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SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549




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FORM 10-K

|   |  |                                                                                                 
|-- |  | ------------------------------------------------------------------------------------------------
|þ  |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE
    SECURITIES EXCHANGE ACT OF 1934    
|  
|   |  | For the Fiscal Year Ended December 29,
    2002                                                 
|  
|OR
|  
|o  |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR
    15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934
|  
|   |  | For the transition period
    from           to           .                                     

Commission file Number: 0-26126

SEROLOGICALS CORPORATION

(Exact name of Registrant as specified in its
charter)


|                                                                                   |  |                                                      
|---------------------------------------------------------------------------------- |  | -----------------------------------------------------
|Delaware(State or other jurisdiction of
    incorporation or organization)         |  | 58-2142225(I.R.S. Employer
    Identification Number)
|                                                                                  
|5655 Spalding Drive, Norcross, Georgia(Address of principal executive
    offices) |  | 30092(Zip Code)                                      

(Registrant telephone number including area
code) (678) 728-2000

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

None

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

Common Stock, $0.01 par value per
share

Rights to Purchase Preferred Stock


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 o

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.     o

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

The aggregate market value of the shares of
common stock held by non-affiliates (based upon the closing sale
price on The Nasdaq Stock Market) on June 30, 2002 was
approximately $445,773,226. As of March 21, 2003, there
were 24,459,746 shares of Common Stock, $0.01 par value per
share, 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 December 29, 2002)
shall be deemed to be incorporated by reference in Part III.



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TABLE OF CONTENTS



|                                               |                                                                                                         |  |  |  |  |  |  | 
|---------------------------------------------- | ------------------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I.                                       
|                                               | Item 1. Business                                                                                       
|                                               | Item 2. Properties                                                                                     
|                                               | Item 3. Legal Proceedings                                                                              
|                                               | Item 4. Submission of Matters to a Vote of Security Holders                                            
|                                               | Item 4A. Executive Officers and Key Employees of the Registrant                                        
|PART II.                                      
|                                               | Item 5. Market for the Registrants Common Equity and Related Stockholder Matters                      
|                                               | Item 6. Selected Financial Data                                                                        
|                                               | Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations          
|                                               | Item 7A. Quantitative and Qualitative Disclosures about Market Risk                                    
|                                               | Item 8. Financial Statements and Supplementary Data                                                    
|                                               | Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure           
|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. Controls and Procedures                                                                       
|PART IV.                                      
|                                               | Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K                               
|SIGNATURES                                    
|CERTIFICATION OF CHIEF EXECUTIVE OFFICER      
|CERTIFICATION OF CHIEF FINANCIAL OFFICER      
|EX-2.5 SECURITY PURCHASE AGREEMENT            
|EX-2.6 EUROPEAN PURCHASE AGREEMENT            
|EX-3.1 AMENDED AND RESTATED CERTIFICATE       
|EX-10.4.1 FORMS OF SECOND REVISED STOCK OPTION
|EX-10.4.2 FORMS OF THIRD REVISED STOCK OPTION 
|EX-10.7 1996 EMPLOYEE STOCK PURCHASE PLAN     
|EX-10.8 1996 UK SHARESAVE SCHEME              
|EX-10.19.1 SEVERANCE AGREEMENT                
|EX-10.23 EMPLOYMENT AGREEMENT                 
|EX-10.24 GUARANTY AGREEMENT                   
|EX-10.25 EMPLOYMENT AGREEMENT                 
|EX-21 SUBSIDIARIES OF THE COMPANY             
|EX-23.1 CONSENT OF DELOITTE & TOUCHE LLP      
|EX-99.1 SECTION 906 CERTIFICATION OF THE CEO  
|EX-99.2 SECTION 906 CERTIFICATION OF THE CFO  



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TABLE OF CONTENTS

|                                             |  |                                                                                                    |  |   
|-------------------------------------------- |  | -------------------------------------------------------------------------------------------------- |  | --
|PART I.                                      |  |                                                                                                    |  |   
|Item 1.                                      |  | Business                                                                                           |  | 3 
|Item 2.                                      |  | Properties                                                                                         |  | 17
|Item 3.                                      |  | Legal Proceedings                                                                                  |  | 17
|Item 4.                                      |  | Submission of Matters to a Vote of
    Security Holders                                            |  | 18
|Item 4A                                      |  | Executive Officers and Key Employees of
    the Registrant                                         |  | 18
|PART II.                                     |  |                                                                                                   
|Item 5.                                      |  | Market for the Registrants Common Equity
    and Related Stockholder Matters                      |  | 20
|Item 6.                                      |  | Selected Financial Data                                                                            |  | 21
|Item 7.                                      |  | Managements Discussion and Analysis of
    Financial Condition and Results of Operations          |  | 21
|Item 7A                                      |  | Quantitative and Qualitative Disclosures about
    Market Risk                                     |  | 34
|Item 8.                                      |  | Financial Statements and Supplementary Data                                                        |  | 34
|Item 9.                                      |  | Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure           |  | 34
|PART III.                                    |  |                                                                                                   
|Item 10.                                     |  | Directors and Executive Officers of
    the Registrant                                             |  | 34
|Item 11.                                     |  | Executive Compensation                                                                             |  | 35
|Item 12.                                     |  | Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters |  | 35
|Item 13.                                     |  | Certain Relationships and
    Related Transactions                                                 |  | 35
|Item 14.                                     |  | Controls and Procedures                                                                            |  | 35
|PART IV.                                     |  |                                                                                                    |  |   
|Item 15.                                     |  | Exhibits, Financial Statement Schedules and
    Reports on Form 8-K                                |  | 36
|SIGNATURES                                   |  | 39                                                                                                
|CERTIFICATION OF CHIEF
    EXECUTIVE OFFICER |  | 40                                                                                                
|CERTIFICATION OF CHIEF
    FINANCIAL OFFICER |  | 41                                                                                                





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PART I.

SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS

This Annual Report on Form 10-K contains
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995 about Serologicals
Corporation and its subsidiaries (collectively,
Serologicals or the Company) that are
subject to risks and uncertainties. Statements that are not
historical facts, including statements about beliefs and
expectations, are forward-looking statements. Forward-looking
statements may be identified by the use of words such as
may, will, expect,
intend, estimate,
anticipate, believe, or
continue and other words of similar meaning or
future or conditional verbs such as will,
should, would, and could.
Forward-looking statements include discussions of the
Companys expected business outlook, future operations,
financial performance, pending acquisitions, financial
strategies, future working capital needs and projected industry
trends, as well as the Companys strategies for growth,
product development, regulatory approvals and compliance, market
position and expenditures.

Forward-looking statements are only
predictions and are not guarantees of performance.
Forward-looking statements are based on current expectations of
future events. The forward-looking statements contained in this
Annual Report on Form 10-K are based on the Companys
current views and assumptions regarding future events and
operating performance. These assumptions could prove inaccurate,
or unknown risks or uncertainties materialize, which could cause
the Companys actual results to differ materially from the
Companys expectations or predictions. Many of these
factors are beyond the Companys ability to control or
predict.

Factors that could cause the Companys
actual results to differ materially, include, but are not
limited to, the following:



| |   |                                                                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the Companys ability to successfully
    integrate the operations of Chemicon International, Inc.
    (Chemicon) following completion of the
    acquisition;                 
|
| |  | the Companys ability to service its
    substantial level of indebtedness following the Chemicon
    acquisition;                                                               
|
| |  | the Companys dependence on a few major
    customers and suppliers and its ability to maintain favorable
    supplier agreements and relationships with them;                   
|
| |  | the effect on the Companys results of
    operations of the loss of any significant customers or reduced
    orders from significant customers;                                 
|
| |  | the Companys ability to maintain and
    expand its customer base;                                                                                                              
|
| |  | increased competition for donors, which may
    affect the Companys ability to attract and retain
    qualified donors;                                                         
|
| |  | the Companys ability to meet future
    customer demand for plasma products after the reduction in the
    number of donor centers;                                             
|
| |  | the Companys ability to generate
    sufficient cash flows or find acceptable third-party financing
    sources to support its internal and external growth
    strategies;     
|
| |  | the Companys ability to identify,
    finance and consummate suitable acquisitions in the future and
    to integrate and manage them;                                          
|
| |  | the Companys ability to identify new
    product opportunities using the Companys technologies that
    can be commercialized;                                                 
|
| |  | the Companys ability to comply with
    regulatory, customer and industry regulations and
    guidelines;                                                                       
|
| |  | adoption of, or changes in, domestic and
    foreign laws and regulations that could affect the
    Companys ability to maintain existing regulatory licenses
    and approvals;

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| |   |                                                                                                                                                                                                                                                                        
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | development of new technologies that compete
    with, and could lessen or eliminate the need for, antibodies and
    other plasma-based products that use the Companys
    technologies and processes;                                                               
|
| |  | the ability of the Company to fully realize
    the efficiencies of the Enterprise Resource Planning system that
    was implemented during 2002;                                                                                                                      
|
| |  | the ability of the Company to complete
    construction and validation of the new
    EX-CYTE®manufacturing
    facility during the first half of 2004.                                                                                                                
|
| |  | changes in industry trends, customer
    specifications and demand, market demand in general and
    potential foreign restrictions of the importation of the
    Companys products that could impact internal and external
    growth, earnings and market share; and

You should not place undue reliance on any
forward-looking statements, which are based on current
expectations. Further, forward-looking statements speak only as
of the date they are made, and the Company disclaims any duty to
update publicly any of them in light of new information or
future events.




Item 1.     Business

Overview of Operations

Serologicals Corporation (a Delaware Corporation)
is a global provider of biological products and enabling
technologies to life science companies. The Companys
products are essential for the research, development and
manufacturing of biologically based life science products. The
Companys products and technologies are used in a wide
variety of applications within the areas of oncology,
hematology, immunology, cardiology and infectious diseases, as
well as in the study of molecular biology. The Companys
customers include many of the leading life science companies
throughout the world.

The Company conducts its operations in facilities
located in North America and Europe. The Company operates
protein fractionation facilities located in Kankakee, Illinois
and Toronto, Ontario. These facilities provide a variety of
proteins used in diagnostic reagents and cell culture media
components for use as additives in biotech products.
Additionally, these facilities produce a line of highly purified
animal proteins known as tissue culture media components that
are used primarily by biopharmaceutical and biotechnology
companies as nutrient additives in cell culture media. The
Company also operates a monoclonal antibody manufacturing
facility in Scotland that is engaged in the development,
manufacturing and sale of monoclonal antibodies for use in
diagnostic products such as blood typing reagents and in
controls for tests used for diagnosing certain infectious
diseases. The Company operates a facility in Milford,
Massachusetts that includes a central product distribution
facility, as well as operations related to the Companys
human-sourced polyclonal antibody business and production of
substrates for use in diagnostic assays. The Company also
operates a research and development laboratory in Gaithersburg,
Maryland. The Company operates 10 human plasma collection
centers (donor centers) in the United States that
specialize in the collection of specialty human antibodies which
are used as the active ingredients in therapeutic products for
the treatment and management of diseases such as Rh
incompatibility in newborns, rabies, hepatitis and in diagnostic
products including blood typing reagents and diagnostic test
kits.

Operating Segments

The Companys operations are organized into
three primary operating segments: Biotechnology and Molecular
Biology Products (Biotech or Biotech Products),
Diagnostic Products and Life Science Reagents (Diagnostics
or Diagnostic Products) and Therapeutic Products
(Therapeutics or Therapeutic Products). These
segments are based primarily on the differing nature of the
ultimate end use of the Companys products, the differing
production, manufacturing and other value-added processes
performed by the Company with respect to the products and, to a
lesser extent, the differing customer bases to which each
reportable segment sells its products.

The activities of the Biotech segment primarily
include the manufacture and sale of cell culture media
components, as well as certain research products and
technologies used in life sciences research and in high

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throughput drug screening. The primary cell
culture media products included in this segment are
EX-CYTE®, Bovine Serum Albumin (BSA) and human
recombinant insulin. The research products include
Amplifluor, a patented technology used for the detection
of nucleic acids amplified by polymerase chain reaction
(PCR) and other techniques. The activities of the
Diagnostic segment include the Companys monoclonal
antibody production facilities and certain human-sourced,
polyclonal antibodies, as well as certain blood protein products
manufactured at the Companys facilities in Kankakee and
Toronto. The antibodies and other proteins reported within the
Diagnostic segment are primarily used in diagnostic products
such as blood typing reagents and diagnostic test kits. The
activities of the Therapeutics segment include the collection
and sale of specialty human antibodies that are used as the
active ingredients in therapeutic products for the treatment and
management of various human diseases.


Recent Events

Donor
Center Optimization

At the beginning of 2002, the Company operated 17
donor centers. As a result of a comprehensive review of its
Therapeutic operations, the Company announced during the second
quarter of 2002 the closure of four centers located in
Pittsburgh, Pennsylvania; Asheville, North Carolina; Atlanta,
Georgia (one of two centers in Atlanta); and Tuscaloosa,
Alabama. Additionally, the Company announced during the first
quarter of 2003 the closure of three additional centers located
in Birmingham, Alabama; Washington D.C.; and Provo, Utah. The
Company expects to absorb much of the donor capacity from the
Provo center into its center located in Salt Lake City, Utah.
The Company believes that the capacity available through the 10
remaining centers is sufficient to meet future demand for its
antibody products.

Vaccinia
Supply Agreement

In August 2002, the Company entered into a
five-year agreement with Cangene Corporation to provide
hyper-immune plasma for use in the manufacturing of vaccinia
immune globulin (VIG), which is used in treating and
preventing severe reactions that may result from administration
of the smallpox vaccine or from an outbreak of smallpox. The
agreement provides that the Company will supply up to 60,000
liters of vaccinia antibodies during the first 18 months of
the contract, and will be the exclusive provider of up to 85% of
the product requirements for Cangene. The contract is tied
directly to our customers contract with the Centers for
Disease Control and Prevention (CDC). The ultimate
quantity of VIG provided under this contract is dependent on the
volume of orders provided to Cangene by the CDC. As of
March 25, 2003, the Company has received orders for
approximately half of the contractual volume described above.
There is no guarantee that we will receive orders that will
result in the production and sale of 60,000 liters, or that
there will be future demand for this product.

Chemicon
Acquisition

On February 11, 2003, the Company announced
that it had entered into an agreement to acquire Chemicon
International (Chemicon), a privately held company
headquartered in Temecula, California. Chemicon is a supplier of
a variety of specialty reagents, antibodies and molecular
research tools to the life science industry and is primarily a
supplier to the research marketplace. The purchase price is
$95.0 million, less Chemicons outstanding debt as of
the closing date. The acquisition will be financed with the
proceeds from a new $100.0 million, five-year term loan.
The transaction is expected to close on March 31, 2003.

Industry Overview

The Company operates in the life sciences
industry, which 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 blood type, or in the

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provision of therapeutic agents for the treatment
or prevention of disease conditions. These areas can be further
broken down into the following categories, which are focus areas
for Serologicals:


Life
Sciences Research

The life sciences research 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, energy, agricultural and chemical
companies. Life sciences researchers require special biochemical
research tools capable of performing precise functions in a
given experimental procedure. Two of the principal disciplines
within the life sciences 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 which
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.

Cell
Culture

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:



| |   |                                                                                                                                                                                                                                                                                                                                                                          
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Mammalian Cell
    Culture:This consists of mammalian
    cells culled from animals such as hamsters and mice that are
    fused to form a hybridoma (a cell mass that has the ability to
    multiply indefinitely). The cell culture is specific to the
    therapeutic use and secretes a single type of antibody or
    protein into the medium in which it is grown.
|
| |  | Fermentation Tanks:These are large tanks of varying capacity (depending on the
    production need) within which the cell culture and the nutrients
    are placed and are encouraged to grow through the maintenance of
    optimal temperature, pressure and other conditions.                                                                                         

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| |   |                                                                                                                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Media and Nutrients:This consists of supplements that the cells in the culture use
    to multiply rapidly. As the cells grow they secrete the antibody
    into the medium that is then harvested, purified and further
    processed.

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 strict quality
    regulations of the biomanufacturing products.                                                                                         

In recent years, the biopharmaceutical or
biotechnology industry has seen many advances in the
commercialization of protein-based therapeutic products, such as
monoclonal antibodies and recombinant proteins. The Human Genome
Project and other areas of research such as proteomics are
expected to result in further additions to the pipeline of
protein-based drugs in clinical trials. Many of these candidate
protein-based therapeutics are made in cell culture, which is
driving demand for cell culture media, including cell culture
components. Many of these cell culture components such as
EX-CYTE®, insulin, certain types of BSA and transferrin are
manufactured and/or distributed by the Company and are essential
to cell growth and product manufacture, leading to increased
demand. While there may be an increased demand for these
components, it is anticipated that there will be a shortage of
manufacturing capacity to make the protein-based therapeutic
products, which may limit the rate at which cell culture
components can be consumed by biopharmaceutical companies or by
contract manufacturing organizations that operate the cell
culture facilities. Another factor that could impede the demand
of these cell culture components is concern about some of these
components being of animal origin, and more specifically, bovine
in origin. This is as a result of concern relating to the
potential for the agent causing Bovine Spongiform Encephalopathy
(BSE) to be present in the raw materials used in the
production process. (See Government and Industry
Regulation).

Diagnostic
Blood Products

Antibodies, both human sourced as well as those
in monoclonal form, are also used in the manufacture of
diagnostic products used to screen patients for prior exposure
to a specific disease or to determine blood type. Polyclonal and
monoclonal antibodies are used in diagnostic products such as
blood typing reagents and diagnostic test kits. In addition to
antibodies, 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 Gamma Globulin
(BGG), thrombin, fibrinogen and cholesterol.

The Company believes that the following factors
are influencing the diagnostic blood and clinical testing
industry: increased regulation and concerns relating to blood
safety resulting in a broader array of antibody based diagnostic
tests used to evaluate blood samples and increasing demand for
more diverse diagnostic tests as the world population migration
is spreading diseases, which were once confined to specific
geographic areas.

Therapeutic
Blood Products

The human blood products 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 which are produced by the immune system to fight specific
diseases. Other derivative products of source plasma include
albumin, used to treat shock and burn patients, and clotting
factors such as Factor VIII Concentrate and Factor IX
Concentrate, used primarily by hemophiliac patients.

The human blood products industry is generally
divided into two distinct sectors. The largest sector of the
industry is comprised of non-profit organizations, such as the
American Red Cross and community blood banks, which supply whole
blood and other transfusible products to hospitals. Conversely,
the commercial

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sector of the industry is focused primarily on
supplying source plasma, specialty and non-specialty antibodies
and specialty biologic components which further process these
components into therapeutic and diagnostic products.


Therapeutic blood products include specialty
antibodies and cells, as well as non-specific, or non-specialty,
antibodies and source plasma. Specialty therapeutic antibodies
are typically used to manufacture products for treating persons
exposed to, or at risk of contracting, a specific disease.
Specialty antibodies used for therapeutic purposes range from
those used to treat medical indications such as tetanus and
rabies, to high-end products such as anti-D, an antibody used to
treat Rh incompatibility in newborns and anti-hepatitis.

The demand for specialty therapeutic antibodies
is influenced by a small number of customers. There are very few
fractionators that purchase specialty antibody products to
produce an end-product used in the treatment or prevention of
various medical conditions. Due to the high concentration,
demand for these products is extremely difficult to predict due
to the uneven ordering patterns of this small group of
customers. Accordingly, the Company is subject to annual and
quarterly sales fluctuations for these products.

In addition to the demand and supply factors
discussed above, the industries in which the Company operates
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.

Operations



| |                            
| | ---------------------------
| | Biotech Products Operations

The activities of the Biotech segment primarily
include the manufacture and sale of tissue culture media
components, as well as certain research products and
technologies used in life sciences research and in high
throughput drug screening. The primary products included in this
segment are EX-CYTE®, certain grades of BSA, human
recombinant insulin, apoptosis kits and Amplifluor.

Blood Protein
Fractionation.The Company, through
its manufacturing facilities in Kankakee, Illinois and Toronto,
Ontario, isolates specific proteins contained primarily in
animal sera or plasma through specialized manufacturing
processes known as protein fractionation. The Company utilizes
core technologies such as cold-solvent precipitation, including
cold-ethanol precipitation (Cohn fractionation); heat shock
precipitation; molecular and microporus filtration; ion-exchange
chromatography; sale precipitation to isolate and purify major
plasma protein classes (e.g., albumin, gamma globulin,
transferrin, lipoproteins, aprotinin and clotting factors). The
resulting blood protein product line is sold worldwide,
primarily to biopharmaceutical companies and laboratories for
use in tissue culture media in the production of genetically
engineered proteins and for use in experimentation related to
the drug discovery process.

The primary raw material used in the
Companys two fractionation facilities is bovine serum. The
Kankakee facility purchases its serum almost exclusively from a
single abattoir located in Illinois. The Company has a long-term
agreement with the supplier, pursuant to which the Company is
guaranteed certain minimum levels of serum. Additionally, the
contract provides the Company with certain rights in the event
of a change in control of this supplier. An inability of the
supplier to meet its obligations under the contract or any other
material disruption in the supply of serum could have an adverse
effect on the Company. The Toronto facility currently purchases
its bovine serum under an annual purchase agreement from the
same abattoir in Illinois and an unrelated abattoir in Calgary,
Alberta.

Molecular Biology/ Research
Products.The Company manufactures a
line of products for use in life sciences research and in high
throughput drug screening. These products were acquired through
the acquisition of Intergen in December 2001. These
products can be broken down into three primary categories: 1)
Detection products, 2) Cell-based research products and 3)
molecular biology-based research products.

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These products are manufactured and developed
primarily at our facility in Gaithersburg, while some detection
products are produced at our facility in Milford. The
Companys 2003 acquisition of Chemicon is expected to
provide a much larger platform and customer base on which to
commercialize these products.




| |                                   
| | ----------------------------------
| | Diagnostic Products
    Operations

The activities of the Diagnostic segment include
the Companys monoclonal antibody production facility in
Scotland and certain human-sourced, polyclonal antibodies, as
well as certain blood protein products manufactured at the
Companys facilities in Kankakee and Toronto. The
antibodies and other proteins provided by the Diagnostic
Products segment are used in diagnostic products such as blood
typing reagents and diagnostic test kits.

Blood Protein
Fractionation.The Companys
Kankakee and Toronto fractionation facilities described above
also produce products sold for use in diagnostic applications.
The largest product is BSA, which is often used as a stabilizer
in diagnostic test kits.

Monoclonal Antibody
Production.In addition to collecting
antibodies from its donors, the Company produces monoclonal
antibodies from over 60 cell lines. The Companys
FDA-licensed monoclonal manufacturing facility in Livingston,
Scotland produces monoclonal antibodies from cells derived
through the Companys donor network or acquired from other
laboratories. Currently, all monoclonal antibodies manufactured
by the Company are used in diagnostic products such as blood
typing reagents and in controls for tests used for diagnosing
certain infectious diseases. The Company produces its products
in fermentation tanks ranging in size from 50 liters up to 200
liters. The Company also produces companion products to its
monoclonal blood typing range. These include reagent red cells,
enzymes and diluents that are used in blood typing laboratories.

Human-Sourced
Antibodies.Through its donor center
network, the Company collects antibodies used in the
manufacturing of clinical diagnostic test kits and in certain
blood typing reagents. The donor recruitment, product collection
and donor management processes are similar to those used in the
collection of therapeutic products. The Company is also able to
identify and react rapidly to disease outbreaks in order to
recruit suitable donors for the specific antibodies created by
such specific diseases.



| |                                    
| | -----------------------------------
| | Therapeutic Products
    Operations

The activities of the Therapeutics segment
include the collection and sale of specialty human antibodies
that are used as the active ingredients in therapeutic products
for the treatment and management of various human diseases.

Donor Recruitment and
Management.The Company obtains the
majority of its specialty antibodies from donors with high
concentrations of the antibodies sought. The Company maintains
an active donor recruitment function to assist in identifying
these donors. The majority of the Companys 10 specialty
donor centers are strategically located on or near medical
campuses or hospitals, enhancing the Companys ability to
source specialty antibodies from medical community referrals.
Once a person becomes an active donor, the donor center staff
continually communicates with the donor to reinforce his/her
commitment. The Company has personnel and programs designed to
make each visit to the donor center a smooth, comfortable and
safe experience. The Companys expertise in donor
management has enabled it to retain many donors for years of
repeated, regular donations, thereby enhancing the
Companys profitability. The Companys specialty
donors typically donate once or twice per week, with many having
continued as donors for 10 years or more.

Donor Screening and Product
Collection.Each donor candidate
undergoes a process that includes an explanation of the donation
procedure and how the antibodies they are donating are
subsequently used, extensive physiological and biological
screening, a physical examination and the collection of test
samples. In addition, donors of specialty antibodies undergo
further qualification profiling. Once a candidate is accepted as
a donor, the Company can collect antibodies from the donor at a
donor center through an FDA-approved collection procedure known
as plasmapheresis, which lasts between 40 and 60 minutes and is
very similar to donating blood. However, since red blood cells
are separated by means of centrifugation and returned to the

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donor, individuals may donate as frequently as
twice per week. Each donation is quarantined at the donor center
while samples are tested for FDA-mandated viral marker screening
(e.g., hepatitis, HIV, etc.) and characterization (i.e., special
analytical tests to identify and measure the quality and
activity level or concentration of the targeted antibodies).
Furthermore, voluntary industry standards require that each
first time donors (Applicant Donor) donation
be quarantined until such time that a second qualifying donation
is obtained from the Applicant Donor and appropriate test
results are obtained on both donations. If a second donation is
not received from the Applicant Donor within six months, the
initial donation must be destroyed, or sold as a diagnostic
product. Once these two donations and their test results are
complete and acceptable, the Applicant Donor becomes a
qualified donor and all future donations are
generally available for shipment once the mandated tests have
been completed.


Products

Through its value-added services, the Company
provides biological products and enabling technologies for use
in certain biotech, therapeutic and diagnostic products
manufactured by life science companies. The Companys
customers generally further process these products. The Company
also provides a full range of animal and human proteins that are
used in the manufacturing process of recombinant (genetically
engineered) therapeutic products and in diagnostic reagents. In
2002, the Company derived approximately 38% of its sales from
biotech products, approximately 30% of its sales from diagnostic
products, and 32% of its sales from therapeutic products. In
2002, EX-CYTE® and anti-hepatitis antibodies represented
21% and 14% of consolidated net sales, respectively. In 2001,
the following products represented more than 10% of consolidated
net sales: Anti-D antibodies (25%); EX-CYTE® (17%); and
anti-hepatitis antibodies (17%). In 2000, IVIG and anti-D
represented 36% and 19% of consolidated net sales, respectively.
The majority of the IVIG plasma sales were generated by the
Companys Seramed subsidiary, which was divested in
August 2000.



| |                 
| | ----------------
| | Biotech Products

The primary products produced and sold through
the Companys Biotech segment include the following:

Animal Blood
Proteins.The Companys largest
revenue-generating product in 2002 was EX-CYTE®. Sales of
EX-CYTE® increased 61% in 2002 and the Company is producing
this product at capacity. Based on current and expected future
demand for this product, the Company commenced construction of a
second EX-CYTE® manufacturing plant in February 2003. The
plant will be located in Lawrence, Kansas and is expected to be
operational in the first half of 2004. The total estimated cost
for the plant is $28 million. Upon completion, the Company
will have tripled its EX-CYTE® production capacity which
should enable it to meet customer demand for at least the next
five years.

The Company manufactures certain other products
used in cell culture media including, among others, BSA, which
delivers essential nutrients critical for cellular growth and
metabolism; transferrin, a protein that provides the cells with
the iron required for proper cellular respiration to occur; and
aprotinin, a bovine derived protease inhibitor which protects
cells from enzymes.

In addition, the Company, through a contract with
Novo-Nordisk, is the exclusive distributor for human recombinant
insulin for cell culture applications.

Research Products and
Technologies.Through the acquisition
of Intergen, the Company acquired a product line for use in life
sciences research and in high throughput drug screening.
Included in this group is Amplifluor, a patented
technology used for the detection of nucleic acids amplified by
PCR and other techniques.



| |                    
| | -------------------
| | Diagnostic Products

The primary products produced and sold through
the Companys Diagnostic segment include the following:

Animal Blood
Proteins.The Company sells products
manufactured at its Kankakee and Toronto facilities for use in
blood typing and other diagnostic reagents. The largest product
in this category is BSA.

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Antibodies for Blood Typing
Reagents.Blood typing reagents are
used by blood banks and hospital transfusion services worldwide
to assure compatibility between a recipient and a donors
blood type. There are many blood types and highly accurate and
specific antibodies are required to determine blood type.
Historically, blood typing reagents were made primarily from
human-sourced, or polyclonal, antibodies. Over the past fifteen
years, monoclonal antibodies have been developed to provide
certain high quality antibodies on a consistent basis, and many
of these are FDA approved for diagnostic purposes. Monoclonal
antibodies have largely, but not completely, replaced polyclonal
antibodies for use in blood typing. The Company currently
provides over 80 different antibodies used in the production of
blood typing reagents that the Company believes provide it with
a competitive advantage in this market due to the desire of
customers to buy an entire panel of different antibodies for
blood typing reagents from one manufacturer. While the majority
of antibodies sold by the Company for use in blood typing
reagents are in monoclonal form, the Company continues to
collect certain rare human-sourced polyclonal antibodies that
are used in diagnostic products.

Clinical Diagnostic
Antibodies.Through its expertise in
donor recruiting, the Company is able to locate and recruit
donors who can provide antibodies and other biological specimens
that are known to be positive or negative for a specific disease
or infection. The Company provides these biological specimens
for use in clinical diagnostic test kit controls. The diseases
for which the Company sources clinical diagnostic antibodies
include, among others, cytomegalovirus (CMV),
rheumatoid arthritis, toxoplasmosis, hepatitis and HIV. The
Companys recruiting capability is complemented by in-house
experience in the laboratory disciplines of immunohematology,
immunology, serology and clinical chemistry to characterize
human specimens to meet manufacturers requirements.



| |                     
| | --------------------
| | Therapeutic Products

The primary products produced and sold through
the Companys Therapeutic segment include the following:

Anti-D Immune Globulin
(anti-D).Since 1968,
anti-D immune globulin, also known as Rh immune globulin, has
been prescribed by obstetricians to prevent Rh incompatibility
in newborns (RhHDN). This sometimes fatal condition
affecting Rh positive infants born to Rh-negative women is due
to the incompatibility of the blood of an Rh-negative mother and
her Rh-positive child. Anti-D immune globulin is also used in
the treatment of Idiopathic Thrombocytopenic Purpura
(ITP) in immunocompromised patients.

Anti-Hepatitis B Immune Globulin
(anti-HBs).The
traditional use for anti-HBs is for the prevention of hepatitis
in individuals who are at risk of contracting, or have had
recent exposure to, the hepatitis B virus. In addition, anti-HBs
is used for intensive treatment of liver transplant patients.

Vaccinia
(VIG). Vaccinia
immune globulin is administered to persons who have an adverse
reaction from receipt of the smallpox vaccine. VIG is also used
to inoculate individuals in the event of an outbreak of smallpox.

Anti-Rabies Immune Globulin
(anti-rabies).Anti-rabies
immune globulin therapy is prescribed for individuals suspected
of recent exposure to the rabies virus. Rabies is commonly
transmitted by infectious saliva from the bite of a rabid
animal. Anti-rabies is administered as promptly as possible
after exposure and consists of antibodies directed against the
live virus particles with which the patient may be infected. In
the post-exposure treatment regimen, anti-rabies is administered
in conjunction with a rabies vaccine, which is used to provide
the patient with an additional active immunity to the rabies
virus.

Prior to the divestiture of Seramed, the Company
derived a substantial amount of its revenues from the sale of
source plasma, used in the manufacture of intravenous immune
globulin (a broad spectrum of non-specific antibodies used in
the treatment of many medical indications to help build the
bodys defense against exposure to life threatening
diseases), albumin and clotting factors. The Company continues
to collect limited quantities of source plasma.

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Research and Development

The Company believes that a commitment to
research and development is an important component of our future
growth opportunities. The Company spent $5.6 million,
$1.7 million, and $0.7 million on research and
development activities in 2002, 2001 and 2000, respectively. The
Companys research and development activities are focused
on developing new products and applications for the markets it
serves, particularly in the areas of therapeutics and cell
culture media supplements.

The therapeutic activities are focused on the
development of new indications for hyper-immune plasma products
related to identified bio-terrorism targets and infectious
diseases for which there are no or insufficient treatment
opportunities. Additionally, a longer term objective is to
leverage the know-how and expertise existing in the Company to
start the development of monoclonal antibodies for therapeutic
purposes.

