financing plans, business strategy, budget, projected
    costs or cost savings, capital expenditures, competitive
    positions, growth opportunities for existing products or
    products under development, plans and objectives of management
    for future operations and markets for stock are forward-looking
    statements. In addition, forward-looking statements include
    statements in which we use words such as expect,
    believe, anticipate, intend,
    or similar expressions. Although we believe the expectations
    reflected in such forward-looking statements are based on
    reasonable assumptions, we cannot assure you that these
    expectations will prove to have been correct, and actual results
    may differ materially from those reflected in the
    forward-looking statements. Factors that could cause our actual
    results to differ from the expectations reflected in the
    forward-looking statements in this document include those set
    forth in Risk Factors in Item 1A. Many of these
    factors are beyond our ability to control or predict.
  Item 1.
    BUSINESS  Overview
    of the Company
    in vitro
    Company
    History
    
    Reagents and bioprocessing products of BioMedical Resources,
    Inc. and Simply Diagnostics, Inc. in 2003; 1




---



##### Table of Contents




    Human clinical specimens and their accompanying medical
    information from Genomics Collaborative, Inc. (GCI)
    in 2004, some assets of which were then sold in March 2007;
    Control and panel products as well as biobanking and contract
    research services of the BBI Diagnostics and BBI Biotech
    Research Laboratories divisions of Boston Biomedica, Inc. in
    2004; and
    Diagnostic manufacturing facilities and some of the product
    lines in the areas of molecular diagnostic reagents, diagnostic
    intermediates and plasma substitutes of the Celliance division
    of Serologicals Corporation in 2006.    Emergence
    from Bankruptcy
    
    Hired a new management team
    Appointed a new Board of Directors, which included one
    continuing Board member, all of which were re-elected at our
    last annual meeting;
    Reorganized operations, closed the California and Pennsylvania
    facilities and relocated those operations and the Company
    headquarters to Massachusetts (See Item 2 
    Properties);
    Raised $20.2 million through a Rights Offering (See
    Item 1  Business-Chapter 11
    Reorganization);
    Secured a $10.0 million line of credit (See
    Item 7  Managements Discussion and
    Analysis of Financial Condition and Results of
    Operations  Debt);
    Become Sarbanes-Oxley compliant;
    Sold an unprofitable business line (See Item 1 
    Business-Discontinued Operations);
    Completed a rebranding strategy which reflects the new strategic
    and business direction of the Company and re-launched our
    corporate website which includes our on-line catalog (See
    Item 7  Managements Discussion and
    Analysis of Financial Condition and Results of
    Operations  Comparison of years ended
    September 30, 2007 and 2006  Impairment of
    Assets);
    Commenced trading on NASDAQ on June 23, 2008 under the
    symbol SRLS (See Item 5  Market for
    Registrants Common Equity, Related Stockholder Matters and
    Issuer Purchases of Equity Securities); and
    Consolidated all of our Massachusetts operations into a
    60,000 square-foot cutting-edge manufacturing and research
    facility in Milford, Massachusetts which houses all current
    manufacturing operations and our corporate headquarters (See
    Item 2  Properties).  Our
    Strategy
    
    Repositioning SeraCare from being a distributor with low margins
    to a value added partner focusing on customers and products with
    higher margins;
    Accelerating growth through expansion opportunities in high
    growth/high value market segments organically and through
    acquisitions;
    Achieving operating income leverage through growth, cost
    reduction and operating efficiencies; and
    Re-shaping our portfolio to focus on differentiated products and
    services that create barriers to competition. 2




---



##### Table of Contents



Industry
    Overview
      Competitive
    Advantages
      
    Broad product portfolio.  SeraCare offers a
    comprehensive portfolio of biological materials and services for
    diagnostic and biopharmaceutical applications. The breadth of
    our product portfolio enhances our ability to establish and
    maintain relationships with both large and small companies.
    These relationships lead to additional opportunities to develop
    new products and provide scientific, manufacturing and
    biobanking services, and thus to position ourselves as the
    one stop shop for many of these companies
    biological products and service needs.
    Expertise and experience.  We continue to
    explore innovative solutions to meet the needs of evolving
    technology. SeraCare scientists developed and manufactured the
    first and for many years the only Food and Drug Administration
    (FDA) licensed confirmatory test for HIV and
    produced the first commercially available seroconversion panels
    for HIV, hepatitis B virus (HBV), HCV and West Nile
    Virus (WNV). These panels are important tools for
    studying early infection and the human immune response.
    SeraCares biobanking and repository services have set the
    standard in this expanding field. The Company continues to
    innovate, developing a new product line of genetic controls that
    include controls for diagnostic testing of warfarin sensitivity
    and controls for thrombophilia testing which were recently
    launched.
    Extensive quality assurance programs.  Our
    customers often require vendor pre-approval and certification to
    purchase biological materials and often perform audits of vendor
    facilities with extensive review of quality documentation.
    SeraCare is a vendor-approved supplier to many large
    pharmaceutical and IVD companies, and these relationships
    provide access to sell additional products and services. To
    build on these relationships, SeraCare continues to develop and
    maintain its quality assurance programs. All of our facilities
    have International Organization for Standardization
    (ISO) 13485 and 9001 certifications. SeraCares
    manufacturing facilities operate under Food and Drug
    Administrations current Good Manufacturing Practices
    (cGMP) and its research facilities operate under
    Good Laboratory Practices (GLP).
    Comprehensive manufacturing
    capabilities.  SeraCare has fully integrated its
    manufacturing capabilities, which allows us to control our
    processes from acquisition of raw materials to shipment of
    finished 3




---



##### Table of Contents



products. Our fluid processing capabilities range from a few
    milliliters to hundreds of liters, all managed with the same
    attention to quality. In addition to our own branded products,
    the Company can rapidly manufacture customized products that
    meet a wide range of specifications. Customers purchase products
    and services from us instead of sourcing them internally largely
    because these products involve processing plasma or other
    biological fluids, or require complex manufacturing processes,
    unique or isolated facilities, specialized test requirements to
    meet specifications and enhanced quality control procedures.
    SeraCare can safely and efficiently manufacture high quality
    products that incorporate cultured cells or viruses, reduce
    infectivity, involve high volume processing of DNA samples or
    isolation of specific cells from human blood.  
    Extensive raw material sourcing capabilities and
    relationships.  Many products we develop and
    manufacture require raw materials such as human plasma or human
    tissue samples. We have established relationships with plasma
    center operators, blood banks, hospitals, clinical laboratories
    and physicians that facilitate continued access to these
    necessary biological materials. Through an innovative outreach
    program (idonateplasma.com), we recruit plasma donors who have
    rare antibodies or DNA variations to provide these plasma
    components for specialized products. SeraCare protects the
    privacy of its donors and adheres to all federal and local
    regulations.  Principal
    Business Segments
  in vitro
    Diagnostic &
    Biopharmaceutical Products
    Controls
    and Panels
   4




---



##### Table of Contents



Reagents
    and Bioprocessing Products
       5




---



##### Table of Contents



BioServices
  Biobanking
    Contract
    Research
  in vitro
  Product
    Development
      Suppliers
   6




---



##### Table of Contents



Sales and
    Distribution
      Customers
      Discontinued
    Operations
    Domestic
    and Foreign Sales
     7




---



##### Table of Contents



Licensing
    Arrangements
      Intellectual
    Property
      Regulatory
    Environment
  Regulation
    of Health Care Industry
    Regulation
    of Products
         8




---



##### Table of Contents



Regulation
    of Laboratory Operations
    Environmental
    Occupational
    Safety and Health Administration (OSHA)
    State
    Governments
    Competitors
    Diagnostic & Biopharmaceutical
    Products:
  BioServices:
  Employees
   9




---



##### Table of Contents



Chapter 11
    Reorganization
  Form 10-K
  debtor-in-possession
      Available
    Information
  (508) 244-6400. Form 10-K. Form 10-K
 10




---



##### Table of Contents



Form 10-K, Form 10-Q, Form 8-K
  Item 1A.
    RISK
    FACTORS    RISKS
    RELATED TO OUR BUSINESS
  Quarterly
    revenue and operating results may fluctuate in future periods,
    and the Company may fail to meet investor
    expectations.
    
