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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

Commission file number 0-33045

SERACARE LIFE SCIENCES, INC.

(Exact name of Registrant as specified in its charter)

1935 Avenida del Oro, Suite F

Oceanside, California, 92056

(Address of principal executive offices including zip code)

(760) 806-8922

(Registrant’s telephone number)

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, no 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-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    x

Indicate by checkmark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).     Yes x  No ¨

As of March 31, 2004, the aggregate market value of voting and non-voting common equity held by non-affiliates of the registrant was approximately $81,519,338 based upon the closing sales price of the common stock as reported on Nasdaq National Stock Market on such date. For this computation, the registrant has excluded the market value of all Common Stock beneficially owned by all executive officers and directors of the registrant. This determination of affiliate status for purposes of this computation is not necessarily a conclusive determination for other purposes.

As of November 30, 2004, there were 9,912,116 shares of the registrant’s common stock issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE.

Portions of the definitive proxy statement for the Annual Meeting of Stockholders (which will be filed pursuant to Regulation 14A within 120 days of the close of the registrant’s fiscal year ended September 30, 2004) shall be deemed to be incorporated by reference in Part III.

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PART I

ITEM 1.    BUSINESS

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. Many of these factors are beyond our ability to control or predict.

1.    Description of the business

Overview of the Company

SeraCare Life Sciences, Inc. (the “Company”), is a manufacturer and provider of biological products and services for diagnostic, therapeutic, drug discovery, and research organizations based in Oceanside, California, with satellite offices in: Hatboro, Pennsylvania; Cambridge, Massachusetts; West Bridgewater, Massachusetts; Frederick, Maryland; Gaithersburg, Maryland and distributors in Europe and Asia. We offer a diverse array of products including quality controls for diagnostic tests, specialty plasmas, human and animal-based proteins for research, development, and manufacture of therapeutics and diagnostics, and ethically collected, high quality, clinically annotated biological specimens for target validation and drug discovery. Recently, we acquired substantially all of the assets of the BBI Diagnostics and BBI Biotechnology Research Laboratories divisions of Boston Biomedica, Inc., as well as substantially all of the assets of Genomics Collaborative, Inc. Headquartered in Oceanside, CA, SeraCare conducts business throughout the world, and its common stock is traded on the NASDAQ National Market under the symbol “SRLS”.

The Company is a vendor-approved supplier to over 500 pharmaceutical and healthcare companies, and is listed as an exclusive supplier in many customers’ regulatory filings with the Food and Drug Administration (“FDA”). Our primary focus is the development and sale of human and animal plasma-based diagnostic, therapeutic, and research products to domestic and international customers. Through our strategic alliances with Biomat USA, Inc., we have access to a nationwide network of donor centers. This has historically provided the basis for our development of human plasma-based products and services. Through our strategic alliance with Proliant, Inc., we have access to bovine serum albumin, which has provided the basis for development of our bovine serum-based products. Through our strategic alliance with SurModics, Inc., we are able to provide in vitro assay stabilizers to many of our customers. We provide quality control products for infectious disease testing. In conjunction with the products we sell for research purposes, we are able to offer services such as nucleic acid isolation and sequencing, SNP analysis, target validation, assistance in statistical study design, and biorepository services. We also provide antibody-based products, which are used as active ingredients in therapeutic products (generally, drugs used to treat and manage diseases) and in diagnostic products (generally, diagnostic tests and test kits). In addition, we have established ourself as a provider of ethically collected, high quality, clinically annotated biological specimens for target drug validation and discovery studies.

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We focus on product development, the solidification of customer relationships, and improvement of our operational systems in California, Maryland, Massachusetts and Pennsylvania. We have increased the variety, and improved the quality, of products that we manufacture and sell. Management believes our strategy will aid our long-term success in the highly regulated and competitive industry in which we operate. During the course of our corporate evolution, we have helped many customers develop internal protocols and standards, established quality control benchmarks, and have performed various other value-added services for our customers in order to establish solid relationships. We have made significant progress as a major supplier of protein and media products to several pharmaceutical and biotechnology companies.

Company History

The Company was incorporated under the laws of the State of California in 1984 and changed its name from The Western States Group, Inc. to SeraCare Life Sciences, Inc. in June 2001. We focus on the development, manufacturing, and marketing of plasma-based diagnostic, therapeutic, and research products. Key to our ongoing business are: (1) the agreement with Instituto Grifols, S.A. under which Grifols supplies us with Human Serum Albumin, which we then distribute to domestic and international biotechnology companies; (2) the strategic alliance with Proliant for the distribution of Bovine Serum Albumin to multinational diagnostic products manufacturers; (3) the establishment of a manufacturing operation in Oceanside for the custom manufacturing of bulk diagnostic products; (4) the acquisition of BioMedical Resources, Inc. to strengthen our Diagnostics product line; (5) the commercial launch of the SeraCare BioBank^™; (6) the acquisition of Genomics Collaborative, Inc in order to advance our BioBank operations; and, (7) the acquisition of the Diagnostics and Biotechnology divisions of Boston Biomedica, Inc. in order to strengthen our operations technology.

On September 24, 2001, in connection with the merger of Biomat USA, Inc. with a subsidiary of Instituto Grifols, S.A, Biomat USA, Inc. spun off our company to Biomat USA Inc.’s then existing stockholders in a distribution. In the spin-off, stockholders of Biomat USA, Inc. received two shares of our common stock for every five shares of Biomat USA, Inc. common stock that they owned as of the close of business on September 24, 2001. A total of 5,633,467 shares of our common stock were issued as part of the spin-off. Warrant and option holders of Biomat USA, Inc. also participated in the distribution. Holders of options or warrants to purchase Biomat USA, Inc. common stock who held their options or warrants on the day prior to the spin-off received options or warrants to purchase two shares of common stock of our company for every five shares of common stock underlying the Biomat USA, Inc. options or warrants held. Options and warrants to purchase an aggregate of 2,233,045 shares of our common stock were issued as part of the spin-off.

Recent Events and Acquisitions

On June 3, 2004, we announced the acquisition of substantially all of the assets of Genomics Collaborative, Inc (“GCI”) (the “GCI Acquisition”). This acquisition was funded with our common stock and cash. The purchase price paid to acquire GCI was $14,300,000, which consisted of 1,065,683 shares of our common stock as well as a cash payment of $1,245,000, including transaction costs. The market value of the 1,065,683 shares was $13,055,000. GCI is based in Cambridge, Massachusetts and provides clinical samples and applies human genetics to target validation for drug discovery.

On September 14, 2004, we announced the acquisition of substantially all of the assets of BBI Diagnostics and BBI Biotech Research Laboratories, divisions of Boston Biomedica, Inc. (the “BBI Acquisition”), for $30,000,000 in cash plus the assumption of certain liabilities. We financed the BBI Acquisition through the following sources: (1) borrowings totaling $21,000,000 under a new credit facility, (2) subordinated loans from certain lenders amounting to $4,000,000 (of which $3,500,000 was with related parties) and (3) $8,160,000 (800,000 shares) from a private placement of our common stock. The acquired divisions include in vitro diagnostics operations and BioBank related operations which management believes to be complementary to our existing operations and which are located at facilities in West Bridgewater, Massachusetts, Frederick, Maryland, and Gaithersburg, Maryland.

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II.    Industry Overview

The life sciences industry includes producers of, among other things, diagnostics products and biopharmaceuticals. These sectors of the life science industry are focused on either diagnosing specific patient conditions, including infectious disease and disease state, or in the provision of therapeutic agents for the treatment or prevention of disease conditions, or in the research and development of products for an ultimate therapeutic or diagnostic use. These areas can be further classified into the categories described in “Principal Business Segments,” below.