With respect to cell culture media supplements,
the Company is performing studies related to EX-CYTE® that
should lead to more defined derivatives and specifically
targeted compounds. In addition, research efforts will include
the study and development of new recombinant supplements.

Overall, the development strategy is based on
establishing core know-how within the Company, while using
external contract organizations and co-development agreements
for carrying out the majority of the required activities.
Management believes research and development is a very important
component of the continued development of the Company, and
expects to continue to increase its investment in research and
development over the next several years.

Marketing and Customers

The Company sells the majority of its products
through its own direct sales force, although distributors are
also used in the marketing and sales of our products. We
currently market our products directly in over 38 countries
throughout the world and sell through distributors or agents in
approximately 39 other countries. As of December 29, 2002,
the Company employed approximately 61 people in its sales,
customer service and marketing organization.

During 2002, the Companys customer base
increased to over 2,500 customers of various sizes. Prior to the
Intergen acquisition in December 2001, the Companys
customer base was just over 200 customers. Sales to the
Companys top ten customers accounted for approximately
63%, 73% and 80% of total sales in 2002, 2001 and 2000,
respectively. One of the Companys customers, Bayer
Corporation (Bayer), accounted for approximately 8%,
24% and 33% of the Companys net sales in 2002, 2001 and
2000, respectively, while another customer, Aventis
Bio-Services, Inc. (Aventis), accounted for 7%, 13%
and 15% of net sales in 2002, 2001 and 2000, respectively.
During 2002, no single customer represented more than 10% of net
sales. During 2001 and 2000, no other single customer of the
Company accounted for greater than 10% of net sales. In 2002,
2001 and 2000, the Companys domestic sales represented
approximately 49%, 53% and 69%, respectively, of net sales.

Quality Assurance

The Company maintains a Global Quality Assurance
System and Program designed to assure the efficacy and safety of
its products and compliance with the requirements of regulatory
authorities, voluntary quality standards, industry trade
associations and its customers. Through the Companys
Quality Assurance Program and an internally maintained
regulatory compliance program, the Company conducts periodic
audits of each facility to ascertain the status and compliance
of the Quality System as implemented. These audits are designed
to ensure adherence to applicable regulations and Company
procedures, and to assess the effectiveness of the Quality
System as a whole. These audits are one component of the key
performance indicators collected, reviewed and monitored by the
Company in order to maintain a program of continuous improvement
and compliance with its established systems and programs.

The Companys operating facilities worldwide
are registered to ISO 9000 Quality Standards, with the exception
of our Gaithersburg, Maryland research and development facility
which produces products for Research Use Only (RUO).
The ISO 9000 series of standards is a voluntary Quality Standard
recognized

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throughout the world. Compliance to this standard
is required by many of our customers and in certain global
markets. All ISO registrations will need to be converted to the
new ISO 9000:2000 standard by the end of 2003. The Company has a
program in place to assure a smooth transition of its ISO
registrations in advance of the deadline. Additionally, for our
monoclonal manufacturing facility, compliance with the In Vitro
Diagnostic Directive (IVDD) will be required for
continued participation in the European Union and other global
markets. The Company has already begun an extensive project to
ensure that this facility is compliant with the IVDD well in
advance of the deadline for adherence. Failure to achieve such
compliance could have a material adverse effect on the Company.
Our monoclonal manufacturing facility achieved registration to
ISO 9000:2000 during 2002, a year in advance of the required
deadline.


For our donor centers and plasma operations, the
Company subscribes to the Quality Plasma Program
(QPP), which is a donor center certification program
administered by the Plasma Protein Therapeutics Association
(PPTA), an industry trade organization. PPTA
certifies only those facilities that meet its standards and
provide the highest quality products. Many of the Companys
customers require their suppliers to be QPP certified, as well
as comply with governmental regulations and meet the
requirements of ISO 9002. All of the Companys donor center
facilities are currently QPP certified and ISO 9002 compliant.

Competition



| |                             
| | ----------------------------
| | Biotech Products Competition

The Company does not believe that it currently
faces significant competition for its EX-CYTE® product. In
2001, the Company announced the completion of a study validating
that a key step in the production of EX-CYTE® is capable of
inactivating prions, the agents that are suspected to cause BSE.
The Company has applied for additional patent protection for
this manufacturing process. The Company is one of a very few
suppliers of Cohn-fractionated BSA, which is produced at its
Toronto facility. The Company believes it is the largest
supplier of this particular grade of BSA. The Company is the
exclusive distributor of Novo-Nordisks human recombinant
insulin for use in cell culture. The competition for the
Companys research products manufactured primarily in
Gaithersburg, Maryland includes large life science reagent
suppliers as well as smaller companies focusing on specialty
markets. The various product groups are sold into multiple
market segments including cell biology research, molecular
biology research, high throughput screening and assay
development and genetic analysis. The Companys focus on
reagents and kits allows complementary selling with multiple
instrument manufacturers in the marketplace. This marketplace is
price competitive, however, it also is subject to customer
loyalty based on the ability of a supplier to meet the needs of
researchers in terms of new product introduction, time to
market, product quality, speed of delivery, technical support
and pricing.



| |                                    
| | -----------------------------------
| | Diagnostic Products
    Competition

The Company faces competition in purified blood
proteins, such as BSA, from a number of sources. There are
several established competitors of various sizes both in the
United States and internationally. The geographic location with
respect to the source of raw materials (bovine serum) used for
purification, the production process itself, and the suitability
of the various purified proteins for the intended application
are all factors that can have an effect on competition. The
Company believes it maintains a competitive advantage for these
products due to the high quality of the products it sells, as
well as the high value of the technical support that is provided
to its customers. Due to the long established product range, the
quality of the technical support and recent investments in
current good manufacturing practices (cGMP) at its
facilities, the Company believes it is well positioned in its
markets.

The primary competition for monoclonal antibodies
used in blood typing reagents (both OEM and bulk material) comes
from customers that are vertically integrated, and thus provide
antibodies for their own use, and smaller, independent
manufacturers that offer a more limited range of product than
the Company. Some fully integrated manufacturers also offer OEM
and bulk services. As the Company does not have a significant
presence in the end market and is thus seen as not being in
direct competition with its customers, the Company believes that
it is generally favored over fully integrated manufacturers that
offer OEM and bulk

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antibodies. Additionally, the Company believes
that its broad range of proprietary antibodies and state of the
art facilities provide it a competitive advantage with respect
to these competitors.


The Company faces competition for its clinical
diagnostic antibodies primarily from other independent suppliers
of antibodies that operate donor centers. In addition, the
Company faces some competition from companies or brokers that
independently source antibodies from donor centers.



| |                                     
| | ------------------------------------
| | Therapeutic Products
    Competition

The Therapeutic Products segment is engaged in
the business of providing specialty antibodies, which is a
competitive and continually changing field. The Company competes
for customers with other antibody suppliers on the basis of
price, reliability and quality of product, breadth of product
line and the ability to provide value-added services. While the
Company believes that its proprietary anti-D vaccination
protocol and extensive donor base of individuals with high
concentrations of pre-existing anti-D antibodies provide it a
competitive advantage and allow it to offer a premium product in
terms of quality, in recent years the Company has experienced,
and expects to continue to experience, increased competition for
anti-D antibodies from other independent collection companies.
The Company believes that future increases in the production of
anti-D antibodies by other suppliers could have an adverse
effect on the Company through lower selling prices per unit as
well as potentially reducing its market share.

In certain markets, the Company competes for
donors by means of financial incentives which the Company offers
for the donation of the antibodies it collects, by providing
donor services, by implementing programs designed to attract and
retain donors through education as to the uses for collected
antibodies, by encouraging groups to have their members become
antibody donors and by maintaining the attractiveness of the
Companys donor centers. The Companys anti-D
antibodies are derived from donors with rare antibody
characteristics, resulting in increased competition for such
donors. If the Company is unable to maintain and expand its
donor base, its business and future prospects may be adversely
affected.

Furthermore, several companies are attempting to
develop and market products to treat diseases based upon
technology that may lessen or eliminate the need for certain
antibodies or other plasma-based products. Such products, if
successfully developed and marketed, could adversely affect the
demand for antibodies and other plasma-based products. The
Company does not believe that any such products will be
developed and or marketed over the next 18 to 24 months, and
likely longer.

The Company believes there are certain barriers
to entry in the Therapeutic Products business. The Company
believes it takes 12 to 15 months to obtain the necessary
regulatory approvals in order to begin shipping product from a
specialty donor center that immunizes its donors. In addition to
these regulatory requirements, once the center is operational, a
stable donor base must be established and maintained as repeat
donors are critical to success for both quality control and
profitability. A significant volume of donated antibodies and
sophisticated screening and immunization procedures also are
necessary in order to provide the diversity and quality of
antibody products demanded by the market.

Government and Industry Regulation

General.The
majority of the Companys activities are subject to
significant regulation by numerous governmental authorities in
the United States and internationally. These regulatory
authorities govern the collection, testing, manufacturing,
safety, efficacy, labeling, storage, record keeping,
transportation, approval, advertising and promotion of the
Companys products, as well as the training of its
employees. The Company does manufacture and distribute products
that are not subject to FDA regulation, however, they are
subject to import and export regulations specific to the country
of import. The Company believes it is in substantial compliance
with all relevant laws and regulations.

The Company is subject to extensive FDA
regulation, primarily through the requirements of the Public
Health Service Act and the Food, Drug and Cosmetic Act. All of
the Companys donor centers and the Companys
monoclonal manufacturing facilities hold FDA biologics licenses
(BLA) and the Companys

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donor centers have numerous supplements to the
source plasma license, permitting the production and sale of
specialty antibodies and the immunization of donors.


New facilities, products and operating procedures
at the majority of the Companys locations must undergo FDA
approval processes. Significant changes to existing facilities,
products or operating procedures must also undergo FDA review
prior to implementation. The Companys FDA-licensed donor
centers and central testing laboratory in the United States and
its monoclonal manufacturing facility in the United Kingdom
(U.K.) are required to adhere to FDA cGMP and are
periodically inspected by the FDA. Furthermore, the
Companys protein fractionation site in Illinois and its
facility in Milford, Massachusetts are both FDA-registered
facilities. Donor centers must meet detailed standards for,
among other things, the screening of donors, obtaining informed
consents from donors, the collection of antibodies, training of
personnel and the testing, handling and disposal of biologic
products. If the FDA believes that a facility is not in
compliance with all applicable laws and regulations, generally
as a result of an on-site inspection, it typically issues a
deficiency notice known as a Form FDA-483. A warning letter
may be issued for serious deficiencies. If deficiencies are not
adequately responded to or addressed in an appropriate and
timely manner, further action may be taken by the FDA. These
actions may include the detainment or seizure of products,
issuance of a recall, enjoinment of future operations and the
assessment of civil and criminal penalties against the Company,
its officers or its employees. In addition, approvals or
licenses could be temporarily suspended or revoked in certain
circumstances. Failure to comply with regulatory requirements or
a significant adverse regulatory action could have a material
adverse effect on the Company.

In the past, the Company has received
notifications and warning letters from the FDA of possible
deficiencies in the Companys compliance with FDA
requirements. To date, the Company believes that it has
adequately addressed or corrected such deficiencies and that it
is in material compliance with all relevant laws and
regulations. As part of the regulatory compliance program, the
Company is continually monitoring and improving its
communication with FDA in an effort to prevent any adverse
action for the facilities currently inspected. During the first
quarter of 2002, the FDA conducted an inspection of the
Companys monoclonal manufacturing facility in Scotland.
The facility received a Form FDA-483 as a result of the
inspection. The Company has responded in full to this notice and
has received acknowledgment from the FDA that the response and
action plan were accepted. No further action is required or
planned by the agency.

The Company is also subject to numerous industry
and customer-mandated standards. Industry groups such as PPTA
and the Companys customers continually evaluate their
practices and procedures regarding new information or public
concerns over diseases which may be transmitted from donors
through their blood or blood components. Based upon such
evaluation, a certain portion of the population may be
prohibited from donating in the future, or certain new testing
and screening procedures may be required to be performed with
respect to certain donors. The Company is also subject to
routine inspections of its facilities by its customers, whose
approval must generally be obtained for each donor center prior
to shipping product. The Company is also subject to additional
inspections by the Health Care Financing Administration
(HCFA) and state health departments. HCFA regulates
and certifies all clinical testing performed at each donor
center and the Companys central testing laboratory under
the Clinical Laboratories Improvement Act (CLIA) of
1988. The Companys central testing laboratory in Atlanta,
Georgia is licensed by the FDA and the State of Georgia.

Outside the United States, sales of the
Companys products are subject to additional regulatory
requirements, which vary widely from country to country. In
particular, much of Companys domestic plasma operations,
including its central testing laboratory, are subject to
inspection and approval by various German regulatory bodies, as
a significant portion of its therapeutic antibody products,
including those sold to domestic affiliates of German companies,
are ultimately further manufactured or sold in Germany. These
regulations, while similar in scope to those promulgated by the
FDA, are often more restrictive.

In the United Kingdom, the Company is subject to
the U.K. Health and Safety at Work Act, which regulates the
safety precautions required of manufacturers in the United
Kingdom, and to various other regulations covering the use of
genetically engineered organisms in laboratory and manufacturing
processes. In certain countries, the Companys customers
are subject to regulatory requirements that require additional

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inspection and approval of the Companys
facilities prior to the shipment of products to such countries.
Changes in existing federal, state or foreign laws or
regulations, or the Companys inability to comply with such
regulations, could have an adverse effect on the Companys
business.


One specific concern currently facing the
industry is Creutzfeld-Jakob disease (CJD) and
nvCJD, an often fatal disease occurring sporadically in the
world which has been reportedly linked in some cases to BSE,
also known as mad cow disease. However, no evidence
currently exists that CJD or nvCJD can be transmitted by blood
or plasma products and the risk, if any, is believed to be small
and at present only theoretical. While no acceptable testing or
screening procedure currently exists to detect CJD or nvCJD, CJD
has generally been found to have a higher incidence in the older
population. In response to this concern and at the request of
several of its customers, the Company has ceased collecting
certain antibodies from donors over the age of 59 at certain of
its donor centers. As a further precaution against the
theoretical transmission of nvCJD, the FDA has issued guidance
which the Company follows banning plasma and blood donations
from individuals that had spent extended periods of time in the
United Kingdom during the mad cow epidemic there from 1980 to
1996.

The Company produces certain bovine-derived
products at its protein fractionation facilities in Kankakee,
Illinois and Toronto, Ontario. The majority of these products
are of the lowest determinable risk, and are derived according
to FDA, World Health Organization (WHO) and European
regulatory guidelines for the production of bovine source
components for use in the development of critical therapeutic
products. The Company takes additional measures to ensure that
its bovine-derived products will be free from BSE, including the
use of a limited number of abattoirs to supply bovine serum for
each facility. Ante and post mortem inspections are performed by
USDA/ Agriculture Canada veterinarians for evidence of disease
including BSE. The Toronto facility sources certain raw
materials other than serum from abattoirs in the U.S. and New
Zealand. Each of the countries from which the Companys
bovine materials are sourced are currently regarded as free from
BSE. The Company will continue to monitor developments regarding
BSE and actively take steps to ensure its products are
manufactured in full compliance with current regulatory
guidelines.

Another standard voluntarily adopted by the
industry relates to the acceptance of new donors. In an effort
to further minimize the potential that infected plasma could
enter the manufacturing process undetected, all first time
donors plasma is excluded from shipment and further
manufacture in therapeutic products unless a second, negative
set of test results is also obtained on a second donation within
six months, essentially precluding one-time donations. Also, in
order to further shorten the window period during
which time a donor is potentially infectious but is not detected
as such by current screening tests that measure antibody
response to the viruses, certain of the Companys
therapeutic customers have implemented a testing method, NAT,
sometimes known as Polymerase Chain Reaction (PCR)
technology. PCR/ NAT testing is a method used to detect the
presence of genetic material of problem viruses before
antibodies against those viruses can be formed.

Although the Company does not believe that these
new standards will have a material impact on its operating
results, there is no assurance that the long-term impact of
these standards, or the imposition of other blood safety or
other measures, will not have a material adverse effect on
future operations.

Certain of the products produced at the
Companys protein fractionation facilities in Kankakee and
Toronto are considered medical devices under the
Food, Drug and Cosmetic Act and, accordingly, are subject to its
general control provisions that include requirements for
registration, listing of devices, cGMP, labeling and
prohibitions against misbranding and adulteration. These
products, which represent an insignificant amount of the
Companys sales, nonetheless subject the Company to FDA
inspection and scrutiny. Furthermore, the FDA has indicated in
certain guidance documents and in public meetings that it
intends to more closely regulate tissue culture media products,
such as the Companys EX-CYTE® product, that are used
in the manufacture of injectable products. While there has been
no indication as to how these products will be classified and
therefore with which standards they will need to comply, the FDA
has indicated that, at minimum, manufacturers of tissue culture
media should adhere to cGMP standards. The Company currently
produces EX-CYTE® in a dedicated facility that was
constructed to cGMP standards. The imposition of

15



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additional regulatory requirements for its
protein fractionation facility in Illinois could adversely
affect the Company.


Federal, state and foreign laws and regulations
regarding the manufacture and sale of the Companys
products are subject to future change. The Company cannot
predict what impact, if any, such change might have on its
business. However, such changes could have a material impact on
the Companys business.

Other.The Company
is also subject to government regulations enforced under the
Environmental Protection Act, the Clean Air Act, the Clean Water
Act, the National Environmental Policy Act, the Toxic Substances
Control Act, the Resource Conservation and Recovery Act, the
Medical Waste Tracking Act, and other national, state or local
restrictions. The Company is also subject to workplace safety
regulations under the Occupational Safety and Health Act (OSHA).
As part of its internal compliance program, the Company
undertook an independent review of its compliance with OSHA and
other regulations during 2002. While there were observations
made by the internal reviews, the Company believes it is in
substantial compliance with the regulations.

Patents, Proprietary Rights and
Trademarks

The Company considers the protection of its
proprietary technologies and products to be important to the
success of the Company. The Company relies on a combination of
patents and trademarks to protect its technologies and products.
The Company has over 60 patents registered globally, expiring at
various times through 2021. Additionally the Company has over 70
trademarks globally, expiring at various dates through 2012.

Third Party Reimbursement

In both domestic and foreign markets, sales by
the Companys customers may depend in part on the
availability of reimbursement from third-party payors such as
government health administration authorities, private health
insurers and other similar organizations. Third-party payors are
continually challenging the price and cost-effectiveness of
medical products and services. There can be no assurance that
pricing pressures which may be experienced by the Companys
customers will not adversely affect the Company because of a
determination that these products are not cost effective or
because of inadequate third-party reimbursement levels to such
customers.

Employees

As of March 15, 2003, the Company employed
651 persons, 473 of whom were located in the United States, 63
of whom were located in Canada and 115 of whom were located in
Europe. Of the Companys employees, 51 that are employed at
the Companys manufacturing site in Illinois and 30 that
are employed at the Companys manufacturing site in Toronto
are members of a collective bargaining unit. The Company
believes that its relationship with its employees is generally
satisfactory.

Product Liability and Insurance

The sourcing, processing, manufacturing and sale
of the Companys products involve a risk of product and
professional liability claims. The Company has obtained product
liability insurance in an amount of $1.0 million per
incident and $3.0 million in the aggregate per annum per
location for each of the Companys facilities with a
$15.0 million aggregate policy limit on a claims made
basis. The Company also has a $10.0 million excess
liability umbrella insurance policy. There can be no assurance
that the coverage limits of the Companys insurance
policies and/or any rights of indemnification and contribution
that the Company may have will offset potential claims. A
successful claim against the Company in excess of insurance
coverage and not subject to indemnification could have a
material adverse effect on the Company.

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Available Information

The Company makes available free of charge
through its website, www.serologicals.com, its annual
report on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K and amendments to those reports
filed pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, as amended, as soon as reasonably possible
after the Company files such material with, or furnishes it to,
the SEC.






|        |           
|------- | ----------
|Item 2. | Properties

The Companys principal executive office is
located in approximately 50,000 square feet of office space in
Norcross, Georgia. The Company leases this space under a
agreement that expires in 2011.

The Companys central testing laboratory is
located in Atlanta, Georgia in approximately 25,000 square feet.
The Companys FDA licensed monoclonal antibody
manufacturing facilities are located in Livingston, Scotland.
These facilities are leased with terms expiring through 2021,
with the exception of one 22,000 square foot manufacturing site
that is owned by the Company.

The Company owns its 61,000 square foot blood
protein fractionation facility in Illinois. The Company owns its
40,000 square foot blood protein fractionation facility in
Toronto, Ontario. The Company leases two buildings in Milford,
Massachusetts totaling approximately 36,000 square feet, and one
facility in Gaithersburg, Maryland with approximately 12,000
square feet.

The Companys 10 donor centers are located
in 8 states including South Carolina (3), Florida (2), Georgia,
Utah, Alabama, North Carolina, and Louisiana. The donor centers
range in size from approximately 5,000 to 10,000 square feet and
are generally leased with varying terms, expiring on various
dates between October 2004 and April 2013. The
majority of these leases contain renewal options that permit the
Company to renew the leases for an additional five-year period
at the then fair rental value. The Company believes that in the
normal course of its business, it will be able to renew its
existing leases or relocate its operations subject to regulatory
approval.






|        |                  
|------- | -----------------
|Item 3. | Legal Proceedings

The Company is involved in certain litigation
arising in the ordinary course of business. In managements
opinion, the ultimate resolution of these matters will not have
a material adverse effect on the Companys financial
position or results of operations.

During 2000, twelve complaints were filed in the
United States District Court for the Northern District of
Georgia, Atlanta Division against the Company and certain of its
current and former executive officers and directors that allege
violations of the Securities Exchange Act of 1934, including
Sections 10(b) and 20(a) thereof and Rule 10b-5
promulgated thereunder. During the third quarter of 2000, the
complaints were consolidated and a lead plaintiff was named. A
consolidated complaint was filed on October 10, 2000 which
also seeks the courts certification of the litigation as
class action on behalf of all purchasers of the Companys
stock between April 27, 1999 and April 10, 2000. On
November 30, 2000, the Company and the other defendants
filed a motion to dismiss the consolidated complaint. On
January 17, 2001, the plaintiff filed an opposition to the
motion to dismiss. On April 20, 2001, a hearing was held on
the motion to dismiss. On September 5, 2001, the Court
granted the motion to dismiss the complaint in its entirety with
prejudice and ruled that the plaintiffs would not be allowed to
amend the complaint. On September 19, 2001, the plaintiffs
filed a motion to amend the judgement and/or for relief arguing
that they should have been allowed to amend the complaint. The
Company responded by filing a brief supporting the Courts
dismissal of the complaint. On January 17, 2002, the Court
reconsidered its decision and granted plaintiffs leave to file
an amended complaint. The plaintiffs filed a second amended
consolidated complaint on February 12, 2002. The Company
filed a motion to dismiss the second amended consolidated
complaint on March 11, 2002. On February 26, 2003, the
Court granted the defendants motion and dismissed the
second amended complaint with prejudice and without leave to
replead.

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|        |                                                        
|------- | -------------------------------------------------------
|Item 4. | Submission of Matters to a Vote of Security
    Holders

No matter was submitted to a vote of security
holders in the fourth quarter of the fiscal year ended
December 29, 2002.






|         |                                                           
|-------- | ----------------------------------------------------------
|Item 4A. | Executive Officers and Key Employees of the
    Registrant

The following table sets forth the names, ages
and all positions and offices with the Company held by the
Companys present executive officers:

|                                               |  |     |    |                                      |  |                                                                                                  
|---------------------------------------------- |  | --- | -- | ------------------------------------ |  | -------------------------------------------------------------------------------------------------
|Name                                           |  | Age |    | Positions and Offices Presently Held
|                                               |  |     |    |                                     
|David A. Dodd                                  |  |     | 53 |                                      |  | President, Chief Executive Officer and Director                                                  
|David L. Bellitt                               |  |     | 54 |                                      |  | Vice President, Global Commercial Operations                                                     
|Robert P. Collins                              |  |     | 49 |                                      |  | Vice President, Human Resources                                                                  
|Roland Gerritsen van der Hoop, M.D.,
    Ph.D. |  |     | 42 |                                      |  | Vice President, Global Research & Development
    and Chief Scientific Officer                   
|Harold W. Ingalls                              |  |     | 55 |                                      |  | Vice President, Finance and Chief Financial
    Officer                                          
|Sue Sutton-Jones                               |  |     | 50 |                                      |  | Vice President, Global Regulatory Affairs,
    Quality Assurance, Compliance and Medical Affairs 
|Joseph T. Kozma                                |  |     | 52 |                                      |  | Vice President, Strategic Market Development                                                     
|James J. Kramer, Ph. D                         |  |     | 47 |                                      |  | Vice President, Global Manufacturing Operations                                                  
|Jeffrey D. Linton                              |  |     | 40 |                                      |  | Vice President, Corporate Business Development,
    Legal and Public Affairs; Corporate Secretary
|Keith J. Thompson                              |  |     | 45 |                                      |  | Former Vice President, Global Manufacturing
    Operations                                       

David A. Doddhas
served as President, Chief Executive Officer and a director of
the Company since June 2000. From August 1995 to
June 2000, Mr. Dodd served as President and Chief Executive
Officer of Solvay Pharmaceuticals, Inc., a U.S. component of an
international chemical and pharmaceutical group, and as a member
of the Management Board for the Pharmaceutical Sector of Solvay
S.A. (Solvay). In addition, Mr. Dodd served as
Chairman of the Board of Unimed Pharmaceuticals, Inc., a
subsidiary of Solvay, from July 1999 to June 2000. Prior to
joining Solvay, Mr. Dodd served in a number of management
and executive positions for major life science corporations,
including American Home Products, Bristol-Myers Squibb Company,
and Abbott Laboratories. Mr. Dodd currently also serves on
the board of directors of the American Foundation for Suicide
Prevention and the Georgia Biomedical Partnership.

David L. Bellitthas
served as Vice President, Global Commercial Operations since
January 2003. Over the past 30 years, Mr. Bellitt
has served in numerous management positions within the
healthcare industry. From October 2000 to October 2002,
Mr. Bellitt served as Senior Vice President with Aksys,
Ltd., a start-up medical device company, in charge of global
marketing, sales and service. From June 1997 to
November 1999, Mr. Bellitt served as Senior Vice
President with Akzo Nobel, a medical diagnostic instrumentation
and reagents company, in charge of marketing, sales and service.

Robert P. Collinshas served as Vice President, Human
Resources since August 2001. From April 2000 to
August 2001, Mr. Collins was a partner with Ray &
Berndtson, one of the nations largest retained executive
search firms. From February 1999 to April 2000,
Mr. Collins served as President and Chief Operating Officer
for Vision Twenty-One, Inc., a leading eye-care company. From
September 1998 to February 1999, Mr. Collins
worked as a self-employed consultant. From February 1986 to
September 1998, Mr. Collins held a variety of
leadership positions in human resources, business development,
mergers and acquisitions and strategic initiatives with Magellan
Health Services, Inc., a managed behavioral health and wellness
organization, including serving as President of Beacon
Behavioral Health Group and President and Chief Executive

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##### Table of Contents



Officer of Group Practice Affiliates, Inc.
Mr. Collins currently serves as a member of the Association
of Executive Search Consultants and the Technology Association
of Georgia.


Roland Gerritsen van der Hoop, M.D.,
Ph.D., has served as Vice President,
Global Research & Development and Chief Scientific Officer
since May 2002. From February 1989 to May 2002,
Dr. Gerritsen van der Hoop served in various capacities for
Solvay Pharmaceuticals, first in their office in Weesp, the
Netherlands, where from 1992 until 1995 he was head of Clinical
R&D. In 1995 he moved to the US and joined Solvay
Pharmaceuticals Inc., an international chemical and
pharmaceutical group, in Marietta, Georgia, where he served as
Vice President Clinical Operations and later as Sr. Vice
President Research & Development with responsibility for all
drug development in the USA.

Harold W. Ingallshas served as Vice-President, Finance
and Chief Financial Officer since October 2001. From
August 1998 to August 2001, Mr. Ingalls served as
President and Chief Executive Officer and as a member of the
Board of Directors for LaRoche Industries, Inc., a diversified
commodity and specialty chemical manufacturer with operations in
the United States, France and Germany. LaRoche Industries, Inc.
filed a petition for reorganization under Chapter 11 of the
Federal Bankruptcy Code on May 3, 2000. In
September 2001, LaRoche emerged from Chapter 11 under
a court approved plan of reorganization. From April 1996 to
August 1998, Mr. Ingalls served as Chief Financial
Officer and Treasurer of LaRoche. In addition, from
April 2001 until August 2001, Mr. Ingalls served as
President and Chief Executive Officer and a member of the Board
of Directors of Nutec Sciences Corporation, a start up
informatics company serving both the petroleum and life sciences
industries. Mr. Ingalls has also held various financial and
operating management positions, including Chief Financial
Officer, for public and private corporations.

Sue Sutton-Joneshas
served as Vice President, Global Regulatory Affairs, Quality
Assurance, Compliance and Medical Affairs of the Company since
January 2001. From July 1998 until December 2000,
Ms. Jones served as Vice President, Worldwide Regulatory
Compliance for Ortho-Clinical Diagnostics, a division of Johnson
& Johnson, a healthcare manufacturing company. From
September 1997 until July 1998, Ms. Sutton-Jones
served as Executive Director, Quality and Compliance Services
for Johnson & Johnson. From August 1996 until
August 1997, Ms. Sutton-Jones served as Vice
President, West Coast Operations for BRI Quality Regulatory
Alliance, Inc., a provider of regulatory and clinical affairs
and quality system consulting products and services to the
healthcare industry. From 1994 to 1996, Ms. Sutton-Jones
served as Vice President, Regulatory Affairs, Quality Assurance
and Regulatory Compliance for Telectronics Pacing Systems.

Joseph T. Kozmahas
served as Vice President, Strategic Market Development of the
Company since March 2002. From 1987 until joining the
Company, Mr. Kozma served in various capacities with the
Intergen Company, a privately owned supplier of biological
products and technologies to the life sciences industry acquired
by Serologicals in 2001, most recently as Executive Vice
President of Worldwide Sales and Marketing. Mr. Kozma was a
co-founder of the Intergen Company.

James Kramer, Ph.D.
has served as Vice President, Global Manufacturing Operations
since March 2003. From August 2002 to March 2003
Mr. Kramer served as Vice President, Plasma Operations.
From 1995 to August 2002, Dr. Kramer served in various
capacities with Ortho-Clinical Diagnostics, Inc., a division of
Johnson & Johnson, a healthcare manufacturing company, most
recently as Program Director, Lifeblood. Previously, he held
additional leadership positions at Ortho-Clinical Diagnostics,
including Director, Manufacturing and Director, RhoGAM
Operations.

Jeffrey D. Lintonhas served as Vice President,
Corporate Business Development, Legal and Public Affairs since
October 2000. Mr. Linton will assume responsibilities
as Corporate Vice President, President, Chemicon Division, upon
the closing of the Chemicon acquisition. In September 2001,
Mr. Linton was elected Secretary of the Corporation. From
June 1993 until October 2000, Mr. Linton served in
various capacities with Solvay America, Inc. companies, most
recently as Vice President of Law, Government, and Public
Affairs for Solvay Pharmaceuticals, Inc., a U.S. component of an
international chemical and pharmaceutical group, from
April 1999 until October 2000. From December 1996
until April 1999, Mr. Linton served as Vice President,
Human Resources of Solvay Automotive, Inc., a partner and
supplier to

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##### Table of Contents



automotive companies throughout the world, and
from June 1993 until December 1996, Mr. Linton served
as Staff Attorney of Solvay America, Inc., the parent of North
American operating subsidiaries of Solvay.


Keith J. Thompsonserved as Vice President, Global
Manufacturing Operations from March 2002 to
March 2003. Effective March 2003,
Mr. Thompsons employment with the Company has
terminated. From January 1998 to March 2002,
Mr. Thompson served as Vice President, Diagnostic
Operations. Prior to his appointment as Vice President,
Mr. Thompson served in various capacities at Serologicals,
Ltd. since 1985, including as Managing Director from
January 1995 until December 1997 and as Operations Director
from November 1992 until December 1994.

