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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

or

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, including area code)

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 the 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.    ¨

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

As of March 31, 2003, the aggregate market value of Common Stock held by non-affiliates of the registrant was approximately $13,944,412 based on the closing sale price of $3.39 per share as reported by the National Association of Securities Dealers. Shares of Common Stock held by officers, directors, and 5% holders have been excluded from this calculation because such persons may be deemed to be affiliates. The determination of affiliate status is not a conclusive determination for other purposes.

As of December 5, 2003, there were 7,724,492 shares of the registrant’s Common Stock outstanding.

Part III incorporates information by reference from the registrant’s definitive Proxy Statement to be filed with the Commission within 120 days after the close of the registrant’s fiscal year.

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PART I

ITEM 1.    BUSINESS

CAUTIONARY NOTE AS TO 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 Life Sciences” 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 the Company’s ability to control or predict.

I.    Overview of the Company

We are a manufacturer and marketer of human and animal based diagnostic, therapeutic, and research products based in Oceanside, California, with a satellite office in Hatboro, Pennsylvania, and distributors in Europe and South Korea. We are a vendor-approved supplier to over 500 pharmaceutical and healthcare companies, and are listed as an exclusive supplier in many customers’ regulatory filings with the Food and Drug Administration. Our primary focus is the development and sale of human and animal blood-based diagnostic, therapeutic, and research products to domestic and international customers. Through our strategic alliances with Biomat USA, Inc. and other suppliers, 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 our development of bovine serum-based products. 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).

We focus on product development, the solidification of customer relationships, and improvement of our operational systems in California 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.

A.    Company History

SeraCare Life Sciences 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. SeraCare Life Sciences focuses 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 Instituto Grifols, S.A. 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

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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; and (5) the commercial launch of the SeraCare BioBank^™.

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.

On November 6, 2001, we announced a change in our fiscal year from February 28/29 to September 30. Accordingly, on January 2, 2002 we filed a transition report on Form 10-K for the transition period from March 1, 2001 to September 30, 2001.

B.    Recent Events

Acquisition of BioMedical Resources, Inc. On July 16, 2003, we announced the acquisition of BioMedical Resources, Inc., a provider of disease state products used in the development and manufacture of calibrators and controls. The purchase price was approximately $4.0 million, of which $400,000 was in our common stock and the balance in cash.

BioBank Commercial Launch. In the fourth quarter of fiscal 2003 we launched our BioBank product line.

Development of Cell Culture Media. We continued to progress in our initiative to launch a line of serum-free, protein-free, and defined media for hybridoma cells, CHO cells, and stem cells within our Biopharmaceutical segment. We plan to launch in fiscal 2004.

II.    Industry Overview

The life sciences industry includes producers of, among other things, blood products, 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.

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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 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 segment as simply “Therapeutic Products;” however, this term no longer encompasses the wide variety of products offered.

These 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

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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:

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:

Biomanufacturing Cell Culture Products: These are used in the therapeutics manufacturing process and need to be included in the drug filing as they are regulated by the United States Food and Drug Administration and similar bodies in other countries.

Research Cell Culture Products: These products are used by researchers in the lab and not subject to the same strict quality regulations of the biomanufacturing 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.

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.

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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 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:

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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.

Our acquisition of the former business of BioMedical Resources is expected to represent a significant portion of our Diagnostics segment in future periods, contributing significantly to the disease state plasma and controls, standards, and panel product lines.

V.    Competitors

We compete with integrated plasma collection/fractionators and processing companies such as Serologicals, Inc., and NABI, 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 Food and Drug Administration (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).

These regulations apply to our facilities in Oceanside, California and Hatboro, Pennsylvania. 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 (“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,

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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 facility and the contract collection centers 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 (Health Information Portability and Accountability Act) of 1996, modified in 2002. 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.

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:

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VIII.    Strategic Alliances

Key to our competitive strength is our strategic alliance with Instituto Grifols, S.A. Biomat USA, Inc., our former parent, entered into an agreement in June 1999 with Instituto Grifols, S.A., which was subsequently assumed by us in connection with our spin-off from Biomat USA, Inc. in September 2001, 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, 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 additional capital. Although we believe that internal cash flows from operations 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 October 2003, we entered into a $10 million secured line of credit primarily to finance future acquisitions. Our ability to finance prospective 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.