Our business operates in the industry known as life sciences, and, more specifically, the human and animal components industry. This industry encompasses a number of markets, with products ranging from whole blood, which is used for direct transfusions, to blood components, such as source plasma, specialty and non-specialty antibodies found in source plasma, and other specialty biologic components. Source plasma, the clear liquid portion of blood characterized by non-specific concentrations of antibodies, is used to manufacture many products that treat a variety of medical indications. Antibodies are soluble components contained in plasma that are produced by the immune system to fight specific diseases. Other derivative products of source plasma include albumin, used as a stabilizer, blocker, or excipient for drug delivery, or human gamma globulin for diagnostic control manufacturing.

Product sectors in which we compete include human plasma and serum, specialty and non-specialty antibodies found in source plasma, and other specialty human and animal biologic components.

The products in our industry can be divided into several categories, including biopharmaceutical products (intended for therapeutic manufacturing, cell culture, and life science research), and diagnostic products. Diagnostic products are defined as those products used to diagnose specific patient conditions, including infectious disease and conditions, and include products that are used to screen for a specific disease or patient condition. The diagnostic segment also includes non-human derived blood products for cell culture, research, manufacture, or in vitro diagnostic use. Biopharmaceutical products include therapeutic products that are used for the treatment or prevention of disease conditions, and encompass products consisting of specialty human and recombinant proteins. Additional biopharmaceutical products include cell culture products such as media and the components found therein. Media is used to grow cells to produce substances including but not limited to monoclonal antibodies and recombinant proteins. Biopharmaceutical products used for life science research encompass other biomaterials used in primary research and development (in vitro and in vivo) of tests, therapeutics, or cellular and molecular mechanisms.

A major source of our products is plasma. 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 industries in which we operate continue to experience a number of other trends. One such trend is the movement by healthcare companies towards obtaining antibodies and other biologic products and services from a fewer number of suppliers who can supply a wider array of products and services. The resulting enhanced relationships between life science companies and these suppliers have resulted in an increased tendency by some major life science companies to outsource essential complex regulatory, testing and specialized manufacturing activities. In addition, the increased regulatory environment, as well as the increasing preference of customers for value-added services, requires suppliers to have a high level of expertise and capital resources.

III.    Principal Business Segments

A.    Biopharmaceutical Products (“Biopharmaceuctical”)

The activities of the Biopharmaceutical segment primarily include the manufacture and marketing of therapeutic products, cell culture media components, and certain research products and technologies used in life

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sciences research. These products are marketed toward life science research, pharmaceutical, and biotechnology organizations. This market consists of laboratories generally associated with universities, medical research centers, government institutions such as the National Institute for Health and other research institutions as well as biotechnology, pharmaceutical, and chemical companies. In periods prior to fiscal 2003, we have referred to this division as simply “Therapeutic Products;” however, this term no longer encompasses the wide variety of products offered.

Our therapeutic biopharmaceutical products are marketed to therapeutic drug manufacturers, pharmaceutical companies, and biotechnology companies to be used in the manufacture of drugs.

There are essentially two broad categories of molecules that can be used as drugs (or more broadly as therapeutics). These are small molecule therapeutics and large molecule therapeutics. Small molecule therapeutics are chemical entities that are made through an organic or inorganic process. Chemical or pharmaceutical companies manufacture these drugs and their active ingredients in bulk. Large molecule therapeutics are of more recent origin. These are mostly protein-based therapeutics and their building blocks are amino acids. These large molecules need to be grown in living cells (such as bacteria, yeast or mammalian cells) as they cannot be synthesized chemically. One of the first large molecule drugs to be synthesized outside the body (but in living bacterial cells) was insulin, a protein made of amino acids. Another major category of protein therapeutics is monoclonal antibodies. Significant research is being done to develop antibodies that are specific to disease causing antigens in the body.

The process for the manufacturing of large molecule therapeutics requires a number of components that are essential for the manufacturing process, including:

In addition to therapeutic products, we also offer cell culture products. These products are marketed to pharmaceutical and biotechnology life science companies. They are used primarily in mammalian cell culture with the goal of researching potential therapeutic candidates or producing biomaterials used in therapeutic drug manufacturing.

Within the cell culture market, there are two different types of products:

Within this segment we also sell products to life science researchers. Two of the principal disciplines within the life science research market are cellular biology and molecular biology.

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Cellular biology research involves the study of the genetic functioning and biochemical composition of cells as well as their proliferation, differentiation, growth and death. The understanding gained from such study has broad application in the field of developmental biology and is important in the study of carcinogenesis, virology, immunology, vaccine design and production and agriculture. To grow the cells required for research, researchers use cell or tissue culture media that simulate under laboratory conditions (in vitro) the environment in which cells live naturally (in vivo) and which provides nutrients required for their growth.

Molecular biology research involves the study of the genetic information systems of living organisms. The genetic material of living organisms consists of long, double-stranded molecules of deoxyribonucleic acid (“DNA”). DNA contains the information required for the production of proteins by means of ribonucleic acid (“RNA”), a single-stranded molecule similar in composition to DNA. Proteins have many different functional properties and include antibodies, certain hormones and enzymes. Many researchers study the various steps of gene expression from DNA to RNA to protein products and the impact of these proteins on cellular function. Other researchers are interested in manipulating the DNA-RNA system in order to modify its functioning. Through techniques that are commonly termed “genetic engineering” or “gene-splicing,” a researcher can modify an organism’s naturally occurring DNA to produce a desired protein not usually produced by the organism, or to produce a naturally produced protein at an increased rate.

B.    Diagnostic Products (“Diagnostics”)

Our Diagnostics segment markets to diagnostic test kit manufacturers worldwide. This segment includes BioMedical Resources, Inc., acquired in July 2003. The products we market, described below, are ultimately used in tests that screen patients for prior exposure to specific diseases or to determine patient conditions. In addition to non-specialty plasma and serum products, there are also a variety of purified blood proteins, often from bovine source, used in the manufacture of diagnostic kits. These include proteins such as BSA (bovine serum albumin), bovine gamma globulin, thrombin, and cholesterol.

IV.    Discussion of Primary Products

A.    Biopharmaceutical Products

Our primary therapeutic product is human serum albumin in solution. Human serum albumin, or HSA, is used as a carrier or excipient in many of our customers’ therapeutic drug formulations. Its function is the stabilization of proteins or other molecules in the therapeutic formulations.

In addition to therapeutic products, we offer a wide variety of human and animal-based cell culture products. These cell culture products are primarily used in the maintenance of cell lines that manufacture recombinant proteins or monoclonal antibodies, for the maintenance of cell banks, and also for general research purposes. Our products include:

Our life science research products encompass other biomaterials used in research and development. They consist of products sold under the name SeraCare BioBank^™, which is a repository of biomaterials and medical

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data offered to enhance drug discovery and development, therapeutic target validation, and diagnostic product development. Customers have access to serum, plasma, DNA and RNA samples, and other biological materials, as well as associated patient information. Both off-the-shelf and custom collections are available. BioBank provides access to over 120,000 consenting donors including disease-specific patients, healthy individuals, and “at-risk” populations. All samples are ethically collected under Institutional Review Board (“IRB”) approved protocols, and all procedures are compliant with current “Health Information Portability and Accountability Act” (HIPAA) regulations as described in the “Regulatory Environment” section below.