In addition, the following individuals serve as
key employees of the Company:

Samuel R. Schwartz, CPA,53, has served as Corporate Controller
and Chief Accounting Officer since September 2001. From
August 1998 to September 2001, Mr. Schwartz
served in various senior financial management roles for the
Company. From March 1998 to August 1998,
Mr. Schwartz worked as a self-employed consultant,
primarily on projects for the Company. From October 1990 to
December 1997, Mr. Schwartz served as President and
Chief Executive Officer of Quality Furniture Company, a private
furniture manufacturer. From 1973 to 1990, Mr. Schwartz was
employed by Coopers & Lybrand, LLC in various positions,
most recently serving as a Partner in the Atlanta audit practice
of the firm.

M. Dwain Wilcox,35,
has served as Vice President, Information Systems since joining
the Company in October 1998. Prior to joining the Company,
Mr. Wilcox held several positions at Lanier Worldwide, a
subsidiary of Harris Corporation, most recently as Director,
Systems Integration from June 1996 until October 1998
and Program Manager, System Integration from November 1993
until June 1996.






PART II.







|        |                                                                              
|------- | -----------------------------------------------------------------------------
|Item 5. | Market for the Registrants Common Equity
    and Related Stockholder Matters

The Companys common stock trades on the
Nasdaq Stock Market under the symbol SERO.

On March 21, 2003, the closing price of the
common stock was $8.49 per share. As of March 21, 2003,
there were 80 holders of record. The Company believes there
are substantially more beneficial holders of the Companys
common stock.

The Company has not paid any cash dividends on
its common stock to date. The payment of cash dividends, if any,
in the future is within the discretion of the Board of Directors
and will depend on the Companys earnings, its capital
requirements and financial condition. In addition, the
Companys Fourth Amended and Restated Credit Agreement,
dated as of April 25, 2002, with Bank of America, N.A., et
al. contains limitations on the Companys ability to pay
cash dividends.

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

|                             |               |      |   |       |  |  |   |       | 
|---------------------------- | ------------- | ---- | - | ----- |  |  | - | ----- | 
|                             |               | High |   | Low  
|                             |               |      |   |      
|Year Ended December 29, 2002 |               |      |   |       |  |  |   |      
|                             | Quarter Ended |      |   |       |  |  |   |       | 
|                             | March 31      |      | $ | 22.00 |  |  | $ | 13.71 | 
|                             | June 30       |      |   | 21.80 |  |  |   | 15.08 | 
|                             | September 29  |      |   | 20.20 |  |  |   | 11.00 | 
|                             | December 29   |      |   | 13.90 |  |  |   | 7.32  | 
|Year Ended December 30, 2001 |               |      |   |       |  |  |   |      
|                             | Quarter Ended |      |   |       |  |  |   |       | 
|                             | April 1       |      | $ | 18.75 |  |  | $ | 9.31  | 
|                             | July 1        |      |   | 25.75 |  |  |   | 12.81 | 
|                             | September 30  |      |   | 23.95 |  |  |   | 12.53 | 
|                             | December 30   |      |   | 22.17 |  |  |   | 15.10 | 

20



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|        |                        
|------- | -----------------------
|Item 6. | Selected Financial Data

The following selected financial data as of and
for the years ended December 29, 2002, December 30,
2001, December 31, 2000, December 26, 1999 and
December 27, 1998 have been derived from the audited
Consolidated Financial Statements of the Company. These data
should be read in conjunction with Managements
Discussion and Analysis of Financial Condition and Results of
Operations and the Consolidated Financial Statements of
the Company and notes thereto included elsewhere in this Annual
Report on Form 10-K.

|                                                                      |                                              |                                       |        |         |   |      |        |         |   |      |        |         |   |   |         |         |   |   |        |         |  
|--------------------------------------------------------------------- | -------------------------------------------- | ------------------------------------- | ------ | ------- | - | ---- | ------ | ------- | - | ---- | ------ | ------- | - | - | ------- | ------- | - | - | ------ | ------- | -
|                                                                      |                                              | 2002                                  |        | 2001    |   | 2000 |        | 1999    |   | 1998
|                                                                      |                                              |                                       |        |         |   |      |        |         |   |     
|                                                                      |                                              |                                      
|                                                                      |                                              | (In thousands, except per share data)
|STATEMENT OF OPERATIONS DATA:                                         |                                              |                                       |        |         |   |      |        |         |   |      |        |         |   |   |         |         |   |   |        |        
|                                                                      | Net sales                                    |                                       | $      | 145,470 |   |      | $      | 109,792 |   |      | $      | 147,760 |   |   | $       | 129,744 |   |   | $      | 123,072 |  
|                                                                      | Cost of sales                                |                                       |        | 76,627  |   |      |        | 57,627  |   |      |        | 101,113 |   |   |         | 94,157  |   |   |        | 81,242  |  
|                                                                      |                                              |                                       |        |         |   |      |        |         |   |      |        |         |   |   |         |         |   |   |        |        
|GROSS PROFIT                                                          |                                              |                                       | 68,843 |         |   |      | 52,165 |         |   |      | 46,647 |         |   |   | 35,587  |         |   |   | 41,830 |        
|                                                                      | Selling, general and administrative expenses |                                       |        | 37,974  |   |      |        | 23,521  |   |      |        | 21,777  |   |   |         | 17,340  |   |   |        | 13,545  |  
|                                                                      | Research and development                     |                                       |        | 5,628   |   |      |        | 1,665   |   |      |        | 710     |   |   |         | 701     |   |   |        | 1,403   |  
|                                                                      | Special charges (credits), net               |                                       |        | 3,228   |   |      |        | 61      |   |      |        | (414    | ) |   |         | 33,969  |   |   |        |        |  
|                                                                      |                                              |                                       |        |         |   |      |        |         |   |      |        |         |   |   |         |         |   |   |        |        
|OPERATING INCOME (LOSS)                                               |                                              |                                       | 22,013 |         |   |      | 26,918 |         |   |      | 24,574 |         |   |   | (16,423 | )       |   |   | 26,882 |        
|                                                                      | Other expense, net                           |                                       |        | 951     |   |      |        | 1,471   |   |      |        | 2,376   |   |   |         | 4,513   |   |   |        | 2,696   |  
|                                                                      | Interest (income) expense, net               |                                       |        | (398    | ) |      |        | (1,139  | ) |      |        | 1,233   |   |   |         | 543     |   |   |        | (846    | )
|                                                                      |                                              |                                       |        |         |   |      |        |         |   |      |        |         |   |   |         |         |   |   |        |        
|                                                                      | Income (loss) before income taxes            |                                       |        | 21,460  |   |      |        | 26,586  |   |      |        | 20,965  |   |   |         | (21,479 | ) |   |        | 25,032  |  
|                                                                      | Provision (benefit) for income taxes         |                                       |        | 7,511   |   |      |        | 9,494   |   |      |        | 8,048   |   |   |         | (6,017  | ) |   |        | 8,687   |  
|                                                                      |                                              |                                       |        |         |   |      |        |         |   |      |        |         |   |   |         |         |   |   |        |        
|NET INCOME (LOSS)                                                     |                                              | $                                     | 13,949 |         |   | $    | 17,092 |         |   | $    | 12,917 |         |   | $ | (15,462 | )       |   | $ | 16,345 |        
|                                                                      |                                              |                                       |        |         |   |      |        |         |   |      |        |         |   |   |         |         |   |   |        |        
|NET INCOME (LOSS) PER COMMON
    SHARE  BASIC:                       |                                              |                                       |        |         |   |      |        |         |   |      |        |         |   |   |         |         |   |   |        |        
|                                                                      | Net income (loss)                            |                                       | $      | 0.57    |   |      | $      | 0.72    |   |      | $      | 0.57    |   |   | $       | (0.65   | ) |   | $      | 0.68    |  
|                                                                      |                                              |                                       |        |         |   |      |        |         |   |      |        |         |   |   |         |         |   |   |        |        
|NET INCOME (LOSS) PER COMMON
    SHARE  DILUTED:                     |                                              |                                       |        |         |   |      |        |         |   |      |        |         |   |   |         |         |   |   |        |        
|                                                                      | Net income (loss)                            |                                       | $      | 0.56    |   |      | $      | 0.70    |   |      | $      | 0.56    |   |   | $       | (0.65   | ) |   | $      | 0.63    |  
|                                                                      |                                              |                                       |        |         |   |      |        |         |   |      |        |         |   |   |         |         |   |   |        |        
|WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT
    SHARES OUTSTANDING: |                                              |                                       |        |         |   |      |        |         |   |      |        |         |   |   |         |         |   |   |        |        
|                                                                      | Basic                                        |                                       |        | 24,357  |   |      |        | 23,749  |   |      |        | 22,815  |   |   |         | 23,617  |   |   |        | 24,001  |  
|                                                                      |                                              |                                       |        |         |   |      |        |         |   |      |        |         |   |   |         |         |   |   |        |        
|                                                                      | Diluted                                      |                                       |        | 24,837  |   |      |        | 24,439  |   |      |        | 23,283  |   |   |         | 23,617  |   |   |        | 25,942  |  
|                                                                      |                                              |                                       |        |         |   |      |        |         |   |      |        |         |   |   |         |         |   |   |        |        
|BALANCE SHEET DATA:                                                   |                                              |                                       |        |         |   |      |        |         |   |      |        |         |   |   |         |         |   |   |        |        
|                                                                      | Working capital                              |                                       | $      | 65,468  |   |      | $      | 55,156  |   |      | $      | 56,790  |   |   | $       | 50,172  |   |   | $      | 56,164  |  
|                                                                      | Total assets                                 |                                       |        | 191,165 |   |      |        | 175,338 |   |      |        | 131,495 |   |   |         | 156,898 |   |   |        | 147,331 |  
|                                                                      | Long-term debt, less current maturities      |                                       |        | 39      |   |      |        | 1,451   |   |      |        |        |   |   |         | 30,000  |   |   |        | 878     |  
|                                                                      | Stockholders equity                         |                                       |        | 170,370 |   |      |        | 152,475 |   |      |        | 118,707 |   |   |         | 103,224 |   |   |        | 129,009 |  






|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis of
    Financial Condition and Results of Operations

Overview

General

The Company is a global provider of biological
products and enabling technologies to life science companies.
The Companys products are essential for the research,
development and manufacturing of biologically based life science
products. The Companys products and technologies are used
in a wide variety of applications within the areas of oncology,
hematology, immunology, cardiology and infectious diseases, as
well as in the study of molecular biology. The Companys
customer base includes many of the leading life science
companies throughout the world.

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Beginning in 2002, for management purposes the
operations of the Companys subsidiaries were organized
into three primary operating segments: Biotech Products,
Diagnostic Products and Therapeutic Products. These segments are
based primarily on the differing nature of the ultimate end use
of the Companys products, the differing production,
manufacturing and other value-added processes performed by the
Company with respect to the products and, to a lesser extent,
the differing customer bases to which each reportable segment
sells its products. Prior to 2002, the Company reported only two
operating segments, Therapeutics and Diagnostics. All of the
comparisons discussed below reflect the restatement of the prior
year segments so that they are consistent with the current year
presentation.

The activities of the Biotech segment primarily
include the manufacture and sale of tissue culture media
components, as well as certain research products and
technologies used in life sciences research and in
high-throughput drug screening. The primary products included in
this segment are EX-CYTE®, certain grades of BSA, human
recombinant insulin and Amplifluor, a patented technology
used for the detection of nucleic acids amplified by polymerase
chain reaction and other techniques. In March 2003, the
Company commenced the construction of an EX-CYTE®
manufacturing facility in Lawrence, Kansas that will increase
capacity by 110,000 liters. The facility is expected to be
completed in the first half of 2004 at an estimated cost of
$28.0 million.

The activities of the Diagnostic segment include
the Companys monoclonal antibody production facilities and
certain human-sourced, polyclonal antibodies, as well as certain
blood protein products manufactured at the Companys
facilities in Kankakee and Toronto. The antibodies and other
proteins provided by the Diagnostic Products segment are used in
diagnostic products such as blood typing reagents and diagnostic
test kits and as nutrient additives in biotech products.

The Companys Therapeutic segment (or blood
plasma operations) conducts its operation through a national
network of 10 donor centers that specialize in the collection of
specialty human antibodies. This segment of the Companys
business provides value-added antibody-based products that are
used as the active ingredients in therapeutic products for the
treatment and management of diseases, such as Rh incompatibility
in newborns, rabies, hepatitis and adverse reactions to the
smallpox vaccination, and in diagnostic products, such as blood
typing reagents and diagnostic test kits. During 2002, the
Company completed an extensive review of its plasma operations.
As a result of this review, the Company permanently closed four
of its seventeen donor centers. In February 2003, the
Company closed an additional 3 donor centers. As a result of
capacity optimization procedures completed in 2002, the Company
does not expect a reduction in plasma capacity upon completion
of these closings.

Prior to August 2000, the Company also
operated 47 donor centers specializing in the collection of
non-specialty antibodies. In August 2000 the Company
divested substantially all of the long-term assets of its
non-specialty antibody business, the results of which were
included in the Therapeutic Products segment for 2000.

On February 11, 2003 the Company announced
that it signed an agreement to acquire Chemicon International,
Inc. (Chemicon). Chemicon provides a broad range of
specialty reagents, kits, antibodies and molecular biology tools
to biotech, pharma and academic research customers working in
the areas of neuroscience, infectious disease, drug discovery,
cancer research, stem cell research and proteomics. Chemicon is
also a leading supplier of monoclonal antibodies, conjugates,
antibody blends and kits for use in the diagnostic laboratory.
Chemicon has a proven track-record of being able to successfully
identify, develop, manufacture, and commercialize new products
quickly. Chemicon introduced more than 500 new products during
2002. Chemicon is expected to operate in a fourth business
segment that will be established in 2003, Research Products.

Critical Accounting Policies

The consolidated financial statements are
presented on the basis of accounting principles that are
generally accepted in the United States of America, which
require management to make estimates that affect the amount of
revenues, expenses, assets and liabilities reported. The
following are five critical accounting policies that are both
very important to the portrayal of the Companys financial
condition and results of operations and required
managements most difficult, subjective, or complex
judgements. The accounting for

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these matters was based on current facts and
circumstances which, in managements judgment, hold
potential for change which could affect managements future
estimates. Therefore, future financial results could differ
materially from current financial results based on
managements current estimates.


Revenue
recognition

The Company recognizes revenue in accordance with
SEC Staff Accounting Bulletin No. 101, Revenue
Recognition in Financial Statements (SAB 101).
SAB 101 requires that four basic criteria must be met before
revenue can be recognized: (1) persuasive evidence of an
arrangement exists; (2) delivery has occurred; (3) the
selling price is fixed and determinable; and (4) collectibility
is reasonably assured. Determination of criteria (3) and
(4) are based on managements judgments regarding the
fixed nature of the selling prices of the products delivered and
the collectibility of those amounts. The Company has negotiated
volume pricing discounts with certain customers that provide for
a discount if certain volumes of the Companys products are
purchased. The Company defers any revenue subject to refund if
the volumes are met under these arrangements until such time
that the Company and the customer jointly determine that the
volumes required for discount will not be achieved. If the
amount of revenue deferred were to be inaccurate, the Company
may have over or under stated accounts receivable and revenue,
accordingly.

Accounts
receivable

The Company performs ongoing credit evaluations
of its customers and adjusts credit limits based upon payment
history and the customers current credit worthiness, as
determined by review of current credit information. The Company
monitors collections and payments from its customers and
maintains a provision for estimated credit losses based upon
historical experience and any specific customer collection
issues that have been identified. These estimates may prove to
be inaccurate, in which case the Company may have over or under
stated the reserve required for uncollectible accounts
receivables and selling, general and administrative expense,
accordingly.

Inventory

Inventories are carried at the lower of cost or
market. Cost includes materials, labor and overhead. Market,
with respect to all inventories, is replacement cost or net
realizable value. Management frequently reviews inventory to
determine the necessity of reserves for excess, obsolete or
unsaleable inventory. These reviews require management to assess
customer and market demand. These estimates may prove to be
inaccurate, in which case the Company may have over or under
stated the reserve required for excess, obsolete or unsaleable
inventory and its cost of goods sold, accordingly.

Valuation
of goodwill and other intangible assets

The Company periodically evaluates its goodwill
and intangibles for potential impairment whenever events or
changes occur that indicate the carrying value may no longer be
recoverable. Evaluations are based on estimated discounted
future cash flows from the use and eventual disposition of the
underlying assets. In the first quarter of 2002, the Company
adopted Statement of Financial Standard No. 142,
Goodwill and Other Intangible Assets (SFAS
No. 142). The Company completed its initial
impairment review during the second quarter of 2002 and will
perform an annual review thereafter. Based on the initial
evaluation, the Company determined that no impairment existed as
of December 31, 2001. The estimates used to evaluate the
fair value of goodwill and other intangibles assets may prove to
be inaccurate, in which case the Company may have over stated
goodwill and other intangible assets.

Deferred
income taxes

The Company recognizes deferred tax assets and
liabilities based on differences between the carrying amount in
the financial statements and the tax bases of assets and
liabilities. The Company regularly reviews its deferred tax
assets for recoverability. If the Company determines that the
recoverability of its deferred tax assets is not probable, a
valuation allowance is recorded against these assets. The
estimates used to evaluate

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the recoverability of deferred tax assets may
prove to be inaccurate, in which case the Company may have over
or under stated income tax valuation allowances and its
provision for income taxes, accordingly.


The Company uses a combination of historical
results, anticipated future events and detailed assessment of
relevant facts and circumstances to estimate and make
assumptions relating to its critical accounting policies. Actual
results could differ from those estimates.

Results of Operations

The following discussion and analysis of the
Companys financial condition and results of operations
should be read in conjunction with the Consolidated Financial
Statements and Notes thereto included in this Annual Report on
Form 10-K. The following table sets forth certain consolidated
operating data of the Company as a percentage of net sales for
the fiscal years indicated below.

|                                             |  |      |       |      |  |      |       |   |  |  |       |  
|-------------------------------------------- |  | ---- | ----- | ---- |  | ---- | ----- | - |  |  | ----- | -
|                                             |  | 2002 |       | 2001 |  | 2000
|                                             |  |      |       |      |  |     
|Net sales                                    |  |      | 100.0 | %    |  |      | 100.0 | % |  |  | 100.0 | %
|Gross profit                                 |  |      | 47.3  | %    |  |      | 47.5  | % |  |  | 31.6  | %
|Selling, general and administrative expenses |  |      | 26.1  | %    |  |      | 21.4  | % |  |  | 14.7  | %
|Research and development                     |  |      | 3.9   | %    |  |      | 1.5   | % |  |  | 0.5   | %
|Income before income taxes                   |  |      | 14.8  | %    |  |      | 24.2  | % |  |  | 14.2  | %

The results of operations for the year ended
December 2002 presented below include twelve months of
operations of Intergen Company, L.P. and Subsidiaries
(Intergen), which was acquired on December 13,
2001. The consolidated Biotech Products segment and Diagnostic
Products segment discussions below in the comparisons between
years are impacted by the Intergen acquisition. The results of
operations for the year 2000 presented below include the results
of Seramed, which was divested in August 2000. The
consolidated and Therapeutic Products segment discussions below
in the comparisons between years are impacted by the
divestiture. Additionally, 2001 net sales include approximately
$767,000 of remaining Seramed inventory that had previously been
fully reserved.

Comparison of Fiscal Years ended
December 29, 2002 and December 30, 2001

NET SALES

Consolidated

Consolidated net sales increased 33%, or
approximately $35.7 million, from $109.8 million in
2001 to $145.5 million in 2002. The increase was driven
primarily by the sales contribution from the products acquired
with the Intergen acquisition and a significant increase in
EX-CYTE® sales, which offset significant decreases in sales
of Therapeutic products.

Biotech Products

Net sales of Biotech Products increased
$36.4 million, or 191%, from $19.1 million in 2001 to
$55.5 million in 2002. Sales of EX-CYTE® increased
$11.7 million, or 61%, from $19.1 million in 2001 to
$30.8 million in 2002. The growth in the EX-CYTE®
product is due to continued advancement in the commercialization
of the Companys customers end-products because these
products are in later stage clinical trials and FDA drug
approval, which results in increased demand for the
Companys products. The remainder of the increase was due
to the sales contribution from Intergen, including sales of
human recombinant insulin and other media supplements, BSA,
specialty reagents and various other products.

Diagnostic Products

Net sales of Diagnostic Products increased
approximately $9.3 million, or 27%, from $34.5 million
in 2001 to $43.8 million in 2002. This increase was
primarily due to increased sales of BSA and sales growth from
other products acquired through the Intergen acquisition. BSA
sales increased from $12.0 million in

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2001 to $13.7 million during 2002. Sales of
monoclonal antibodies and related products were
$16.1 million in 2002 compared to $16.0 million in
2001.


Therapeutic Products

Net sales of Therapeutic Products decreased
approximately $10.0 million, or 18%, from
$56.2 million in 2001 to $46.2 million in 2002. Sales
of anti-D antibodies declined $17.2 million, or 63%, from
$27.2 million in 2001 to $10.0 million in 2002, primarily
as a result of the timing of customer orders and delivery
requirements. Sales of anti-hepatitis antibodies increased
$1.6 million, from $18.6 million in 2001 to
$20.2 million in 2002. The sales growth in this product
occurred during the first six months of 2002. During the second
half of 2002, sales declined significantly as our major
customers have indicated that they have sufficient inventories
to meet their current manufacturing requirements. Sales of
anti-rabies declined $2.6 million, or 34% from the prior
year, primarily as a result of the timing of customer orders and
delivery requirements. Sales of the recently launched Vaccinia
product totaled approximately $10.4 million during 2002.
The remainder of the sales decrease was due to declines in
Intravenous Immune Globulin (IVIG) sales.

GROSS PROFIT

Consolidated

Consolidated gross profit increased approximately
$16.6 million, or 32%, from $52.2 million in 2001 to
$68.8 million in 2002. This increase was primarily due to
increased sales. Gross margin decreased slightly from 48% in
2001 to 47% in 2002. Margins were lower primarily due to the
increase of lower margin Intergen products in the sales mix and
higher costs associated with the Companys plasma
operations, including costs related to starting up the Vaccinia
antibody collection program.

Biotech Products

Gross profit from Biotech Products increased
approximately $15.4 million, or 106%, from
$14.5 million in 2001 to $29.9 million in 2002. This
increase was primarily due to the increased sales of
EX-CYTE® and the addition of the former Intergen products
to the Biotech sales mix. Gross margins on Biotech Products
decreased from 76% in 2001 to 54% in 2002. This decrease was due
to the mix of sales. During 2001, all sales in this segment
represented sales of the higher margin EX-CYTE® product,
whereas in 2002 EX-CYTE® represented approximately 55% of
Biotech Products sales. The Intergen products included in this
segment are generally lower margin products than EX-CYTE®.

Diagnostic Products

Gross profit from Diagnostic Products increased
approximately $6.1 million, or 38%, from $16.2 million in
2001 to $22.3 million in 2002. The majority of the increase
was attributable to increased sales due to the Intergen
acquisition. During 2002, gross margins on Diagnostic Products
were 51%, compared with 47% in 2001. Gross margins increased due
to the introduction of Intergen products in the sales mix, which
in the Diagnostic Products segment are generally higher margin
products.

Therapeutic Products

Gross profit from Therapeutic Products decreased
approximately $4.9 million, or 23%, from $21.5 million in
2001 to $16.6 million in 2002. The decrease in gross
margins is primarily due to the significantly lower sales of
anti-D in 2002 as a result of the timing of customer orders and
delivery requirements, which is a relatively higher margin
specialty antibody product. Gross margins were positively
impacted by increases in anti-hepatitis antibody sales, for
which the Company achieved higher gross margins during 2002 as a
result of contractual arrangements with a customer that provide
for premium pricing adjustments for delivery of product that
exceeds antibody concentration requirements as defined within
the contract. Gross margins on Therapeutic Products decreased
from 38% in 2001 to 36% in 2002, as the sales decline of the
relatively high margin anti-D antibodies product was nearly
offset by margin improvements in the Companys
anti-hepatitis product. Therapeutic gross margins also have been
negatively impacted by excess production capacity in the

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donor centers, as well as higher costs than
expected associated with the start-up of the vaccinia program.
As a result of lower unit sales, fixed costs associated with
running the donor centers have been spread over fewer units.


SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES

Selling, general and administrative expenses
increased approximately $14.5 million, or 62%, from
$23.5 million in 2001 to $38.0 million in 2002. As a
percentage of revenues, SG&A expenses were 26% in 2002
compared with 21% in 2001. Approximately $2.0 million of
this increase was due to external costs related to the
integration of Intergen. Other significant items contributing to
the increase compared with the prior year included approximately
$0.8 million in professional fees incurred as part of a
project to evaluate all aspects of the Therapeutic Products
business operations, approximately $1.0 million related to
operating the former Intergen corporate office during the first
quarter of 2002, approximately $4.6 million related to the
expansion of the Companys sales and marketing
organization, approximately $1.0 million of increased costs
due to the timing of hiring certain executives during the second
half of 2001 and an increase of approximately $2.5 million
related to higher commercial insurance costs.

RESEARCH AND DEVELOPMENT

Research and development expenses increased
approximately $3.9 million, or 229%, from $1.7 million
in 2001 to approximately $5.6 million in 2002. As a
percentage of sales, spending in this area increased from 2% in
2001 to 4% in 2002. This increase is primarily due to the
expansion of the Companys research and development
activities, including those acquired as a result of the Intergen
acquisition. The current year also includes payments totaling
approximately $1.0 million made to a third party research
facility to fund start-up costs associated with projects this
facility is undertaking related to detailed characterization and
optimization of the Companys primary Biotech products. The
Company expects research and development expenditures to
increase as a percentage of sales over the next several years.

SPECIAL CHARGES (CREDITS), NET

During 2002, the Company completed an extensive
review of its plasma operations. As a result of this review, the
Company permanently closed four of its seventeen donor centers,
resulting in a charge of $1.3 million. The components of
the charge included approximately $0.2 million related to
severance payments, approximately $0.5 million related to
lease obligations and approximately $0.5 million related to
the write-off of certain long-lived assets with closed centers.
The remaining $0.1 million consisted of other miscellaneous
costs related to the closures. The severance payments covered
approximately thirty-five employees. Severance payments and
lease obligations are expected to be paid by the end of the
second quarter of 2003 and third quarter of 2004, respectively.

Additionally, during 2002, the Company recorded a
charge of $1.9 million related primarily to the
reorganization of the Companys research and development
organization, as well as personnel restructurings within the
sales organization and at the Companys manufacturing
locations in Canada and Scotland. The components of the charge
included approximately $1.5 million for severance and
termination benefits, approximately $0.1 million related to
lease obligations and approximately $0.3 million related to
the impairment of certain long-lived assets. The severance
payments covered approximately thirty employees. Severance
payments and lease obligations are expected to be paid by the
end of 2003.

During 2001, the Company recorded a charge of
approximately $0.2 million representing severance costs
associated with the departure of the Companys former Chief
Financial Officer. This severance was paid out over a one-year
period beginning in October 2001. Also, during
June 2001, the Company wrote off approximately
$0.9 million of incremental external due diligence costs
related to the evaluation of the potential acquisition of
Intergen. At the time of the write-off, the Company did not
consider the acquisition probable of being completed. All
eligible costs incurred with respect to the eventual acquisition
subsequent to the resumption of negotiations with Intergen later
in 2001 were capitalized as part of the cost of the acquisition.
Additionally, during 2001, the Company reversed approximately
$0.8 million of previously

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accrued amounts related to the cancellation of a
software development contract in 1999, under which a third party
vendor was assisting the Company in developing a donor center
automation system. This amount had been accrued as part of a
$4.2 million charge to write off previously capitalized costs
and accrue for estimated remaining costs related to the project.
During 2001, the Company received a favorable ruling in its
arbitration case related to these costs in which the arbitrator
ruled that the Company had no further obligation to the vendor.
The Company also recorded an adjustment of approximately
$0.3 million in 2001 to reverse a pre-acquisition
contingency accrual that was initially recorded when the Company
acquired its Kankakee facility in 1998.


OTHER EXPENSE, NET

Consolidated other expense, net, which primarily
consists of amortization of intangible assets and gains and
losses from realized foreign currency translations, decreased
approximately $0.5 million, or 33%, from $1.5 million
in 2001 to $1.0 million in 2002. Amortization of goodwill
decreased $1.4 million, as amortization of goodwill was
discontinued effective December 31, 2001 in accordance with
SFAS No. 142, Goodwill and Other Intangible
Assets. The reduction in goodwill amortization was
partially offset by amortization of other intangibles acquired
in connection with the Intergen acquisition on December 13,
2001.

INTEREST (INCOME) EXPENSE, NET

The Company recorded net interest income of
$0.4 million in 2002 and $1.1 million in 2001. Interest
income decreased due to lower cash balances in 2002 and lower
interest rates.

PROVISION FOR INCOME TAXES

The provision for income taxes as a percentage of
income before taxes remained relatively constant at 36% in 2001
and 35% in 2002.

Comparison of Fiscal Years ended
December 30, 2001 and December 31, 2000

NET SALES

Consolidated

Consolidated net sales decreased 26%, or
approximately $38.0 million, from $147.8 million in
2000 to $109.8 million in 2001. The decrease was driven by
the decreased sales contribution from Seramed of approximately
$54.2 million. Sales from Seramed products were
$55.0 million in 2000 and $0.8 million in 2001. The
decrease in Seramed sales was offset by increases of both
specialty Therapeutic Products and Biotech Products over 2000.

Biotech Products

Net sales of Biotech Products increased
$7.3 million, or 62%, from $11.8 million in 2000 to
$19.1 million in 2001. During 2000 and 2001, EX-CYTE®
was the only product within the Biotech Product segment. The
growth in the EX-CYTE® product was due to continued
advancement in the commercialization of the Companys
customers end-products because these products are in later
stage clinical trials and FDA drug approval, which results in
increased demand for the Companys products.

Diagnostic Products

Net sales of Diagnostic Products increased
approximately $0.9 million, or 3%, from $33.6 million
in 2000 to $34.5 million in 2001. Total net sales increased
due to monoclonal antibodies and related products increasing
$1.1 million, from $14.8 million in 2000 to
$15.9 million in 2001 and contributions from Intergen from
the date of acquisition until year-end of $1.1 million,
offset by lower BSA sales. Net sales of primarily human-sourced
antibodies used in blood typing reagents and diagnostic test
kits were approximately $6.1 million, unchanged from 2000.

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Therapeutic Products

Net sales of Therapeutic Products decreased
approximately $46.2 million, or 45%, from
$102.4 million in 2000 to $56.2 million in 2001. The
decrease was primarily due to the reduction of sales of source
plasma previously described, offset by increased sales of
specialty antibodies. The increase in sales of specialty
antibodies was primarily due to increased sales of
anti-hepatitis antibodies, which increased 46% over the prior
year. The Company believes the growth in demand for this product
was largely being driven by the increasing life span for liver
transplant patients, as well as other new treatment protocols
for liver patients. Additionally, sales of anti-rabies
antibodies increased 22% over the 2000 levels. Sales of anti-D
antibodies declined 4% compared with 2000. Sales from Seramed
were $55.0 million in 2000 and decreased to only
$0.8 million in 2001.

GROSS PROFIT

Consolidated

Consolidated gross profit increased 12%, or
approximately $5.6 million, from $46.6 million in 2000
to $52.2 million in 2001. This increase was primarily the
result of increased sales of high margin products, particularly
EX-CYTE®, combined with the positive impact of the
divestiture of the relatively low-margin source plasma business
(with the exception of the 2001 Seramed sales of
$0.8 million previously discussed). Gross margin increased
from 32% in 2000 to 48% in 2001, largely as a result of the
sales mix reflecting the increased sales of EX-CYTE®, the
impact from sales of higher margin specialty antibodies
representing a larger percentage of total sales in 2001 compared
with 2000, and the decline in sales of the relatively low margin
non-specialty antibodies resulting from the disposition of the
Seramed business. Gross profit from Seramed was approximately
$0.5 million and $0.9 million in 2000 and 2001,
respectively.

Biotech Products

Gross profits from Biotech Products increased
approximately $5.4 million, or 59%, from $9.1 million
in 2000 to $14.5 million in 2001. The increase was
attributable to increased sales of EX-CYTE®. Gross margin
for the Biotech Product segment remained relatively stable,
decreasing from 77% in 2000 to 76% in 2001.

Diagnostic Products

Gross profit from Diagnostic Products decreased
$0.1 million from $16.3 million in 2000 to
$16.2 million in 2001. Gross margins for the Diagnostic
Products remained relatively stable, decreasing from 49% in 2000
to 47% in 2001.