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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 guarantees 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. In connection with our agreement for the supply of Human Serum Albumin that we entered into with one of our significant customers, we amended the terms of our agreement with Instituto Grifols S.A. to conform certain aspects of the agreement with this customer.

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 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.

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, 2003, our stock price has ranged from $2.55 to $6.87, and during the 12 months ended November 30, 2003, our stock price has ranged from $3.00 to $11.03. 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, 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 former parent, Biomat USA, Inc., was historically relatively low and to date, the trading volume of our common stock has been low. Investments in our common stock may be relatively illiquid, and investors in our common stock must be prepared to bear the economic risks of such investment for an indefinite period of time.

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We May Not Be Able to Successfully Implement Our Growth Strategy

Our growth strategy may include acquisitions and expansion into new markets. However, our ability to successfully implement this strategy depends on a number of factors, including our access to capital, our ability to obtain applicable governmental approvals and our ability to integrate acquired businesses into our existing operations. Any problems with manufacturing or licensing of our Oceanside or Hatboro facilities could severely curtail our sales to biologics companies. We cannot assure you that we will be successful in expanding our operations or entering new markets.

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

Our growth strategy includes possible acquisitions, which involve various inherent risks, such as:

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 December 5, 2003, our Chairman of the Board, Barry D. Plost, beneficially owned approximately 11.3% of our common stock. In addition, Pecks Management Partners, Ltd., as investment advisor for four separate investors, beneficially owns 18.9% 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.

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We Are Subject to Significant Government Regulation

Our business is heavily regulated in the United States. In addition to the Food and Drug Administration, or 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 requirements, we could be subjected to civil and criminal penalties, or even required to suspend or cease operations. 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.

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 assure you that more restrictive laws, rules and regulations or enforcement policies will not be adopted in the future which could make compliance more difficult or expensive or otherwise adversely affect our business or prospects. The Company believes that its current product liability insurance is sufficient at this time.

We Are Subject to the Risks Associated with International Sales

International sales accounted for 30% of our total revenues during the year ended September 30, 2003, 34% of our total revenues during the year ended September 30, 2002, and approximately 50% of our total revenues during the transition period from March 1, 2001 to September 30, 2001. We anticipate that international sales will continue to account for a significant percentage of our revenues. Risks associated with these sales include:

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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.

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 additional 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 additional shares of preferred stock or to create new series of preferred stock, if we do issue additional 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 the shareholders of the Company. These provisions, among other things:

(i) eliminate cumulative voting rights when the Company becomes a “listed” company on a national securities exchange;

(ii) 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 the shareholders of the Company; and

(iii) eliminate the right of shareholders to act by written consent.

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:

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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.

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.

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 REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

(a)    Market Information:

Our common stock is traded on the NASDAQ SmallCap Market under the symbol “SRLS.”

The following table sets forth the high and low prices for the Company’s common stock for the periods indicated as reported by Nasdaq.

(b)    Holders:

As of December 5, 2003 there were 7,724,492 shares of our common stock outstanding and approximately 193 holders of record of our common stock; the closing price of the stock was $10.81 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 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 lender under our credit facility, we may pay dividends of up to an aggregate during the term of the credit facility of $2,000,000. Future dividend policy will depend on our earnings, capital requirements, financial condition, contractual restrictions contained in our credit agreement and other agreements, and other factors considered relevant by our Board of Directors.

(d)    Issuance of Unregistered Securities:

On July 16, 2003, the Company acquired substantially all of the assets of BioMedical Resources, Inc. The purchase price paid by the Company for the assets included the issuance by the Company of 67,002 shares of the Company’s common stock to the sellers. The asset purchase agreement valued such shares at approximately $400,000. The securities were issued pursuant to an exemption from registration provided by Rule 506 of Regulation D of the Securities Act of 1933, as amended (the “Securities Act”).

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ITEM 6.    SELECTED FINANCIAL DATA.

The table below presents selected financial data of the Company as of and for the years ended February 28 (29), 2001, 2000, 1999, for the seven months ended September 30, 2001 and for the years ended September 30, 2003 and 2002. The historical results are not necessarily indicative of results to be expected for any future period.