B.    Diagnostic Products

We provide a number of diagnostic products, the main uses of which are to serve as raw materials for the manufacture of diagnostic tests and test kits. These products are not to be used in vivo. The product categories in the Diagnostics segment are:

Disease state plasma products include infectious disease, virology, serology, sexually transmitted diseases, ToRCH (toxoplasma, rubella, CMV, and HSV), and autoimmune plasma products. Human blood based products encompass EDTA (ethylene-diamine-tetra-acetate) plasma, heparinized plasma, fresh frozen plasma, recovered liquid or frozen plasma, and haemolysed, lipemic, source, and applicant plasma. Additional human blood based products are off the clot (pooled, male only, and female only), whole blood, buffy coats, and red blood cells. Our custom processing includes defibrination, charcoal stripping (to remove hormones, thyroid markers, and steroids), and delipidization. Our bovine serum albumin is intended for sensitive immunodiagnostic and protein chemistry applications, as well as for automated clinical analysis. Animal serum products, including fetal bovine serum, are used in in vitro diagnostic applications. Human serum albumin stabilizes other proteins in solution, and our line of controls, standards, and panels is used in a variety of diagnostic test kits for disease states and patient conditions.

V.    Competitors

We compete with integrated plasma collection/fractionators and processing companies such as Serologicals Corporation and Nabi Biopharmaceuticals, as well as smaller, independent plasma collection centers and brokers of plasma products. Competitors also include purveyors of cell culture and life science research products such as Irvine Scientific and HyClone. We compete on the basis of quality, breadth of product line, technical expertise, and reputation.

VI.    Regulatory Environment

The blood resources industry is one of the most heavily regulated in the United States. Federal, state, local and international regulations are designed to protect the health of the donors as well as the integrity of the products. 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 facility licensed by the FDA or monetary fines or both, depending upon the issues involved. We are also subject to regulation by the Occupational Safety and Health Administration (“OSHA”).

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These regulations apply to all of our facilities. In addition, these regulations apply to the collection facilities under contract with us that supply us with plasma and the facilities where we refer donors for plasmapheresis services in connection with our specialty plasma program (our “contract collection centers”). We do not own or operate plasma collection centers or perform plasmapheresis services. The following summarizes the nature of certain of these regulations:

A.    Food and Drug Administration

The testing, manufacturing, storage, transport, labelling, export, and marketing of blood products and in vitro diagnostic products are extensively regulated. In the United States, the FDA regulates blood products and medical devices under the Food, Drug, and Cosmetic Act, the Public Health Service Act, and implementing regulations. Violations of FDA requirements may result in various adverse consequences, including shutdown of a facility, withdrawal of product approvals, and the imposition of civil or criminal penalties.

Generally, blood products and in vitro diagnostics may not be marketed in the United States unless they are the subject of FDA approval or clearance. Obtaining FDA approvals and clearances is time consuming, expensive and uncertain. Approvals or clearances for the products we manufacture and distribute are generally obtained and held by our customers, who often include information on our products, as well as their own products, in their FDA applications for approval or clearance. Once a product is approved or cleared, certain product changes must receive FDA approval or clearance before they are implemented. If our customers do not obtain and maintain FDA approvals or clearances in compliance with the law, it could adversely affect our ability to continue to manufacture and distribute our products.

In addition, we must comply with extensive FDA requirements governing our manufacturing procedures and practices. These requirements cover, among other issues, personnel qualifications; suitability of facilities; product processing, packaging, labelling, and shipping; and record keeping. We are also required to register and list our products with the FDA. The FDA periodically inspects facilities to assess compliance with these requirements, and manufacturers must continue to spend time, money and effort to maintain compliance. Future inspections may identify compliance issues at our facilities, or those of our suppliers or customers, that could disrupt production, or require substantial resources to correct. In addition, discovery of problems with a product may result in restrictions on the product, manufacturer, or license holder, including withdrawal of the product from the market.

B.    Occupational Safety and Health Administration

As with most operating companies, our manufacturing facilities must comply with both Federal and State OSHA regulations. We train our employees in current OSHA standards, provide hepatitis vaccination to employees when desired, and maintain all required records. OSHA does inspect operating locations as it deems appropriate, and generally does so without advance notice.

C.    Health and Human Services

Our BioBank products are subject to federal regulation covered in HIPAA. HIPAA is administered by the United States Department of Health and Human Services (HHS) and generally governs patient privacy issues.

D.    State Governments

Most states in which we operate have regulations that parallel the federal regulations. Most states conduct periodic unannounced inspections and require licensing under each state’s procedures.

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VII.    Customers

Our customers are both domestic and international pharmaceutical manufacturers, researchers, and diagnostic test makers. We often receive exact specifications for our products from our customers, and we develop our products specifically to meet those specifications. Our products are then used to manufacture final products to be sold to the consumer.

Our ability to supply quality products to our customers helps them do their jobs effectively. We provide various benefits to our customers including:

VIII.    Strategic Alliances

Key to our competitive strength is our strategic alliance with Instituto Grifols, S.A. and Biomat USA, Inc., our former parent. We entered into an agreement with Instituto Grifols, S.A. under which Instituto Grifols, S.A., supplies us with Human Serum Albumin, which we then distribute for therapeutic use to multinational biotech companies. Under this agreement, Instituto Grifols, S.A. also supplies us with Human Serum Albumin for use in diagnostic products as well as for distribution by us to our biotech customers. This agreement also provides us with a constant source of Human Serum Albumin for manufacturing of our diagnostic products. We obtain a substantial portion of our revenue and operating margin from sales of Human Serum Albumin or products incorporating the Human Serum Albumin, supplied to us by Instituto Grifols, S.A., under this agreement. We have entered into an amendment to the original agreement with Instituto Grifols, S.A., extending the term until March 31, 2006; however, there can be no assurances that Instituto Grifols, S.A., will be able to supply us with our needs, or that the demand for Human Serum Albumin will continue throughout the contract period. The loss of our contract with Instituto Grifols, S.A. would have a material adverse effect on our revenues and profitability.

IX.    Employees

As of September 30, 2004, we employed 242 full-time and 16 part-time employees. As of September 30, 2003, we employed 50 full-time employees.

We believe that the relations between our employees and us are good, although there can be no assurances that such relations will continue. If we are unable to attract or retain qualified personnel, our business could be materially adversely affected. None of our employees are covered by a collective bargaining agreement.

X.    Risk Factors

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

We May Need Additional Capital

In order to implement our growth strategy and remain competitive, we must make investments in research and development to fund new product initiatives, continue to upgrade our process technology and manufacturing capabilities, and actively seek out potential acquisition candidates. In order to do this, we may need to obtain

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additional capital. Although we believe that internal cash flows from operations, along with the existing capacity under our line of credit, will be sufficient to satisfy our working capital and normal operating requirements, we may not be able to fund our planned research and development, capital investment programs, and potential acquisitions without seeking additional capital.

Our ability to raise additional capital depends on a variety of factors, some of which may not be within our control, including investor perceptions of our management, our business, and the industries in which we operate. In September 2004, we entered into a $25 million secured line of credit with Brown Brothers Harriman & Co. as the Collateral Agent and Union Bank of California as Administrative Agent primarily to finance the acquisition of BBI. Our ability to finance future acquisitions under our new credit facility is subject to certain conditions as set forth in the credit agreement with respect to that facility. Even if we are able to access our credit facility for future acquisitions, we cannot assure you that our borrowing capacity under the credit facility, even combined with cash generated from operations will be sufficient to implement our growth strategy. In such event we may need to raise additional capital. If we raise additional capital through new borrowings, we may become subject to additional restrictive covenants. If we raise money through the issuance of equity securities, your stock ownership will be diluted. Any inability to successfully raise needed capital on a timely or cost-effective basis could have a material adverse effect on our business, financial condition, and operating results.