Therapeutic Products

Gross profit from Therapeutic Products increased
approximately $0.3 million, or 1%, from $21.2 million in
2000 to $21.5 million in 2001. This increase was primarily
due to the sales of fully reserved product from Seramed
previously discussed. Gross margin increased from 21% in 2000 to
38% in 2001 as a result of the divestiture of the relatively
low-margin source plasma business (with the exception of the
2001 Seramed sales of $0.8 million previously discussed).
Gross profit from Seramed was approximately $0.5 million
and $0.9 million in 2000 and 2001, respectively.

SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES

Consolidated selling, general and administrative
expenses increased 8%, or $1.7 million, from
$21.8 million in 2000 to $23.5 million in 2001. The
increase was primarily attributable to higher corporate
expenses, which included recruiting and other expenses
associated with the hiring of certain executives, increased
professional fees, and increased costs associated with Company
incentive compensation programs.

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RESEARCH AND DEVELOPMENT

Consolidated research and development expenses
increased 143%, or $1.0 million, from $0.7 million in 2000
to $1.7 million in 2001. As a percentage of revenues, the
investment in research and development increased from 1% in 2000
to 2% in 2001. The majority of the growth in 2001 occurred at
the Companys research and development laboratory in
Scotland, where the Company increased the number of its
scientists in order to more quickly pursue development projects
for new monoclonal antibody products and other products related
to the cell culture market. As previously mentioned, the
Intergen acquisition greatly expanded the Companys
research and development capabilities. A significant amount of
the research and development currently performed at the
Companys United States based facilities, acquired through
the Intergen transaction, is related to the development of
applications for certain technologies and products by working
closely with customer requirements.

SPECIAL (CREDITS) CHARGES, NET

During 2001, the Company recorded a charge of
approximately $0.2 million representing severance costs
associated with the departure of the Companys former Chief
Financial Officer. This severance was paid out over a one-year
period beginning in October 2001. Also, during
June 2001, the Company wrote off approximately
$0.9 million of incremental external due diligence costs
related to the evaluation of the potential acquisition of
Intergen. At the time of the write-off, the Company did not
consider the acquisition probable of being completed. All
eligible costs incurred with respect to the eventual acquisition
subsequent to the resumption of negotiations with Intergen later
in 2001 were capitalized as part of the cost of the acquisition.
Additionally, during 2001, the Company reversed approximately
$0.8 million of previously accrued amounts related to the
cancellation of a software development contract in 1999, under
which a third party vendor was assisting the Company in
developing a donor center automation system. This amount had
been accrued as part of a $4.2 million charge to write off
previously capitalized costs and accrue for estimated remaining
costs related to the project. During 2001, the Company received
a favorable ruling in its arbitration case related to these
costs in which the arbitrator ruled that the Company had no
further obligation to the vendor. Also during 2001, the Company
recorded an adjustment of approximately $0.3 million to
reverse a pre-acquisition contingency accrual that was initially
recorded when the Company acquired Serologicals Proteins in 1998.

Special (credits) charges, net for 2000
consisted of costs incurred related to the divestiture of
Seramed, and the $2.0 million benefit from an insurance
settlement of a product liability claim. Also in 2000, the
Company recorded an asset impairment charge totaling
$0.3 million, along with approximately $1.3 million of
charges associated with termination benefits, lease terminations
and other costs associated with the divestiture of the
non-specialty antibody business. The Company realized a gain on
the disposal of Seramed totaling approximately $0.2 million.

OTHER EXPENSE, NET

Consolidated other expense, net, which primarily
consists of amortization of goodwill and other intangible assets
and gains and losses from foreign currency translations,
decreased approximately $0.9 million, or 38%, from $2.4
million in 2000 to $1.5 million in the current year. The
decrease was almost entirely due to the decrease in goodwill
amortization resulting from the sale of Seramed.

INTEREST (INCOME) EXPENSE, NET

The Company recorded net interest income of
$1.1 million in 2001 compared with net interest expense of
$1.2 million in 2000. The Company maintained significantly
higher cash balances in 2001 compared with 2000, but these
higher balances were offset by lower interest rates during 2001.
In August 2000, the Company repaid all of its outstanding
borrowings under its credit facility with cash proceeds received
from the Seramed sale.

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PROVISION FOR INCOME TAXES

The provision for income taxes as a percentage of
income before taxes decreased from 38% in 2000 to 36% in 2001,
primarily as a result of the reduction in the amount of
non-deductible goodwill resulting from the sale of Seramed in
August 2000.

Liquidity and Capital Resources

The following table sets forth certain indicators
of consolidated financial condition and liquidity of the Company
as of the following fiscal year ends (in thousands):

|                                         |  |      |         |      |  |      |         |   |  |   |         | 
|---------------------------------------- |  | ---- | ------- | ---- |  | ---- | ------- | - |  | - | ------- | 
|                                         |  | 2002 |         | 2001 |  | 2000
|                                         |  |      |         |      |  |     
|Cash and cash equivalents                |  | $    | 12,850  |      |  | $    | 10,780  |   |  | $ | 22,492  | 
|Working capital                          |  |      | 65,468  |      |  |      | 55,156  |   |  |   | 56,790  | 
|Total debt and capital lease obligations |  |      | 424     |      |  |      | 4,576   |   |  |   | 13      | 
|Stockholders equity                     |  |      | 170,370 |      |  |      | 152,475 |   |  |   | 118,707 | 
|Total debt to equity ratio               |  |      | 0.2     | %    |  |      | 3.0     | % |  |   |        | 

The Company has three principal sources of
near-term liquidity: (1) existing cash and cash equivalents;
(2) cash generated by operations; and (3) borrowing
capacity under the Companys revolving credit facility (the
Revolver).

On February 11, 2003 in connection with the
proposed Chemicon acquisition the Company announced its plans to
enter into a $100.0 million, five-year term loan. This term
loan, combined with a new four year revolving credit facility,
which is currently expected to be $25.0 million, will
replace the Companys existing $65.0 million facility.
The proceeds from the $100.0 million term loan will be used
to fund the purchase of Chemicon and associated transaction
costs. Management believes the Companys liquidity and
capital resources are sufficient to meet its working capital,
capital expenditure, debt repayment obligations and other
anticipated cash requirements over the next twelve months and
may be available for use in acquisitions.

Net cash provided by operating activities in 2002
was $17.2 million, as compared to net cash provided by
operating activities of $21.6 million in 2001. The decrease
was primarily attributable to a $2.5 million incremental
increase in working capital in 2002 versus 2001, lower net
income of $3.1 million, and $2.9 million less in tax
benefits from exercises of stock options, offset by an increase
in non-cash special charges of $1.9 million and non-cash
deferred income tax provision of $2.5 million in 2002
compared with $1.2 million in 2001. The increased
investment in working capital was primarily due to an
$11.2 million increase in accounts receivable in 2002,
compared with a $7.7 million increase in 2001, and a
$2.0 million increase in other assets in 2002, compared
with a decrease of $2.7 million in 2001, offset by a
decrease between years of approximately $3.3 million in
income tax receivables. The accounts receivable year over year
changes were primarily due to timing of sales and cash receipts.

Net cash used in investing activities in 2002 was
$12.8 million, compared with net cash used in investing
activities of $46.5 million in 2001. Investing activities
in 2002 related primarily to capital expenditures of
$12.5 million, whereas 2001 included the acquisition of
Intergen for $41.4 million, and capital expenditures of
$5.1 million.

Net cash used in financing activities in 2002 was
$2.3 million, compared with net cash provided by financing
activities of $13.1 million in 2001. Financing activities
in 2002 consisted of $4.0 million in payments on long-term
debt and capital obligations, $0.5 million related to costs
to amend and extend the Companys revolving line of credit
and $0.3 million used to repurchase 20,000 shares of the
Companys common stock in a private transaction with a
director, offset by $2.7 million in proceeds from the
exercise of stock options and the purchase of stock through
other Company stock ownership plans. Financing activities in
2001 consisted of cash proceeds of approximately $13.3 million
from the exercise of stock options and the purchase of stock
through other Company stock ownership plans.

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Capital expenditures in 2002 consisted primarily
of the following major projects: (1) implementation of an
Enterprise Resource Planning (ERP) system;
(2) buildout of the expanded monoclonal manufacturing
operations in Scotland; (3) completion of the expansion of
the Companys manufacturing facility in Toronto, Ontario;
and (4) leasehold improvements associated with the
relocations of certain human plasma donor centers. Capital
expenditures in 2001 consisted primarily of the following major
projects: (1) leasehold improvement associated with the
relocation of the Companys corporate headquarters;
(2) completion of various expansion projects at Serological
Proteins; and (3) various information systems initiatives.

During 2003, the Company anticipates capital
expenditures of approximately $30.0 million to
$34.0 million. The most significant expenditure will be the
construction of a second EX-CYTE® manufacturing facility in
Lawrence, Kansas and the completion of leasehold improvements
associated with relocations of certain donor centers. The total
cost of the EX-CYTE® manufacturing facility is currently
estimated to be $28.0 million, of which approximately
$24.0 million is expected to be expended in 2003. The plant
is expected to begin production of validated product in the
first half of 2004.

In October 2002, the Companys Board of
Directors authorized a program to repurchase up to 2,000,000
shares of its outstanding common stock between October 2002
and December 31, 2004. The repurchases will be made from
time to time in the open market, in block trades or in private
transactions, subject to price, market and general business
conditions. Through March 25, 2003, the Company has not
purchased any shares under this program.

As of December 29, 2002, the Company had
outstanding debt of approximately $0.4 million consisting
of capital leases acquired through the Intergen acquisition on
December 13, 2001. The Company has no borrowings
outstanding under its Revolver. The following table sets forth
the Companys contractual obligations as of
December 29, 2002 (in thousands):

|                            |  |                       |        |        |  |           |       |           |  |          |       |  |  |   |       |  |  |   |       | 
|--------------------------- |  | --------------------- | ------ | ------ |  | --------- | ----- | --------- |  | -------- | ----- |  |  | - | ----- |  |  | - | ----- | 
|                            |  |                      
|                            |  | Payment due by period
|                            |  |                      
|                            |  | Total                 |        | 1 year |  | 2-3 years |       | 4-5 years |  | 5+ years
|                            |  |                       |        |        |  |           |       |           |  |         
|Operating lease obligations |  | $                     | 19,675 |        |  | $         | 3,302 |           |  | $        | 5,921 |  |  | $ | 4,473 |  |  | $ | 5,979 | 
|Capital lease obligations   |  |                       | 424    |        |  |           | 385   |           |  |          | 39    |  |  |   |      |  |  |   |      | 
|                            |  |                       |        |        |  |           |       |           |  |          |       |  |  |   |       |  |  |   |       | 
|                            |  | $                     | 20,099 |        |  | $         | 3,687 |           |  | $        | 5,960 |  |  | $ | 4,473 |  |  | $ | 5,979 | 
|                            |  |                       |        |        |  |           |       |           |  |          |       |  |  |   |       |  |  |   |       | 

As previously discussed, the Company expects to
enter into a $100.0 million, five year term loan. The proceeds
from the $100.0 million term loan will be used for the
purchase of Chemicon and associated transaction costs. The new
facility and term loan are expected to have financial covenants.
The Company is still in the process of negotiating the covenants
under this the new facility and term loan. Payments under the
term are expected to be payable in quarterly installments. The
following table reflects the expected payments under the term
loan:

| |      |  |  |   |         | 
| | ---- |  |  | - | ------- | 
| | 2003 |  |  | $ | 750     | 
| | 2004 |  |  |   | 7,750   | 
| | 2005 |  |  |   | 17,500  | 
| | 2006 |  |  |   | 27,500  | 
| | 2007 |  |  |   | 36,750  | 
| | 2008 |  |  |   | 9,750   | 
| |      |  |  |   |         | 
| |      |  |  | $ | 100,000 | 
| |      |  |  |   |         | 

At December 29, 2002 the Company has a
commitment with a vendor, which requires the Company to use the
vendor in connection with the processing of BSA at the Toronto
facility for a minimum of $120,000 per quarter. The contract can
be terminated by the Company or the supplier at any time with
180 days notice. The contract automatically renews
after the initial three year term on a rolling one-year basis.

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The Company has no off-balance sheet financing
arrangements and has not created any special purpose entities.
Additionally, the Company does not undertake any trading
activities within its business with respect to non-exchange
traded contracts accounted for at fair value.

Market Risk

The Company is exposed to market risk from
changes in foreign currency exchange rates and, to a lesser
extent, interest rates, which could affect its future results of
operations and financial condition. The Company manages its
exposure to these risks through its regular operating and
financing activities.

Foreign
Currency Exchange Rates

The Companys foreign-based operations are
conducted through manufacturing operations located in the United
Kingdom and Canada. In 2002, 2001 and 2000, foreign-based
operations accounted for approximately 17%, 15% and 10% of net
sales and approximately 39%, 17% and 16% of income from
operations, respectively. The net investments in foreign
subsidiaries translated into dollars using year-end exchange
rates at December 29, 2002, is $16.9 million. The
potential loss in fair value impacting other comprehensive
income resulting from a hypothetical 10% change in quoted
foreign currency exchange rates amounts to $1.7 million.
The Company does not use derivative financial instruments to
hedge its exposure to changes in foreign currency exchange rates.

The functional currency of the Companys
U.K. operations is the British pound sterling, and the
functional currency for the Companys Canadian operations
based in Toronto is the Canadian dollar. Fluctuations in foreign
exchange rates can impact operating results, including net
revenues and expenses, when translations of the subsidiary
financial statements are made in accordance with SFAS
No. 52, Foreign Currency Translation.
Furthermore, the Company transacts business in various foreign
currencies, subjecting it to exposure from movements in the
exchange rates of those countries. However, a large portion of
the Companys sales to foreign countries is denominated in
U.S. currency, thus mitigating a significant portion of this
risk. It has not been the Companys practice to hedge its
assets and liabilities in these countries or its intercompany
transactions and, accordingly, the Company has not used
derivatives or other off-balance sheet items to manage any
significant foreign currency exchange risk. In 2002, 2001 and
2000, the Company recorded foreign currency transaction gains
(losses) of approximately $11,000, $44,000 and $(63,000),
respectively.

Recent Accounting Pronouncements

In August 2001, the FASB issued SFAS
No. 143, Accounting for Asset Retirement
Obligations (SFAS No. 143), which
addresses financial accounting and reporting for obligations
associated with the retirement of tangible long-lived assets and
the associated asset retirement costs. SFAS No. 143
requires that the fair value of a liability for an asset
retirement obligation be recognized in the period in which it is
incurred if a reasonable estimate of fair value can be made. The
fair value of the liability is added to the carrying amount of
the associated asset and this additional carrying amount is
depreciated over the life of the asset. The liability is
accreted at the end of each period through charges to operating
expense. If the obligation is settled for other than the
carrying amount of the liability, a gain or loss on settlement
will be recognized. The Company plans to adopt SFAS No. 143
in the first quarter of 2003. The adoption of SFAS No. 143
is not expected to have a material impact on the Companys
financial position or results of operations.

In June 2002, the FASB issued SFAS
No. 146, Accounting for Costs Associated with Exit or
Disposal Activities (SFAS No. 146). SFAS
No. 146 addresses financial accounting and reporting for
costs associated with exit or disposal activities and nullifies
Emerging Issues Task Force Issue No. 94-3, Liability
Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring) (Issue No. 94-3). The
principal difference between SFAS No. 146 and Issue
No. 94-3 relates to its requirements for recognition of a
liability for a cost associated with an exit or disposal
activity. SFAS No. 146 requires that a liability for a cost
associated with an exit or disposal activity be recognized when
the liability is incurred. Under Issue No. 94-3, a
liability for an exit cost was recognized at

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the date of an entitys commitment to an
exit plan. A fundamental conclusion reached by the FASB in SFAS
No. 146 is that an entitys commitment to a plan, by
itself, does not create a present obligation to others that
meets the definition of a liability. Therefore, SFAS
No. 146 eliminates the definition and requirements for
recognition of exit costs in Issue No. 94-3. SFAS
No. 146 also establishes that fair value is the objective
for initial measurement of the liability. SFAS No. 146 is
effective for exit or disposal activities that are initiated
after December 30, 2002. The Company adopted SFAS
No. 146 effective December 30, 2002. Adoption of SFAS
No. 146 did not have a significant effect on the Companys
consolidated results of operations or financial position.


In November 2002, the FASB issued
Interpretation No. 45 Guarantors Accounting and
Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others (FIN 45).
FIN 45 requires that the guarantor recognize, at the inception
of certain guarantees, a liability for the fair value of the
obligation undertaken in issuing such a guarantee. FIN 45 also
requires additional disclosure about the guarantors
obligations under certain guarantees that it has issued. The
initial recognition and measurement provisions of this
interpretation are applicable on a prospective basis to
guarantees issued or modified after December 30, 2002 and
the disclosure requirements are effective after
December 15, 2002. The Company does not have any material
guarantees at December 29, 2002. Adoption of FIN 45 will
not have a significant effect on the Companys results of
operations or financial position.

Outlook

The Companys activities in 2003 will be
largely focused on several major initiatives. The Company
expects to close the Chemicon acquisition at the end of
March 2003. While there is expected to be minimal
integration of the functional operating activities, we will
begin to implement programs to effectively cross sell the
products of the combined companies through our sales force and
distribution network. We will also explore potential for cost
synergies related to research products in existing
Serologicals facilities. The Company will finance the
Chemicon acquisition with proceeds from a $100.0 million 5-year
term loan. As a result, the Company will be exposed to interest
rate risk, particularly given that interest rates are currently
at historic lows. The Company plans to enter into one or more
agreements using some combination of interest rate swaps, caps
or similar instruments that will provide protection from rising
rates on a minimum of $50.0 million of the borrowings.

The second major effort ongoing during 2003 is
the construction of our second EX-CYTE® manufacturing
facility in Lawrence, Kansas. The Company expects sales of
EX-CYTE® to be at or near manufacturing capacity at the
existing facility. We expect that substantially all of the
construction will be complete by the end of the year and that
during the first three to six months of 2004 the validation and
commissioning of the plant will be completed.

The Company continues to experience uneven demand
for its specialty antibody products and 2003 revenues from the
products could decline from prior year levels. The demand for
the vaccinia antibody product is primarily dependent on order
flow from the Centers for Disease Control and Prevention
(CDC) to its supplier, and our customer, Cangene.
The Company is currently fulfilling its second purchase order
for 15,000 liters of this product. There can be no assurance
that there will be additional orders during 2003 for this
product. In addition, demand for the Companys other
Therapeutic Products may decline from 2002 levels, primarily due
to soft demand for anti-D antibodies and decreases for
anti-hepatitis B due to our customers high inventory
levels. The Company will continue to evaluate the optimal
structure of its donor center network to meet the expected
demand for its products.

In addition, sales of BSA are expected to
increase now that the Toronto facility became fully operational
in January 2003. Sales of monoclonal blood typing products
are expected to increase during 2003 as we believe the
manufacturing issues experienced during 2002 at our facility in
Scotland impacting our production capabilities have been
successfully resolved.

The Company expects to continue to increase its
investment in research and development activities, primarily
associated with cell culture media products and alternative
fractionation methods.

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|         |                                                               
|-------- | --------------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosures about
    Market Risk

Quantitative and qualitative disclosures about
market risk are discussed under the caption Market
Risk in Item 7 Managements Discussion and
Analysis of Financial Condition and Results of Operations.






|        |                                                
|------- | -----------------------------------------------
|Item 8. | Financial Statements and Supplementary
    Data

The information required in this item is
contained in the index to the Companys consolidated
financial statements located on Page F-1 of this Annual Report
on Form 10-K and is incorporated herein by reference.






|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|Item 9. | Changes in and Disagreements with Accountants
    on Accounting and Financial Disclosure

On May 29, 2002, the Board of Directors of
the Company, upon recommendation of the Audit Committee, adopted
a resolution to dismiss the Companys independent public
accountants, Arthur Andersen LLP, and engage Deloitte &
Touche LLP as the Companys independent public accountants
for the fiscal year ending December 29, 2002 effective upon
the acceptance of the Company as a client by Deloitte &
Touche LLP, which occurred on June 12, 2002.

Arthur Andersen LLPs prior audit reports on
the Companys financial statements for each of the two
fiscal years in the period ended December 30, 2001
contained no adverse opinion or disclaimer of opinion nor were
such reports qualified or modified as to uncertainty, audit
scope, or accounting principles. During each of the two fiscal
years of the Company in the period ended December 30, 2001
and through June 12, 2002, there were no disagreements
between the Company and Arthur Andersen LLP on any matter of
accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements,
if not resolved to Arthur Andersen LLPs satisfaction,
would have caused Arthur Andersen LLP to make reference to the
subject matter of the disagreement in connection with their
reports; and during such period there were no reportable
events.

During the Companys two fiscal years in the
period ended December 30, 2001 and through June 12,
2002, the Company did not consult Deloitte & Touche LLP with
respect to the application of accounting principles to a
specified transaction, either completed or proposed, or the type
of audit opinion that might be rendered on the Companys
consolidated financial statements or any other matters or
reportable events.




PART III.






|         |                                                       
|-------- | ------------------------------------------------------
|Item 10. | Directors and Executive Officers of the
    Registrant

For information on Directors of the Company, the
section under the heading Information As to Nominees and
Other Directors and under the heading
Section 16(a) Beneficial Ownership Reporting
Compliance within the Companys Proxy Statement for
the Annual Meeting of Stockholders to be held May 16, 2003
(the Companys 2003 Proxy Statement), which the
Company intends to file within 120 days after the end of
the Companys fiscal year ended December 29, 2002, is
incorporated herein by reference. See Item 4A in Part I of
this report for information regarding the Executive Officers of
the Company.

34



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##### Table of Contents








|         |                       
|-------- | ----------------------
|Item 11. | Executive Compensation

The following table sets forth a summary
information about compensation plans:

|                                                               |  |                   |           |                   |  |                     |       |  |  |  |           | 
|-------------------------------------------------------------- |  | ----------------- | --------- | ----------------- |  | ------------------- | ----- |  |  |  | --------- | 
|                                                               |  | Number of         |           | Weighted-         |  | Number of          
|                                                               |  | securities to be  |           | average           |  | securities         
|                                                               |  | issued upon       |           | exercise price of |  | remaining available
|                                                               |  | exercise of       |           | outstanding       |  | for future issuance
|                                                               |  | outstanding       |           | options,          |  | under equity       
|                                                               |  | options, warrants |           | warrants          |  | compensation       
|Plan Category                                                  |  | and rights        |           | and rights        |  | plans              
|                                                               |  |                   |           |                   |  |                    
|Equity compensation plans approved by
    security holders     |  |                   | 2,248,876 |                   |  | $                   | 13.46 |  |  |  | 2,112,000 | 
|Equity compensation plans not approved by
    security holders |  |                   |          |                   |  |                     |      |  |  |  | 420,500   | 
|                                                               |  |                   |           |                   |  |                     |       |  |  |  |           | 
|Total                                                          |  |                   | 2,248,876 |                   |  | $                   | 13.46 |  |  |  | 2,532,500 | 
|                                                               |  |                   |           |                   |  |                     |       |  |  |  |           | 

For descriptions of equity compensation plans,
refer to the heading Stock Compensation Plans in
Note 5 to our consolidated financial statements contained within
Item 15 of this Annual Report on Form 10-K.

The sections under the heading Executive
Compensation within the Companys 2003 Proxy
Statement, are incorporated herein by reference.






|         |                                                                                                   
|-------- | --------------------------------------------------------------------------------------------------
|Item 12. | Security Ownership of Certain Beneficial
    Owners and Management and Related Stockholder Matters

The section under the heading Security
Ownership of Certain Stockholders and Management within
the Companys 2003 Proxy Statement, is incorporated herein
by reference.






|         |                                                   
|-------- | --------------------------------------------------
|Item 13. | Certain Relationships and Related
    Transactions

The section under the heading Certain
Relationships and Related Transactions within the
Companys 2003 Proxy Statement is incorporated by reference.






|         |                        
|-------- | -----------------------
|Item 14. | Controls and Procedures

(a) Evaluation of disclosure controls and
procedures.

As required by SEC rules, the Company has
evaluated the effectiveness of the design and operation of its
disclosure controls and procedures within 90 days of the filing
of this quarterly report. This evaluation was carried out under
the supervision and with the participation of the Companys
management, including its principal executive officer and
principal financial officer. Based on this evaluation, these
officers have concluded that the design and operation of the
Companys disclosure controls and procedures are effective.
There were no significant changes to the Companys internal
controls or in other factors that could significantly affect
internal controls subsequent to the date of their evaluation.

Disclosure controls and procedures are the
Companys controls and other procedures that are designed
to ensure that information required to be disclosed by the
Company in the reports that it files or submits under the
Exchange Act is recorded, processed, summarized and reported,
within the time periods specified in the SECs rules and
forms. Disclosure controls and procedures include, without
limitation, controls and procedures designed to ensure that
information required to be disclosed by the Company in the
reports that the Company files under the Exchange Act is
accumulated and communicated to the Companys management,
including its principal executive officer and principal
financial officer, as appropriate, to allow timely decisions
regarding required disclosure.

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(b) Changes in internal controls.

N/ A




PART IV.






|         |                                                                    
|-------- | -------------------------------------------------------------------
|Item 15. | Exhibits, Financial Statement Schedules and
    Reports on Form 8-K

(a) (1) Financial Statements

The financial statements listed in the
accompanying Index to Financial Statements are filed as part of
this Annual Report on Form 10-K.

(a) (2) Financial Statement Schedules

Schedule II  Valuation and
Qualifying Accounts

All other schedules have been omitted because the
information is not required or is not so material as to require
submission of the schedule, or because the information is
included in the financial statements or the notes thereto.

(b) Reports on Form 8-K

The Company did not file any reports on
Form 8-K during the fourth quarter of the fiscal year ended
December 29, 2002.

(c) Exhibits

| |       |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                  
| | ----- |  |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 2.1   |  |  | Asset Purchase and Sale Agreement dated May 31,
    2000, by and between Serologicals Corporation and Aventis
    Bio-Services, Inc. (Exhibit 2.1 to the Companys
    Quarterly Report on Form 10-Q for the period ended June 25,
    2000 is hereby incorporated by reference).                                                                                                                                
| | 2.2   |  |  | Plan and Agreement of Merger dated
    November 5, 2001, by and among Serologicals Corporation,
    Intergen Company, L.P., Serocor Incorporated, and Intergen
    Investors, L.P. (Exhibit 2.1 to the Companys Current
    Report on Form 8-K, dated December 19, 2001, is hereby
    incorporated by reference).                                                                                              
| | 2.2.1 |  |  | Amendment to Plan and Agreement of Merger dated
    December 13, 2001 (Exhibit 2.2 to the Companys
    Current Report on Form 8-K, dated December 19, 2001, is
    hereby incorporated by reference).                                                                                                                                                                                                           
| | 2.3   |  |  | Earnout Agreement dated December 13, 2001 by
    and among Serologicals Corporation, Intergen Investors L.P., STJ
    Bio Corp., Spencer Paige Corp., Ronald Dilling, Donald
    Gutenkunst, President and Fellows of Harvard College, and
    University of Illinois Foundation (Exhibit 2.3 to the
    Companys Current Report on Form 8-K, dated
    December 19, 2001, is hereby incorporated by reference).
| | 2.4   |  |  | Agreement of Purchase and Sale, dated
    November 30, 1998, between Serologicals Corporation and
    Bayer Corporation (Exhibit 2.1 to the Companys
    Current Report on Form 8-K, dated January 12, 1999, is
    hereby incorporated by reference).                                                                                                                                                          
| | 2.4.1 |  |  | First Amendment to the Agreement of Purchase and
    Sale, dated December 29, 1998, between Serologicals
    Corporation and Bayer Corporation (Exhibit 2.2 to the
    Companys Current Report on Form 8-K, dated March 15,
    1999, is hereby incorporated by reference).                                                                                                                                     
| | 2.5   |  |  | Security Purchase Agreement dated February 11,
    2003 between Serologicals Research Products, Inc. and Falcon
    International Investment Holdings LLC.*                                                                                                                                                                                                                                                      
| | 2.6   |  |  | European Purchase Agreement dated February 11,
    2003 between Serologicals Research Products, Inc. and Falcon
    International Investment Holdings LLC.*                                                                                                                                                                                                                                                      
| | 3.1   |  |  | Amended and Restated Certificate of
    Incorporation.*                                                                                                                                                                                                                                                                                                                                                          

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| |        |  |  |                                                                                                                                                                                                                                                                                                                                                                                
| | ------ |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 3.2    |  |  | Amended and Restated By-laws (Exhibit 3.4 to
    the Companys Registration Statement on Form S-1 (File
    No. 33-91176), effective June 14, 1995, is hereby
    incorporated by reference).                                                                                                                                                                                  
| | 4.1    |  |  | Specimen Common Stock Certificate
    (Exhibit 4.1 to the Companys Registration Statement
    on Form S-1 (File No. 33-91176), effective June 14,
    1995, is hereby incorporated by reference).                                                                                                                                                                             
| | 4.2.1  |  |  | Specimen Form of Rights Certificate
    (incorporated herein by reference to Exhibit 2.1 of the
    Registration Statement on Form 8-A filed August 10, 1999).                                                                                                                                                                                                                 
| | 4.2.2  |  |  | Form of Rights Agreement, dated as of August
    2, 1999, between the Company and State Street Bank & Trust
    Company, N.A. (incorporated herein by reference to
    Exhibit 2.2 of the Registration Statement on Form 8-A
    filed August 10, 1999).                                                                                                                       
| | 4.2.3  |  |  | Form of Certificate of Designation,
    Preferences and Rights of Series B Preferred Stock (incorporated
    herein by reference to Exhibit 2.3 of the Registration
    Statement on Form 8-A filed August 10, 1999).                                                                                                                                                          
| | 4.2.4  |  |  | Summary of Rights Plan (incorporated herein by
    reference to Exhibit 2.4 of the Registration Statement on
    Form 8-A filed August 10, 1999).                                                                                                                                                                                                                              
| | 10.1   |  |  | Fourth Amended and Restated Credit Agreement,
    dated as of April 25, 2002, between the Company and Bank of
    America, N.A., JP Morgan Chase Bank, Branch Banking and Trust
    Company, and PNC Bank, National Association. (Exhibit 10.1
    to the Companys Quarterly Report on Form 10-Q for the
    period ended March 31, 2002 is hereby incorporated by reference).
| | 10.2   |  |  | Employment Agreement between the Company and
    Robert P. Collins (Exhibit 10.1 to the Companys
    Quarterly Report on Form 10Q for the period ended September
    30, 2001 is incorporated herein by reference).                                                                                                                                                          
| | 10.3   |  |  | 1994 Second Amended and Restated Omnibus
    Incentive Plan, as Amended (Exhibit 10.7.2 to the
    Companys Quarterly Report on Form 10-Q for the period
    ended June 25, 2000 is hereby incorporated by
    reference).                                                                                                                                                   
| | 10.3   |  |  | Forms of Stock Option Agreement
    (Exhibit 10.15 to the Companys Registration Statement
    on Form S-1 (File No. 33-91176), effective June 14,
    1995, is hereby incorporated by reference).                                                                                                                                                                            
| | 10.4.1 |  |  | Forms of Second Revised Stock Option
    Agreements.*                                                                                                                                                                                                                                                                                                                         
| | 10.4.2 |  |  | Forms of Third Revised Stock Option
    Agreements.*                                                                                                                                                                                                                                                                                                                          
| | 10.5   |  |  | Amended and Restated 1995 Non-Employee
    Directors Stock Option Plan, as Amended (Exhibit 10.6
    to the Companys Annual Report on Form 10-K for the
    period ended December 31, 2000 is hereby incorporated by
    reference).                                                                                                                                        
| | 10.6   |  |  | Form of Indemnification Agreement
    (Exhibit 10.16 to the Companys Registration Statement
    on Form S-1 (File No. 33-91176), effective June 14,
    1995, is hereby incorporated by reference).                                                                                                                                                                           
| | 10.7   |  |  | 1996 Employee Stock Purchase Plan.*                                                                                                                                                                                                                                                                                                                                           
| | 10.8   |  |  | Serologicals Corporation 1996 UK Sharesave
    Scheme.*                                                                                                                                                                                                                                                                                                                       
| | 10.9   |  |  | Transition Agreement between the Company and P.
    Anne Hoppe (Exhibit 10.17.1 to the Companys Quarterly
    Report on Form 10-Q for the period ended March 26, 2000 is
    hereby incorporated by reference).                                                                                                                                                              
| | 10.10  |  |  | Forms of Senior Executive Severance Agreement
    (Exhibit 10.20 to the Companys Annual Report on
    Form 10-K for the period ended December 27, 1998 is
    hereby incorporated by reference).                                                                                                                                                                              
| | 10.11  |  |  | Forms of Executive Severance Agreement
    (Exhibit 10.21 to the Companys Annual Report on
    Form 10-K for the period ended December 27, 1998 is
    hereby incorporated by reference).                                                                                                                                                                                     
| | 10.12  |  |  | Employment Agreement between the Company and
    Peter J. Pizzo, III. (Exhibit 10.24 to the Companys
    Annual Report on Form 10-K for the period ended
    December 26, 1999 is hereby incorporated by
    reference).                                                                                                                                                     