    changes in demand for the Companys products and services,
    and the ability to obtain the required resources to satisfy
    customer demand on a cost-effective basis or even to attain the
    required resources at all;
    ability to develop, introduce, market and gain market acceptance
    of new products or services in a timely manner;
    ability to manage inventories, accounts receivable and cash
    flows;
    ability to control costs; and
    overall market conditions.    Our
    operating results could deteriorate if we fail to maintain
    proper inventory levels.
    
    the need to maintain significant inventory of materials that are
    in limited supply;
    the unpredictable demand for products; and
    customer requests for quick delivery schedules. 11




---



##### Table of Contents



We may
    need additional capital.
      Failure
    to obtain alternative financing to fund a financing shortfall
    created by a potential breach of our lenders funding
    commitment could negatively impact our growth
    strategy.
    The
    terms of our debt covenants could limit how we conduct our
    business and our ability to raise additional
    funds.
   12




---



##### Table of Contents



We
    depend on contracts with government agencies, which if
    terminated or reduced, would have a material adverse effect on
    our business.
    We
    derive a substantial amount of our revenue from a limited number
    of customers.
    An
    interruption in the supply of diagnostic and therapeutic
    products at competitive prices that we purchase from third
    parties could cause a decline in our revenue.
    We may
    be unable to realize our growth strategy if we cannot identify
    suitable acquisition opportunities in the future or if we cannot
    integrate acquired businesses or technologies into our
    business.
   13




---



##### Table of Contents



and/or
    
    successfully managing and assimilating the operations,
    facilities and technology of the acquired businesses;
    maintaining and increasing the customer base for the acquired
    products;
    demonstrating to customers and suppliers that the acquisitions
    will not result in adverse changes in service standards or
    business focus;
    minimizing the diversion of management attention from ongoing
    business concerns;
    maintaining employee morale and retaining key employees,
    integrating cultures and management structures and accurately
    forecasting employee benefit costs;
    consolidating our management information, inventory, accounting
    and other systems;
    our ability to assess accurately the value, strengths,
    weaknesses, contingent and other liabilities and potential
    profitability of acquisition candidates;
    the potential loss of key personnel of an acquired business;
    our ability to integrate acquired businesses and to achieve
    identified financial and operating synergies anticipated to
    result from an acquisition;
    increased pressure on our staff and on our operating
    systems; and
    unanticipated changes in business and economic conditions
    affecting an acquired business.    Our
    success depends in large part upon the continued services of our
    senior executives and other key employees, including certain
    sales, consulting and technical personnel.
   14




---



##### Table of Contents



We may
    face additional expenses and cash funding needs pending the sale
    of our manufacturing facility in West Bridgewater,
    Massachusetts.
    Lack
    of early success with our pharmaceutical and biotechnology
    customers can shut us out of future business with those
    customers.
    Our
    profits will likely decline if we are unable to pass price
    increases on to customers or obtain necessary raw materials at
    their current prices.
    Our
    failure to improve our product offerings and develop and
    introduce new products may negatively impact our
    business.
   15




---



##### Table of Contents



We are
    subject to the risks associated with international
    sales.
    
    political and economic instability;
    export controls;
    changes in legal and regulatory requirements;
    United States and foreign government policy changes affecting
    the markets for our products; and
    changes in tax laws and tariffs.      Our
    financial condition could suffer if we experience unanticipated
    costs or enforcement action as a result of the Department of
    Justice investigation and other lawsuits.
    If we
    fail to maintain adequate quality standards for our products and
    services, our business may be adversely affected and our
    reputation harmed.
    Our
    principal shareholders may exert significant influence on
    us.
   16




---



##### Table of Contents



We
    heavily rely on air cargo carriers and other third party package
    delivery services, and a significant disruption in these
    services or significant increases in prices may disrupt our
    ability to import or export materials, increase our costs and
    lower our profitability.
    We
    have limited manufacturing capabilities, and if our
    manufacturing capabilities are insufficient to produce an
    adequate supply of products at appropriate quality levels, our
    growth could be limited and our business could be
    harmed.
    The
    cost of compliance or failure to comply with the Sarbanes-Oxley
    Act of 2002 may adversely affect our
    business.
    A
    disaster at our facilities could substantially impact our
    business.
   17




---



##### Table of Contents



back-up
  Our
    inability to protect our intellectual property rights could
    prevent us from selling our products and hinder our financial
    performance.
    Product
    liability claims could have a material adverse effect on our
    reputation, business, results of operations and financial
    condition.
    Foreign
    restrictions on importation and exportation of blood
    derivatives.
    RISKS
    RELATED TO OUR INDUSTRY
  Reduced
    demand due to economic downturn in overall market.
   18




---



##### Table of Contents



The
    industries and market segments in which we operate are highly
    competitive, and we may not be able to compete effectively with
    larger companies with greater financial resources than we
    have.
        We are
    subject to significant regulation by the government and other
    regulatory authorities.
     19




---



##### Table of Contents



Failure
    to comply with environmental, health and safety laws and
    regulations, including the federal Occupational Safety and
    Health Administration Act, may result in fines and penalties and
    loss of licensure, and have a material adverse effect upon the
    Companys business.
  follow-up,
  and/or
  Changes
    in demand for plasma-derived products and the availability of
    donated plasma could affect profitability.
    We are
    subject to governmental reforms and the adequacy of
    reimbursement.
    RISKS
    RELATED TO OUR STOCK
  Our
    stock could be delisted if our stock price falls below
    $1.00.
   20




---



##### Table of Contents



Our
    stock price could be volatile.
    We may
    issue preferred stock in the future.
    Anti-takeover effects of certain charter and bylaw
    provisions.
    
    eliminate cumulative voting rights;
    authorize the issuance of blank check preferred
    stock having such designations, rights and preferences as may be
    determined from time to time by the Board of Directors, without
    any vote or further action by our shareholders; and
    eliminate the right of shareholders to act by written consent.  Lack
    of dividend payments.
    Our
    shareholders ability to sell shares of the Companys
    stock may be limited.
   21




---



##### Table of Contents



Additional
    risk factors
    
    our ability to maintain favorable supplier agreements and
    relationships with major customers and suppliers;
    the loss of any significant customers or reduced orders from
    significant customers;
    our ability to maintain and expand our customer base;
    increased competition for donors, which may affect our ability
    to attract and retain qualified donors;
    our ability to meet future customer demand for plasma
    products; and
    changes in industry trends, customer specifications and demand,
    market demand in general and potential foreign restrictions of
    the importation of our products.  Item 1B.
    UNRESOLVED
    STAFF COMMENTS    Item 2.
    PROPERTIES      Approximate FloorLocation

Facility Use

Industry Segment

Owned or Leased

Space in Sq. Ft.Frederick, MD

Repository

BioServices

Leased


65,000Milford, MA

Manufacturing, warehouse and office

Diagnostic & Biopharmaceutical Products

Leased


60,000Gaithersburg, MD

Manufacturing, repository, laboratory and office

BioServices

Leased


36,000West Bridgewater, MA

Held for Sale

Diagnostic & Biopharmaceutical Products

Owned


32,000  22




---



##### Table of Contents



Item 3.
    LEGAL
    PROCEEDINGS  Department
    of Justice/Securities and Exchange Commission
    CTL
    Analyzers, LLC
    Item 4.
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS   PART II  Item 5.
    MARKET
    FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
    AND ISSUER PURCHASES OF EQUITY SECURITIES    2008 Quarter Ended

High


LowSeptember 30, 2008

$
5.19


$
2.30June 30, 2008

$
4.90


$
3.85March 31, 2008

$
6.00


$
4.05December 31, 2007

$
6.35


$
5.30   2007 Quarter Ended

High


LowSeptember 30, 2007

$
7.00


$
5.00June 30, 2007

$
7.55


$
6.31March 31, 2007

$
7.00


$
5.50December 31, 2006

$
6.80


$
5.80  23




---



##### Table of Contents



Holders
    Dividends
    Securities
    Authorized for Issuance under Equity Compensation
    Plans
   Number of SecuritiesRemaining Available forNumber of Securities





Future Issuance Underto be Issued Upon


Weighted Average


Equity Compensation PlansExercise of


Exercise Price of


(Excluding SecuritiesPlan Category

Outstanding Options


Outstanding Options ($)


Reflected in First Column)Equity compensation plans approved by security holders:Amended and Restated 2001 Stock Incentive Plan


962,000


$
7.97



618,676Equity compensation not pursuant to the Plan


700,000
(1)

$
5.93



N/ATotal


1,662,000


$
7.11     (1)
    
    450,000 options were issued to Ms. Vogt on August 25,
    2006 at an exercise price of $6.00 per share and 250,000 options
    were issued to Mr. Gould on October 3, 2006 at an
    exercise price of $5.80 per share. 24




---



##### Table of Contents



Stock
    Performance Graph
    COMPARISON
    OF 5 YEAR CUMULATIVE TOTAL RETURN*
   
     September 30,2003



2004



2005



2006



2007



2008SeraCare Life Sciences, Inc.