An Interruption in the Supply of Diagnostic and Therapeutic Products That We Purchase From Third Parties Could Cause a Decline in Our Sales

We purchase diagnostics products that are used in the manufacture and testing of our plasma products from third parties, such as Instituto Grifols, S.A. and other companies. Any significant interruption in the supply of these diagnostics products could cause a decline in our plasma product sales, unless and until we are able to replace them.

We obtain a substantial portion of our therapeutic revenue and operating margin from sales of products incorporating the Human Serum Albumin supplied to us by Instituto Grifols S.A. Although we have entered into an amendment to the original agreement with Instituto Grifols S.A. extending the term until March 31, 2006, there can be no guarantee that Instituto Grifols S.A. will be able to supply us with our needs or that the demand for Human Serum Albumin will continue throughout the contract period or that the agreement will not be terminated prior to March 31, 2006. The loss of this contract with Instituto Grifols or a significant increase in our purchase price would have a material adverse effect on our revenues and profitability.

We also depend on third parties such as Instituto Grifols, S.A. to provide their raw materials and/or products on a timely and cost-effective basis and to deliver high quality products and respond to emerging industry standards and other technological changes. The failure of these third parties to meet these criteria could harm our business.

We May Fail to Realize the Anticipated Benefits of Our Acquisitions

The definitive agreements governing our recent acquisitions each include standard representations, warranties and covenants from the counterparty to such agreements, as well as indemnification obligations from the same counterparty, for, among other things, breaches of the same representations, warranties and covenants. These indemnification obligations are limited in time and amount, and it is unlikely that we will otherwise be able to recover any losses that exceed these limits.

Although we expect to realize strategic, operational and financial benefits as a result of these acquisitions, we cannot predict whether and to what extent such benefits will be achieved. Working through integration issues is complex, time-consuming and expensive and could significantly disrupt our business. There are significant challenges to integrating the acquired operations into our business, including:

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Our failure to successfully integrate and operate the acquired businesses, and to realize the anticipated benefits of these acquisitions, could adversely impact our operating performance and financial results.

We May Not Be Able to Successfully Implement Our Growth Strategy

We will grow as a result of our recent acquisitions, and our business plan contemplates continued growth in the form of additional acquisitions and expansion into new markets. Successful future growth will depend upon our ability to access capital, obtain applicable governmental approvals and integrate acquired businesses into our existing operations. We cannot assure you that we will be successful in any future expansion of our operations or any entrance into new markets.

Future Acquisitions Will Involve Inherent Risks That May Adversely Affect Our Operating Results and Financial Condition

Our growth strategy includes the possibility of additional, future acquisitions, which acquisitions would involve various inherent risks, such as:

Our Stock Price is Expected to be Volatile

The market price of our common stock has, like that of many other life sciences companies, been volatile, and is expected to continue to be volatile. During the two year period ended September 30, 2004, our stock price has ranged from $3.00 to $13.50, and during the 12 months ended November 30, 2004, our stock price has ranged from $6.90 to $13.50. We believe that future announcements concerning us, our competitors, governmental regulations, litigation or unexpected losses, or the failure to meet or exceed analysts’ projections of financial performance, may cause the market price of our common stock to fluctuate substantially in the future. Sales of substantial amounts of our outstanding common stock in the public market could also materially adversely affect the market price of our common stock. These fluctuations, as well as general economic, political and market conditions, may materially adversely affect the market price of our common stock.

We Risk a Securities Class Action Litigation Due to Expected Stock Price Volatility

In the past, stockholders have brought securities class action litigation against a company following a decline in the market price of its securities. This risk is especially acute for us because life science companies have experienced greater than average stock price volatility in recent years and, as a result, have been subject to,

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on average, a greater number of securities class action claims than companies in other industries. To date, we have not been subject to class action litigation. However, we may in the future be the target of this type of litigation. Securities litigation could result in substantial costs and divert our management’s attention and resources, and could seriously harm our business.

Investment in Our Common Stock may be Relatively Illiquid

The trading volume of our common stock has historically been low. The recent issuance of a substantial number of shares of our common stock may have an adverse effect on the liquidity of our common stock. Investors in our common stock must be prepared to bear the economic risks of such investment for an indefinite period of time. We also expect that the trading volume of our common stock will be significantly affected by the price of our common stock, which may be volatile.

Our Business is Highly Competitive

Our products compete with those of other companies. Many of these companies have greater financial resources, research and product development capabilities and marketing organizations than we do. Competition for customers depends primarily on the ability to provide products of the quality and in the quantity required by customers. If we succeed in bringing one or more products to market, we will compete with many other companies that may have extensive and well-funded marketing and sales operations. Our failure to provide products of the quality and quantity demanded by our customers and successfully market new products could have a material adverse effect on our future business, financial condition and results of operation.

Certain of our special antibody products are derived from donors with rare antibody characteristics, resulting in increased competition for such donors. If we are unable to maintain and expand our donor base, this could have a material adverse effect on our future business, financial condition and results of operation.

We Are Dependent on Key Personnel

Our success depends on our ability to attract, retain and motivate the qualified personnel that will be essential to our current plans and future development. The competition for such personnel is substantial, and we cannot assure you that we will successfully retain our key employees or attract and retain any required additional personnel. In particular, our success depends to a significant extent upon the continued services of Michael F. Crowley Jr., our President and Chief Executive Officer, and Barry Plost, our Chairman of the Board.

Our Principal Shareholders May Exert Significant Influence on Us

As of November 30, 2004, our Chairman of the Board, Barry D. Plost, beneficially owned approximately 8.9% of our common stock. In addition, Pecks Management Partners, Ltd., as investment advisor for four separate investors, beneficially owns 14.7% of our outstanding shares. Therefore, Mr. Plost and Pecks Management Partners, Ltd. each will have power to exert significant influence on our management and policies.

We Are Subject to Significant Government Regulation

Our business is heavily regulated in the United States. In addition to the FDA which regulates, among other matters, the testing, manufacturing, storage, labeling, export, and marketing of blood products and in vitro diagnostic products, various other federal, state and local regulations also apply and can be, in some cases, more restrictive. If we fail to comply with FDA or other regulatory requirements, we could be subjected to civil and criminal penalties, or even required to suspend or cease operations. Any such actions could severely curtail our sales to biologics companies. Failure of our plasma suppliers or customers to comply with FDA requirements could also adversely affect us. In addition, more restrictive laws, regulations or interpretations could be adopted, which could make compliance more difficult or expensive or otherwise adversely affect our business.

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We Are Subject to Governmental Reforms and the Adequacy of Reimbursement

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

Product Liability Claims Could Have a Material Adverse Effect on Our Reputation, Business, Results of Operations and Financial Condition

As a manufacturer and marketer of various therapeutic and diagnostic plasma products, our results of operations are susceptible to adverse publicity regarding the quality or safety of our products. Product liability claims challenging the safety of our products may result in a decline in sales for a particular product, which could adversely affect our results of operations. This could be true even if the claims themselves are proven to not be true or settled for immaterial amounts. We believe that our current product liability insurance is sufficient at this time.

Risk of Hazardous Waste Liability

Our operations involve the controlled use of bio-hazardous materials and chemicals. Although we believe that our safety procedures for handling and disposing of such materials comply with the standards prescribed by state and federal agencies, we cannot assure you that we will be able to continue to comply with all applicable standards or that violations will not occur. In addition, we cannot provide assurance that more restrictive laws, rules and regulations or enforcement policies will not be adopted in the future which could make compliance more difficult or expensive or otherwise adversely affect our business or prospects. We believe that our current product liability insurance is sufficient at this time.

We Are Subject to the Risks Associated with International Sales

International sales accounted for 36% of our total revenues during the year ended September 30, 2004, 30% of our total revenues during the year ended September 30, 2003, and 34% of our total revenues during the year ended September 30, 2002. We anticipate that international sales will continue to account for a significant percentage of our revenues. Risks associated with these sales include:

Any of these factors could have a material adverse effect on our business, results of operations and financial condition.