37



---



##### Table of Contents



| |         |  |  |                                                                                                                                                                                                                                                    
| | ------- |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10.12.1 |  |  | Severance Agreement between the Company and Peter
    J. Pizzo, III. (Exhibit 10.4 to the Companys
    Quarterly Report on Form 10-Q for the period ending September
    30, 2001 is hereby incorporated by reference).                          
| | 10.13   |  |  | Employment Agreement between the Company and
    Harold W. Ingalls (Exhibit 10.2 of the Companys
    Quarterly Report on Form 10-Q for the period ending
    September 30, 2001 is hereby incorporated by reference).                            
| | 10.14   |  |  | Amended and Restated Compensation Plan for
    Non-Employee Directors (Exhibit 10.26 to the Companys
    Quarterly Report on Form 10-Q for the period ended
    June 25, 2000 is hereby incorporated by reference).                              
| | 10.15   |  |  | Employment Agreement between the Company and
    David A. Dodd (Exhibit 10.27 to the Companys
    Quarterly Report on Form 10-Q for the period ended June 25,
    2000 is hereby incorporated by reference).                                     
| | 10.16   |  |  | Employment Agreement between the Company and
    Jeffrey D. Linton (Exhibit 10.28 to the Companys
    Quarterly Report on Form 10-Q for the period ended
    September 24, 2000 is hereby incorporated by reference).                            
| | 10.17   |  |  | Lease Agreement dated October 6, 2000
    between the Company and Spalding Triangle, L.L.C.
    (Exhibit 10.29 to the Companys Quarterly Report on
    Form 10-Q for the period ended September 24, 2000 is hereby
    incorporated by reference).
| | 10.18   |  |  | Employment Agreement between the Company and Sue
    Sutton-Jones (Exhibit 10.26 to the Companys Annual
    Report on Form 10-K for the year ended December 31,
    2000 is hereby incorporated by reference).                                   
| | 10.19   |  |  | Employment Agreement between the Company and
    Thomas H. Trobaugh (Exhibit 10.3 to the Companys
    Quarterly Report on Form 10-Q for the period ending
    September 30, 2001 is hereby incorporated by reference).                           
| | 10.19.1 |  |  | Severance Agreement between the Company and
    Thomas H. Trobaugh.*                                                                                                                                                                              
| | 10.20   |  |  | Employment Agreement between the Company and
    Joseph T. Kozma (Exhibit 10.20 to the Companys Annual
    Report on Form 10-K for the period ending December 30,
    2001 is hereby incorporated by reference).                                 
| | 10.21   |  |  | Employment Agreement between the Company and
    Roland Gerritsen van der Hoop, M.D., Ph.D. (Exhibit 10.2 to
    the Companys Quarterly Report on Form 10-Q for the
    period ending March 31, 2002 is hereby incorporated by
    reference).   
| | 10.22   |  |  | Employment Agreement between the Company and
    James J. Kramer, Ph. D. (Exhibit 10.1 to the Companys
    Quarterly Report on Form 10-Q for the period ending
    June 30, 2002 is hereby incorporated by reference).                           
| | 10.23   |  |  | Employment Agreement between the Company and
    David L. Bellitt.*                                                                                                                                                                               
| | 10.24   |  |  | Guaranty Agreement dated February 11, 2003 by and
    among Serologicals Research Products, Inc., The Beckman Family
    Trust, David Alan Beckman, Keiko Koga Beckman and Falcon
    International Investment Holdings LLC.*                      
| | 10.25   |  |  | Employment Agreement between the Company and
    Keith J. Thompson.*                                                                                                                                                                              
| | 21      |  |  | Subsidiaries of the Company.*                                                                                                                                                                                                                      
| | 23.1    |  |  | Consent of Deloitte & Touche LLP.*                                                                                                                                                                                                                 
| | 99.1    |  |  | Certification of the Chief Executive Officer
    pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                     
| | 99.2    |  |  | Certification of the Chief Financial Officer
    pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                     



---



|  |               
|- | --------------
|* | Filed herewith



|  |                                 
|- | --------------------------------
| | Compensatory Plan or Arrangement

38



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##### Table of Contents






SIGNATURES

Pursuant to the requirements of Section 13
or 15(d) of the Securities Exchange Act of 1934, Serologicals
Corporation has duly caused this annual report on Form 10-K
to be signed on its behalf by the undersigned, thereunto duly
authorized on March 25, 2003.



| |                         
| | ------------------------
| | SEROLOGICALS CORPORATION
| | (Registrant)            



| |     |                  
| | --- | -----------------
| | By: | /s/ DAVID A. DODD

| |                                    
| | -----------------------------------
| |                                    
| | David A. Dodd                      
| | President & Chief Executive Officer

Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below by the
following persons on behalf of Serologicals Corporation and in
the capacities indicated on March 25, 2003:

|                                                                 |  |                                                        
|---------------------------------------------------------------- |  | -------------------------------------------------------
|Signature                                                        |  | Title                                                  
|                                                                 |  |                                                        
|/s/ DAVID A. DODDDavid A. Dodd                                   |  | President, Chief Executive Officer and Director        
|                                                                
|/s/ HAROLD W. INGALLSHarold W. Ingalls                           |  | Vice President, Finance and Chief Financial
    Officer
|                                                                
|/s/ SAMUEL R. SCHWARTZSamuel R. Schwartz                         |  | Corporate Controller and Chief Accounting Officer      
|                                                                
|/s/ DESMOND H. OCONNELLDesmond H. OConnell                     |  | Chairman of the Board of Directors                     
|                                                                
|/s/ GEORGE M. SHAW, M.D., PH.D.George M. Shaw, M.D., Ph.D.       |  | Director                                               
|                                                                
|/s/ LAWRENCE E. TILTONLawrence E. Tilton                         |  | Director                                               
|                                                                
|/s/ RONALD G. GELBMANRonald G. Gelbman                           |  | Director                                               
|                                                                
|/s/ WADE FETZER, IIIWade Fetzer, III                             |  | Director                                               
|                                                                
|/s/ GERARD M. MOUFFLETGerard M. Moufflet                         |  | Director                                               
|                                                                
|/s/ RALPH E. CHRISTOFFERSEN, PH.D.Ralph E. Christoffersen, Ph.D. |  | Director                                               

39



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##### Table of Contents






CERTIFICATION OF CHIEF EXECUTIVE
OFFICER

I, David A. Dodd, certify that



|   |                                                                                                                                                                                                                                                                                                                                             
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1. | I have reviewed this Annual Report on
    Form 10-K of Serologicals Corporation;                                                                                                                                                                                                                                                            
|  
|2. | Based on my knowledge, this Annual Report does
    not contain any untrue statement of a material fact or omit to
    state a material fact necessary to make the statements made, in
    light of the circumstances under which such statements were
    made, not misleading with respect to the period covered by this
    Annual Report;
|  
|3. | Based on my knowledge, the financial statements
    and other financial information included in this Annual Report,
    fairly present in all material respects the financial condition,
    results of operations and cash flows of the registrant as of,
    and for, the periods presented in this Annual Report;                        
|  
|4. | The registrants other certifying officers
    and I are responsible for establishing and maintaining
    disclosure controls and procedures (as defined in Exchange Act
    Rules 13a-14 and 15d-14) for the registrant and we have:                                                                                                       



| |     |                                                                                                                                                                                                                                                                                                             
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) | designed such disclosure controls and procedures
    to ensure that material information relating to the registrant,
    including its consolidated subsidiaries, is made known to us by
    others within those entities, particularly during the period in
    which this Annual Report is being prepared;
|
| | (b) | evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this Annual
    Report (the Evaluation Date); and                                                                                                      
|
| | (c) | presented in this Annual Report our conclusions
    about the effectiveness of the disclosure controls and
    procedures based on our evaluation as of the Evaluation Date;                                                                                                                                



|   |                                                                                                                                                                                                                                                               
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|5. | The registrants other certifying officers
    and I have disclosed, based on our most recent evaluation, to
    the registrants auditors and the audit committee of
    registrants board of directors (or persons performing the
    equivalent function):



| |     |                                                                                                                                                                                                                                                                                                                   
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) | all significant deficiencies in the design or
    operation of internal controls which could adversely affect the
    registrants ability to record, process, summarize and
    report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and
|
| | (b) | any fraud, whether or not material, that involves
    management or other employees who have a significant role in the
    registrants internal controls; and                                                                                                                                                    



|   |                                                                                                                                                                                                                                                                                                                                                                                                        
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|6. | The registrants other certifying officers
    and I have indicated in this Annual Report whether there were
    significant changes in internal controls or in other factors
    that could significantly affect internal controls subsequent to
    the date of our most recent evaluation, including any corrective
    actions with regard to significant deficiencies and material
    weaknesses.

Date: March 25, 2003

| |                                                                                      
| | -------------------------------------------------------------------------------------
| | /s/ DAVID A. DODD 
     _________________________________________ 
     David A. Dodd
| | President, Chief Executive Officer and Director                                      

40



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##### Table of Contents






CERTIFICATION OF CHIEF FINANCIAL
OFFICER

I, Harold W. Ingalls, certify that



|   |                                                                                                                                                                                                                                                                                                                                             
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1. | I have reviewed this Annual Report on
    Form 10-K of Serologicals Corporation;                                                                                                                                                                                                                                                            
|  
|2. | Based on my knowledge, this Annual Report does
    not contain any untrue statement of a material fact or omit to
    state a material fact necessary to make the statements made, in
    light of the circumstances under which such statements were
    made, not misleading with respect to the period covered by this
    Annual Report;
|  
|3. | Based on my knowledge, the financial statements
    and other financial information included in this Annual Report,
    fairly present in all material respects the financial condition,
    results of operations and cash flows of the registrant as of,
    and for, the periods presented in this Annual Report;                        
|  
|4. | The registrants other certifying officers
    and I are responsible for establishing and maintaining
    disclosure controls and procedures (as defined in Exchange Act
    Rules 13a-14 and 15d-14) for the registrant and we have:                                                                                                       



| |    |                                                                                                                                                                                                                                                                                                             
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a. | designed such disclosure controls and procedures
    to ensure that material information relating to the registrant,
    including its consolidated subsidiaries, is made known to us by
    others within those entities, particularly during the period in
    which this Annual Report is being prepared;



| |    |                                                                                                                                                                                                       
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | b. | evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this Annual
    Report (the Evaluation Date); and



| |    |                                                                                                                                                                             
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | c. | presented in this Annual Report our conclusions
    about the effectiveness of the disclosure controls and
    procedures based on our evaluation as of the Evaluation Date;



|   |                                                                                                                                                                                                                                                               
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|5. | The registrants other certifying officers
    and I have disclosed, based on our most recent evaluation, to
    the registrants auditors and the audit committee of
    registrants board of directors (or persons performing the
    equivalent function):



| |    |                                                                                                                                                                                                                                                                                                                   
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a. | all significant deficiencies in the design or
    operation of internal controls which could adversely affect the
    registrants ability to record, process, summarize and
    report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and



| |    |                                                                                                                                                               
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------
| | b. | any fraud, whether or not material, that involves
    management or other employees who have a significant role in the
    registrants internal controls; and



|   |                                                                                                                                                                                                                                                                                                                                                                                                        
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|6. | The registrants other certifying officers
    and I have indicated in this Annual Report whether there were
    significant changes in internal controls or in other factors
    that could significantly affect internal controls subsequent to
    the date of our most recent evaluation, including any corrective
    actions with regard to significant deficiencies and material
    weaknesses.

Date: March 25, 2003

| |                                                                                              
| | ---------------------------------------------------------------------------------------------
| | /s/ HAROLD W. INGALLS 
     _________________________________________ 
     Harold W. Ingalls
| | Vice President, Finance and                                                                  
| | Chief Financial Officer                                                                      

41



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##### Table of Contents



INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS

|                                                                                                                                         |  |      |     | 
|---------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | --- | 
|                                                                                                                                         |  | Page
|                                                                                                                                         |  |     
|Independent Auditors Report                                                                                                             |  |      | F-2 | 
|Copy of Report Previously Issued by the
    Companys Former Independent Public Accountants                                              |  |      | F-3 | 
|Consolidated Balance Sheets 
    December 29, 2002 and December 30, 2001                                                                |  |      | F-4 | 
|Consolidated Statements of Income  For the
    years ended December 29, 2002, December 30, 2001 and
    December 31, 2000               |  |      | F-5 | 
|Consolidated Statements of Stockholders
    Equity  For the years ended December 29, 2002,
    December 30, 2001 and December 31, 2000 |  |      | F-6 | 
|Consolidated Statements of Cash Flows  For
    the years ended December 29, 2002, December 30, 2001
    and December 31, 2000           |  |      | F-7 | 
|Notes to Consolidated Financial Statements                                                                                               |  |      | F-8 | 

F-1



---



##### Table of Contents



INDEPENDENT AUDITORS REPORT

Board of Directors and Stockholders of 
 Serologicals Corporation:

We have audited the consolidated balance sheet of
SEROLOGICALS CORPORATION AND SUBSIDIARIES(the
Company) as of December 29, 2002, and the
related consolidated statements of income, shareholders
equity, and cash flows for the year then ended. Our audit also
included the financial statement schedule for the year ended
December 29, 2002 listed in the Index at Item 15.
These financial statements and financial statement schedule are
the responsibility of the Companys management. Our
responsibility is to express an opinion on the financial
statements and financial statement schedule based on our audit.
The consolidated financial statements of Serologicals
Corporation as of December 30, 2001, and for each of the two
years in the period ended December 30, 2001, before the
revisions described in Notes 2 and 12 to the consolidated
financial statements, were audited by other auditors who have
ceased operations. Those auditors expressed an unqualified
opinion on those consolidated financial statements in their
report dated February 25, 2002.

We conducted our audit in accordance with
auditing standards generally accepted in the United States of
America. 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 audit
provides a reasonable basis for our opinion.

In our opinion, such 2002 consolidated financial
statements present fairly, in all material respects, the
financial position of the Company as of December 29, 2002,
and the results of its operations and its cash flows for the
year then ended in conformity with accounting principles
generally accepted in the United States of America. Also, in our
opinion, such financial statement schedule for the year ended
December 29, 2002, when considered in relation to the basic
consolidated financial statements taken as a whole, presents
fairly in all material respects the information set forth
therein.

As discussed in Note 2 to the consolidated
financial statements, the Company changed its method of
accounting for goodwill and other intangible assets to conform
to Statement of Financial Accounting Standards No. 142
Goodwill and Other Intangible Assets, (SFAS
142), which was adopted by the Company as of
December 31, 2001.

As discussed above, the consolidated financial
statements of the Company as of December 30, 2001 and for
each of the two years in the period ended December 30, 2001
were audited by other auditors who have ceased operations. As
described in Note 2, these consolidated financial statements
have been revised to include the disclosures required by SFAS
142. As described in Note 12, the Company changed the
composition of its reportable segments in 2002, and the amounts
in the 2001 and 2000 consolidated financial statements relating
to reportable segments have been revised to conform to the 2002
composition of reportable segments. We audited the adjustments
described in Note 12 that were applied to revise the disclosure
for reportable segments reflected in the 2001 and 2000
consolidated financial statements. We also audited the SFAS 142
disclosures described in Note 2. In our opinion, such
adjustments and disclosures are appropriate and have been
properly applied. However, we were not engaged to audit, review,
or apply any procedures to the 2001 and 2000 consolidated
financial statements of the Company other than with respect to
such adjustments and disclosures and, accordingly, we do not
express an opinion or any other form of assurance on the 2001
and 2000 consolidated financial statements taken as a whole.

/s/ DELOITTE & TOUCHE LLP

Atlanta, Georgia

February 28, 2003


F-2



---



##### Table of Contents



COPY OF REPORT PREVIOUSLY ISSUED BY THE
COMPANYS

FORMER INDEPENDENT PUBLIC
ACCOUNTANTS


NOTE: We could not obtain permission of
Arthur Andersen LLP to the inclusion in this Annual Report on
Form 10-K of their Report of Independent Public Accountants
issued on February 25, 2002. This is a copy of a report
previously issued by Arthur Andersen LLP, the Companys
former independent accountants. The Arthur Andersen LLP report
refers to certain financial information for the year ended
December 26, 1999 and certain balance sheet information at
December 31, 2000, which are no longer included in the
accompanying financial statements. Additionally, the schedule
referred to below has been included in Item 15 in the 2002
Annual Report on Form 10-K. Arthur Andersen LLP has not
reissued this report in connection with the filing of this
Annual Report on Form 10-K.

To Serologicals Corporation:

We have audited the accompanying consolidated
balance sheets of SEROLOGICALS CORPORATION(a Delaware
corporation) AND SUBSIDIARIESas of December 30,
2001 and December 31, 2000 and the related consolidated
statements of income, stockholders equity and cash flows
for each of the three fiscal years ended December 30, 2001.
These financial statements and the schedule referred to below
are the responsibility of the Companys management. Our
responsibility is to express an opinion on these financial
statements and schedule based on our audits.

We conducted our audits in accordance with
auditing standards generally accepted in the 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 Serologicals Corporation and subsidiaries as of
December 30, 2001 and December 31, 2000 and the
results of their operations and their cash flows for each of the
three fiscal years ended December 30, 2001 in conformity
with accounting principles generally accepted in the United
States.

Our audits were made for the purpose of forming
an opinion on the basic financial statements taken as a whole.
The schedule included in Item 14 of the Companys
Form 10-K is presented for purposes of complying with the
Securities and Exchange Commissions rules and is not part
of the basic financial statements. This schedule has been
subjected to the auditing procedures applied in the audits of
the basic financial statements and, in our opinion, fairly
states in all material respects the financial data required to
be set forth therein in relation to the basic financial
statements taken as a whole.

/s/ ARTHUR ANDERSEN LLP

Atlanta, Georgia

February 25, 2002


F-3



---



##### Table of Contents



SEROLOGICALS CORPORATION AND
SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

December 29, 2002 and December 30,
2001


(in thousands, except share amounts)


|                                                                          |                                                                                                                                                                                          |                            |                                                |         |         |         |        |         |         |         | 
|------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ---------------------------------------------- | ------- | ------- | ------- | ------ | ------- | ------- | ------- | 
|                                                                          |                                                                                                                                                                                          | 2002                       |                                                | 2001   
|                                                                          |                                                                                                                                                                                          |                            |                                                |        
|ASSETS                                                                    |                                                                                                                                                                                          |                            |                                                |         |         |         |        |        
|CURRENT ASSETS:                                                           |                                                                                                                                                                                          |                            |                                                |         |         |         |        |        
|                                                                          | Cash and cash equivalents                                                                                                                                                                |                            | $                                              | 12,850  |         |         | $      | 10,780  |        
|                                                                          | Trade accounts receivable, less allowance for
    doubtful accounts of $822 and $1,975 at December 29, 2002
    and December 30, 2001, respectively                                      |                            |                                                | 35,868  |         |         |        | 24,652  |        
|                                                                          | Inventories                                                                                                                                                                              |                            |                                                | 26,305  |         |         |        | 31,595  |        
|                                                                          | Income tax receivable                                                                                                                                                                    |                            |                                                | 780     |         |         |        | 4,201   |        
|                                                                          | Other current assets                                                                                                                                                                     |                            |                                                | 5,912   |         |         |        | 4,144   |        
|                                                                          |                                                                                                                                                                                          |                            |                                                |         |         |         |        |        
|                                                                          |                                                                                                                                                                                          | Total current assets       |                                                |         | 81,715  |         |        |         | 75,372  |        
|                                                                          |                                                                                                                                                                                          |                            |                                                |         |         |         |        |        
|PROPERTY AND EQUIPMENT, net                                               |                                                                                                                                                                                          |                            | 55,461                                         |         |         |         | 48,869 |        
|                                                                          |                                                                                                                                                                                          |                            |                                                |         |         |         |        |        
|OTHER ASSETS:                                                             |                                                                                                                                                                                          |                            |                                                |         |         |         |        |        
|                                                                          | Goodwill                                                                                                                                                                                 |                            |                                                | 39,226  |         |         |        | 35,360  |        
|                                                                          | Patents and proprietary know-how, net                                                                                                                                                    |                            |                                                | 10,704  |         |         |        | 11,471  |        
|                                                                          | Intangible assets, net                                                                                                                                                                   |                            |                                                | 3,508   |         |         |        | 3,696   |        
|                                                                          | Other, net                                                                                                                                                                               |                            |                                                | 551     |         |         |        | 570     |        
|                                                                          |                                                                                                                                                                                          |                            |                                                |         |         |         |        |        
|                                                                          |                                                                                                                                                                                          | Total other assets         |                                                |         | 53,989  |         |        |         | 51,097  |        
|                                                                          |                                                                                                                                                                                          |                            |                                                |         |         |         |        |        
|                                                                          |                                                                                                                                                                                          |                            | Total assets                                   |         | $       | 191,165 |        |         | $       | 175,338 | 
|                                                                          |                                                                                                                                                                                          |                            |                                                |         |         |         |        |        
|LIABILITIES AND STOCKHOLDERS
    EQUITY                                  |                                                                                                                                                                                          |                            |                                                |         |         |         |        |        
|CURRENT LIABILITIES:                                                      |                                                                                                                                                                                          |                            |                                                |         |         |         |        |        
|                                                                          | Current maturities of long-term debt and capital
    lease obligations                                                                                                                   |                            | $                                              | 385     |         |         | $      | 3,125   |        
|                                                                          | Accounts payable                                                                                                                                                                         |                            |                                                | 5,361   |         |         |        | 5,955   |        
|                                                                          | Accrued liabilities                                                                                                                                                                      |                            |                                                | 9,833   |         |         |        | 10,711  |        
|                                                                          | Deferred revenue                                                                                                                                                                         |                            |                                                | 668     |         |         |        | 425     |        
|                                                                          |                                                                                                                                                                                          |                            |                                                |         |         |         |        |        
|                                                                          |                                                                                                                                                                                          | Total current liabilities  |                                                |         | 16,247  |         |        |         | 20,216  |        
|                                                                          |                                                                                                                                                                                          |                            |                                                |         |         |         |        |        
|LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS,
    less current maturities |                                                                                                                                                                                          |                            | 39                                             |         |         |         | 1,451  |        
|                                                                          |                                                                                                                                                                                          |                            |                                                |         |         |         |        |        
|DEFERRED INCOME TAXES                                                     |                                                                                                                                                                                          |                            | 4,116                                          |         |         |         | 858    |        
|                                                                          |                                                                                                                                                                                          |                            |                                                |         |         |         |        |        
|OTHER LIABILITIES                                                         |                                                                                                                                                                                          |                            | 393                                            |         |         |         | 338    |        
|                                                                          |                                                                                                                                                                                          |                            |                                                |         |         |         |        |        
|COMMITMENTS AND CONTINGENCIES (NOTE 7)
    STOCKHOLDERS EQUITY:          |                                                                                                                                                                                          |                            |                                                |         |         |         |        |        
|                                                                          | Preferred stock, $.01 par value; 1,000,000 shares
    authorized, no shares issued                                                                                                       |                            |                                                |        |         |         |        |        |        
|                                                                          | Common stock, $.01 par value; 50,000,000 shares
    authorized, 27,730,053 and 27,455,790 shares issued and
    outstanding at December 29, 2002 and December 30, 2001,
    respectively |                            |                                                | 277     |         |         |        | 275     |        
|                                                                          | Additional paid-in capital                                                                                                                                                               |                            |                                                | 118,116 |         |         |        | 114,489 |        
|                                                                          | Retained earnings                                                                                                                                                                        |                            |                                                | 72,211  |         |         |        | 58,262  |        
|                                                                          | Accumulated other comprehensive income (loss)                                                                                                                                            |                            |                                                | 113     |         |         |        | (551    | )      
|                                                                          | Less: common stock held in treasury (3,288,000
    and 3,268,000 shares at December 29, 2002 and
    December 30, 2001, respectively)                                                    |                            |                                                | (20,347 | )       |         |        | (20,000 | )      
|                                                                          |                                                                                                                                                                                          |                            |                                                |         |         |         |        |        
|                                                                          |                                                                                                                                                                                          | Total stockholders equity |                                                |         | 170,370 |         |        |         | 152,475 |        
|                                                                          |                                                                                                                                                                                          |                            |                                                |         |         |         |        |        
|                                                                          |                                                                                                                                                                                          |                            | Total liabilities and
    stockholders equity |         | $       | 191,165 |        |         | $       | 175,338 | 
|                                                                          |                                                                                                                                                                                          |                            |                                                |         |         |         |        |        

The accompanying notes are an integral part of
these consolidated balance sheets.

F-4



---



##### Table of Contents



SEROLOGICALS CORPORATION AND
SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

For the Years Ended December 29, 2002,
December 30, 2001 and December 31, 2000


(in thousands, except share and per share
amounts)


|                                     |                                              |      |         |            |   |      |         |            |   |   |         |            |  
|------------------------------------ | -------------------------------------------- | ---- | ------- | ---------- | - | ---- | ------- | ---------- | - | - | ------- | ---------- | -
|                                     |                                              | 2002 |         | 2001       |   | 2000
|                                     |                                              |      |         |            |   |     
|NET SALES                            |                                              | $    | 145,470 |            |   | $    | 109,792 |            |   | $ | 147,760 |           
|COSTS AND EXPENSES:                  |                                              |      |         |            |   |      |         |            |   |   |         |           
|                                     | Cost of sales                                |      |         | 76,627     |   |      |         | 57,627     |   |   |         | 101,113    |  
|                                     | Selling, general and administrative expenses |      |         | 37,974     |   |      |         | 23,521     |   |   |         | 21,777     |  
|                                     | Research and development                     |      |         | 5,628      |   |      |         | 1,665      |   |   |         | 710        |  
|                                     | Special charges (credits), net               |      |         | 3,228      |   |      |         | 61         |   |   |         | (414       | )
|                                     |                                              |      |         |            |   |      |         |            |   |   |         |           
|OPERATING INCOME                     |                                              |      | 22,013  |            |   |      | 26,918  |            |   |   | 24,574  |           
|                                     | Other expense, net                           |      |         | 951        |   |      |         | 1,471      |   |   |         | 2,376      |  
|                                     | Interest (income) expense, net               |      |         | (398       | ) |      |         | (1,139     | ) |   |         | 1,233      |  
|                                     |                                              |      |         |            |   |      |         |            |   |   |         |           
|INCOME BEFORE INCOME TAXES           |                                              |      | 21,460  |            |   |      | 26,586  |            |   |   | 20,965  |           
|PROVISION FOR INCOME TAXES           |                                              |      | 7,511   |            |   |      | 9,494   |            |   |   | 8,048   |           
|                                     |                                              |      |         |            |   |      |         |            |   |   |         |           
|NET INCOME                           |                                              | $    | 13,949  |            |   | $    | 17,092  |            |   | $ | 12,917  |           
|                                     |                                              |      |         |            |   |      |         |            |   |   |         |           
|NET INCOME PER COMMON SHARE:         |                                              |      |         |            |   |      |         |            |   |   |         |           
|                                     | Basic                                        |      | $       | 0.57       |   |      | $       | 0.72       |   |   | $       | 0.57       |  
|                                     |                                              |      |         |            |   |      |         |            |   |   |         |           
|                                     | Diluted                                      |      | $       | 0.56       |   |      | $       | 0.70       |   |   | $       | 0.56       |  
|                                     |                                              |      |         |            |   |      |         |            |   |   |         |           
|WEIGHTED AVERAGE SHARES OUTSTANDING: |                                              |      |         |            |   |      |         |            |   |   |         |           
|                                     | Basic                                        |      |         | 24,356,852 |   |      |         | 23,748,764 |   |   |         | 22,814,855 |  
|                                     |                                              |      |         |            |   |      |         |            |   |   |         |           
|                                     | Diluted                                      |      |         | 24,837,205 |   |      |         | 24,438,505 |   |   |         | 23,283,393 |  
|                                     |                                              |      |         |            |   |      |         |            |   |   |         |           

The accompanying notes are an integral part of
these consolidated statements.