100.00




182.48




259.27




84.67




83.94




43.65NASDAQ Composite



100.00




107.74




123.03




131.60




158.88




119.05NASDAQ Biotechnology



100.00




103.64




125.03




125.78




137.54




132.36   Recent
    Sales of Unregistered Securities
  Forms 10-Q 8-K. Form S-1 No. 333-151773). S-1.
 25




---



##### Table of Contents



Item 6.
    SELECTED
    FINANCIAL DATA    Year Ended September 30,2008


2007


2006


2005


2004In thousands, except for per share dataSTATEMENT OF OPERATIONS DATA:Revenue

$
48,967


$
47,304


$
49,176


$
50,300


$
28,441Cost of revenue


33,945



33,930



32,552



50,784



17,701Gross profit (loss)


15,022



13,374



16,624



(484
)


10,740Research and development expense


1,776



566



496



410



Selling, general and administrative expenses


16,119



14,527



13,308



11,958



5,097Impairment of assets


7,987



5,220











Reorganization items


1,314



5,224



9,408







Operating (loss) income


(12,174
)


(12,163
)


(6,588
)


(12,852
)


5,643Interest expense


(386
)


(697
)


(2,114
)


(1,762
)


(250
)Interest expense to related parties






(313
)


(493
)


(490
)


(23
)Other income (expense), net


221



194



286



(96
)


26(Loss) income before income taxes


(12,339
)


(12,979
)


(8,909
)


(15,200
)


5,396Income tax (benefit) expense


(376
)


76



(31
)


(513
)


1,241Net (loss) income from continuing operations


(11,963
)


(13,055
)


(8,878
)


(14,687
)


4,155Loss from discontinued operations, net of income tax






(110
)


(15,400
)


(6,410
)


Net (loss) income

$
(11,963
)

$
(13,165
)

$
(24,278
)

$
(21,097
)

$
4,155(LOSS) INCOME PER COMMON SHARE:Basic net (loss) income per common share:Continuing operations

$
(0.64
)

$
(0.82
)

$
(0.64
)

$
(1.32
)

$
0.51Discontinued operations






(0.01
)


(1.10
)


(0.58
)


Net (loss) income

$
(0.64
)

$
(0.83
)

$
(1.74
)

$
(1.90
)

$
0.51Diluted net (loss) income per common share:Continuing operations

$
(0.64
)

$
(0.82
)

$
(0.64
)

$
(1.32
)

$
0.45Discontinued operations






(0.01
)


(1.10
)


(0.58
)


Net (loss) income

$
(0.64
)

$
(0.83
)

$
(1.74
)

$
(1.90
)

$
0.45   As of September 30,2008


2007


2006


2005


2004In thousandsSELECTED BALANCE SHEET DATA:Working capital

$
14,330


$
20,084


$
7,777


$
30,978


$
23,923Total assets

$
51,097


$
58,440


$
71,108


$
96,112


$
89,128Long-term obligations(1)

$
61


$
2,111


$
5,718


$
17,865


$
25,967Stockholders equity

$
40,410


$
50,524


$
41,566


$
64,586


$
45,764     (1)
    
    Includes debt, notes payable to related parties and capital
    leases. 26




---



##### Table of Contents



Item 7.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS  This Managements Discussion and Analysis of Financial
    Condition and Results of Operations should be read together with
    the financial statements, related notes and other financial
    information included elsewhere in this Annual Report on
    Form 10-K.
  Business
    Overview
  state-of-the-art
    state-of-the-art
   27




---



##### Table of Contents



Results
    of Operations
    Year Ended September 30,2008


2007


2006STATEMENT OF OPERATIONS DATA:


%



%



%Revenue


100.0



100.0



100.0Cost of revenue


69.3



71.7



66.2Gross profit


30.7



28.3



33.8Research and development expense


3.6



1.2



1.0Selling, general and administrative expenses


32.9



30.7



27.1Impairment of assets


16.3



11.0



Reorganization items


2.8



11.1



19.1Operating loss


(24.9
)


(25.7
)


(13.4
)Interest expense


(0.8
)


(1.5
)


(4.3
)Interest expense to related parties






(0.6
)


(1.0
)Other income, net


0.5



0.4



0.6Loss before income taxes


(25.2
)


(27.4
)


(18.1
)Income tax (benefit) expense


(0.8
)


0.2



Net loss from continuing operations


(24.4
)


(27.6
)


(18.1
)Loss from discontinued operations, net of income tax






(0.2
)


(31.3
)Net loss


(24.4
)


(27.8
)


(49.4
)   Comparison
    of years ended September 30, 2008 and September 30,
    2007
  Revenue
    September 30,


September 30,


Percent2008


2007


changeDiagnostic & Biopharmaceutical Products

$
35.0


$
35.0



0
%BioServices


14.0



12.3



14
%Total revenue

$
49.0


$
47.3



4
%    28




---



##### Table of Contents



Gross
    Profit
    Research
    and Development Expense
    Selling,
    General and Administrative Expenses
    Impairment
    of Assets
    Reorganization
    Items
    Operating
    Loss
   29




---



##### Table of Contents



Interest
    Expense and Other Income
    Income
    Tax (Benefit) Expense
    Net
    Loss from Continuing Operations
    Loss
    from Discontinued Operations
    Net
    Loss and Net Loss Per Share
    Comparison
    of years ended September 30, 2007 and September 30,
    2006
  Revenue
    September 30,


September 30,


Percent2007


2006


changeDiagnostic & Biopharmaceutical Products

$
35.0


$
37.8



(7.4
)%BioServices


12.3



11.4



7.9
%Total revenue

$
47.3


$
49.2



(3.9
)%    30




---



##### Table of Contents



Gross
    Profit
  debtor-in-possession.
  Research
    and Development Expense
  in vitro
  Selling,
    General and Administrative Expenses
    Impairment
    of Assets
    Reorganization
    Items
    Operating
    Loss
   31




---



##### Table of Contents



Interest
    Expense and Other Income
  then-existing
  Income
    Tax (Benefit) Expense
    Net
    Loss from Continuing Operations
    Loss
    from Discontinued Operations
    Net
    Loss and Net Loss Per Share
    Liquidity
    and Capital Resources
  Cash
    Flows
    September 30,2008


2007


2006Net cash used in operating activities

$
(2.6
)

$
(10.6
)

$
(6.2
)Net cash (used in) provided by investing activities


(3.8
)


1.5



(4.8
)Net cash (used in) provided by financing activities


(0.2
)


5.1



(5.0
)Net decrease in cash and cash equivalents

$
(6.6
)

$
(4.0
)

$
(16.0
)   build-up
 32




---



##### Table of Contents



Operating
    Cash Flows
    Investing
    Cash Flows
    Financing
    Cash Flows
    Off-Balance
    Sheet Arrangements
   33




---



##### Table of Contents



Debt
  and/or
    Critical
    Accounting Policies and Estimates
    Revenue Recognition. Revenue
    Recognition in Financial Statements
  
    evidence of an arrangement exists;
    delivery or performance has occurred;
    prices are fixed or determinable; and
    collection of the resulting receivable is reasonably assured.    Inventory valuation.
 34




---



##### Table of Contents



Valuation of Long-Lived and Intangible Assets and
    Goodwill. non-amortizable
    
    significant underperformance related to historical or expected
    projected future operating results; or
    significant changes or developments in strategy or operations
    which affect our long-lived assets.      Contingencies and Litigation Reserves.
  