Foreign Restrictions on Importation of Blood Derivatives

Concern over blood safety has led to movements in a number of European and other countries to restrict the importation of blood and blood derivatives, including antibodies, collected outside the countries’ borders or, in the case of certain European countries, outside Europe. To date, these efforts have not led to any meaningful restriction on the importation of blood or blood derivates, and have not adversely affected our business. Such restrictions, however, continue to be debated and there can be no assurance that such restrictions will not be imposed in the future. If imposed, such restrictions could have a material adverse effect on the demand for our products.

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We May Issue Preferred Stock in the Future

We have authorized in our Articles of Incorporation the issuance of up to 25 million shares of preferred stock. We may issue shares of preferred stock in one or more new series. Our Board of Directors may determine the terms of the preferred stock without further action by our shareholders. These terms may include voting rights, preferences as to dividends and liquidation, conversion and redemption rights, and sinking fund provisions. Although we have no present plans to issue shares of preferred stock or to create new series of preferred stock, if we do issue preferred stock, it could affect the rights, or even reduce the value, of our common stock.

Anti-Takeover Effects of Certain Charter and Bylaw Provisions

Certain provisions of our articles of incorporation and bylaws may be deemed to have anti-takeover effects and may discourage, delay or prevent a takeover attempt that might be considered in the best interests of our shareholders. These provisions, among other things:

Additional Risk Factors

In addition to the foregoing risk factors, our business, financial condition, and operating results could be seriously harmed by additional factors, including but not limited to the following:

Available Information

Free copies of our annual reports on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K and any amendments to those reports filed or furnished with the Securities and Exchange Commission may be obtained through our website at www.seracare.com. Our website address is provided solely for informational purposes. We do not intend, by this reference, that our website or any of the information contained therein should be deemed to be part of, or incorporated into, this Annual Report.

ITEM 2.    PROPERTIES.

Our principal executive offices are located in Oceanside, California. This facility, which is leased under a five-year lease term (expiring in August 2006 with a five-year extension option), consists of approximately 18,000 square feet, and includes our corporate offices and our manufacturing facility.

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We operate a satellite office in Hatboro, Pennsylvania, the site of BioMedical Resources, Inc., acquired in July 2003. This facility, which is leased under a five-year lease term (expiring in 2008 with one five-year extension option), consists of approximately 5,500 square feet, and includes sales offices, a testing laboratory, and inventory storage facilities.

In conjunction with the GCI and BBI Acquisitions, we assumed leases in Cambridge, Massachusetts, Frederick, Maryland and Gaithersburg, Maryland. These facilities are leased under 10 year leases expiring September 2008 and October 2007 and an 11 year lease expiring July 2015, respectively, and currently consist of approximately 16,135 square feet, 36,412 square feet and 39,120 square feet, respectively. These properties include sales offices, testing laboratories, and refrigerated storage facilities. Beginning in August 2005, it is planned that the Gaithersburg, Maryland facility will be expanded to 65,160 square feet.

In addition to the assumed leases, and pursuant to the BBI Acquisition, the Company acquired certain real property and entered into an Assumption and Modification Agreement pursuant to which the Company assumed the mortgage obligations related to the property. The property consists of administrative offices and a diagnostics products manufacturing facility and is located in a two story, 32,000 square foot building located in West Bridgewater, Massachusetts. As of September 30, 2004 there was $2,300,000 owing under the mortgage.

ITEM 3.    LEGAL PROCEEDINGS.

From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. As of the date of this report, we are not a party to any material legal proceedings.

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

None.

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PART II

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

(a)    Market Information:

The Company’s Common Stock is traded on the NASDAQ National Market under the symbol “SRLS”.

The following table sets forth the high and low prices of our common stock for the periods indicated as reported by Nasdaq:

(b)    Holders:

As of November 30, 2004 there were 9,912,116 shares of our common stock outstanding and approximately 250 holders of record of our common stock. The closing price of our stock on November 30, 2004 was $11.40 per share.

(c)    Dividends:

Our company has not paid any dividends since our spin-off from Biomat USA, Inc. in September 2001. Our Board of Directors has no current plans to pay cash dividends. Our credit agreement with our senior lender and our note agreement with our subordinated lender each currently limits our ability to declare or pay any dividends or other distributions on any shares of our capital stock other than dividends payable solely in shares of our capital stock; provided that with the prior written consent of the lenders under the respective credit facilities, we may pay dividends of up to an aggregate during the term of the respective credit facilities of $2,000,000. Future dividend policy will depend on our earnings, capital requirements, financial condition, contractual restrictions contained in our loan agreements and other agreements, and other factors considered relevant by our Board of Directors.

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLAN

Equity Compensation Plans Approved by Stockholders. We maintain the SeraCare Life Sciences, Inc. 2001 Stock Incentive Plan. Please see Note 13 to the Financial Statements included with this Form 10K for a description of the 2001 Stock Incentive Plan. In addition, on September 25, 2001, we granted to each of Messrs. Plost, Burdick, Teng, Kasten, Cresci, Jallad and Anderson options to purchase 40,000 shares of our common stock at an exercise price of $1.00 per share. These options were granted outside the scope of the 2001 Stock Incentive Plan. Our 2001 Stock Incentive Plan and the other September 25, 2001 option grants referred to in the previous sentence were approved by our shareholders in September 2001. The September 25, 2001 option grants referred to above are fully vested and have a maximum term of five years from the date of grant.

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Equity Compensation Plan Not Approved by Stockholders. On October 4, 2001, we granted options covering an aggregate of 40,000 shares to certain consultants for services that have been rendered. These options were not granted under the 2001 Stock Incentive Plan and we were not required to obtain shareholder approval for these options. Each of these options was fully vested at grant and has a maximum term of three years from the date of grant.

Summary Table. The following table sets forth, for our 2001 Stock Incentive Plan and the other option grants referred to above, the number of shares of our common stock subject to outstanding options, the weighted-average exercise price of outstanding options, and the number of shares remaining available for future award grants as of September 30, 2004.

Purchases of Equity Securities by the Registrant

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ITEM 6.    SELECTED FINANCIAL DATA

The Table below presents selected financial data of the Company as of and for the three years ended September 30, 2004, 2003, 2002, for the seven months ended September 30, 2001 and for the two years ended February 28(29), 2001 and 2000. These data have been derived from the historical audited financial statement of the Company and should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Financial Statements, including the notes thereto, included elsewhere herein. The historical results are not necessarily indicative of results to be expected for any future period.

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ITEM 7.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS.

Critical Accounting Policies

To prepare the financial statements in conformity with accounting principles generally accepted in the United States, management is required to make significant 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. In particular, SeraCare Life Sciences provides for estimates regarding the recoverability of long-lived assets, purchase price allocations, collectability of accounts receivable, the net realizable value of its inventory, as well as its deferred tax asset valuation allowance. On an on-going basis, we evaluate our estimates based on historical experience and various other assumptions that we believe to be reasonable under the circumstances, the results of which, form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Future financial results could differ materially from current financial results based on management’s current estimates.

We believe that the following critical accounting policies reflect the more significant judgments and estimates used in the preparation of our financial statements:

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The following should be read in conjunction with the “Selected Financial Data” and the Company’s financial statements and related notes thereto.