F-5



---



##### Table of Contents



SEROLOGICALS CORPORATION AND
SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS
EQUITY

For the Years Ended December 29, 2002,
December 30, 2001 and December 31, 2000


(in thousands, except share amounts)


|                                                                 |                      |              |            |            |  |          |     |               |  |                |         |        |  |        |        |        |  |   |      |      |   |  |            |   |  |   |         |   |  |   |         |        | 
|---------------------------------------------------------------- | -------------------- | ------------ | ---------- | ---------- |  | -------- | --- | ------------- |  | -------------- | ------- | ------ |  | ------ | ------ | ------ |  | - | ---- | ---- | - |  | ---------- | - |  | - | ------- | - |  | - | ------- | ------ | 
|                                                                 |                      |              |            |            |  |          |     |               |  | Accumulated    |         |        |  |        |        |       
|                                                                 |                      |              |            |            |  |          |     | Other         |  |                |         |       
|                                                                 |                      | Common Stock |            | Additional |  |          |     | Comprehensive |  | Treasury Stock |         |       
|                                                                 |                      |              |            | Paid-In    |  | Retained |     | Income        |  |                |         |       
|                                                                 |                      | Shares       |            | Amount     |  | Capital  |     | Earnings      |  | (Loss)         |         | Shares |  | Amount |        | Total 
|                                                                 |                      |              |            |            |  |          |     |               |  |                |         |        |  |        |        |       
|BALANCE, December 26, 1999                                       |                      |              | 24,912,823 |            |  | $        | 249 |               |  | $              | 91,383  |        |  | $      | 28,253 |        |  | $ | 362  |      |   |  | (2,611,155 | ) |  | $ | (17,023 | ) |  | $ | 103,224 |       
|Comprehensive income:                                            |                      |              |            |            |  |          |     |               |  |                |         |        |  |        |        |        |  |   |      |      |   |  |            |   |  |   |         |   |  |   |         |       
|Net income                                                       |                      |              |           |            |  |          |    |               |  |                |        |        |  |        | 12,917 |        |  |   |     |      |   |  |           |   |  |   |        |   |  |   | 12,917  |       
|Foreign currency translation adjustments, net of
    tax of $278 |                      |              |           |            |  |          |    |               |  |                |        |        |  |        |       |        |  |   | (506 | )    |   |  |           |   |  |   |        |   |  |   | (506    | )     
|                                                                 |                      |              |            |            |  |          |     |               |  |                |         |        |  |        |        |        |  |   |      |      |   |  |            |   |  |   |         |   |  |   |         |       
|                                                                 | Comprehensive income |              |            |           |  |          |     |              |  |                |         |       |  |        |        | 12,917 |  |   |      | (506 | ) |  |            |  |  |   |         |  |  |   |         | 12,411 | 
|                                                                 |                      |              |            |            |  |          |     |               |  |                |         |        |  |        |        |        |  |   |      |      |   |  |            |   |  |   |         |   |  |   |         |       
|Exercise of stock options                                        |                      |              | 1,130,907  |            |  |          | 11  |               |  |                | 3,232   |        |  |        |       |        |  |   |     |      |   |  |           |   |  |   |        |   |  |   | 3,243   |       
|Shares issued through employee stock
    purchase plan           |                      |              | 45,065     |            |  |          | 1   |               |  |                | 188     |        |  |        |       |        |  |   |     |      |   |  |           |   |  |   |        |   |  |   | 189     |       
|Tax effect of stock option exercise                              |                      |              |           |            |  |          |    |               |  |                | 2,617   |        |  |        |       |        |  |   |     |      |   |  |           |   |  |   |        |   |  |   | 2,617   |       
|Repurchase of common stock                                       |                      |              |           |            |  |          |    |               |  |                |        |        |  |        |       |        |  |   |     |      |   |  | (656,845   | ) |  |   | (2,977  | ) |  |   | (2,977  | )     
|                                                                 |                      |              |            |            |  |          |     |               |  |                |         |        |  |        |        |        |  |   |      |      |   |  |            |   |  |   |         |   |  |   |         |       
|BALANCE, December 31, 2000                                       |                      |              | 26,088,795 |            |  |          | 261 |               |  |                | 97,420  |        |  |        | 41,170 |        |  |   | (144 | )    |   |  | (3,268,000 | ) |  |   | (20,000 | ) |  |   | 118,707 |       
|Comprehensive income:                                            |                      |              |            |            |  |          |     |               |  |                |         |        |  |        |        |        |  |   |      |      |   |  |            |   |  |   |         |   |  |   |         |       
|Net income                                                       |                      |              |           |            |  |          |    |               |  |                |        |        |  |        | 17,092 |        |  |   |     |      |   |  |           |   |  |   |        |   |  |   | 17,092  |       
|Foreign currency translation adjustments, net of
    tax of $209 |                      |              |           |            |  |          |    |               |  |                |        |        |  |        |       |        |  |   | (407 | )    |   |  |           |   |  |   |        |   |  |   | (407    | )     
|                                                                 |                      |              |            |            |  |          |     |               |  |                |         |        |  |        |        |        |  |   |      |      |   |  |            |   |  |   |         |   |  |   |         |       
|                                                                 | Comprehensive income |              |            |           |  |          |     |              |  |                |         |       |  |        |        | 17,092 |  |   |      | (407 | ) |  |            |  |  |   |         |  |  |   |         | 16,685 | 
|                                                                 |                      |              |            |            |  |          |     |               |  |                |         |        |  |        |        |        |  |   |      |      |   |  |            |   |  |   |         |   |  |   |         |       
|Exercise of stock options                                        |                      |              | 1,241,185  |            |  |          | 12  |               |  |                | 13,122  |        |  |        |       |        |  |   |     |      |   |  |           |   |  |   |        |   |  |   | 13,134  |       
|Conversion of common stock warrants                              |                      |              | 98,530     |            |  |          | 1   |               |  |                | (1      | )      |  |        |       |        |  |   |     |      |   |  |           |   |  |   |        |   |  |   |        |       
|Shares issued through employee stock purchase
    plans          |                      |              | 27,280     |            |  |          | 1   |               |  |                | 178     |        |  |        |       |        |  |   |     |      |   |  |           |   |  |   |        |   |  |   | 179     |       
|Deferred and other compensation                                  |                      |              |           |            |  |          |    |               |  |                | 91      |        |  |        |       |        |  |   |     |      |   |  |           |   |  |   |        |   |  |   | 91      |       
|Tax effect of stock option exercise                              |                      |              |           |            |  |          |    |               |  |                | 3,679   |        |  |        |       |        |  |   |     |      |   |  |           |   |  |   |        |   |  |   | 3,679   |       
|                                                                 |                      |              |            |            |  |          |     |               |  |                |         |        |  |        |        |        |  |   |      |      |   |  |            |   |  |   |         |   |  |   |         |       
|BALANCE, December 30, 2001                                       |                      |              | 27,455,790 |            |  |          | 275 |               |  |                | 114,489 |        |  |        | 58,262 |        |  |   | (551 | )    |   |  | (3,268,000 | ) |  |   | (20,000 | ) |  |   | 152,475 |       
|Comprehensive income:                                            |                      |              |            |            |  |          |     |               |  |                |         |        |  |        |        |        |  |   |      |      |   |  |            |   |  |   |         |   |  |   |         |       
|Net income                                                       |                      |              |           |            |  |          |    |               |  |                |        |        |  |        | 13,949 |        |  |   |     |      |   |  |           |   |  |   |        |   |  |   | 13,949  |       
|Foreign currency translation adjustments, net of
    tax of $357 |                      |              |           |            |  |          |    |               |  |                |        |        |  |        |       |        |  |   | 664  |      |   |  |           |   |  |   |        |   |  |   | 664     |       
|                                                                 |                      |              |            |            |  |          |     |               |  |                |         |        |  |        |        |        |  |   |      |      |   |  |            |   |  |   |         |   |  |   |         |       
|                                                                 | Comprehensive income |              |            |           |  |          |     |              |  |                |         |       |  |        |        | 13,949 |  |   |      | 664  |   |  |            |  |  |   |         |  |  |   |         | 14,613 | 
|                                                                 |                      |              |            |            |  |          |     |               |  |                |         |        |  |        |        |        |  |   |      |      |   |  |            |   |  |   |         |   |  |   |         |       
|Exercise of stock options                                        |                      |              | 249,405    |            |  |          | 2   |               |  |                | 2,323   |        |  |        |       |        |  |   |     |      |   |  |           |   |  |   |        |   |  |   | 2,325   |       
|Shares issued through employee stock
    purchase plans          |                      |              | 24,858     |            |  |          |    |               |  |                | 326     |        |  |        |       |        |  |   |     |      |   |  |           |   |  |   |        |   |  |   | 326     |       
|Deferred and other compensation                                  |                      |              |           |            |  |          |    |               |  |                | 198     |        |  |        |       |        |  |   |     |      |   |  |           |   |  |   |        |   |  |   | 198     |       
|Repurchase of common stock                                       |                      |              |           |            |  |          |    |               |  |                |        |        |  |        |       |        |  |   |     |      |   |  | (20,000    | ) |  |   | (347    | ) |  |   | (347    | )     
|Tax effect of stock option exercise                              |                      |              |           |            |  |          |    |               |  |                | 780     |        |  |        |       |        |  |   |     |      |   |  |           |   |  |   |        |   |  |   | 780     |       
|                                                                 |                      |              |            |            |  |          |     |               |  |                |         |        |  |        |        |        |  |   |      |      |   |  |            |   |  |   |         |   |  |   |         |       
|BALANCE, December 29, 2002                                       |                      |              | 27,730,053 |            |  | $        | 277 |               |  | $              | 118,116 |        |  | $      | 72,211 |        |  | $ | 113  |      |   |  | (3,288,000 | ) |  | $ | (20,347 | ) |  | $ | 170,370 |       
|                                                                 |                      |              |            |            |  |          |     |               |  |                |         |        |  |        |        |        |  |   |      |      |   |  |            |   |  |   |         |   |  |   |         |       

The accompanying notes are an integral part of
these consolidated statements.

F-6



---



##### Table of Contents



SEROLOGICALS CORPORATION AND
SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH
FLOWS

For the Years Ended December 29, 2002,
December 30, 2001 and December 31, 2000


(in thousands)


|                                                                          |                                                                                                      |                                            |                                                         |         |         |         |         |         |        |         |        |         |        |         |  
|------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------------------------------------------------------- | ------- | ------- | ------- | ------- | ------- | ------ | ------- | ------ | ------- | ------ | ------- | -
|                                                                          |                                                                                                      | 2002                                       |                                                         | 2001    |         | 2000   
|                                                                          |                                                                                                      |                                            |                                                         |         |         |        
|OPERATING ACTIVITIES:                                                     |                                                                                                      |                                            |                                                         |         |         |         |         |         |        |         |        |        
|                                                                          | Net income                                                                                           |                                            | $                                                       | 13,949  |         |         | $       | 17,092  |        |         | $      | 12,917  |       
|                                                                          |                                                                                                      |                                            |                                                         |         |         |         |         |         |        |         |        |        
|                                                                          | Adjustments to reconcile net income to net cash
    provided by operating activities:                |                                            |                                                         |         |         |         |         |         |        |         |        |         |       
|                                                                          |                                                                                                      | Depreciation and amortization              |                                                         |         | 6,947   |         |         |         | 6,169  |         |        |         | 7,472  |        
|                                                                          |                                                                                                      | Loss on disposal of assets                 |                                                         |         |        |         |         |         | 39     |         |        |         |       |        
|                                                                          |                                                                                                      | Tax benefit from exercise of stock options |                                                         |         | 780     |         |         |         | 3,679  |         |        |         | 2,617  |        
|                                                                          |                                                                                                      | Deferred and other compensation            |                                                         |         | 198     |         |         |         | 91     |         |        |         |       |        
|                                                                          |                                                                                                      | Deferred income tax provision              |                                                         |         | 2,457   |         |         |         | 1,196  |         |        |         | 6,535  |        
|                                                                          |                                                                                                      | Non-cash special charges (credits), net    |                                                         |         | 882     |         |         |         | (1,062 | )       |        |         | (1,386 | )      
|                                                                          | Changes in operating assets and liabilities, net
    of acquisitions and dispositions of businesses: |                                            |                                                         |         |         |         |         |         |        |         |        |         |       
|                                                                          |                                                                                                      | Trade accounts receivable, net             |                                                         |         | (11,216 | )       |         |         | (7,745 | )       |        |         | 16,432 |        
|                                                                          |                                                                                                      | Inventories                                |                                                         |         | 2,098   |         |         |         | 1,969  |         |        |         | 11,045 |        
|                                                                          |                                                                                                      | Income tax receivable                      |                                                         |         | 3,421   |         |         |         | 128    |         |        |         | (583   | )      
|                                                                          |                                                                                                      | Other assets                               |                                                         |         | (1,962  | )       |         |         | 2,658  |         |        |         | (3,758 | )      
|                                                                          |                                                                                                      | Accounts payable                           |                                                         |         | (594    | )       |         |         | (1,853 | )       |        |         | (2,123 | )      
|                                                                          |                                                                                                      | Accrued liabilities                        |                                                         |         | (1,337  | )       |         |         | (1,400 | )       |        |         | (2,818 | )      
|                                                                          |                                                                                                      | Deferred revenue                           |                                                         |         | 243     |         |         |         | 392    |         |        |         | (1,352 | )      
|                                                                          |                                                                                                      | Other, net                                 |                                                         |         | 1,313   |         |         |         | 276    |         |        |         | (787   | )      
|                                                                          |                                                                                                      |                                            |                                                         |         |         |         |         |         |        |         |        |        
|                                                                          |                                                                                                      |                                            | Total adjustments                                       |         |         | 3,230   |         |         |        | 4,537   |        |         |        | 31,294  |  
|                                                                          |                                                                                                      |                                            |                                                         |         |         |         |         |         |        |         |        |        
|                                                                          |                                                                                                      |                                            | Net cash provided by operating activities               |         |         | 17,179  |         |         |        | 21,629  |        |         |        | 44,211  |  
|                                                                          |                                                                                                      |                                            |                                                         |         |         |         |         |         |        |         |        |        
|INVESTING ACTIVITIES:                                                     |                                                                                                      |                                            |                                                         |         |         |         |         |         |        |         |        |        
|                                                                          | Purchases of property and equipment                                                                  |                                            |                                                         | (12,509 | )       |         |         | (5,081  | )      |         |        | (9,560  | )     
|                                                                          | Purchases of businesses, net of cash acquired                                                        |                                            |                                                         | (327    | )       |         |         | (41,369 | )      |         |        | (3,460  | )     
|                                                                          | Disposition of business, net of cash
    expenses paid                                               |                                            |                                                         |        |         |         |         |        |        |         |        | 20,097  |       
|                                                                          |                                                                                                      |                                            |                                                         |         |         |         |         |         |        |         |        |        
|                                                                          |                                                                                                      |                                            | Net cash (used in) provided by
    investing activities |         |         | (12,836 | )       |         |        | (46,450 | )      |         |        | 7,077   |  
|                                                                          |                                                                                                      |                                            |                                                         |         |         |         |         |         |        |         |        |        
|FINANCING ACTIVITIES:                                                     |                                                                                                      |                                            |                                                         |         |         |         |         |         |        |         |        |        
|                                                                          | Net payments on revolving line of credit                                                             |                                            |                                                         |        |         |         |         |        |        |         |        | (30,000 | )     
|                                                                          | Payments on long-term debt and capital
    lease obligations                                         |                                            |                                                         | (4,040  | )       |         |         | (204    | )      |         |        | (2,554  | )     
|                                                                          | Proceeds from stock plans and warrants                                                               |                                            |                                                         | 2,651   |         |         |         | 13,313  |        |         |        | 3,432   |       
|                                                                          | Repurchase of common stock                                                                           |                                            |                                                         | (347    | )       |         |         |        |        |         |        | (2,977  | )     
|                                                                          | Other                                                                                                |                                            |                                                         | (537    | )       |         |         |        |        |         |        | 9       |       
|                                                                          |                                                                                                      |                                            |                                                         |         |         |         |         |         |        |         |        |        
|                                                                          |                                                                                                      |                                            | Net cash (used in) provided by
    financing activities |         |         | (2,273  | )       |         |        | 13,109  |        |         |        | (32,090 | )
|                                                                          |                                                                                                      |                                            |                                                         |         |         |         |         |         |        |         |        |        
|NET INCREASE (DECREASE) IN CASH AND
    CASH EQUIVALENTS                  |                                                                                                      |                                            | 2,070                                                   |         |         |         | (11,712 | )       |        |         | 19,198 |        
|CASH AND CASH EQUIVALENTS, beginning
    of year                          |                                                                                                      |                                            | 10,780                                                  |         |         |         | 22,492  |         |        |         | 3,294  |        
|                                                                          |                                                                                                      |                                            |                                                         |         |         |         |         |         |        |         |        |        
|CASH AND CASH EQUIVALENTS, end
    of year                                |                                                                                                      | $                                          | 12,850                                                  |         |         | $       | 10,780  |         |        | $       | 22,492 |        
|                                                                          |                                                                                                      |                                            |                                                         |         |         |         |         |         |        |         |        |        
|SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING
    AND FINANCING ACTIVITIES: |                                                                                                      |                                            |                                                         |         |         |         |         |         |        |         |        |        
|                                                                          | Accrued acquisition consideration                                                                    |                                            | $                                                       |        |         |         | $       | 570     |        |         | $      |        |       
|                                                                          | Accrued purchase of property and equipment                                                           |                                            |                                                         |        |         |         |         | 612     |        |         |        |        |       

The accompanying notes are an integral part of
these consolidated statements.

F-7



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##### Table of Contents



SEROLOGICALS CORPORATION AND
SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

December 29, 2002, December 30, 2001
and December 31, 2000




|   |                                     
|-- | ------------------------------------
|1. | Organization and Business Operations

Serologicals Corporation, a Delaware corporation,
(together with its subsidiaries, the Company or
Serologicals) is a global provider of biological
products and enabling technologies to life science companies.
The Companys products are essential for the research,
development and manufacturing of biologically based life science
products. The Companys products and technologies are used
in a wide variety of applications within the areas of oncology,
hematology, immunology, cardiology and infectious diseases, as
well as in the study of molecular biology. The Companys
customers include many of the leading life sciences companies
throughout the world.

The Company conducts its operations at facilities
located in North America and Europe. The Company operates
protein fractionation facilities located in Kankakee, Illinois
and in Toronto, Ontario. These facilities provide a variety of
proteins used in diagnostic reagents and cell culture media
components for use as additives in biotech products. A number of
these products, such as bovine serum albumin (BSA),
are primarily supplied to life science companies for use in
diagnostic reagents. Additionally, these facilities produce a
line of highly purified animal proteins, known as tissue culture
components that are used primarily by biopharmaceutical and
biotechnology companies as nutrient additives in cell culture
media. One example of these media components is EX-CYTE®,
which is produced through a patented manufacturing process. The
Company also operates a monoclonal antibody manufacturing
facility in Scotland that is engaged in the development,
manufacturing and sale of monoclonal antibody products for use
in diagnostic products such as blood typing reagents, and in
controls for tests used for diagnosing certain infectious
diseases. The Company operates a facility in Milford,
Massachusetts that includes a central product distribution
facility, as well as operations related to the Companys
human-sourced polyclonal antibody business and the production of
substrates for use in diagnostic assays. The Company also
operates a research and development laboratory in Gaithersburg,
Maryland. As of December 29, 2002, the Company conducted
its therapeutic operations (or blood plasma operations) through
a national network of 13 donor centers that specialize in the
collection of specialty human antibodies.

The industries in which the Company operates are
subject to strict regulation and licensing by the FDA and
similar regulatory bodies in many of the states and foreign
countries where the Company or its customers conduct business.
Changes in existing federal, state or foreign laws or
regulations could have an adverse effect on the Companys
business.

Export sales from the United States represented
approximately 42% of net sales in 2002, and foreign sales
originating in the United Kingdom accounted for an additional 9%
of net sales (Note 12). Concern over the safety of blood
products has led to movements in a number of countries,
particularly those in western Europe, to restrict the
importation of blood and blood derivatives 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 and
blood derivatives and have not adversely affected the Company.
However, there can be no assurance that the impact of these or
other efforts will not have a material adverse effect on the
Company or its operations.

The Company generates significant sales outside
the United States and is subject to risks generally associated
with international operations. The Companys operations in
Scotland and Canada, which accounted for approximately 17% of
the Companys net sales in 2002, generate certain net sales
and incurs expenses in foreign currencies. Accordingly, the
Companys financial results from international operations
may be affected by fluctuations in currency exchange rates.

F-8



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##### Table of Contents



SEROLOGICALS CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|   |                                               
|-- | ----------------------------------------------
|2. | Summary of Significant Accounting
    Policies

Basis
of Presentation

The accompanying consolidated financial
statements include the accounts of the Company and its
wholly-owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated in consolidation. The
Companys fiscal period end for financial reporting
purposes is the last Sunday of each period and the fiscal year
ends on the Sunday closest to December 31. Fiscal years
2002 and 2001 included 52 weeks, and fiscal year 2000
included 53 weeks.

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

Use
of Estimates

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

Cash
Equivalents

For financial reporting purposes, the Company
considers all investments purchased with an original maturity of
three months or less to be cash equivalents.

Inventories

Inventories are stated at the lower of cost or
market, cost being determined on a first-in, first-out basis.
Market for product inventories is net realizable value and for
supplies is replacement cost.

Inventories at December 29, 2002 and
December 30, 2001 consisted of the following (in thousands):

|                |  |      |        |      |  |   |        | 
|--------------- |  | ---- | ------ | ---- |  | - | ------ | 
|                |  | 2002 |        | 2001
|                |  |      |        |     
|Raw materials   |  | $    | 4,167  |      |  | $ | 4,999  | 
|Work in process |  |      | 4,132  |      |  |   | 4,302  | 
|Finished goods  |  |      | 18,006 |      |  |   | 22,294 | 
|                |  |      |        |      |  |   |        | 
|                |  | $    | 26,305 |      |  | $ | 31,595 | 
|                |  |      |        |      |  |   |        | 

Property
and Equipment

Property and equipment are stated at cost. Major
property additions, replacements, and betterments are
capitalized, while maintenance and repairs which do not extend
the useful lives of these assets are expensed as incurred.
Depreciation is provided using the straight-line method over the
estimated useful lives for financial reporting purposes. For
income tax purposes, the Company uses accelerated depreciation
methods. Depreciable lives for equipment, furniture and fixtures
generally range from three to ten years. Leasehold improvements
are amortized over the shorter of the lease term or the economic
lives of the assets. Buildings and improvements are depreciated
over lives ranging from 20 to 32.5 years.

Software developed or acquired for internal use
is accounted for in accordance with Statement of Position 98-1,
Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use (SOP 98-1).
SOP 98-1 requires certain direct development costs
associated with internal-use software to be capitalized,
including external direct costs of material and services and
payroll costs for employees devoting time to the software
projects. Costs incurred during the preliminary project stage,
as well as for maintenance

F-9



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##### Table of Contents



SEROLOGICALS CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

and training are expensed as incurred. During
2002, the Company capitalized costs associated with various
projects totaling approximately $3.2 million. As of
December 29, 2002, the net book value of capitalized
software project costs is approximately $6.4 million. Of
this total, approximately $3.4 million is included in
Construction in Progress and the remainder is included in
Furniture, Fixtures and Equipment.

Property and equipment at December 29, 2002
and December 30, 2001 consisted of the following
(in thousands):

|                                          |  |      |         |      |  |   |         |  
|----------------------------------------- |  | ---- | ------- | ---- |  | - | ------- | -
|                                          |  | 2002 |         | 2001
|                                          |  |      |         |     
|Land, buildings and improvements          |  | $    | 21,407  |      |  | $ | 11,863  |  
|Leasehold improvements                    |  |      | 4,791   |      |  |   | 6,199   |  
|Furniture, fixtures and equipment         |  |      | 46,113  |      |  |   | 34,116  |  
|Construction in progress                  |  |      | 4,901   |      |  |   | 15,391  |  
|                                          |  |      |         |      |  |   |         |  
|Total property and equipment              |  |      | 77,212  |      |  |   | 67,569  |  
|Accumulated depreciation and amortization |  |      | (21,751 | )    |  |   | (18,700 | )
|                                          |  |      |         |      |  |   |         |  
|Property and equipment, net               |  | $    | 55,461  |      |  | $ | 48,869  |  
|                                          |  |      |         |      |  |   |         |  

Construction in progress at December 29,
2002 relates primarily to expenditures relating to the
Companys implementation of an Enterprise Resource Planning
system.

Consolidated depreciation expense was
$5.7 million, $4.7 million and $4.7 million in 2002,
2001 and 2000, respectively.

Accrued
Liabilities

Accrued liabilities at December 29, 2002 and
December 30, 2001 consisted of the following
(in thousands):

|                                                             |  |      |       |      |  |   |        | 
|------------------------------------------------------------ |  | ---- | ----- | ---- |  | - | ------ | 
|                                                             |  | 2002 |       | 2001
|                                                             |  |      |       |     
|Accrued payroll, bonuses, severance and
    related benefits |  | $    | 4,903 |      |  | $ | 3,809  | 
|Accrued inventory purchases                                  |  |      | 156   |      |  |   | 1,089  | 
|Other                                                        |  |      | 4,774 |      |  |   | 5,813  | 
|                                                             |  |      |       |      |  |   |        | 
|                                                             |  | $    | 9,833 |      |  | $ | 10,711 | 
|                                                             |  |      |       |      |  |   |        | 

Revenue
Recognition and Deferred Revenue

The Company recognizes revenue in accordance with
SEC Staff Accounting Bulletin No. 101, Revenue
Recognition in Financial Statements (SAB 101).
SAB 101 requires that four basic criteria must be met before
revenue can be recognized: (1) persuasive evidence of an
arrangement exists; (2) delivery has occurred; (3) the
selling price is fixed and determinable; and (4) collectibility
is reasonably assured. Determination of criteria (3) and
(4) are based on managements judgments regarding the
fixed nature of the selling prices of the products delivered and
the collectibility of those amounts. The Company has negotiated
volume pricing discounts with certain customers that provide for
a discount if certain volumes of the Companys products are
purchased. The Company defers any revenue subject to refund if
the volumes are met under these arrangements until such time
that the Company and the customer jointly determine that the
volumes required for discount will not be achieved.

F-10



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##### Table of Contents



SEROLOGICALS CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Foreign
Operations

The financial statements of the Companys
manufacturing operations located in Scotland and Canada have
been translated into U.S. dollars in accordance with Statement
of Financial Accounting Standards (SFAS)
No. 52, Foreign Currency Translation. Under
SFAS No. 52, all balance sheet accounts are translated at
the exchange rate at year-end. Income statement items are
translated at the average exchange rate for the year.
Translation adjustments are not included in determining net
income but are accumulated and reported as a component of
stockholders equity and comprehensive income. Realized
gains and losses, which result from foreign currency
transactions, are included in other expenses, net within the
accompanying Consolidated Statements of Income. Realized foreign
currency gains (losses) were immaterial in 2002, 2001 and
2000.

Goodwill
and Other Intangible Assets

Goodwill

In July 2001, the Financial Accounting
Standards Board (FASB) issued SFAS No. 142,
Goodwill and Other Intangible Assets. SFAS
No. 142 requires companies to cease amortizing goodwill and
establishes a new method for testing goodwill for impairment on
an annual basis (or an interim basis if an event occurs that
might reduce the fair value of a reporting unit below its
carrying value). Any goodwill resulting from acquisitions
completed after June 30, 2001 will not be amortized. SFAS
No. 142 also requires that an identifiable intangible asset
which is determined to have an indefinite useful economic life
not be amortized, but be separately tested for impairment using
a fair value based approach. The Company adopted SFAS
No. 142 effective December 31, 2001 resulting in a
decrease in amortization expense of approximately
$1.4 million during the year ended December 29, 2002
when compared to the year ended December 30, 2001.

The changes in the carrying amount of goodwill
during the period are summarized as follows (in thousands):

|                                  |  |               |        |            |  |             |       |       |  |   |       |  |  |   |        | 
|--------------------------------- |  | ------------- | ------ | ---------- |  | ----------- | ----- | ----- |  | - | ----- |  |  | - | ------ | 
|                                  |  | Biotechnology |        | Diagnostic |  | Therapeutic |       |      
|                                  |  | Products      |        | Products   |  | Products    |       | Total
|                                  |  |               |        |            |  |             |       |      
|Balance as of December 30, 2001   |  | $             | 24,320 |            |  | $           | 2,626 |       |  | $ | 8,414 |  |  | $ | 35,360 | 
|Goodwill acquired during the year |  |               | 2,899  |            |  |             | 967   |       |  |   |      |  |  |   | 3,866  | 
|                                  |  |               |        |            |  |             |       |       |  |   |       |  |  |   |        | 
|Balance as of December 29, 2002   |  | $             | 27,219 |            |  | $           | 3,593 |       |  | $ | 8,414 |  |  | $ | 39,226 | 
|                                  |  |               |        |            |  |             |       |       |  |   |       |  |  |   |        | 

During 2002, the Company tested goodwill and
intangible assets with indefinite useful lives for impairment as
of December 31, 2001, as required by SFAS No. 142,
utilizing a combination of valuation techniques including the
expected present value of future cash flows, a market multiple
approach, and a comparable transaction approach. The analysis
did not result in an impairment during fiscal 2002. As of
December 29, 2002 the Company does not believe any of its
goodwill or long-lived assets are impaired.

Prior to the adoption of SFAS No. 142,
goodwill was amortized on a straight-line basis over periods
ranging from 22 1/2 to 25 years. Prior to the
divestiture of Seramed in 2000, the Company amortized goodwill
over periods ranging from 13 to 25 years. Had the Company
accounted for goodwill and intangibles with

F-11



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##### Table of Contents



SEROLOGICALS CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

indefinite useful lives consistent with the
provisions of SFAS No. 142 in prior periods, the
Companys net income would have been affected as follows
(in thousands, except per share data):

|                                            |  |      |        |      |  |      |        |  |  |   |        | 
|------------------------------------------- |  | ---- | ------ | ---- |  | ---- | ------ |  |  | - | ------ | 
|                                            |  | 2002 |        | 2001 |  | 2000
|                                            |  |      |        |      |  |     
|Reported net income                         |  | $    | 13,949 |      |  | $    | 17,092 |  |  | $ | 12,917 | 
|Add back: Goodwill amortization, net of tax |  |      |       |      |  |      | 920    |  |  |   | 1,663  | 
|                                            |  |      |        |      |  |      |        |  |  |   |        | 
|Adjusted net income                         |  | $    | 13,949 |      |  | $    | 18,012 |  |  | $ | 14,580 | 
|                                            |  |      |        |      |  |      |        |  |  |   |        | 
|Basic earnings per share:                   |  |      |        |      |  |      |        |  |  |   |        | 
|Reported net income                         |  | $    | 0.57   |      |  | $    | 0.72   |  |  | $ | 0.57   | 
|Add back: Goodwill amortization, net of tax |  |      |       |      |  |      | 0.04   |  |  |   | 0.07   | 
|                                            |  |      |        |      |  |      |        |  |  |   |        | 
|Adjusted net income                         |  | $    | 0.57   |      |  | $    | 0.76   |  |  | $ | 0.64   | 
|                                            |  |      |        |      |  |      |        |  |  |   |        | 
|Diluted earnings per share:                 |  |      |        |      |  |      |        |  |  |   |        | 
|Reported net income                         |  | $    | 0.56   |      |  | $    | 0.70   |  |  | $ | 0.56   | 
|Add back: Goodwill amortization, net of tax |  |      |       |      |  |      | 0.04   |  |  |   | 0.07   | 
|                                            |  |      |        |      |  |      |        |  |  |   |        | 
|Adjusted net income                         |  | $    | 0.56   |      |  | $    | 0.74   |  |  | $ | 0.63   | 
|                                            |  |      |        |      |  |      |        |  |  |   |        | 

Patents
and Proprietary Know-How

In connection with the acquisition of Intergen
Company, L.P. and Subsidiaries (Intergen), the
Company acquired certain patents and proprietary know-how
related to certain of Intergens core products and
technologies. The value of these patents was determined by an
independent third-party appraisal to be $11.5 million. The
patents and proprietary know-how are amortized over
15 years, the average estimated useful life of the assets.

Trademarks

In connection with the acquisition of Intergen,
the Company acquired certain trademarks associated with several
of Intergens core products and technologies. The value of
these trademarks was determined by an independent third-party
appraisal to be $0.3 million. The trademarks are considered to
have indefinite lives and therefore are not being amortized.

Customer
Relationships

In connection with the acquisition of Intergen,
the Company acquired certain customer relationship intangibles.
The value of these customer relationships was determined by an
independent third-party appraisal to be $2.5 million. The
customer relationships have an estimated weighted average life
of 20 years, and are amortized over this period.

Debt
Issuance Costs

In connection with the amendment of its revolving
credit facility in April 2002 (Note 6), the Company
incurred certain costs. Such amounts were capitalized and are
being amortized to interest (income) expense, net over three
years, the term of the related facility. Debt issuance costs
associated with the previous revolver of $0.7 million, net
of $0.7 million in accumulated amortization was written off
in 2002.

F-12



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##### Table of Contents



SEROLOGICALS CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

FDA
Licenses

In connection with the acquisitions of donor
centers, the Company acquired the related licenses of the
FDA-approved donor centers. The estimated fair values of the FDA
licenses are capitalized and amortized on a straight-line basis
over a period of 25 years.

Non-Compete
Agreements

In connection with certain of its acquisitions,
the Company entered into non-compete agreements with the
sellers. Such agreements are recorded at their estimated fair
market value and were amortized on a straight-line basis over
the terms of the respective agreements, which range from three
to five years. At December 29, 2002, these non-compete
agreements were fully amortized.

The consolidated amortization of all intangible
assets was approximately $1.3 million, $1.5 million
and $2.7 million in 2002, 2001 and 2000, respectively.
Amortization is expected to be $1.2 million,
$1.2 million, $1.1 million, $1.0 million and
$1.0 million in 2003, 2004, 2005, 2006 and 2007,
respectively. Amortization of debt issuance costs is included in
interest (income) expense, net and amortization of the
remaining amortized intangible assets are included in other
expense, net within the accompanying Consolidated Statements of
Income.

The following table sets forth the gross balance
and accumulated amortization of all intangible assets as of
December 29, 2002 and December 30, 2001 (in thousands):

|                                 |  |       |        |              |  |       |        |              |  |   |        |  |  |   |        |  
|-------------------------------- |  | ----- | ------ | ------------ |  | ----- | ------ | ------------ |  | - | ------ |  |  | - | ------ | -
|                                 |  |       |        |             
|                                 |  | 2002  |        | 2001        
|                                 |  |       |        |             
|                                 |  |       |        | Accumulated  |  |       |        | Accumulated 
|                                 |  | Gross |        | Amortization |  | Gross |        | Amortization
|                                 |  |       |        |              |  |       |        |             
|Amortized intangible assets:     |  |       |        |              |  |       |        |              |  |   |        |  |  |   |        |  
|Patents and Proprietary Know-how |  | $     | 11,500 |              |  | $     | (796   | )            |  | $ | 11,500 |  |  | $ | (29    | )
|Customer Relationships           |  |       | 2,500  |              |  |       | (130   | )            |  |   | 2,500  |  |  |   | (5     | )
|Debt Issuance Costs              |  |       | 537    |              |  |       | (128   | )            |  |   | 705    |  |  |   | (526   | )
|FDA Licenses                     |  |       | 655    |              |  |       | (226   | )            |  |   | 883    |  |  |   | (198   | )
|Non-Compete Agreements           |  |       | 367    |              |  |       | (367   | )            |  |   | 375    |  |  |   | (338   | )
|                                 |  |       |        |              |  |       |        |              |  |   |        |  |  |   |        |  
|                                 |  | $     | 15,559 |              |  | $     | (1,647 | )            |  | $ | 15,963 |  |  | $ | (1,096 | )
|                                 |  |       |        |              |  |       |        |              |  |   |        |  |  |   |        |  
|Unamortized intangible assets:   |  |       |        |              |  |       |        |              |  |   |        |  |  |   |        |  
|Trademarks                       |  | $     | 300    |              |  | $     |       |              |  | $ | 300    |  |  | $ |       |  
|                                 |  |       |        |              |  |       |        |              |  |   |        |  |  |   |        |  

Earnings
Per Share

Basic earnings per share are calculated by
dividing net income by the weighted average number of common
shares outstanding during the period. The calculation of the
Companys diluted earnings per share is similar to basic
earnings per share, except that net income is adjusted by the
after-tax interest expense on convertible indebtedness and the
weighted average number of shares includes the dilutive effect
of stock options, stock awards, warrants, convertible
indebtedness and similar instruments.