    interpretation of contractual rights and obligations;
    the status of government regulatory initiatives, interpretations
    and investigations;
    the status of settlement negotiations;
    prior experience with similar types of claims;
    whether there is available insurance; and
    advice of counsel.  Stock-Based Compensation. Share-Based Payments
   35




---



##### Table of Contents



Simplified
    Method for Estimating the Expected Term.
  Accounting for Income Taxes.
    Recent
    Accounting Pronouncements
  SFAS No. 157,
    Fair Value Measurements
  Fair Value Measurements mark-to-model
 36




---



##### Table of Contents



SFAS No. 141
    (Revised 2007), Business Combinations
  Business Combinations
  
    acquisition costs will be generally expensed as incurred;
    noncontrolling interests will be valued at fair value at the
    acquisition date;
    acquired contingent liabilities will be recorded at fair value
    at the acquisition date and subsequently measured at either the
    higher of such amount or the amount determined under existing
    guidance for non-acquired contingencies;
    in-process research and development will be recorded at fair
    value as an indefinite-lived intangible asset at the acquisition
    date until the completion or abandonment of the associated
    research and development efforts;
    restructuring costs associated with a business combination will
    be generally expensed subsequent to the acquisition
    date; and
    changes in deferred tax asset valuation allowances and income
    tax uncertainties after the acquisition date generally will
    affect income tax expense.    SFAS No. 160,
    Noncontrolling Interests in Consolidated Financial
    Statements  An Amendment of ARB
    No. 51
  Noncontrolling Interests in
    Consolidated Financial Statements  An Amendment of
    ARB No. 51
 37




---



##### Table of Contents



FIN No. 48,
    Accounting for Uncertainty in Income Taxes 
    An Interpretation of FASB Statement
    No. 109
  Accounting for
    Uncertainty in Income Taxes  An Interpretation of
    FASB Statement No. 109 Accounting for Income
    Taxes
    Contractual
    Obligations and Commitments
    Payments Due by PeriodContractual Obligations

Total


Less Than 1 Year


1-3 Years


3-5 Years


More Than 5 YearsLong-term debt obligations(1)

$
2,098


$
2,037


$
49


$
12


$
Interest payments(2)


204



163



41







Operating lease
    obligations


22,139



2,305



4,941



5,311



9,582Purchase obligations


258



188



70







TOTAL

$
24,699


$
4,693


$
5,101


$
5,323


$
9,582     (1)
    
    Long-term debt obligations include capital leases.
    $1.9 million relates to the Commerce Bank &
    Trust Mortgage Note which is due on August 31, 2009
    while the remaining $0.2 million relates to capital leases.(2)
    
    Interest payment amounts include unused line fees owed to GE
    Capital under the Credit and Security Agreement.  Item 7A.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK  Interest Rate and Market Risk.
 38




---



##### Table of Contents



Foreign Currency Exchange Risk.
    Item 8.
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA  Form 10-K page F-1.
  Item 9.
    CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE    Item 9A(T).
    CONTROLS
    AND PROCEDURES  (a)
    Disclosure
    Controls and Procedures  Rule 13a-15(b) Regulation S-K
  Form 10-K
  Form 10-K. Form 10-K. Form 10-K
  (b)
    Managements
    Report on Internal Control Over Financial Reporting  Rule 13a-15(f) 15d-15(f)
  
    Pertain to the maintenance of records that in reasonable detail
    accurately and fairly reflect the transactions and dispositions
    of the assets of the company; 39




---



##### Table of Contents




    Provide reasonable assurance that transactions are recorded as
    necessary to permit preparation of financial statements in
    accordance with generally accepted accounting principles, and
    that receipts and expenditures of the company are being made
    only in accordance with authorizations of management and
    directors of the company; and
    Provide reasonable assurance regarding prevention or timely
    detection of unauthorized acquisition, use or disposition of the
    companys assets that could have a material effect on the
    financial statements.        (c)
    Changes
    in Internal Control  Rule 13a-15(d) Form 10-K
  Item 9B.
    OTHER
    INFORMATION   PART III  Item 10.
    DIRECTORS
    AND EXECUTIVE OFFICERS OF THE REGISTRANT    Item 11.
    EXECUTIVE
    COMPENSATION   40




---



##### Table of Contents



Item 12.
    SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
    RELATED STOCKHOLDER MATTERS    Item 13.
    CERTAIN
    RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
    INDEPENDENCE    Item 14.
    PRINCIPAL
    ACCOUNTING FEES AND SERVICES   41




---



##### Table of Contents



PART IV  Item 15.
    EXHIBITS,
    FINANCIAL STATEMENT SCHEDULES  Exhibit



Incorporated by Reference

FiledNumber

Exhibit Description

Form

Date

Number

Herewith2
.1

Asset Purchase Agreement, dated March 29, 2007, between SeraCare
    Life Sciences, Inc. and BioServe Biotechnologies Limited.

8-K

3/29/07


10
.12
.2

First Amended Joint Plan of Reorganization of the Debtor and Ad
    Hoc Equity Committee, as Modified.

8-K

2/23/07


2
.12
.3

Order on Confirmation of First Amended Joint Plan of
    Reorganization of the Debtor and The Ad Hoc Equity Committee, as
    Modified.

8-K

2/23/07


2
.22
.4

Merger Agreement between SeraCare Life Sciences, Inc. and
    Reorganized SeraCare, dated May 17, 2007.

8-K

5/17/07


2
.33
.1

Certificate of Incorporation.

8-A

5/17/07


3
.13
.2

Amended and Restated Bylaws.

8-K

9/3/08


3
.13
.3

Certificate of Merger, dated May 17, 2007, filed with Delaware
    Secretary of State.

8-K

5/17/07


3
.14
.1

Form of SeraCare Life Sciences, Inc. common stock certificate.

8-A

5/17/07


4
.110
.1.1

Employment Agreement, dated July 14, 2006, between SeraCare Life
    Sciences, Inc. and Susan L.N. Vogt.*

8-K

5/17/07


10
.110
.1.2

Employment Agreement, dated August 16, 2006, between SeraCare
    Life Sciences, Inc. and Gregory A. Gould.*

8-K/A

5/18/07


10
.210
.1.3

Employment Agreement, dated February 1, 2008, between SeraCare
    Life Sciences, Inc. and Ronald R. Dilling.*

8-K

2/1/08


10
.110
.1.4

Offer Letter, dated September 1, 2004, between SeraCare Life
    Sciences, Inc. and Katheryn E. Shea.*

S-1

6/19/08


10
.1.410
.1.5

Offer Letter, dated September 29, 2006, between SeraCare Life
    Sciences, Inc. and William J. Smutny.*

S-1

6/19/08


10
.1.510
.2.1

Amended and Restated 2001 Stock Incentive Plan, as amended.*









X10
.2.2

Form of Nonqualified Stock Option Agreement.*

8-K

5/21/07


99
.210
.2.3

Form of Incentive Stock Option Agreement.*

8-K

5/21/07


99
.310
.3

SeraCare Life Sciences, Inc. Fiscal 2009 Director
    Compensation Program.*









X10
.4

SeraCare Life Sciences, Inc. Management Incentive Program.*

10-K

1/31/08


10
.410
.5

Award/Contract, dated September 30, 2005, by and between
    SeraCare Life Sciences, Inc. d/b/a SeraCare BioServices and the
    National Cancer Institute.

8-K

10/6/05


10
.110
.6

Contract No. HHSN272200700060C among Office of Acquisitions,
    DEA, National Institute of Allergy and Infections Diseases,
    National Institute of Health, DHHS and SeraCare Life Sciences,
    Inc. dated September 30, 2007.

8-K

10/3/07


10
.110
.7

Lease Agreement dated as of October 1, 2007 by and between
    Birchwood Fortune  SPVEF, LLC and SeraCare Life
    Sciences, Inc.

8-K

10/4/07


10
.110
.8

Lease Agreement dated as of May 16, 1997 by and between
    BBI-Biotech Research Laboratories, Inc. and B.F. Saul Real
    Estate Investment Trust.

10-K

1/31/08


10
.810
.8.1

First Amendment to the Lease Agreement dated October 14, 1997 by
    and between BBI-Biotech Research Laboratories, Inc. and B.F.
    Saul Real Estate Investment Trust.