General

SeraCare Life Sciences, Inc. (the “Company”), is a manufacturer and provider of biological products and services for diagnostic, therapeutic, drug discovery, and research organizations based in Oceanside, California, with satellite offices in: Hatboro, Pennsylvania; Cambridge, Massachusetts; West Bridgewater, Massachusetts; Frederick, Maryland; Gaithersburg, Maryland and distributors in Europe and Asia. We offer a diverse array of products including quality controls for diagnostic tests, specialty plasmas, human and animal-based proteins for research, development, and manufacture of therapeutics and diagnostics, and ethically collected, high quality, clinically annotated biological specimens for target validation and drug discovery. Recently, we acquired substantially all of the assets of the BBI Diagnostics and BBI Biotechnology Research Laboratories divisions of Boston Biomedica, Inc., as well as substantially all of the assets of Genomics Collaborative, Inc. Headquartered in Oceanside, CA, SeraCare conducts business throughout the world, and its common stock is traded on the NASDAQ National Market under the symbol “SRLS”.

The Company is a vendor-approved supplier to over 500 pharmaceutical and healthcare companies, and is listed as an exclusive supplier in many customers’ regulatory filings with the Food and Drug Administration (“FDA”). Our primary focus is the development and sale of human and animal plasma-based diagnostic, therapeutic, and research products to domestic and international customers. Through our strategic alliances with Biomat USA, Inc., we have access to a nationwide network of donor centers. This has historically provided the basis for our development of human plasma-based products and services. Through our strategic alliance with Proliant, Inc., we have access to bovine serum albumin, which has provided the basis for development of our bovine serum-based products. Through our strategic alliance with SurModics, Inc., we are able to provide in vitro assay stabilizers to many of our customers. We provide quality control products for infectious disease testing. In conjunction with the products we sell for research purposes, we are able to offer services such as nucleic acid isolation and sequencing, SNP analysis, target validation, assistance in statistical study design, and biorepository services. We also provide antibody-based products, which are used as active ingredients in therapeutic products (generally, drugs used to treat and manage diseases) and in diagnostic products (generally, diagnostic tests and test kits). In addition, we have established ourselves as a provider of ethically collected, high quality, clinically annotated biological specimens for target drug validation and discovery studies.

We focus on product development, the solidification of customer relationships, and improvement of our operational systems in California, Maryland, Massachusetts and Pennsylvania. We have increased the variety, and improved the quality, of products that we manufacture and sell. Management believes our strategy will aid our long-term success in the highly regulated and competitive industry in which we operate. During the course of our corporate evolution, we have helped many customers develop internal protocols and standards, established quality control benchmarks, and have performed various other value-added services for our customers in order to establish solid relationships. We have made significant progress as a major supplier of protein and media products to several pharmaceutical and biotechnology companies.

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RESULTS OF OPERATIONS

The following condensed statements of operations reflects the operating results for the twelve-month periods ended September 30, 2004, 2003 and 2002.

Year Ended September 30, 2004 vs Year Ended September 30, 2003

Net Sales

Net sales for the year ended September 30, 2004 increased by 23% or $5,238,000 to $28,441,000 as compared to the 2003 period. For the period, Diagnostic sales increased by $7,511,000 or 75% while Biopharmaceutical sales decreased by $2,273,000 or 17%. The increase in Diagnostic revenues was primarily the result of the acquisition of BMR during the fourth quarter of 2003 combined with organic growth in the Company’s core business operations and an increase in sales related to distribution alliances. The decrease in Biopharmaceutical revenue was primarily a result of the loss of a major customer during the fourth quarter of 2003, partially offset by the acquisitions of GCI and the Biotech division of BBI and increases in revenue from our remaining core biopharmaceutical customers.

Gross Profit

For the current year period, the Company reported a gross profit of $10,740,000, an increase of $3,612,000 from the gross profit of $7,128,000 for the prior year 2003 period. The overall increase in gross profit was the result of both the increase in sales revenue and an increase in the overall gross margin percentage from 31% in 2003 to 38% for the year 2004. Diagnostic products margins improved by $2,780,000 due primarily to the increased sales and a one percent increase in the gross margin percentage. Biopharmaceutical products margins increased by $832,000 during the year due to a 13.4% increase in gross margin percentage from 2003. This increase in Biopharmaceutical products margins was the result of a refocusing by the Company after the loss of a major customer. This refocusing included the acquisitions of GCI and BBI during the current year and a concentration on higher profit margin products and services.

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Bad debt expense totaled $19,000 and $18,000 during the years ended September 30, 2004 and 2003, respectively, and was offset by account receivable recoveries of $33,000 in the year 2003. There were no recoveries during the year 2004.

Selling, General and Administrative Expense

Selling, general and administrative expense increased $864,000 or 20% over the comparable 2003 period. This increase was primarily the result of higher sales related costs including: sales salaries (including increased commissions); advertising; marketing; and sales-related travel costs. The acquisitions of BMR, GCI and BBI contributed to the increase in SG&A.

Interest Expense(Income)

Net interest expense, including amounts paid to related parties, totaled $273,000 during the 2004 period compared to interest income of $5,000 during the 2003 period. The Company established a credit facility and borrowed funds in order to meet the working capital requirements of expansion and for the BBI Acquisition.

Other Expense(Income)

Other income for the year ended September 30, 2004 was $26,000. There was no other income or expense for the prior year period.

Income Tax Expense

Income tax expense for the current year period consisted of federal and state tax and increased by $957,000 or 337% from the year earlier period. $712,000 of the increase was a direct result of an increase in the effective tax rate from 9.8% to 23.0%. The reason for the increase in the effective tax is that we exhausted our federal NOL during the current year. With regard to the State of California, the two-year moratorium on the use of net operating loss carryforwards (“NOL”) is still in place and there has been no update on our ability to use our state NOL. Accordingly, we are required to pay state income tax at the approximate rate of 9.8% during fiscal years ended September 30, 2003 and 2004.

Net Income

As a result of the above, net income for the year ended September 30, 2004 totaled $4,155,000 versus net income of $2,616,000 for the year ended September 30, 2003.

Year Ended September 30, 2003 vs Year Ended September 30, 2002

Net Sales

Net sales for the year ended September 30, 2003 decreased by 8% or $2,105,000 to $23,203,000 for the comparable 2002 period. This decrease is comprised of a $1,330,000 or 11% increase in biopharmaceutical sales and a $3,435,000 or 26% decrease in diagnostic sales. Sales to our two largest customers decreased by approximately $5,017,000, or 40%, from 2002 to 2003. Our largest customer notified us during 2003 that it would no longer require the use of our biopharmaceutical product after August 2003. Sales to our largest customer decreased by approximately $2,321,000 from 2002 to 2003. Sales volume to new and existing customers partially replaced the reduced sales volume to the major customer and has resulted in a more diversified customer base.

The Korean blood market was weaker than expected during 2003 and diagnostic sales to a large Korean customer decreased by approximately $2,696,000 compared to 2002. United States demand for blood products decreased during 2003 as well.

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Gross Profit

The Company reported a gross profit of $7,128,000, a decrease of $247,000 from the gross profit of $7,375,000 for the comparable 2002 period. The overall decrease in gross profit was the result of lower sales during 2003 as compared to 2002. Gross profit as a percent of sales for 2003 was 31% and was comparable to 29% for 2002. Diagnostic product margins improved due primarily to lower sales during the year ended September 30, 2003 compared to 2002 to a major customer that had lower than average profit margins, thereby increasing the overall margin for the remaining diagnostic product sales.

Profit margins for Biopharmaceutical products decreased during the year ended September 30, 2003 compared to 2002 primarily due to decreased sales to a major customer that had higher profit margins than the margins on the sales volume to several smaller customers that replaced the major customer sales.

Bad debt expense totaled $18,000 and $19,000 during the years ended September 30, 2003 and 2002, respectively, and was offset by account receivable recoveries of $33,000 and $65,000, respectively.