F-13



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##### Table of Contents



SEROLOGICALS CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The following table sets forth the calculation of
basic and diluted earnings per share (in thousands, except per
share amounts):

|                                                                                        |                                                                    |                        |        |        |        |      |        |        |        |  |        |        |        | 
|--------------------------------------------------------------------------------------- | ------------------------------------------------------------------ | ---------------------- | ------ | ------ | ------ | ---- | ------ | ------ | ------ |  | ------ | ------ | ------ | 
|                                                                                        |                                                                    | 2002                   |        | 2001   |        | 2000
|                                                                                        |                                                                    |                        |        |        |        |     
|Basic earnings per share:                                                               |                                                                    |                        |        |        |        |      |        |        |        |  |        |       
|                                                                                        | Net income                                                         |                        | $      | 13,949 |        |      | $      | 17,092 |        |  | $      | 12,917 |       
|                                                                                        | Weighted average shares of common stock
    outstanding            |                        |        | 24,357 |        |      |        | 23,749 |        |  |        | 22,815 |       
|                                                                                        |                                                                    |                        |        |        |        |      |        |        |        |  |        |       
|                                                                                        |                                                                    | Net income per share   |        | $      | 0.57   |      |        | $      | 0.72   |  |        | $      | 0.57   | 
|                                                                                        |                                                                    |                        |        |        |        |      |        |        |        |  |        |       
|Diluted earnings per share:                                                             |                                                                    |                        |        |        |        |      |        |        |        |  |        |       
|                                                                                        | Net income                                                         |                        | $      | 13,949 |        |      | $      | 17,092 |        |  | $      | 12,917 |       
|                                                                                        | Plus: interest expense on convertible
    indebtedness, net of tax |                        |        |       |        |      |        |       |        |  |        | 50     |       
|                                                                                        |                                                                    | Net income as adjusted |        | $      | 13,949 |      |        | $      | 17,092 |  |        | $      | 12,967 | 
|                                                                                        |                                                                    |                        |        |        |        |      |        |        |        |  |        |       
|Weighted average shares of common
    stock outstanding                                 |                                                                    |                        | 24,357 |        |        |      | 23,749 |        |        |  | 22,815 |       
|                                                                                        | Effect of dilutive securities:                                     |                        |        |        |        |      |        |        |        |  |        |        |       
|                                                                                        | Stock options and warrants                                         |                        |        | 466    |        |      |        | 678    |        |  |        | 324    |       
|                                                                                        | Convertible indebtedness                                           |                        |        |       |        |      |        |       |        |  |        | 138    |       
|                                                                                        | Common stock awards                                                |                        |        | 14     |        |      |        | 11     |        |  |        | 6      |       
|                                                                                        |                                                                    |                        |        |        |        |      |        |        |        |  |        |       
|Weighted average shares of common stock
    outstanding, including dilutive instruments |                                                                    |                        | 24,837 |        |        |      | 24,438 |        |        |  | 23,283 |       
|                                                                                        |                                                                    |                        |        |        |        |      |        |        |        |  |        |       
|                                                                                        |                                                                    | Net income per share   |        | $      | 0.56   |      |        | $      | 0.70   |  |        | $      | 0.56   | 
|                                                                                        |                                                                    |                        |        |        |        |      |        |        |        |  |        |       

The diluted earnings per share calculation for
2002, 2001 and 2000 excludes the effect of options to purchase
approximately 0.9 million, 0.3 million and 1.8 million
shares, respectively, as the option price exceeded the average
market price for the Companys stock during the period and
thus their effect was anti-dilutive.

Stock-Based
Compensation Plan

At December 29, 2002, the Company has one
stock-based employee compensation plan, which is described more
fully in Note 5. The Company accounts for this plan under the
recognition and measurement principles of Accounting Principles
Board (APB) Opinion No. 25, Accounting
for Stock Issued to Employees, and related
interpretations. No stock-based employee compensation cost is
reflected in net income, as all options granted under this plan
had an exercise price equal to the market value of the
underlying common stock on the date of grant. The following
table illustrates the effect on net income and earnings per
share if the Company had applied the fair value recognition
provisions of SFAS No. 123, Accounting for

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##### Table of Contents



SEROLOGICALS CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Stock-Based Compensation, to stock-based
employee compensation (in thousands, except per share amounts):

|                                                                                                                                                    |                       |      |        |      |  |      |        |      |  |   |        |      | 
|--------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------- | ---- | ------ | ---- |  | ---- | ------ | ---- |  | - | ------ | ---- | 
|                                                                                                                                                    |                       | 2002 |        | 2001 |  | 2000
|                                                                                                                                                    |                       |      |        |      |  |     
|Net income, as reported                                                                                                                             |                       | $    | 13,949 |      |  | $    | 17,092 |      |  | $ | 12,917 |     
|Deduct: Total stock-based employee compensation
    expense determined under fair value based method for all awards,
    net of related tax effects |                       |      | 1,119  |      |  |      | 2,209  |      |  |   | 1,145  |     
|                                                                                                                                                    |                       |      |        |      |  |      |        |      |  |   |        |     
|Pro forma net income                                                                                                                                |                       | $    | 12,830 |      |  | $    | 14,883 |      |  | $ | 11,772 |     
|                                                                                                                                                    |                       |      |        |      |  |      |        |      |  |   |        |     
|Earnings per share:                                                                                                                                 |                       |      |        |      |  |      |        |      |  |   |        |     
|                                                                                                                                                    | Basic  as reported   |      | $      | 0.57 |  |      | $      | 0.72 |  |   | $      | 0.57 | 
|                                                                                                                                                    | Basic  pro forma     |      |        | 0.53 |  |      |        | 0.63 |  |   |        | 0.52 | 
|                                                                                                                                                    | Diluted  as reported |      | $      | 0.56 |  |      | $      | 0.70 |  |   | $      | 0.56 | 
|                                                                                                                                                    | Diluted  pro forma   |      |        | 0.53 |  |      |        | 0.62 |  |   |        | 0.52 | 

Under SFAS No. 123, the fair value of
stock-based awards is calculated through the use of
option-pricing models, even though such models were developed to
estimate the fair value of freely tradable, fully transferable
options without vesting restrictions, which differ significantly
from the Companys stock option grants. These models also
require subjective assumptions, including future stock price
volatility and expected lives of each option grant. The fair
value for each option grant was estimated on the grant date
using the Black-Scholes option-pricing model with the following
weighted-average assumptions:

|                                |  |      |      |      |  |      |      |   |  |  |      |  
|------------------------------- |  | ---- | ---- | ---- |  | ---- | ---- | - |  |  | ---- | -
|                                |  | 2002 |      | 2001 |  | 2000
|                                |  |      |      |      |  |     
|Expected life (years)           |  |      | 4.2  |      |  |      | 4.6  |   |  |  | 4.6  |  
|Dividend yield                  |  |      | 0    | %    |  |      | 0    | % |  |  | 0    | %
|Expected stock price volatility |  |      | 65   | %    |  |      | 100  | % |  |  | 85   | %
|Risk-free interest rate         |  |      | 4.14 | %    |  |      | 4.15 | % |  |  | 6.65 | %

Using these assumptions, the weighted average
fair value per share of options granted in 2002, 2001 and 2000
was $10.73, $12.52 and $3.81, respectively.

Recent
Accounting Pronouncements

In August 2001, the FASB issued SFAS
No. 143, Accounting for Asset Retirement
Obligations, which addresses financial accounting and
reporting for obligations associated with the retirement of
tangible long-lived assets and the associated asset retirement
costs. SFAS No. 143 requires that the fair value of a
liability for an asset retirement obligation be recognized in
the period in which it is incurred if a reasonable estimate of
fair value can be made. The fair value of the liability is added
to the carrying amount of the associated asset and this
additional carrying amount is depreciated over the life of the
asset. The liability is accreted at the end of each period
through charges to operating expense. If the obligation is
settled for other than the carrying amount of the liability, a
gain or loss on settlement will be recognized. The Company plans
to adopt SFAS No. 143 in the first quarter of 2003. The
adoption of SFAS No. 143 is not expected to have a material
impact on the Companys financial position or results of
operations.

In June 2002, the FASB issued SFAS
No. 146, Accounting for Costs Associated with Exit or
Disposal Activities.SFAS No. 146 addresses
financial accounting and reporting for costs associated with
exit or disposal activities and nullifies Emerging Issues Task
Force Issue No. 94-3, Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a
Restructuring) (Issue No. 94-3). The
principal difference between SFAS No. 146 and Issue
No. 94-3 relates to its requirements for recognition of a
liability for a cost associated with an exit or disposal
activity.

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##### Table of Contents



SEROLOGICALS CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

SFAS No. 146 requires that a liability for a
cost associated with an exit or disposal activity be recognized
when the liability is incurred. Under Issue No. 94-3, a
liability for an exit cost was recognized at the date of an
entitys commitment to an exit plan. A fundamental
conclusion reached by the FASB in SFAS No. 146 is that an
entitys commitment to a plan, by itself, does not create a
present obligation to others that meets the definition of a
liability. Therefore, SFAS No. 146 eliminates the
definition and requirements for recognition of exit costs in
Issue No. 94-3. SFAS No. 146 also establishes that
fair value is the objective for initial measurement of the
liability. SFAS No. 146 is effective for exit or disposal
activities that are initiated after December 30, 2002. The
Company will adopt SFAS No. 146 effective December 30,
2002. Adoption of SFAS No. 146 will not have a significant
effect on the Companys consolidated financial position or
results of operations.

In November 2002, the FASB issued
Interpretation No. 45 Guarantors Accounting and
Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others (FIN 45).
FIN 45 requires that the guarantor recognize, at the inception
of certain guarantees, a liability for the fair value of the
obligation undertaken in issuing such a guarantee. FIN 45 also
requires additional disclosure about the guarantors
obligations under certain guarantees that it has issued. The
initial recognition and measurement provisions of this
interpretation are applicable on a prospective basis to
guarantees issued or modified after December 30, 2002 and
the disclosure requirements are effective after
December 15, 2002. The Company does not have any material
guarantees at December 29, 2002. The adoption of FIN 45 is
not expected to have a material impact on the Companys
financial position or results of operations.



|   |                                                                  
|-- | -----------------------------------------------------------------
|3. | Acquisitions, Dispositions and Special Charges
    (Credits), Net



| |             
| | ------------
| | Acquisitions

Intergen
Acquisition

On December 13, 2001, the Company completed
the acquisition of Intergen, a privately held limited
partnership. The assets, liabilities and results of operations
of Intergen have been included in the Companys
consolidated financial statements since the date of acquisition.
Intergen was a developer, manufacturer and supplier of a variety
of biological products and technologies to the life sciences
industry. Intergens products and technology support the
development and manufacturing of biopharmaceutical products. The
three primary strategic markets served by Intergen are
1) biotechnology products, 2) diagnostic components,
and 3) life sciences research. Intergen was headquartered
in Purchase, New York, and had operations located in
Gaithersburg, Maryland; Milford, Massachusetts; and Toronto,
Ontario. The Intergen corporate headquarters were permanently
closed during the first quarter of 2002 based on an integration
plan determined at the time of acquisition. The acquisition of
Intergen greatly expanded the Companys range of products
and customers within the life sciences industry, particularly
within the research and pharmaceutical drug development sectors
and enhanced the Companys research and development
capabilities.

The total purchase price was $45 million,
less approximately $1.7 million representing estimated
costs to complete the expansion of Intergens manufacturing
facility in Toronto. To date, the Company has actually incurred
approximately $3.3 million in costs related to the
expansion. Additionally, the Company entered into an earnout
agreement with Intergens partners. The earnout agreement
required the Company to pay additional consideration to
Intergens partners based on a defined formula if
Intergens sales exceeded $8 million during the first
quarter of 2002. This provision resulted in an additional
payment of approximately $0.3 million that was recorded as
an adjustment to goodwill on the accompanying Consolidated
Balance Sheet. This payment was made in July 2002. Also, a
second component of the earnout agreement requires the Company
to pay additional consideration based on a formula related to
sales of certain Intergen technologies over a five year period
ending December 31, 2006. Any payments made under the
earnout agreement will be treated as additional consideration
and accounted for as additional goodwill. No payments were made
under this component of the earnout agreement during 2002.

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##### Table of Contents



SEROLOGICALS CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

During 2002, the Company recorded several
additional purchase price adjustments to goodwill. These
adjustments included additional severance costs related to the
acquisition of $0.1 million, adjustments to the preliminary
opening inventory valuation for slow moving inventory of
$3.2 million, a discount related to early payment of a
supplier note payable of $0.1 million and an accrual for
certain license agreements of $0.3 million. Additionally in
2002, the Company reversed into income $0.4 million of
allowance for doubtful accounts, offset by an additional
$0.4 million accruals for certain pre-acquisition expenses.

The components of the total purchase price were
as follows (in thousands):

|                                        |  |   |        | 
|--------------------------------------- |  | - | ------ | 
|Cash paid at closing                    |  | $ | 42,735 | 
|Cash paid pursuant to earnout agreement |  |   | 327    | 
|Direct costs of acquisition             |  |   | 1,064  | 
|Amounts payable at future date          |  |   | 570    | 
|Notes payable                           |  |   | 3,712  | 
|Other liabilities assumed               |  |   | 9,750  | 
|                                        |  |   |        | 
|                                        |  | $ | 58,158 | 
|                                        |  |   |        | 

The Company has allocated the purchase price
based on the fair values of the assets and liabilities acquired
as follows (in thousands):

|                                      |  |   |        | 
|------------------------------------- |  | - | ------ | 
|Assets acquired:                      |  |   |        | 
|Cash and cash equivalents             |  | $ | 2,430  | 
|Accounts receivable, net of allowance |  |   | 3,780  | 
|Inventory                             |  |   | 9,186  | 
|Other current assets                  |  |   | 826    | 
|Property and equipment                |  |   | 14,917 | 
|Patents and proprietary know-how      |  |   | 11,500 | 
|Customer relationships                |  |   | 2,500  | 
|Trademarks                            |  |   | 300    | 
|Goodwill                              |  |   | 12,013 | 
|Deposits                              |  |   | 130    | 
|Non-current deferred taxes            |  |   | 576    | 
|                                      |  |   |        | 
|                                      |  | $ | 58,158 | 
|                                      |  |   |        | 

The Company allocated the purchase price to the
fair value of identifiable long-lived assets and intangibles as
determined by an independent third party appraisal. Patents and
proprietary know-how and customer relationships have an
estimated weighted average useful life of 15 and 20 years,
respectively. The amounts allocated to trademarks and goodwill
are not amortized in accordance with SFAS No. 142, as their
lives are determined to be indefinite. All of the goodwill
related to the acquisition of Intergen is expected to be
deductible for tax purposes. Intergen is reported in the
Companys Biotechnology Products and Diagnostic Products
segments.

In connection with the allocation of the purchase
price, and the results of the independent appraisal, the Company
determined that no amount should be allocated to in-process
research and development projects, since Intergens
research and development efforts are focused on developing
applications and uses of existing technologies.

F-17



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##### Table of Contents



SEROLOGICALS CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Pentex
Blood Proteins Acquisition

On December 29, 1998, the Company purchased
substantially all of the assets of the Pentex Blood Proteins
business of Bayer Corporation (Proteins). Proteins
is engaged in the research, manufacturing, marketing and sale of
a full line of high quality purified blood protein products
primarily to customers in the diagnostics, biopharmaceutical and
biotechnology industries in the United States and approximately
25 other countries worldwide. The purchase price was
$29 million, before transaction costs and subject to
adjustment based on the closing net assets, as defined, of the
acquired business as of the closing date. The Company paid
approximately $3.5 million during 2000 in settlement of the
non-disputed elements of the post closing adjustment, of which
approximately $1.5 million had been previously accrued, and
the balance of approximately $2.0 million which resulted in
an increase to goodwill.



| |                                                                
| | ---------------------------------------------------------------
| | Dispositions of Business and Special
    Charges (Credits), net

Restructuring

During 2002, the Company completed an extensive
review of its plasma operations. As a result of this review, the
Company permanently closed four of its seventeen donor centers,
resulting in a charge of $1.3 million. The components of
the charge included approximately $0.2 million related to
severance payments, approximately $0.5 million related to
lease obligations and approximately $0.5 million related to
the write-off of certain long-lived assets previously used in
the closed centers. The remaining $0.1 million consisted of
other miscellaneous costs related to the closures. The severance
payments covered approximately thirty-five employees. Severance
payments and lease obligations are expected to be paid by the
end of the second quarter of 2003 and third quarter of 2004,
respectively.

Additionally, during 2002, the Company recorded a
charge of $1.9 million related primarily to the
reorganization of the research and development organization, as
well as personnel restructurings within the sales organization
and at the Companys manufacturing locations in Canada and
Scotland. The components of the charge included approximately
$1.5 million for severance and termination benefits,
approximately $0.1 million related to lease obligations and
approximately $0.3 million related to the write-off of
certain long-lived assets. The severance payments covered
approximately thirty employees. Severance payments and lease
obligations are expected to be paid by the end of 2003.

Seramed
Divestiture

On August 21, 2000, the Company completed
the sale of substantially all of the long-term assets of its
Seramed, Inc. subsidiary and its subsidiaries (collectively,
Seramed) to Aventis. The Company received net cash
proceeds from the sale totaling approximately
$20.1 million, and recognized a gain on the disposal of
approximately $0.2 million. The gross proceeds included
$1.3 million related to the purchase of certain working capital
items and other settlements resulting from the sale. The Company
retained working capital totaling approximately
$12.6 million. During 2000, upon reaching a definitive
agreement to sell the Seramed assets to Aventis, these assets
were considered to be held for sale in accordance
with SFAS No. 121, Accounting for Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed
Of. Accordingly, in 2000 a pre-tax asset impairment charge
was recorded totaling $0.3 million to write down the assets
to their fair value less costs to sell. These assets were
previously reported in the Therapeutic Products segment.

Additional costs related to the divestiture of
Seramed were recorded during 2000 in accordance with Issue
No. 94-3. These charges totaled $0.5 million and consisted
of $0.4 million of lease termination costs and employee
termination benefits related to two employees, which were paid
in full as of December 31, 2000.

During 1999, the Company entered into agreements
with certain key employees that provided for termination
benefits to be paid to the employees in the event that Seramed
was sold, they were employed by

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##### Table of Contents



SEROLOGICALS CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

the Company as of the closing of the sale and met
certain other requirements as outlined in the agreements. The
agreements covered sixty-five employees who were terminated from
the Company upon the sale of Seramed. In accordance with SFAS
No. 112, Employers Accounting for
Postemployment Benefits, the Company recorded a pre-tax
charge of $0.8 million in 2000 representing the amount of
employee termination benefits payable under these agreements.
All of the benefits payable under these arrangements were paid
during 2000. Also during 2000, the Company recorded additional
divestiture-related charges totaling approximately
$0.1 million for other miscellaneous items.

Acquisition
Costs

During the second quarter of 2001, the Company
recorded a charge for $0.9 million to write off incremental
external due diligence costs related to the evaluation of the
potential acquisition of Intergen. At the time of the charge,
the Company did not consider the acquisition probable of being
completed. Subsequently, negotiations resumed with Intergen and
all incremental external direct costs incurred after that date
were capitalized and included as a component of the purchase
price.

Pre-Acquisition
Contingency Costs

During 2001, the Company reversed an accrual
totaling approximately $0.3 million representing amounts
recorded for contingencies as part of the acquisition of
Proteins in December 1998. The Company has determined these
amounts are no longer required to be maintained as all material
anticipated contingencies have been resolved.

Separation
Benefits

During 2000, the Company recorded an expense of
$0.2 million to cover the separation benefits payable to
one employee. In 2001, the Company recorded an expense of
approximately $0.2 million to cover severance costs payable
to its former Chief Financial Officer. As of December 29,
2002, there were no individuals who are continuing to receive
payments under these agreements.

Product
Liability Claim

During 1999, the Company was notified by one of
its customers that certain of the Companys shipments of
anti-D antibodies in the prior year had included several units
of plasma that did not meet this customers exact product
specifications. The customer indicated to the Company that the
units had been partially manufactured with other units of plasma
and thus had affected a substantial number of other units. In
1999, the Company agreed to reimburse this customer for its cost
of the product and recorded a liability and related expense in
the amount of approximately $2.0 million. The liability
with the customer was settled during fiscal year 2000. The
Company filed a claim for reimbursement from its product and
professional liability insurance carrier, and was notified in
the fourth quarter of 2000 that the claim had been approved for
settlement. As a result of this notification, the Company
recorded a receivable and the related benefit totaling
$2.0 million. As of December 31, 2000, the Company had
received payment of approximately $0.6 million and reported
the balance totaling approximately $1.4 million in the line
item Other current assets in the Consolidated
Balance Sheets. The Company received the balance of the
settlement during the first quarter of 2001.

Donor
Center Software System Cost Write-off

During 1999, the Company terminated a contract
with a third party software vendor that had been developing a
custom donor center operating system, in favor of an alternative
vendor. As a result of this decision, the Company wrote off
approximately $4.2 million of previously capitalized costs.
These assets were included in the Therapeutic Products segment.
During 2001, the Company reversed approximately
$0.8 million of previously accrued amounts related to the
cancellation of this contract upon receiving a favorable ruling

F-19



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##### Table of Contents



SEROLOGICALS CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

in its arbitration case related to these costs in
which the arbitrator ruled that the Company has no further
obligation to the vendor.

The following table summarizes the activity in
the accrual for termination benefits and other costs for the
periods ended December 29, 2002 and December 30, 2001,
respectively (in thousands):

|                           |  |          |     |              |  |          |       |       |  |          |        |   |  |   |     |   |  |   |       | 
|-------------------------- |  | -------- | --- | ------------ |  | -------- | ----- | ----- |  | -------- | ------ | - |  | - | --- | - |  | - | ----- | 
|                           |  |          |     | Additions to |  |          |       |       |  |         
|                           |  |          |     | Reserve      |  |          |       |       |  |         
|                           |  | Balance, |     | Charged to   |  | Cash     |       |       |  | Balance,
|Description                |  | 12/30/01 |     | Expense      |  | Payments |       | Other |  | 12/29/02
|                           |  |          |     |              |  |          |       |       |  |         
|Employee termination costs |  | $        | 544 |              |  | $        | 1,645 |       |  | $        | (1,343 | ) |  | $ | 180 |   |  | $ | 1,026 | 
|Relocation costs           |  |          | 100 |              |  |          |      |       |  |          | (50    | ) |  |   | (50 | ) |  |   |      | 
|Lease termination costs    |  |          |    |              |  |          | 562   |       |  |          | (237   | ) |  |   |    |   |  |   | 325   | 

|                           |  |          |     |              |  |          |     |       |  |          |      |   |  |   |     |  |  |   |     | 
|-------------------------- |  | -------- | --- | ------------ |  | -------- | --- | ----- |  | -------- | ---- | - |  | - | --- |  |  | - | --- | 
|                           |  |          |     | Additions to |  |          |     |       |  |         
|                           |  |          |     | Reserve      |  |          |     |       |  |         
|                           |  | Balance, |     | Charged to   |  | Cash     |     |       |  | Balance,
|Description                |  | 12/31/00 |     | Expense      |  | Payments |     | Other |  | 12/30/01
|                           |  |          |     |              |  |          |     |       |  |         
|Employee termination costs |  | $        | 470 |              |  | $        | 200 |       |  | $        | (516 | ) |  | $ | 390 |  |  | $ | 544 | 
|Relocation costs           |  |          |    |              |  |          |    |       |  |          |     |   |  |   | 100 |  |  |   | 100 | 

The remaining accrual of $1.4 million at
December 29, 2002 is included in Accrued
liabilities in the Consolidated Balance Sheets and will be
paid during 2003 and 2004.

The following table summarizes the results of
operations for Seramed as included in the Consolidated
Statements of Income for the year ended December 30, 2001 and
December 31, 2000 (in thousands, unaudited):

|                                                |  |              |     |              |  |   |        |  
|----------------------------------------------- |  | ------------ | --- | ------------ |  | - | ------ | -
|                                                |  | December 30, |     | December 31,
|                                                |  | 2001         |     | 2000        
|                                                |  |              |     |             
|Net sales                                       |  | $            | 767 |              |  | $ | 54,974 |  
|Gross profit                                    |  |              | 881 |              |  |   | 543    |  
|Selling, general and administrative expenses(1) |  |              |    |              |  |   | 287    |  
|Other (income) expense, net                     |  |              | (19 | )            |  |   | 848    |  
|Special charges, net                            |  |              | 36  |              |  |   | 1,285  |  
|                                                |  |              |     |              |  |   |        |  
|Income before income taxes                      |  | $            | 864 |              |  | $ | (1,877 | )
|                                                |  |              |     |              |  |   |        |  



---



|    |                                                   
|--- | --------------------------------------------------
|(1) | Does not include allocation of corporate overhead.

The following table summarizes the results of the
Company on a pro forma basis for the year ended
December 29, 2002, December 30, 2001 and
December 31, 2000, respectively, as if the acquisition of
Intergen and the sale of Seramed had occurred on
December 27, 1999 (the first day of the Companys 2000
fiscal year). The 2001 pro forma results exclude certain
expenses totaling approximately $8.9 million that were
recorded by Intergen as a result of the acquisition and are
excluded from the pro forma calculations as they are not
expected to have a continuing impact on the Companys
results of operations. The expenses excluded related to certain
severance payments, professional and other fees paid as a direct
result of the transaction, and certain interest and other
amounts paid to the partners of Intergen associated with amounts
loaned to the Company to finance the expansion of the plant in
Toronto. These unaudited results do not purport to represent
what the results of operations for the Company would actually
have been if these transactions had occurred on

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##### Table of Contents



SEROLOGICALS CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

the date referred to above or to be indicative of
the future results of operations of the Company. (Amounts are in
thousands, except per share amounts).

|                           |         |              |         |              |  |              |         |      |  |   |         |      | 
|-------------------------- | ------- | ------------ | ------- | ------------ |  | ------------ | ------- | ---- |  | - | ------- | ---- | 
|                           |         | December 29, |         | December 30, |  | December 31,
|                           |         | 2002         |         | 2001         |  | 2000        
|                           |         |              |         |              |  |             
|Net sales                  |         | $            | 145,470 |              |  | $            | 136,954 |      |  | $ | 131,394 |     
|Net income                 |         |              | 13,949  |              |  |              | 15,423  |      |  |   | 14,946  |     
|Earnings per common share: |         |              |         |              |  |              |         |      |  |   |         |     
|                           | Basic   |              | $       | 0.57         |  |              | $       | 0.65 |  |   | $       | 0.66 | 
|                           |         |              |         |              |  |              |         |      |  |   |         |     
|                           | Diluted |              | $       | 0.56         |  |              | $       | 0.63 |  |   | $       | 0.64 | 
|                           |         |              |         |              |  |              |         |      |  |   |         |     



|   |                     
|-- | --------------------
|4. | Stockholders Equity

Stockholder
Rights Plan

On July 26, 1999, the Board of Directors
adopted a stockholder rights plan, pursuant to which one
preferred stock purchase right (a Right) was
distributed for each outstanding share of common stock held of
record on August 25, 1999. Each Right represents a right to
purchase, under certain circumstances, one one-thousandth
(1/1000) of a share of a new series of preferred stock at an
exercise price of $45.00. If any person or group acquires 15% or
more of the common stock of the Company (except in transactions
approved by the Board of Directors of the Company in advance),
each Right will then entitle its holder, other than the person
or group owning 15% or such other persons or groups, to acquire,
at the exercise price, the Companys common stock with a
market value equal to twice the exercise price. The Company may
elect, however, to exchange a newly issued share of the
Companys common stock for each Right. If any person or
group owns 15% or more of the Companys common stock, and
the Company is acquired in a merger or other business
combination, or if 50% of its earning power or assets are sold,
each Right will entitle its holder, other than the person or
group owning 15%, to acquire, at the exercise price, shares of
the acquiring companys common stock with a market value of
twice the exercise price.

Persons owning 15% or more of Companys
common stock on the date the plan was adopted were exempt, so
long as they do not acquire an additional number of shares
greater than 2% of the outstanding shares, other than in a
transaction approved by the Board of Directors of the Company in
advance. The Rights expire on August 2, 2009.

Capital
Stock

Under the terms of its amended and restated
articles of incorporation, the Company has authorized 50,000,000
shares of common stock and 1,000,000 shares of preferred stock
that may contain such preferences and rights as determined by
the Companys Board of Directors.

Common
Shares Reserved for Issuance

Shares of common stock reserved for issuance at
December 29, 2002 and December 30, 2001 consisted of
the following:

|                                |  |      |           |      |  |  |           | 
|------------------------------- |  | ---- | --------- | ---- |  |  | --------- | 
|                                |  | 2002 |           | 2001
|                                |  |      |           |     
|Various stock option agreements |  |      | 4,502,073 |      |  |  | 4,752,148 | 
|Employee stock purchase plans   |  |      | 456,900   |      |  |  | 445,346   | 
|                                |  |      |           |      |  |  |           | 
|                                |  |      | 4,958,973 |      |  |  | 5,197,494 | 
|                                |  |      |           |      |  |  |           | 

F-21



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##### Table of Contents



SEROLOGICALS CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Common
Stock Repurchases

During 2002, the Company repurchased 20,000
shares of common stock in a private transaction with a director
of the Company at a per share price of $17.35.

In October 2002, the Companys Board of
Directors authorized a program to repurchase up to 2,000,000
shares of its outstanding common stock between October 2002
and December 31, 2004. The repurchases will be made from
time to time in the open market, in block trades or in private
transactions, subject to price, market and general business
conditions. The Company did not repurchase any shares under this
program during 2002.

During April 1999, the Companys Board
of Directors authorized the repurchase of up to
$20.0 million of the Companys common stock, subject
to market conditions, prevailing stock prices and the
Companys capital resources. The Company repurchased a
total of 3,268,000 shares under this program, which was
completed during 2000. During 2000 the Company purchased 656,845
shares at an average price of $4.53.



|   |                         
|-- | ------------------------
|5. | Stock Compensation Plans

Serologicals
Corporation Stock Incentive Plan

The Companys Stock Incentive Plan (the
Incentive Plan) was approved in May 2001 and
succeeded the existing plans described in further detail below.
The Incentive Plan provides for the issuance of up to
approximately 2,844,000 stock options to key employees and
directors, which includes approximately 1,344,000 options that
were available for issuance under existing Company option plans
at the time this plan was approved. The exercise price of the
options is the fair market value of the common stock on the date
of grant. Options granted under the Incentive Plan can have
varying terms as determined by the Board of Directors. Options
granted in 2001 and 2002 under the Incentive Plan vest ratably
over a period of one year for directors and four years for
employees, and have terms of six years. Vested options held by
terminated employees allow for exercise periods of three months
following termination. Pursuant to the Incentive Plan, each
director is entitled to receive an automatic grant of options
annually to purchase 10,000 shares (15,000 shares for a
non-executive Chairman of the Board) on May 15 each year;
provided, that the first grant of an option to a non-employee
director who was elected as a director prior to May 16,
2000, shall be made on the day after the lump-sum option granted
to such director upon becoming a director under the Serologicals
Corporation Amended and Restated 1995 Non-Employee
Directors Stock Option Plan, as Amended, has vested,
pro-rated to the next succeeding May 15. As of
December 29, 2002, options to purchase approximately
732,000 shares were outstanding under the Incentive Plan,
approximately 153,000 of which were exercisable. As of
December 29, 2002, the Company had approximately 2,112,000
shares available for grant under the plan.

Second
Amended and Restated 1994 Omnibus Incentive Plan, as
Amended

The Companys Second Amended and Restated
1994 Omnibus Incentive Plan, as Amended (the Omnibus
Plan) was succeeded by the Incentive Plan as described
above. The exercise price of the options granted under the
Omnibus Plan is the fair market value of the common stock on the
date of grant. Options granted under the Omnibus Plan have
varying terms as determined by the Board of Directors. Options
granted through 2001 under the Omnibus Plan generally vest
ratably over three to four years or in full after three years
and have terms of six to ten years. Options held by terminated
employees allow for exercise periods ranging from 3 to 24 months
following termination. As of December 29, 2002, options to
purchase approximately 1,284,000 shares were outstanding under
the Omnibus Plan, approximately 855,000 of which were
exercisable. No further grants will be issued under the Omnibus
Plan.