10-K

1/31/08


10
.8.1 42




---



##### Table of Contents



Exhibit



Incorporated by Reference

FiledNumber

Exhibit Description

Form

Date

Number

Herewith10
.8.2

Second Amendment to the Lease Agreement dated December 9, 1997
    by and between BBI-Biotech Research Laboratories, Inc. and B.F.
    Saul Real Estate Investment Trust.

10-K

1/31/08


10
.8.210
.8.3

Third Amendment to the Lease Agreement dated June 14, 2007 by
    and between SeraCare Life Sciences, Inc. and B.F. Saul Real
    Estate Investment Trust.

10-K

1/31/08


10
.8.310
.8.4

Landlords Lien Subordination Agreement dated July 9, 2007
    by and between Saul Holdings Limited Partnership and Merrill
    Lynch Business Financial Services, Inc.

10-K

1/31/08


10
.8.410
.9

Credit and Security Agreement, dated as of June 4, 2007, between
    SeraCare Life Sciences, Inc. and Merrill Lynch Capital (now GE
    Capital) as a lender and the Administrative Agent, excluding the
    annexes, exhibits, riders and schedules thereto.

8-K

6/11/07


10
.110
.10

Assumption and Modification Agreement, dated as of September 14,
    2004, between SeraCare Life Sciences, Inc. and Commerce Bank
    & Trust Company.

8-K

9/16/04


10
.310
.11

Guaranty, dated as of September 14, 2004, made by SeraCare Life
    Sciences, Inc. in favor of Commerce Bank & Trust Company.

8-K

9/16/04


10
.410
.12

Loan Agreement, dated March 31, 2000, between Boston Biomedica,
    Inc. and Commerce Bank & Trust Company.

8-K

9/16/04


10
.510
.13

Allonge to Loan Agreement, dated August 15, 2002, between Boston
    Biomedica, Inc. and Commerce Bank & Trust Company.

8-K

9/16/04


10
.610
.14

Agreement, dated March 27, 2003, between Boston Biomedica, Inc.
    and Commerce Bank & Trust Company.

8-K

9/16/04


10
.710
.15

$2,900,000 Note, dated March 31, 2000, issued by Boston
    Biomedica, Inc. and payable to the order of Commerce Bank &
    Trust Company.

8-K

9/16/04


10
.810
.16

Mortgage and Security Agreement, dated March 31, 2000, granted
    by Boston Biomedica, Inc. to Commerce Bank & Trust
    Company.

8-K

9/16/04


10
.914
.1

Code of Ethics for Chief Executive Officer and Senior Financial
    Officers.

8-K

5/21/07


99
.431
.1

Sarbanes-Oxley Act Section 302 Certification of Susan L.N. Vogt.









X31
.2

Sarbanes-Oxley Act Section 302 Certification of Gregory A. Gould.









X32
.1

Sarbanes-Oxley Act Section 906 Certification of Susan L.N. Vogt
    and Gregory A. Gould.









X       *
    Indicates management contract or compensatory plan or
    arrangement.
    In accordance with the terms of the Assumption and Modification
    Agreement, dated as of September 14, 2004, between SeraCare
    Life Sciences, Inc. and Commerce Bank &
    Trust Company, SeraCare Life Sciences, Inc. agreed to
    assume certain of the obligations of Boston Biomedica, Inc. 43




---



##### Table of Contents



SIGNATURES      Susan
    L.N. Vogt
        Signature

Title

Date/s/  Susan
    L.N. VogtSusan
    L.N. Vogt

President and Chief Executive Officer Director (Principal
    Executive Officer)

December 8, 2008/s/  Gregory
    A. GouldGregory
    A. Gould

Chief Financial Officer, Treasurer and Secretary (Principal
    Financial and Accounting Officer)

December 8, 2008/s/  Eugene
    I. DavisEugene
    I. Davis

Chairman

December 8, 2008/s/  Samuel
    D. AndersonSamuel
    D. Anderson

Director

December 8, 2008/s/  Sarah
    L. MurphySarah
    L. Murphy

Director

December 8, 2008/s/  Jill
    TillmanJill
    Tillman

Director

December 8, 2008  44




---



##### 



SERACARE
    LIFE SCIENCES, INC.
 INDEX TO
    FINANCIAL STATEMENTS   
 Report of Independent Registered Public
    Accounting Firm


F-2Financial StatementsBalance Sheets, As of September 30, 2008 and
    2007


F-3Statements of Operations, Years Ended
    September 30, 2008, 2007 and 2006


F-4Statements of Stockholders Equity, Years
    Ended September 30, 2008, 2007 and 2006


F-5Statements of Cash Flows, Years Ended
    September 30, 2008, 2007 and 2006


F-6Notes to Financial Statements


F-8   F-1




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM           
   F-2




---



##### Table of Contents



SERACARE
    LIFE SCIENCES, INC.
  BALANCE
    SHEETS
  As of September 30,2008


2007ASSETSCurrent assetsCash and cash equivalents

$
2,945,866


$
9,523,950Accounts receivable, less allowance for doubtful accounts of
    $170,000 and $175,000 in 2008 and 2007, respectively


6,540,069



6,590,602Taxes receivable


488,847



1,726,386Inventory


12,153,891



7,316,515Prepaid expenses and other current assets


664,406



333,305Total current assets


22,793,079



25,490,758Property and equipment, net


6,218,242



4,245,716Assets held for sale


1,914,330



Goodwill


19,376,078



27,362,559Other intangible assets


181,985



446,489Other assets


612,841



894,223Total assets

$
51,096,555


$
58,439,745LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilitiesAccounts payable

$
2,766,790


$
2,201,256Prepetition liabilities






198,612Accrued expenses


3,658,983



2,818,700Current portion of long-term debt


2,037,396



187,771Total current liabilities


8,463,169



5,406,339Long-term debt


61,038



2,111,368Other liabilities


2,162,123



397,544Total liabilities


10,686,330



7,915,251Commitments and contingenciesStockholders equityPreferred stock  $.001 par value,
    5,000,000 shares authorized, no shares issued or
    outstanding as of September 30, 2008 and 2007






Common stock  $.001 par value,
    35,000,000 shares authorized, 18,565,580 and
    18,557,948 shares issued and outstanding as of
    September 30, 2008 and 2007, respectively


18,566



18,558Additional paid-in capital


101,585,566



99,736,794Retained earnings


(61,193,907
)


(49,230,858
)Total stockholders equity


40,410,225



50,524,494Total liabilities and stockholders equity

$
51,096,555


$
58,439,745    F-3




---



##### Table of Contents



SERACARE
    LIFE SCIENCES, INC.
  STATEMENTS
    OF OPERATIONS
  Year Ended September 30,2008


2007


2006Revenue

$
48,966,648


$
47,303,595


$
49,175,857Cost of revenue


33,944,392



33,929,232



32,551,533Gross profit


15,022,256



13,374,363



16,624,324Research and development expense


1,776,462



566,634



496,064Selling, general and administrative expenses


16,118,864



14,526,718



13,308,077Impairment of goodwill


7,986,481







Impairment of intangible assets






5,220,000



Reorganization items


1,314,013



5,223,896



9,408,052Operating loss


(12,173,564
)


(12,162,885
)


(6,587,869
)Interest expense


(385,797
)


(697,787
)


(2,114,248
)Interest expense to related parties






(312,862
)


(492,917
)Other income, net


220,531



194,062



286,361Loss before income taxes


(12,338,830
)


(12,979,472
)


(8,908,673
)Income tax (benefit) expense


(375,781
)


75,971



(30,878
)Net loss from continuing operations


(11,963,049
)


(13,055,443
)


(8,877,795
)Loss from discontinued operations, net of income tax






(109,438
)


(15,400,107
)Net loss

$
(11,963,049
)

$
(13,164,881
)

$
(24,277,902
)Loss per common shareBasic and diluted net loss per common shareContinuing operations

$
(0.64
)

$
(0.82
)

$
(0.64
)Discontinued operations






(0.01
)


(1.10
)Net loss

$
(0.64
)

$
(0.83
)