Selling, General and Administrative Expense

Selling, general and administrative expense increased $338,000 or 9% over the comparable 2002 period. This increase was primarily the result of increased costs including sales salaries, advertising and marketing, and sales-related travel costs. Selling, general, and administrative costs for the year ended September 30, 2003 as compared to 2002 increased primarily due to selling and marketing costs related to BioBank products along with increased selling costs due to increased sales volume to a more diversified customer base.

Other Income

Other income for the year ended September 30, 2003 was $5,000 compared to $170,000 for the fiscal year ended September 30, 2002. Other income in 2002 consisted of approximately $137,000 received from a legal settlement and $33,000 in interest income.

Income Tax Expense

Income tax expense for the year ended September 30, 2003 consisted of federal alternative minimum tax and state tax. During September 2002, the State of California initiated a two-year moratorium on the use of net operating loss carry-forwards (“NOL”), thereby eliminating our ability to use our state NOL for the next two years. Accordingly, we will be required to pay income tax at the approximate rate of 9.8% during fiscal years ended September 30, 2002 and 2003.

Net Income

As a result of the above, net income for the year ended September 30, 2003 totaled $2,616,000 versus net income of $3,625,000 for the year ended September 30, 2002.

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LIQUIDITY AND CAPITAL RESOURCES

As of September 30, 2004, our current assets exceeded current liabilities by $23,923,000 compared to $12,308,000 as of September 30, 2003, which translates into a current ratio as of September 30, 2004 of 2.4 to 1 compared to 2.7 to 1 as of September 30, 2003. Total liabilities as of September 30, 2004, were $43,364,000 (which includes $25,000,000 of debt related to the acquisition of BBI) compared to $7,429,000 as of September 30, 2003. The total debt to equity ratio as of September 30, 2004 was 0.95 compared to 0.36 as of September 30, 2003.

Current liabilities increased by $9,581,000 from September 30, 2003 to September 30, 2004, primarily as a result of a $5,292,000 increase in accounts payable. Current portion of long-term debt increased $3,808,000 and accrued expenses increased $3,695,000. All of these increases were a result of the acquisitions of GCI and BBI during the current year.

Net cash used in operating activities during the fiscal year ended September 30, 2004 was $429,000 compared to net cash used in operating activities of $454,000 for the fiscal year ended September 30, 2003. The current year results were due primarily to increases in accounts receivable totaling $2,175,000 due to the increase in sales and inventory totaling $6,175,000, due mainly to the impact of the startup of the Biobank and cell culture operations and an expansion of our disease state product line, mostly offset by net income of $4,155,000, an increase in accounts payable of $3,045,000 and a $1,959,000 increase in accrued expenses.

In June 2004, the Company acquired certain assets of GCI. The purchase price paid by the Company in the GCI Acquisition was $14,300,000 (including transaction costs of $404,000), which was determined as a result of arms’ length negotiations and consisted of 1,065,683 shares of the Company’s common stock having an aggregate value of $13,055,000 as well as a cash payment of $1,245,000 (offset by cash acquired in the GCI Acquisition of $347,000). The Company borrowed $833,000 from its then outstanding $10,000,000 secured line of credit to fund a portion of the cash payment. In addition, as partial consideration for the GCI Acquisition, the Company agreed to pay to GCI certain earn-out payments over a two year period pursuant to a formula set forth in the underlying asset purchase agreement.

Effective as of September 14, 2004, the Company acquired substantially all of the assets of the Diagnostic and Biotech divisions of BBI for $30,000,000 in cash plus the assumption of certain liabilities. The acquired assets consist primarily of inventory, receivables, equipment and intellectual property, and also include a building and real property located in West Bridgewater, Massachusetts. The Company funded the BBI Acquisition through a combination of the following: (1) $21,000,000 in borrowings under the new Credit Agreement, (2) $4,000,000 (of which $3,500,000 was with related parties) in borrowings under a subordinated Note Agreement, and (3) $8,160,000 in gross proceeds from the closing of the Company’s private placement of 800,000 shares (the “Shares”) of its common stock (the “Private Placement”).

During October 2003, the Company entered into a two-year, $10,000,000 secured line of credit. The line of credit was secured by the Company’s assets and included certain financial covenants that limited the Company’s level of debt and capital expenditures and other covenants that required minimum levels of liquidity and profitability. On September 14, 2004, this line of credit (“Revolving Loan Facility”) was modified and expanded to include a $15,000,000 term loan with the current lender and a new lender.

Obligations under the new Credit Agreement are secured by substantially all the assets of the Company. The Revolving Loan Facility, which may also be used for working capital and other general corporate purposes in addition to the BBI Acquisition, is governed by a borrowing base equal to 80% (or, in one case, 60%) of eligible accounts receivable and the lesser of $7,500,000 and 30% of eligible inventory. The Credit Agreement contains standard representations, covenants and events of default for facilities of this type. Occurrence of an event of default allows the lenders to accelerate the payment of the loans and/or terminate the commitments to lend, in addition to the exercise of other legal remedies, including foreclosing on collateral. On September 15, 2004, the

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Company took down an additional $2.5 million under the Revolving Loan Facility for working capital purposes. At September 30, 2004, the borrowing base exceeded the aggregate $10,000,000 Revolving Loan Facility commitment.

As of September 30, 2004, the Company was not in compliance with the Tangible Net Worth covenant of the Credit Agreement. As a result, the Lenders issued a waiver and amended the Credit Agreement to adjust the covenant.

On September 14, 2004, the Company also entered into a four-and-one-half-year $4,000,000 Subordinated Note Agreement (“Note Agreement”). Two of the three note-holders (carrying $3,500,000) (Barry Plost and Dr. Bernard Kasten) are members of the board of directors of the Company, and the administrative agent is a corporation controlled by Mr. Plost. The Company issued $4,000,000 in notes (“Subordinated Notes”) under the Note Agreement to fund a portion of the purchase price for the BBI Acquisition. Until September 15, 2006, the Subordinated Notes bear interest at a rate equal to 14% per annum, increasing thereafter to 16% per annum. Interest is payable monthly in cash, except that any amount in excess of 14% per annum shall be paid in kind, unless payment in cash is permitted under the Credit Agreement and the Company elects to pay such amount in cash. The Subordinated Notes are due on March 15, 2009, and have no scheduled prepayments or sinking fund requirements. The Subordinated Notes may be repaid at any time prior to March 15, 2005 in an amount equal to the principal thereof plus accrued interest. At any time after March 15, 2005 until and including March 15, 2008, the Subordinated Notes may be prepaid only with the payment of a fee equal to 3% (initially) of the amount to be repaid, declining each year by 1%. Mandatory prepayment of the Subordinated Notes is required upon a change of control in an amount equal to 101% of the principal thereof, plus accrued interest. The Subordinated Notes are secured by substantially all the assets of the Company, second in priority to the lien securing obligations under the Credit Agreement, and are subordinated in right of payment to obligations under the Credit Agreement. The Note Agreement contains standard representations, covenants and events of default for facilities of this type. Occurrence of an event of default allows the holders to accelerate payment of the Subordinated Notes, in addition to the exercise of other legal remedies, including foreclosing on collateral, subject to the provisions of the subordination agreement with the lenders under the Credit Agreement.