$
(1.74
)Weighted average shares outstandingBasic and diluted


18,562,350



15,876,236



13,986,413    F-4




---



##### Table of Contents



SERACARE
    LIFE SCIENCES, INC.
  STATEMENTS
    OF STOCKHOLDERS EQUITY
  Additional


RetainedCommon Stock


paid-in


earnings


TotalShares


Amount


capital


(deficit)


amountBalance, September 30, 2005


13,534,861


$
66,421,091


$
9,952,669


$
(11,788,075
)

$
64,585,685Net loss














(24,277,902
)


(24,277,902
)Exercise of warrants and options


744,819



410,409











410,409Stock-based compensation expense










795,242







795,242Employee stock purchase plan


3,268



52,581











52,581Balance, September 30, 2006


14,282,948



66,884,081



10,747,911



(36,065,977
)


41,566,015Net loss














(13,164,881
)


(13,164,881
)Exercise of options


25,000



148,250











148,250Change in par value due to Delaware corporation merger, par $.001






(67,018,023
)


67,018,023







Rights Offering of common stock


4,250,000



4,250



20,183,250







20,187,500Rights Offering of common stock, cost










(610,729
)






(610,729
)Stock-based compensation expense










2,398,339







2,398,339Balance, September 30, 2007


18,557,948



18,558



99,736,794



(49,230,858
)


50,524,494Net loss














(11,963,049
)


(11,963,049
)Stock issued under stock plan


7,632



8



39,945







39,953Stock-based compensation expense










1,808,827







1,808,827Balance, September 30, 2008


18,565,580


$
18,566


$
101,585,566


$
(61,193,907
)

$
40,410,225    F-5




---



##### Table of Contents



SERACARE
    LIFE SCIENCES, INC.
  STATEMENTS
    OF CASH FLOWS
  Year Ended September 30,2008


2007


2006Cash flows from operating activities:Net loss

$
(11,963,049
)

$
(13,164,881
)

$
(24,277,902
)Adjustments to reconcile net loss to cash (used in) operating
    activities:Depreciation and amortization


1,313,978



1,389,087



1,989,232Amortization of deferred financing expenses


179,875



59,959



419,667Bad debt expense


17,766



95,299



202,945Write-down of inventory


2,935,510



699,139



802,111Impairment of trade name






5,220,000



Impairment of goodwill


7,986,481







13,384,849Loss on disposal of fixed assets


33,278







182,393Gain on disposition of certain assets of Genomics Collaborative
    division






(791,661
)


Stock-based compensation


1,848,780



2,398,339



795,242(Increase) decrease from changes, net of effects from
    acquisitions:Accounts receivable


32,767



1,684,391



1,524,951Taxes receivable


1,237,539



75,541



(291,822
)Inventory


(7,772,886
)


(2,277,818
)


(2,907,649
)Prepaid expenses and other current assets


213,459



1,463,608



(1,279,175
)Other assets


101,507



105,747



(258,339
)Increase (decrease) from changes, net of effects from
    acquisitions:Accounts payable


565,534



657,934



(3,599,570
)Prepetition liabilities


(198,612
)


(8,910,001
)


6,824,963Accrued expenses and other liabilities


853,564



640,684



317,880Net cash (used in) operating activities


(2,614,509
)


(10,654,633
)


(6,170,224
)Cash flows from investing activities:Purchases of property and equipment


(4,969,608
)


(492,001
)


(987,859
)Proceeds from landlord for leasehold improvements


1,206,738







Acquisition of certain assets of BioMedical Resources, Inc.










(290,463
)Acquisition of certain assets of Celliance division










(3,588,796
)Proceeds from the disposition of certain assets of Genomics
    Collaborative division






2,000,000



Proceeds from the disposal of property and equipment






15,000



18,000Net cash (used in) provided by investing activities


(3,762,870
)


1,522,999



(4,849,118
)Cash flows from financing activities:Repayments of long-term debt


(200,705
)


(10,590,578
)


(20,436,527
)Repayment of related party debt






(3,500,000
)


Deferred financing expenses






(539,627
)


Proceeds from long term debt










15,000,000Funding received from Rights Offering, net of issue costs






19,576,771



Proceeds from exercise of options, warrants and ESPP transactions






148,250



462,990Net cash (used in) provided by financing activities


(200,705
)


5,094,816



(4,973,537
)Net decrease in cash and cash equivalents


(6,578,084
)


(4,036,818
)


(15,992,879
)Cash and cash equivalents,beginning of year


9,523,950



13,560,768



29,553,647Cash and cash equivalents,end of year

$
2,945,866


$
9,523,950


$
13,560,768    F-6




---



##### Table of Contents



SERACARE
    LIFE SCIENCES, INC.
  STATEMENTS
    OF CASH FLOWS  (Continued)
  Year Ended September 30,2008


2007


2006Supplemental disclosure of cash flow information:(a) Cash paid for:Interest

$
211,188


$
1,859,600


$
1,773,180Federal income taxes

$



$
18,763


$
530,000State income taxes

$
31,357


$
2,636


$
40,912(b) Cash received for:Federal income taxes

$
1,550,658


$



$
State income taxes

$
90,562


$
20,169


$
309,968(c) Non-cash items disclosure:Deferred Rent

$
544,560


$



$
Stock issued for Director services

$
39,953


$



$
Capital lease agreement

$



$
80,000


$
(d) AcquisitionsAssets acquired:Purchase of certain net assets of Celliance divisionInventory

$



$



$
781,945Prepaids










29,080Property and equipment










517,788Deposits










23,820Goodwill (including $276,731 in transaction costs)










2,236,163Total cash paid, including transaction costs

$



$



$
3,588,796    F-7




---



##### Table of Contents



SERACARE
    LIFE SCIENCES, INC.
  NOTES TO
    FINANCIAL STATEMENTS
  1.
    Background  (a)
    Background
    and Organization  in vitro
    (b)
    Reorganization    2.
    Summary
    of Significant Accounting Policies  Use of Estimates in the Preparation of Financial
    Statements.
 F-8




---



##### Table of Contents



SERACARE
    LIFE SCIENCES, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
  Revenue Recognition. Revenue Recognition in Financial
    Statements
  
    evidence of an arrangement exists;
    delivery or performance has occurred;
    prices are fixed or determinable; and
    collection of the resulting receivable is reasonably assured.    Returns.
  Shipping and Handling Costs.
  Advertising.
  Cash and Cash Equivalents.
  Fair Value of Financial Instrument.
  Accounts Receivable.
  Inventory.
 F-9




---



##### Table of Contents



SERACARE
    LIFE SCIENCES, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
  Long-Lived Assets.
    Building and improvements

10 to 30 yearsFurniture and equipment

7 yearsComputer equipment and software

3 yearsLeasehold improvements

Shorter of the life of the improvement or the remaining term of
    the lease   Deferred Tax Asset.
  Contingencies and Litigation Reserves.
  
    interpretation of contractual rights and obligations;
    the status of government regulatory initiatives, interpretations
    and investigations;
    the status of settlement negotiations;
    prior experience with similar types of claims;
    whether there is available insurance; and
    advice of counsel.  Purchase Price Allocations for
    Acquisitions.
 F-10




---



##### Table of Contents



SERACARE
    LIFE SCIENCES, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
    Goodwill and Other Intangible Assets. Goodwill and Other
    Intangible Assets
  non-amortizable non-amortizable non-amortizable
    Balance as of September 30, 2005

$
38,311,245Goodwill impairment Genomics Collaborative division


(13,384,849
)Goodwill earn-out to BioMedical Resources, Inc.


200,000Goodwill acquired Celliance division


2,236,163Balance as of September 30, 2006


27,362,559Goodwill adjustments during year


Balance as of September 30, 2007


27,362,559Goodwill impairment Diagnostics & Biopharmaceutical
    Products


(7,986,481
)Balance as of September 30, 2008

$
19,376,078     Income taxes.
 F-11




---



##### Table of Contents



SERACARE
    LIFE SCIENCES, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
    Earnings Per Share. Earnings per Share
  Deferred Financing Costs.
  Stock-Based Compensation. Share-Based Payments
    Simplified
    Method for Estimating the Expected Term.
 F-12




---



##### Table of Contents



SERACARE
    LIFE SCIENCES, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
    Recent
    Accounting Pronouncements
  SFAS No. 157,
    Fair Value Measurements
  Fair Value Measurements
    SFAS No. 141
    (Revised 2007), Business Combinations
  Business Combinations
  
    acquisition costs will be generally expensed as incurred;
    noncontrolling interests will be valued at fair value at the
    acquisition date;
    acquired contingent liabilities will be recorded at fair value
    at the acquisition date and subsequently measured at either the
    higher of such amount or the amount determined under existing
    guidance for non-acquired contingencies;
    in-process research and development will be recorded at fair
    value as an indefinite-lived intangible asset at the acquisition
    date until the completion or abandonment of the associated
    research and development efforts;
    restructuring costs associated with a business combination will
    be generally expensed subsequent to the acquisition
    date; and F-13




---



##### Table of Contents



SERACARE
    LIFE SCIENCES, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
   
    changes in deferred tax asset valuation allowances and income
    tax uncertainties after the acquisition date generally will
    affect income tax expense.    SFAS No. 160,Noncontrolling
    Interests in Consolidated Financial Statements   An
    Amendment of ARB No. 51
  Noncontrolling Interests in
    Consolidated Financial Statements  An Amendment of
    ARB No. 51
  FIN No. 48,
    Accounting for Uncertainty in Income Taxes  An
    Interpretation of FASB Statement No. 109
  Accounting for
    Uncertainty in Income Taxes  An Interpretation of
    FASB Statement No. 109 Accounting for Income
    Taxes
    3.
    Reorganization   F-14




---



##### Table of Contents



SERACARE
    LIFE SCIENCES, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
  debtor-in-possession
      4.
    Inventory    At September 30,2008


2007Raw materials and supplies

$
2,177,933


$
1,244,399Work-in process


1,494,030



1,126,113Finished goods


11,985,479



7,156,639Gross inventory


15,657,442



9,527,151Reserve for obsolete inventory


(3,503,551
)


(2,210,636
)Net inventory

$
12,153,891


$
7,316,515  F-15




---



##### Table of Contents



SERACARE
    LIFE SCIENCES, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
  5.
    Property
    and Equipment    At September 30,2008


2007Land and building

$



$
2,393,924Furniture and equipment


3,103,237



1,985,519Computer equipment and software


644,195



592,277Construction in progress


727,692



113,962Leasehold improvements


4,919,596



2,147,1109,394,720



7,232,792Less: accumulated depreciation and amortization


(3,176,478
)


(2,987,076
)Property and equipment, net

$
6,218,242


$
4,245,716     6.
    Asset
    Held For Sale    7.
    Long-Term
    Debt    At September 30,2008


2007Real property mortgage note

$
1,940,448


$
2,052,209Capital leases


157,986



246,930Total debt


2,098,434



2,299,139Less current portion


(2,037,396
)


(187,771
)Total long-term debt

$
61,038


$
2,111,368   GE
    Capital Credit and Security Agreement
   F-16




---



##### Table of Contents



SERACARE
    LIFE SCIENCES, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
  and/or
  Brown
    Brothers Harriman/Union Bank of California, N.A. Revolving/Term
    Credit and Security Agreement
      and/or
    Real
    Property Mortgage Note
   F-17




---



##### Table of Contents



SERACARE
    LIFE SCIENCES, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
    Subordinated
    Notes
  four-and-one-half-year
        Aggregate
    Maturities
    2009

$
2,037,3962010


30,7432011


17,9312012


12,364$
2,098,434  F-18




---



##### Table of Contents



SERACARE
    LIFE SCIENCES, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
  8.
    Commitments
    and Contingencies    Chapter 11
    Bankruptcy
    Shareholder
    Litigation
  In re SeraCare Life Sciences,
    Inc. Securities Litigation No. C-05-2335-H. and/or
  Department
    of Justice/Securities and Exchange Commission
    CTL
    Analyzers, LLC
   F-19




---



##### Table of Contents



SERACARE
    LIFE SCIENCES, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
    Purchase
    Commitments and Suppliers
    30-45 days.
  Risks
    and Uncertainties, Significant Customers and Sales
    Commitments
          Year Ended September 30,2008


2007


2006United States

$
41,247,822


$
37,143,056


$
34,573,454Europe


5,603,150



8,190,674



11,422,163Asia


1,312,085



998,169



2,438,994Other


803,591



971,696



741,246Total

$
48,966,648


$
47,303,595


$
49,175,857    F-20




---



##### Table of Contents



SERACARE
    LIFE SCIENCES, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
      9.
    Leases       F-21




---



##### Table of Contents



SERACARE
    LIFE SCIENCES, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
    Capital Leases


Operating Leases


Total LeasesFiscal years ended September 30,2009

$
106,984


$
2,304,743


$
2,411,7272010


34,439



2,403,099



2,437,5382011


19,930



2,538,307



2,558,2372012


12,766



2,619,312



2,632,0782013






2,691,708



2,691,708Thereafter






9,582,134



9,582,134Total minimum lease payments


174,119


$
22,139,303


$
22,313,422Less: amounts representing interest


(16,133
)Present value of future minimum capital lease payments

$
157,986     10.
    Income
    Taxes    Year Ended September 30,2008


2007


2006Current provision (credit):Federal

$
(237,580
)

$
18,763


$
State


(138,201
)


57,208



(30,878
)Total current provision (credit)


(375,781
)


75,971



(30,878
)Deferred tax provision (benefit):Federal


(3,289,869
)


(4,662,418
)


(2,871,087
)State


2,227,234



(1,325,667
)


(878,805
)Total deferred provision (credit)


(1,062,635
)


(5,988,085
)


(3,749,892
)Total provision (credit)


(1,438,416
)


(5,912,114
)


(3,780,770
)(Decrease) increase in valuation allowance


1,062,635



5,988,085



3,749,892Total income tax (benefit) expense

$
(375,781
)

$
75,971


$
(30,878
)  F-22




---



##### Table of Contents



SERACARE
    LIFE SCIENCES, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
    Year Ended September 30,2008


2007


2006Computed provision for taxes


34.0
%


34.0
%


34.0
%State taxes


(1.5
)%


(0.3
)%


0.2
%General business credits



%


3.7
%


2.6
%Other, net


(9.9
)%


(3.5
)%


(5.1
)%Change in valuation allowance


(19.5
)%


(34.5
)%


(31.4
)%Total provision, net of valuation allowance


3.1
%


(0.6
)%


0.3
%   As of September 30,2008


2007


2006Net operating loss carryforwards:Federal

$
39,243,000


$
45,300,000


$
31,400,000State

$
48,836,000


$
49,100,000


$
36,300,000   As of September 30,2008


2007


2006Deferred tax assets

$
26,420,648


$
26,381,601


$
19,828,083Less: valuation allowances


(26,420,648
)


(25,358,013
)


(19,228,826
)Net deferred tax asset






1,023,588



599,257Deferred tax liability






(1,023,588
)


(599,257
)Net deferred tax asset

$



$



$
          F-23




---



##### Table of Contents



SERACARE
    LIFE SCIENCES, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
    11.
    Related
    Party Transactions        
    Harbinger Capital Partners Master Fund I Ltd. and Harbinger
    Capital Partners Special Situations Fund L.P.
    (collectively, Harbinger), a greater than 5%
    beneficial owner of the Company, appointed two directors to the
    Companys Board of Directors pursuant to the Plan of
    Reorganization.
    Black Horse Capital LP, Black Horse Capital (QP) LP, Black Horse
    Capital Offshore Ltd. (collectively, Black Horse
    Capital), a greater than 5% beneficial owner, appointed
    one director to the Companys Board of Directors pursuant
    to the Plan of Reorganization.
    Barry Plost and Bernard L. Kasten, two former directors, were
    parties to the Subordinated Note Agreement between the Company
    and one other note holder. There was no related party interest
    expense during the year ended September 30, 2008. During
    the years ended September 30, 2007 and 2006, the Company
    incurred related party interest expense of $0.3 million and
    $0.5 million, respectively. The debt was paid in full with
    the proceeds of the Rights Offering and the agreement was
    terminated in May 2007. The Company therefore had no liability
    for these notes at September 30, 2008 or 2007.       F-24




---



##### Table of Contents



SERACARE
    LIFE SCIENCES, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
      12.
    Stockholders
    Equity              13.
    Stock-Based
    Compensation Plans     F-25