In connection with the BBI Acquisition, the Company entered into an Assumption and Modification Agreement, dated as of September 14, 2004 (the “Assumption Agreement”), with Commerce Bank & Trust Company (“Commerce Bank”), pursuant to which the Company assumed certain of BBI’s obligations under the loan documents referenced therein (the “Loan Documents”). The obligations assumed by the Company include a promissory note (the “Note”) with an outstanding principal balance of approximately $2,300,000. The Note is secured by a mortgage on the real property located at 375 West Street, West Bridgewater, Massachusetts (the “Real Property”), which was acquired by the Company pursuant to the BBI Acquisition. The Company also entered into a Guaranty (the “Guaranty”) in favor of Commerce Bank, to secure its obligations under the Loan Documents. The outstanding principal balance under the Note bears interest at a rate per annum of 9.75% until February 25, 2005, at which time the rate per annum will adjust to a rate equal to three-quarters of one percent (0.75%) in excess of Commerce Bank’s published corporate base rate. Payments of principal and interest are payable under the Note monthly in an amount calculated to achieve repayment of the Note in equal monthly payments over a 16 year period. The unpaid principal and interest under the Note is due and payable in full on August 31, 2009, although the Note may be prepaid in whole or part, at any time, without penalty. The outstanding principal balance under the Note, together with all unpaid interest, may be accelerated and become immediately due and payable following a default under the Note or the loan agreement (and the expiration of applicable cure periods) or if the Real Property is transferred by the Company to a third party without Commerce Bank’s consent.

Cash flow used in investing activities for the fiscal year ended September 30, 2004 was $31,643,000 compared to $4,005,000 for the fiscal year ended September 30, 2003. The increase in cash used during fiscal 2004 is primarily attributed to the acquisitions of BBI and GCI.

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For the fiscal year ended September 30, 2004, cash flow provided by financing activities totaled $30,560,000 and was primarily the result of funds borrowed for the BBI and GCI acquisitions.

Management believes that internal cash flows, along with existing capacity under our line of credit are sufficient to fund working capital requirements at current operating levels, including minimum purchase commitments. However, management also believes that the year 2005 will reflect continued growth in the Company’s core businesses including the possibility of significant expansion(s) and/or acquisition(s). Accordingly, the Company may need to fund such growth with additional debt and/or equity financing in addition to internally generated cash flow.

In June 2003, our board of directors approved a stock repurchase program, authorizing the repurchase of up to $2 million of our common stock. As of November 30, 2004, we had repurchased an aggregate of 4,780 shares of common stock for a total purchase price of $21,352, or an average of $4.47 per share.

Contractual Commitments

We are also subject to payments under specific contractual obligations and commitments. The minimum annual purchase requirements under certain agreements are approximately $2,349,000, $2,865,000 and $1,620,000, for the fiscal years ending September 30, 2005, 2006 and 2007 respectively.

A summary of those contractual obligations and commercial commitments as of September 30, 2004 is as follows:

Earnouts

In conjunction with the acquisitions of BMR and GCI, the Company is obligated to certain earnout payments based upon certain criteria contained in the respective assets Purchase Agreements. Payments under these provisions will be accounted for as additional purchase-price adjustments.

Off-Balance Sheet Arrangements

We do not utilize “special purpose entities” for any transactions. Our only “off-balance sheet” obligations are for operating leases that are disclosed in the notes to the financial statements.

Inflation

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

New Accounting Pronouncement

In November 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 151 (SFAS No. 151), “Inventory Costs—an amendment of ARB No. 43, Chapter 4” SFAS No.

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151 amends the guidance in ARB No. 43, Chapter 4, “Inventory Pricing,” to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). Paragraph 5 of ARB 43, Chapter 4, previously stated that “…under some circumstances, items such as idle facility expense, excessive spoilage, double freight, and rehandling costs may be so abnormal as to require treatment as current period charges....” This Statement requires that those items be recognized as current—period charges regardless of whether they meet the criterion of “so abnormal.” In addition, this statement requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. SFAS No. 151 shall be effective for inventory costs incurred during fiscal years beginning after June 15, 2005. The Company has not elected to early adopt SFAS No. 151. We will continue to evaluate the impact the adoption of SFAS No. 151 will have on our financial position and results of operations.

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The Company does not believe that it has material exposure to foreign currency exchange rate or other relevant market risks because all international sales are designated in U.S dollars. We were not a party to any derivative financial instruments at September 30, 2004.

Interest Rate and Market Risk. As of September 30, 2004, our only assets or liabilities subject to risks from interest rate changes are (i) debt under the credit facility, subordinated notes and mortgage in the aggregate amount of $29,700,000 and (ii) cash and cash equivalents of $1,500,000, substantially all of which were held in short-term federal government securities. The debt under our credit facility bears interest at a floating rate tied to the Union Bank prime rate of interest. Our mortgage debt bears interest at a fixed rate until February of 2005 at which it time it converts to a variable rate. Our subordinated debt bears interest at a fixed rate. A one-percentage point change in interest rates affecting the Company’s floating rate long-term debt would change pre-tax income by $263,000 over the next twelve months.

Foreign Currency Exchange Risk. The Company does not believe that it currently has material exposure to foreign currency exchange risk because all international sales are designated in U.S dollars.

The Company does not use derivative financial instruments for speculative or trading purposes.

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The Financial Statements of the Company identified in the Index to Financial Statements appearing under “Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K” of this report are incorporated herein by reference to Item 15.

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

None

ITEM 9A.    CONTROLS AND PROCEDURES.

As of the end of the fiscal year ended September 30, 2004, we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures, as such term is defined in Rule 13a-15(e) promulgated under the Securities and Exchange Act of 1934, as amended. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2004 to ensure that information required to be disclosed by us in reports that we file or submit under the Securities and Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. There was no change in our internal

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controls over financial reporting during our fiscal year ended September 30, 2004 that materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

ITEM 9B.    OTHER INFORMATION.

None

PART III

ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

ITEM 11.    EXECUTIVE COMPENSATION.

ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

ITEM 14.    PRINCIPAL ACCOUNTANT FEES AND SERVICES.

The information called for by items 10, 11, 12, 13 and 14 will be contained in the Company’s definitive proxy statement which the Company intends to file within 120 days after the end of the Company’s fiscal year ended September 30, 2004 and such information is incorporated herein by reference.

PART IV

ITEM 15.    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a)(1)    Financial Statements

The financial statements listed in the Index to Financial Statements on page F-1 are filed as part of this Form 10-K.

(a)(2)    Financial Statement Schedules

All financial statement schedules have been omitted because the required information is not applicable or not present in amounts sufficient or because the information required is included in the financial statements or notes thereto.

(a)(3)    Exhibits

The exhibits listed in the Exhibit Index preceding the Consolidated Financial Statements are incorporated herein by reference or are filed with this Form 10-K as indicated.

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EXHIBIT INDEX

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SIGNATURES

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

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.

Each person whose signature appears below hereby authorizes Michael F. Crowley, Jr. and Tim T. Hart, or either of them, as attorneys-in-fact to sign on his behalf, individually, and in each capacity stated below, and to file all amendments and/or supplements to this Annual Report on Form 10-K.

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SeraCare Life Sciences, Inc.

Index to Financial Statements

F-1

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders of

SeraCare Life Sciences, Inc.:

We have audited the accompanying balance sheets of SeraCare Life Sciences, Inc. as of September 30, 2004 and 2003 and the related statements of income, stockholders’ equity, and cash flows for each of the years in the three-year period ended September 30, 2004. 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 the standards of the Public Company Oversight Board (United States). Those standards require that we plan and perform the audit 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 financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of SeraCare Life Sciences, Inc. as of September 30, 2004 and 2003 and the results of its operations and its cash flows for each of the years in the three-year period ended September 30, 2004, in conformity with U.S. generally accepted accounting principles.

/s/    KPMG LLP

San Diego, California

December 10, 2004, except as to the fifth paragraph of note 5,

which is as of December 14, 2004

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SERACARE LIFE SCIENCES, INC.

STATEMENTS OF INCOME

See accompanying notes to financial statements.

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SERACARE LIFE SCIENCES, INC.

BALANCE SHEETS