---



##### Table of Contents



SERACARE
    LIFE SCIENCES, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
    Options
    Granted Outside of the Plan
      Weighted-


Weighted-averageaverage


remainingNumber of


exercise


contractual term


AggregateOptions

options


price


(In years)


intrinsic valueOutstanding September 30, 2007


1,441,500


$
7.57Granted


490,000


$
5.35Exercised





$
Cancelled/Forfeited


(269,500
)

$
6.35Outstanding September 30, 2008


1,662,000


$
7.11



5.18


$
Exercisable at September 30, 2008


847,833


$
8.55



4.83


$
       No. FAS 123R-3, Transition Election Related to Accounting for the Tax
    Effects of Share-Based Payment Awards
 F-26




---



##### Table of Contents



SERACARE
    LIFE SCIENCES, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
      Year Ended September 30,2008


2007


2006Cost of revenue

$
252,859


$
85,331


$
155,569Research and development expense


67,435



8,863



33,639Selling, general and administrative expenses


1,528,486



2,304,145



606,034Total stock based compensation expense

$
1,848,780


$
2,398,339


$
795,242Incremental charge to earnings per shareBasic and diluted

$
0.10


$
0.15


$
0.06       Year Ended September 30,2008

2007

2006Expected stock volatility

84.17-91.74%

79.70-95.44%

61.85-78.95%Weighted-average volatility

89.05%

83.61%

77.56%Risk free interest rate

1.85-3.61%

4.55-4.79%

4.60-4.76%Expected term of options (years)

2.81-3.50

2.50-6.00

3.50-6.00Expected annual dividend per share

0%

0%

0%        F-27




---



##### Table of Contents



SERACARE
    LIFE SCIENCES, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
      2006

$
70,7372007

$
47,6562008

$
4,6622009

$
1,064     Expected stock volatility

83.19-174.66%Risk free interest rate

4.87-5.03%Expected life of options (years)

0.41-3.21Expected annual dividend per share

0%   14.
    Earnings
    Per Share   F-28




---



##### Table of Contents



SERACARE
    LIFE SCIENCES, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
    Year Ended September 30,2008


2007


2006Numerator:Net loss from continuing operations

$
(11,963,049
)

$
(13,055,443
)

$
(8,877,795
)Loss from discontinued operations, net of income tax






(109,438
)


(15,400,107
)Net loss

$
(11,963,049
)

$
(13,164,881
)

$
(24,277,902
)Denominator:Weighted average common shares outstanding


18,562,350



15,876,236



13,986,413Effect of dilutive securities:Stock options(1)










Diluted weighted average common shares outstanding


18,562,350



15,876,236



13,986,413Basic and diluted net loss per common share:Continuing operations

$
(0.64
)

$
(0.82
)

$
(0.64
)Discontinued operations






(0.01
)


(1.10
)Net loss

$
(0.64
)

$
(0.83
)

$
(1.74
)     (1)
    
    Excluded from the calculation of diluted net income per common
    share for the years ended September 30, 2008, 2007 and 2006
    were 1,748,414, 1,656,789 and 1,813,330 shares,
    respectively, related to stock options because their effect was
    anti-dilutive.  15.
    Segment
    Information     F-29




---



##### Table of Contents



SERACARE
    LIFE SCIENCES, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
    2008


2007


2006Revenue:Diagnostic & Biopharmaceutical Products

$
34,982,601


$
34,998,141


$
37,805,224BioServices


13,984,047



12,305,454



11,370,633Total revenue

$
48,966,648


$
47,303,595


$
49,175,857Gross profit (loss):Diagnostic & Biopharmaceutical Products

$
11,643,308


$
11,554,296


$
15,007,803BioServices


3,378,948



1,820,067



1,616,521Total gross profit (loss)

$
15,022,256


$
13,374,363


$
16,624,324Identifiable assets:Diagnostic & Biopharmaceutical Products

$
35,723,683


$
37,800,281


$
37,938,251BioServices


8,564,597



7,715,111



8,345,734Total identifiable assets

$
44,288,280


$
45,515,392


$
46,283,985Depreciation:Diagnostic & Biopharmaceutical Products

$
740,515


$
639,651


$
607,539BioServices


308,959



484,932



518,377Total depreciation

$
1,049,474


$
1,124,583


$
1,125,916Capital expenditures:Diagnostic & Biopharmaceutical Products

$
3,954,212


$
309,706


$
613,433BioServices


1,015,396



182,295



254,874Total capital expenditures

$
4,969,608


$
492,001


$
868,307   16.
    Acquisitions  Celliance
    Acquisition
     F-30




---



##### Table of Contents



SERACARE
    LIFE SCIENCES, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
    Assets acquiredInventory

$
781,945Prepaid assets


29,080Property and equipment, net


517,788Deposits


23,820Goodwill


2,236,163Total assets acquired

$
3,588,796     BMR
    Acquisition
      17.
    Discontinued
    Operations  GCI
    Disposition
    Accounting
    for the Impairment or Disposal of Long-lived Assets
 F-31




---



##### Table of Contents



SERACARE
    LIFE SCIENCES, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
    Year Ended September 30,2008


2007


2006Revenue

$



$
965,938


$
3,569,420Goodwill impairment

$



$



$
(13,384,849
)Pretax losses

$



$
(901,099
)

$
(15,400,107
)Income tax benefit

$



$



$
Gain on disposal

$



$
791,661


$
Income tax on disposal

$



$



$
Net loss from discontinued operations

$



$
(109,438
)

$
(15,400,107
)   18.
    Intangibles  September 30,
    2008
  Estimateduseful life

Gross cost


Accumulated


Net intangible(years)

intangible asset


amortization


assetDeveloped product technology

5

$
150,000


$
120,000


$
30,000Customer relationships

4-5


1,090,000



938,015



151,985$
1,240,000


$
1,058,015


$
181,985   September 30,
    2007
  Estimateduseful life

Gross cost


Accumulated


Net intangible(years)

intangible asset


amortization


assetDeveloped product technology

5

$
150,000


$
90,000


$
60,000Customer relationships

4-5


1,090,000



703,511



386,489$
1,240,000


$
793,511


$
446,489       19.
    Employee
    Benefit Plans     F-32




---



##### Table of Contents



SERACARE
    LIFE SCIENCES, INC.
  NOTES TO
    FINANCIAL STATEMENTS  (Continued)
    20.
    Summarized
    Quarterly Financial Data (Unaudited)    For the Three Months EndedDecember 31


March 31


June 30


September 30(1)


Total YearYear ended September 30, 2008:Revenue

$
12,626,319


$
12,530,143


$
12,374,095


$
11,436,091


$
48,966,648Gross profit


4,098,483



4,712,954



3,631,750



2,579,069



15,022,256Operating loss


(606,710
)


(212,953
)


(1,053,164
)


(10,300,737
)


(12,173,564
)Loss from continuing operations


(667,057
)


(330,651
)


(555,310
)


(10,410,031
)


(11,963,049
)Discontinued operations


















Net loss


(667,057
)


(330,651
)


(555,310
)


(10,410,031
)


(11,963,049
)Loss per common share:Basic and diluted


(0.04
)


(0.02
)


(0.03
)


(0.56
)


(0.64
)Year ended September 30, 2007:Revenue

$
9,910,372


$
13,989,309


$
11,961,463


$
11,442,451


$
47,303,595Gross profit


2,470,384



3,331,338



3,769,940



3,802,701



13,374,363Operating loss


(2,168,144
)


(3,823,355
)


(497,491
)


(5,673,895
)


(12,162,885
)Loss from continuing operations


(2,510,254
)


(4,124,893
)


(669,998
)


(5,750,298
)


(13,055,443
)Discontinued operations


(300,197
)


207,717



(16,958
)






(109,438
)Net loss


(2,810,451
)


(3,917,176
)


(686,956
)


(5,750,298
)


(13,164,881
)Loss per common share:Basic and diluted


(0.20
)


(0.27
)


(0.04
)


(0.31
)


(0.83
)     (1)
    
    In the fourth quarter of fiscal 2008, SeraCare wrote-off
    $8.0 million of goodwill. In the fourth quarter of fiscal
    2007, SeraCare wrote-off $5.2 million related to the BBI
    Diagnostics trade name, an intangible asset. F-33