F-22



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##### Table of Contents



SEROLOGICALS CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Amended
and Restated 1995 Non-Employee Director Stock Option Plan, as
Amended

The Companys Amended and Restated 1995
Non-Employee Directors Stock Option Plan, as amended (the
Director Plan) was succeeded by the Incentive Plan
as described above. Pursuant to the Director Plan, each person
who became a non-employee director of the Company prior to
May 2000 was automatically granted an option to purchase
36,000 shares of the Companys common stock on the date of
adoption or on the day after such persons first election
to the Board of Directors. The exercise price of the options is
the fair market value of the common stock on the date of grant,
and the options vest over three years. During 2000, the Company
amended the Director Plan, pursuant to which each non-employee
director is entitled to receive an automatic grant of options
annually to purchase 10,000 shares (15,000 shares for a
non-executive Chairman of the Board) on the day after the
original lump-sum option becomes vested, pro-rated to the first
anniversary of the preceding Annual Meeting date. Options
granted under the amended plan subsequent to May 2000 vest
over a one-year period. Options granted between 1996 and
May 2000 under the Director Plan typically vest over a
four-year period, while options granted prior to 1996 were fully
vested upon issuance. As of December 29, 2002, options to
purchase approximately 233,000 shares were outstanding under the
Director Plan, approximately 231,000 of which were exercisable.
No further grants will be issued under the Director Plan.

Stock
Option Activity

The following table summarizes the activity for
all stock options outstanding:

|                                   |  |        |           |           |  |        |       |           |  |        |            |           |  |   |       |  |  |  |            |   |  |   |       | 
|---------------------------------- |  | ------ | --------- | --------- |  | ------ | ----- | --------- |  | ------ | ---------- | --------- |  | - | ----- |  |  |  | ---------- | - |  | - | ----- | 
|                                   |  |        |           |           |  |       
|                                   |  | 2002   |           | 2001      |  | 2000  
|                                   |  |        |           |           |  |       
|                                   |  |        |           | Weighted- |  |        |       | Weighted- |  |        |            | Weighted-
|                                   |  |        |           | Average   |  |        |       | Average   |  |        |            | Average  
|                                   |  |        |           | Exercise  |  |        |       | Exercise  |  |        |            | Exercise 
|                                   |  | Shares |           | Price     |  | Shares |       | Price     |  | Shares |            | Price    
|                                   |  |        |           |           |  |        |       |           |  |        |            |          
|Outstanding at beginning of year   |  |        | 2,208,737 |           |  | $      | 12.23 |           |  |        | 3,162,470  |           |  | $ | 11.20 |  |  |  | 4,108,095  |   |  | $ | 10.71 | 
|Granted                            |  |        | 527,701   |           |  |        | 20.00 |           |  |        | 358,494    |           |  |   | 16.83 |  |  |  | 825,850    |   |  |   | 5.52  | 
|Exercised                          |  |        | (249,405  | )         |  |        | 9.13  |           |  |        | (1,241,185 | )         |  |   | 10.53 |  |  |  | (1,130,907 | ) |  |   | 2.87  | 
|Forfeited                          |  |        | (238,157  | )         |  |        | 20.94 |           |  |        | (71,042    | )         |  |   | 17.86 |  |  |  | (640,568   | ) |  |   | 15.43 | 
|                                   |  |        |           |           |  |        |       |           |  |        |            |           |  |   |       |  |  |  |            |   |  |   |       | 
|Outstanding at end of year         |  |        | 2,248,876 |           |  |        | 13.46 |           |  |        | 2,208,737  |           |  |   | 12.23 |  |  |  | 3,162,470  |   |  |   | 11.20 | 
|                                   |  |        |           |           |  |        |       |           |  |        |            |           |  |   |       |  |  |  |            |   |  |   |       | 
|Options exercisable at end of year |  |        | 1,238,570 |           |  | $      | 13.07 |           |  |        | 1,068,866  |           |  | $ | 11.88 |  |  |  | 1,984,643  |   |  | $ | 11.48 | 
|                                   |  |        |           |           |  |        |       |           |  |        |            |           |  |   |       |  |  |  |            |   |  |   |       | 

F-23



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##### Table of Contents



SEROLOGICALS CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The following table summarizes information about
all stock options outstanding at December 29, 2002:

|                |  |                     |           |             |  |           |     |                     |  |           |       |  |  |  |           |  |  |   |       | 
|--------------- |  | ------------------- | --------- | ----------- |  | --------- | --- | ------------------- |  | --------- | ----- |  |  |  | --------- |  |  | - | ----- | 
|                |  |                     |           |             |  |          
|                |  | Options Outstanding |           |             |  |          
|                |  |                     |           |            
|                |  |                     |           | Weighted-   |  |           |     | Options Exercisable
|                |  |                     |           | Average     |  |           |     |                    
|                |  |                     |           | Remaining   |  | Weighted- |     |                     |  | Weighted-
|                |  | Outstanding         |           | Contractual |  | Average   |     | Exercisable         |  | Average  
|Range of        |  | At                  |           | Life        |  | Exercise  |     | at                  |  | Exercise 
|Exercise Prices |  | 12/29/2002          |           | (years)     |  | Price     |     | 12/29/2002          |  | Price    
|                |  |                     |           |             |  |           |     |                     |  |          
|$ 4.06  $ 5.00 |  |                     | 519,931   |             |  |           | 3.1 |                     |  | $         | 4.95  |  |  |  | 357,181   |  |  | $ | 4.94  | 
|$ 5.01  $10.00 |  |                     | 448,913   |             |  |           | 3.4 |                     |  |           | 5.91  |  |  |  | 228,613   |  |  |   | 5.98  | 
|$10.01  $15.00 |  |                     | 206,619   |             |  |           | 3.5 |                     |  |           | 13.30 |  |  |  | 117,084   |  |  |   | 12.41 | 
|$15.01  $20.00 |  |                     | 501,146   |             |  |           | 4.2 |                     |  |           | 17.11 |  |  |  | 296,175   |  |  |   | 16.83 | 
|$20.01  $25.00 |  |                     | 389,942   |             |  |           | 5.2 |                     |  |           | 21.17 |  |  |  | 67,192    |  |  |   | 21.69 | 
|$25.01  $30.00 |  |                     | 182,325   |             |  |           | 2.8 |                     |  |           | 29.95 |  |  |  | 172,325   |  |  |   | 29.96 | 
|                |  |                     |           |             |  |           |     |                     |  |           |       |  |  |  |           |  |  |   |       | 
|                |  |                     | 2,248,876 |             |  |           | 3.8 |                     |  | $         | 13.46 |  |  |  | 1,238,570 |  |  | $ | 13.07 | 
|                |  |                     |           |             |  |           |     |                     |  |           |       |  |  |  |           |  |  |   |       | 

Employee
Stock Purchase Plan

Pursuant to the terms of the Companys 1996
Employee Stock Purchase Plan (the Purchase Plan),
eligible employees are able to purchase up to 562,500 shares of
the Companys common stock through a payroll deduction
program. Employees may have up to 25% of their compensation
withheld to purchase shares at a price equal to 85% of the lower
of the closing price on the first or last day of each successive
three month purchase period. As of December 29, 2002,
approximately 142,000 shares had been acquired pursuant to the
Purchase Plan.



|   |                                                 
|-- | ------------------------------------------------
|6. | Long-Term Debt and Capital Lease
    Obligations

Long-term debt and capital lease obligations at
December 29, 2002 and December 30, 2001 consisted of
the following (in thousands):

|                                                                                    |  |      |     |      |  |   |       | 
|----------------------------------------------------------------------------------- |  | ---- | --- | ---- |  | - | ----- | 
|                                                                                    |  | 2002 |     | 2001
|                                                                                    |  |      |     |     
|Note payable; interest at 7% payable
    at maturity                                |  | $    |    |      |  | $ | 3,752 | 
|Capital lease obligations at varying interest
    rates and terms, maturing in 2004 |  |      | 424 |      |  |   | 824   | 
|                                                                                    |  |      |     |      |  |   |       | 
|                                                                                    |  |      | 424 |      |  |   | 4,576 | 
|Less current maturities                                                             |  |      | 385 |      |  |   | 3,125 | 
|                                                                                    |  |      |     |      |  |   |       | 
|                                                                                    |  | $    | 39  |      |  | $ | 1,451 | 
|                                                                                    |  |      |     |      |  |   |       | 

The Company has a revolving credit facility with
a syndicate of commercial banks (the Revolver) that
was amended during April 2002, which decreased the total
maximum capacity from $75.0 million to $65.0 million.
The Revolver is payable in full on April 25, 2005 and bears
interest at either a floating rate or Eurodollar interest rate
plus a margin that fluctuates based on the Companys
leverage ratio. The margin on the Eurodollar rate ranges from
1.25% to 1.75%, and the margin on the floating rate option
ranges from 0% to 0.25%. At December 29, 2002 and
December 30, 2001, the Company had no outstanding
borrowings under the Revolver. The Company is required to pay a
fee ranging from 0.3% to 0.5%, depending on the Companys
leverage and amounts borrowed under the Revolver. The Revolver
is secured by substantially all of the assets of the Company and
the stock of its domestic subsidiaries. The Revolver also
contains certain financial covenants that require the
maintenance of minimum levels of cash flow coverage, debt
service coverage and debt to net worth and also provides for
maximum levels of debt to cash flow, rent expense, and capital
expenditures. Furthermore, under the terms of the Revolver,
there are limitations on the Companys ability to

F-24



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##### Table of Contents



SEROLOGICALS CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

pay cash dividends and to repurchase shares of
the Companys common stock. Additionally, there are certain
limitations on the Companys ability to complete
acquisitions without approval of the bank group; specifically,
if an individual acquisition exceeds $30.0 million, or if total
acquisitions over the life of the facility exceed $60.0 million,
the Company is required to get approval from the lenders.

As discussed in Note 14, the Company expects to
complete the financing of a $100.0 million, five-year term
loan by March 31, 2003. This term loan, combined with a new
four year revolving credit facility, which is currently expected
to be $25.0 million, will replace the Companys
existing $65.0 million facility The new facility and term
loan are expected to have financial covenants. The Company is
still in the process of negotiating the covenants under this the
new facility and term loan. Payments under the term are expected
to be payable in quarterly installments. The following table
reflects the expected principal payments under the term loan:

|     |  |   |         | 
|---- |  | - | ------- | 
|2003 |  | $ | 750     | 
|2004 |  |   | 7,750   | 
|2005 |  |   | 17,500  | 
|2006 |  |   | 27,500  | 
|2007 |  |   | 36,750  | 
|2008 |  |   | 9,750   | 
|     |  |   |         | 
|     |  | $ | 100,000 | 
|     |  |   |         | 

In connection with the acquisition of Intergen,
the Company acquired certain debt obligations. On
September 5, 2001, Intergen entered into a $4.4 million
note payable agreement with a vendor. The note, with interest at
7%, required that principal payments be made monthly according
to a fixed payment schedule outlined in the agreement. During
the second quarter 2002, the Company prepaid this note payable
at a $0.1 million discount. This discount was recorded as
an adjustment to goodwill arising from the Intergen acquisition.

Future maturities of long-term debt and capital
lease obligations at December 29, 2002 were as follows (in
thousands):

|     |  |   |     | 
|---- |  | - | --- | 
|2003 |  | $ | 385 | 
|2004 |  |   | 39  | 
|     |  |   |     | 
|     |  | $ | 424 | 
|     |  |   |     | 

The Company made interest payments of
approximately $0.4 million, $0.3 million and
$1.8 million during 2002, 2001 and 2000, respectively. The
Company capitalizes interest on borrowings during the active
construction period of major capital projects. During 2002 the
Company capitalized approximately $0.5 million in connection
with various projects. The Company did not capitalize any
interest in 2001 and 2000.



|   |                              
|-- | -----------------------------
|7. | Commitments and Contingencies

Operating
Leases

The Company leases certain office space, donor
centers, laboratory and manufacturing facilities and laboratory
and other equipment under non-cancelable operating lease
agreements. Future minimum annual

F-25



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##### Table of Contents



SEROLOGICALS CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

rental obligations under the non-cancelable
portion of operating leases as of December 29, 2002 were as
follows (in thousands):

|                    |  |   |        | 
|------------------- |  | - | ------ | 
|2003                |  | $ | 3,302  | 
|2004                |  |   | 3,404  | 
|2005                |  |   | 2,517  | 
|2006                |  |   | 2,284  | 
|2007                |  |   | 2,189  | 
|2008 and thereafter |  |   | 5,979  | 
|                    |  |   |        | 
|                    |  | $ | 19,675 | 
|                    |  |   |        | 

Rent expense was approximately $3.6 million,
$2.5 million and $3.7 million during 2002, 2001 and
2000, respectively.

Litigation

The Company is involved in certain litigation
arising in the ordinary course of business. In managements
opinion, the ultimate resolution of these matters will not have
a material adverse effect on the Companys financial
position or results of operations.

During 2000, twelve complaints were filed against
the Company and certain of its current and former executive
officers and directors which alleged violations of the
Securities Exchange Act of 1934, including Sections 10(b)
and 20(a) thereof and Rule 10b-5 promulgated thereunder.
The complaint was dismissed on September 5, 2001 in its
entirety with prejudice, but on February 12, 2002 the court
allowed the plaintiff to amend the initial complaint. On
February 26, 2003, the court granted the defendants
motion and dismissed the second amended compliant with prejudice
and without leave to replead.



|   |                                                         
|-- | --------------------------------------------------------
|8. | Disclosure About Fair Value of Financial
    Instruments

Cash
Equivalents, Accounts Receivables and Accounts Payable

The Company estimates that the fair value of cash
equivalents, accounts receivable and accounts payable
approximates carrying value due to the short maturity of these
instruments.

Notes
Payable

The Company estimates that the fair value of
notes payable approximates carrying value based upon its
estimated current borrowing rate for issuance of debt with
similar terms and remaining maturities.

Disclosure about the estimated fair value of
financial instruments is based on pertinent information
available to management as of December 29, 2002 and
December 30, 2001. Although management is not aware of any
factors that would significantly affect the reasonable fair
value amounts, such amounts have not been comprehensively
revalued for purposes of these financial statements since the
periods presented and current estimates of fair value may differ
significantly from the amounts presented herein.

F-26



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##### Table of Contents



SEROLOGICALS CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|   |             
|-- | ------------
|9. | Income Taxes

The income tax provision for the years ended
December 29, 2002, December 30, 2001 and December 31,
2000 consisted of the following (in thousands):

|                     |                        |      |       |       |  |      |       |       |  |   |       |       |  
|-------------------- | ---------------------- | ---- | ----- | ----- |  | ---- | ----- | ----- |  | - | ----- | ----- | -
|                     |                        | 2002 |       | 2001  |  | 2000
|                     |                        |      |       |       |  |     
|Current:             |                        |      |       |       |  |      |       |       |  |   |       |      
|                     | U.S. federal and state |      | $     | 4,750 |  |      | $     | 7,079 |  |   | $     | 258   |  
|                     | Foreign                |      |       | 304   |  |      |       | 1,219 |  |   |       | 1,255 |  
|                     |                        |      |       |       |  |      |       |       |  |   |       |      
|                     |                        |      | 5,054 |       |  |      | 8,298 |       |  |   | 1,513 |      
|                     |                        |      |       |       |  |      |       |       |  |   |       |      
|Deferred:            |                        |      |       |       |  |      |       |       |  |   |       |      
|                     | U.S. federal and state |      |       | 2,404 |  |      |       | 943   |  |   |       | 6,539 |  
|                     | Foreign                |      |       | 53    |  |      |       | 253   |  |   |       | (4    | )
|                     |                        |      |       |       |  |      |       |       |  |   |       |      
|                     |                        |      | 2,457 |       |  |      | 1,196 |       |  |   | 6,535 |      
|                     |                        |      |       |       |  |      |       |       |  |   |       |      
|Income tax provision |                        | $    | 7,511 |       |  | $    | 9,494 |       |  | $ | 8,048 |      
|                     |                        |      |       |       |  |      |       |       |  |   |       |      

The income tax provision as reported in the
accompanying Consolidated Statements of Income differs from the
amounts computed by applying federal statutory rates due to the
following (in thousands):

|                                                          |  |      |       |      |  |      |       |   |  |   |       |  
|--------------------------------------------------------- |  | ---- | ----- | ---- |  | ---- | ----- | - |  | - | ----- | -
|                                                          |  | 2002 |       | 2001 |  | 2000
|                                                          |  |      |       |      |  |     
|Federal income taxes at statutory rate                    |  | $    | 7,511 |      |  | $    | 9,305 |   |  | $ | 7,338 |  
|State income taxes, net of federal income
    tax benefit |  |      | 337   |      |  |      | 791   |   |  |   | 618   |  
|Impact of foreign tax rates and credits                   |  |      | (737  | )    |  |      | (768  | ) |  |   | (778  | )
|Non-deductible goodwill amortization and
    write-down   |  |      | 4     |      |  |      | 157   |   |  |   | 1,406 |  
|Other                                                     |  |      | 396   |      |  |      | 9     |   |  |   | (536  | )
|                                                          |  |      |       |      |  |      |       |   |  |   |       |  
|                                                          |  | $    | 7,511 |      |  | $    | 9,494 |   |  | $ | 8,048 |  
|                                                          |  |      |       |      |  |      |       |   |  |   |       |  

Deferred income tax assets and liabilities for
2001 and 2000 reflect the impact of temporary differences
between the amounts of assets and liabilities for financial
reporting and income tax reporting purposes. Temporary
differences which give rise to deferred tax assets and
liabilities at December 29, 2002 and December 30, 2001 were
as follows (in thousands):

|                                   |                         |      |        |        |   |   |        |        |  
|---------------------------------- | ----------------------- | ---- | ------ | ------ | - | - | ------ | ------ | -
|                                   |                         | 2002 |        | 2001  
|                                   |                         |      |        |       
|Deferred tax assets:               |                         |      |        |        |   |   |        |       
|                                   | Accruals and reserves   |      | $      | 1,560  |   |   | $      | 2,085  |  
|                                   | Unearned compensation   |      |        | 320    |   |   |        | 74     |  
|                                   | Other                   |      |        | 230    |   |   |        | 424    |  
|                                   |                         |      |        |        |   |   |        |       
|                                   |                         |      | 2,110  |        |   |   | 2,583  |       
|                                   |                         |      |        |        |   |   |        |       
|Deferred tax liabilities:          |                         |      |        |        |   |   |        |       
|                                   | Goodwill amortization   |      |        | (2,408 | ) |   |        | (1,466 | )
|                                   | Excess tax depreciation |      |        | (1,092 | ) |   |        | 329    |  
|                                   | Other                   |      |        | (616   | ) |   |        |       |  
|                                   |                         |      |        |        |   |   |        |       
|                                   |                         |      | (4,116 | )      |   |   | (1,137 | )     
|                                   |                         |      |        |        |   |   |        |       
|Net deferred tax (liability) asset |                         | $    | (2,006 | )      |   | $ | 1,446  |       
|                                   |                         |      |        |        |   |   |        |       

F-27



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##### Table of Contents



SEROLOGICALS CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The Company did not record any valuation
allowance against federal deferred tax assets at
December 29, 2002 and December 30, 2001 as it believes
it is more likely than not that the deferred tax assets will be
realizable through future taxable income. As of
December 29, 2002, the Company has state income tax net
operating loss benefits worth approximately $1.8 million
expiring in various amounts over the next 15 years. Due to
the uncertainty over the ability to use these net operating
losses during the carry forward period, a valuation allowance
equal to 100% of the benefit was recorded at December 29,
2002 and December 30, 2001.

The Company made income tax payments of
approximately $5.6 million, $5.5 million and
$1.9 million during 2002, 2001 and 2000, respectively. As
of December 29, 2002 and December 30, 2001, the
Company had an income tax receivable of $0.8 million and
$4.2 million, respectively.



|    |                      
|--- | ---------------------
|10. | Significant Customers

The Companys ten largest customers
accounted for approximately 63%, 73% and 80% of total net sales
for the years ended December 29, 2002, December 30,
2001 and December 29, 2000, respectively. Customers making
up greater than 10% of net sales of the Company during such
periods are as follows:

|                    |  |      |   |      |  |      |    |   |  |  |    |  
|------------------- |  | ---- | - | ---- |  | ---- | -- | - |  |  | -- | -
|                    |  | 2002 |   | 2001 |  | 2000
|                    |  |      |   |      |  |     
|Bayer               |  |      | * |      |  |      | 24 | % |  |  | 33 | %
|Aventis BioServices |  |      | * |      |  |      | 13 | % |  |  | 15 | %



---



|  |               
|- | --------------
|* | Less than 10%.

At December 29, 2002 and December 30,
2001, 5 of the Companys customers represented 51% and 62%,
respectively, of the Companys accounts receivable balance.



|    |                          
|--- | -------------------------
|11. | Employee Retirement Plans

The Company maintains a defined contribution
401(k) savings plan for all eligible employees. Under the plan,
the Company matches a specified percentage of each participating
employees compensation. Employees become immediately
vested in the Companys contributions as they are made. The
Companys contributions were $0.8 million,
$0.5 million and $0.6 million in 2002, 2001 and 2000,
respectively.



|    |                                   
|--- | ----------------------------------
|12. | Segment and Geographic Information

SFAS No. 131, Disclosures about
Segments of an Enterprise and Related Information defines
operating segments to be those components of a business for
which separate financial information is available that is
regularly evaluated by management in making operating decisions
and in assessing performance. SFAS No. 131 further requires
that the segment information presented be consistent with the
basis and manner in which management internally disaggregates
financial information for the purposes of assisting in making
internal operating decisions. Beginning in 2002, for management
purposes the operations of the Companys subsidiaries were
organized into three primary operating segments: Biotechnology
and Molecular Biology Products (Biotech), Diagnostic
Products and Life Science Reagents (Diagnostics) and
Therapeutic Products (Therapeutics). These segments
are based primarily on the differing nature of the ultimate end
use of the Companys products, the differing production,
manufacturing and other value-added processes performed by the
Company with respect to the products and, to a lesser extent,
the differing customer bases to which each reportable segment
sells its products. Prior to 2002, the Company reported only two
operating segments, Therapeutics and Diagnostics. All of the
comparisons discussed below reflect the restatement of the prior
year segments so that they are consistent with the current year
presentation.

The activities of the Biotech segment primarily
include the manufacture and sale of tissue culture media
components, as well as certain research products and
technologies used in life sciences research and in high-

F-28



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##### Table of Contents



SEROLOGICALS CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

throughput drug screening. The primary products
included in this segment are EX-CYTE®, certain grades of
BSA, human recombinant insulin and Amplifluor, a patented
technology used for the detection of nucleic acids amplified by
polymerase chain reaction and other techniques. The activities
of the Diagnostic segment include the Companys monoclonal
antibody production facilities and certain human-sourced,
polyclonal antibodies, as well as certain blood protein products
manufactured at the Companys fractionation facilities in
Kankakee and Toronto. The antibodies and other proteins provided
by the Diagnostic Products segment are used in diagnostic
products such as blood typing reagents and diagnostic test kits.
The activities of the Therapeutics segment include the
collection and sale of specialty human antibodies that are used
as the active ingredients in therapeutic products for the
treatment and management of various human diseases.

The Companys senior management utilizes
multiple forms of analysis of operating and financial data to
assess segment performance and to make operating decisions with
respect to the segments. While segment financial statements are
prepared on the same basis as the Companys consolidated
financial statements, the primary focus of senior management is
on sales and gross profit. The accounting policies of the
segments are the same as those described in the summary of
significant accounting policies (Note 2).

The Companys segment information as of and
for the years ended December 29, 2002, December 30, 2001
and December 31, 2000 are as follows (in thousands):

|                     |                                              |      |   |         |   |      |   |         |   |  |   |         |  
|-------------------- | -------------------------------------------- | ---- | - | ------- | - | ---- | - | ------- | - |  | - | ------- | -
|                     |                                              | 2002 |   | 2001    |   | 2000
|                     |                                              |      |   |         |   |     
|Net sales:           |                                              |      |   |         |   |      |   |         |   |  |   |        
|                     | Biotechnology Products                       |      | $ | 55,474  |   |      | $ | 19,046  |   |  | $ | 11,788  |  
|                     | Diagnostic Products                          |      |   | 43,815  |   |      |   | 34,518  |   |  |   | 33,557  |  
|                     | Therapeutic Products                         |      |   | 46,181  |   |      |   | 56,228  |   |  |   | 102,415 |  
|                     |                                              |      |   |         |   |      |   |         |   |  |   |        
|                     | Total                                        |      | $ | 145,470 |   |      | $ | 109,792 |   |  | $ | 147,760 |  
|                     |                                              |      |   |         |   |      |   |         |   |  |   |        
|Gross profit:        |                                              |      |   |         |   |      |   |         |   |  |   |        
|                     | Biotechnology Products                       |      | $ | 29,938  |   |      | $ | 14,454  |   |  | $ | 9,133   |  
|                     | Diagnostic Products                          |      |   | 22,275  |   |      |   | 16,232  |   |  |   | 16,312  |  
|                     | Therapeutic Products                         |      |   | 16,630  |   |      |   | 21,479  |   |  |   | 21,202  |  
|                     |                                              |      |   |         |   |      |   |         |   |  |   |        
|                     | Total                                        |      |   | 68,843  |   |      |   | 52,165  |   |  |   | 46,647  |  
|Reconciling items:   |                                              |      |   |         |   |      |   |         |   |  |   |        
|                     | Selling, general and administrative expenses |      |   | 37,974  |   |      |   | 23,521  |   |  |   | 21,777  |  
|                     | Research and development                     |      |   | 5,628   |   |      |   | 1,665   |   |  |   | 710     |  
|                     | Special charges (credits), net               |      |   | 3,228   |   |      |   | 61      |   |  |   | (414    | )
|                     | Other expense, net                           |      |   | 951     |   |      |   | 1,471   |   |  |   | 2,376   |  
|                     | Interest (income) expense, net               |      |   | (398    | ) |      |   | (1,139  | ) |  |   | 1,233   |  
|                     |                                              |      |   |         |   |      |   |         |   |  |   |        
|                     | Income before income taxes                   |      | $ | 21,460  |   |      | $ | 26,586  |   |  | $ | 20,965  |  
|                     |                                              |      |   |         |   |      |   |         |   |  |   |        
|Identifiable assets: |                                              |      |   |         |   |      |   |         |   |  |   |        
|                     | Biotechnology Products                       |      | $ | 78,976  |   |      | $ | 30,805  |   |  | $ | 24,309  |  
|                     | Diagnostic Products                          |      |   | 54,165  |   |      |   | 93,458  |   |  |   | 44,335  |  
|                     | Therapeutic Products                         |      |   | 32,225  |   |      |   | 35,185  |   |  |   | 32,278  |  
|                     | Corporate/ Other                             |      |   | 25,799  |   |      |   | 15,890  |   |  |   | 30,573  |  
|                     |                                              |      |   |         |   |      |   |         |   |  |   |        
|                     | Total                                        |      | $ | 191,165 |   |      | $ | 175,338 |   |  | $ | 131,495 |  
|                     |                                              |      |   |         |   |      |   |         |   |  |   |        

F-29



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##### Table of Contents



SEROLOGICALS CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Identifiable assets of each segment consist
primarily of accounts receivable, inventories, goodwill and
other intangible assets and property and equipment. Corporate
assets generally consist of cash and cash equivalents and other
unallocated assets.

Geographic Information

The Company markets its products and services to
numerous countries worldwide and has operations in the United
States, Canada and the United Kingdom. Other than in the United
States and Germany, the Company does not conduct business in any
one country in which its sales in that country are material to
the Company as a whole. However, the majority of the
Companys remaining foreign sales are to western Europe.
Net sales are attributed to regions based on the country to
which the Company ships its products, which can differ from
their ultimate destination. The composition of the
Companys net sales to unaffiliated customers between those
in the United States, Germany and other foreign locations and of
the Companys long-lived assets for each fiscal year is set
forth below (in thousands):

|                                     |                |      |         |        |  |      |         |        |  |   |         |         | 
|------------------------------------ | -------------- | ---- | ------- | ------ |  | ---- | ------- | ------ |  | - | ------- | ------- | 
|                                     |                | 2002 |         | 2001   |  | 2000
|                                     |                |      |         |        |  |     
|Net sales to unaffiliated customers: |                |      |         |        |  |      |         |        |  |   |         |        
|                                     | United States  |      | $       | 71,682 |  |      | $       | 57,714 |  |   | $       | 101,192 | 
|                                     | Germany        |      |         | 25,946 |  |      |         | 24,899 |  |   |         | 26,110  | 
|                                     | Other foreign  |      |         | 47,842 |  |      |         | 27,179 |  |   |         | 20,458  | 
|                                     |                |      |         |        |  |      |         |        |  |   |         |        
|                                     |                | $    | 145,470 |        |  | $    | 109,792 |        |  | $ | 147,760 |        
|                                     |                |      |         |        |  |      |         |        |  |   |         |        
|Long-lived assets:                   |                |      |         |        |  |      |         |        |  |   |         |        
|                                     | United States  |      | $       | 85,506 |  |      | $       | 80,623 |  |   | $       | 56,341  | 
|                                     | Canada         |      |         | 15,454 |  |      |         | 12,996 |  |   |         |        | 
|                                     | United Kingdom |      |         | 8,490  |  |      |         | 6,347  |  |   |         | 6,961   | 
|                                     |                |      |         |        |  |      |         |        |  |   |         |        
|                                     |                | $    | 109,450 |        |  | $    | 99,966  |        |  | $ | 63,302  |        
|                                     |                |      |         |        |  |      |         |        |  |   |         |        



|    |                                                
|--- | -----------------------------------------------
|13. | Quarterly Results of Operations
    (Unaudited)

The quarterly results of operations for the
fiscal years ended December 29, 2002 and December 30, 2001,
respectively, are as follows (in thousands, except per share
amounts):

|                              |  |       |        |        |  |       |        |        |  |   |        |  |  |   |        | 
|----------------------------- |  | ----- | ------ | ------ |  | ----- | ------ | ------ |  | - | ------ |  |  | - | ------ | 
|                              |  | First |        | Second |  | Third |        | Fourth
|                              |  |       |        |        |  |       |        |       
|2002                          |  |       |        |        |  |       |        |        |  |   |        |  |  |   |        | 
|Net sales                     |  | $     | 31,470 |        |  | $     | 37,292 |        |  | $ | 31,438 |  |  | $ | 45,270 | 
|Gross profit                  |  |       | 15,483 |        |  |       | 18,620 |        |  |   | 15,393 |  |  |   | 19,347 | 
|Special charges, net (Note 3) |  |       |       |        |  |       | 1,309  |        |  |   |       |  |  |   | 1,919  | 
|Net income                    |  |       | 2,708  |        |  |       | 3,782  |        |  |   | 3,281  |  |  |   | 4,178  | 
|Basic earnings per share(1)   |  |       | 0.11   |        |  |       | 0.16   |        |  |   | 0.14   |  |  |   | 0.17   | 
|Diluted earnings per share(1) |  |       | 0.11   |        |  |       | 0.15   |        |  |   | 0.13   |  |  |   | 0.17   | 

F-30



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##### Table of Contents



SEROLOGICALS CORPORATION AND
SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

|                                        |  |       |        |        |  |       |        |        |  |   |        |  |  |   |        |  
|--------------------------------------- |  | ----- | ------ | ------ |  | ----- | ------ | ------ |  | - | ------ |  |  | - | ------ | -
|                                        |  | First |        | Second |  | Third |        | Fourth
|                                        |  |       |        |        |  |       |        |       
|2001                                    |  |       |        |        |  |       |        |        |  |   |        |  |  |   |        |  
|Net sales                               |  | $     | 26,458 |        |  | $     | 27,181 |        |  | $ | 25,876 |  |  | $ | 30,277 |  
|Gross profit                            |  |       | 12,672 |        |  |       | 13,437 |        |  |   | 11,542 |  |  |   | 14,514 |  
|Special charges (credits), net (Note 3) |  |       |       |        |  |       | 163    |        |  |   | 200    |  |  |   | (302   | )
|Net income                              |  |       | 4,382  |        |  |       | 4,825  |        |  |   | 3,024  |  |  |   | 4,861  |  
|Basic earnings per share(1)             |  |       | 0.19   |        |  |       | 0.20   |        |  |   | 0.13   |  |  |   | 0.20   |  
|Diluted earnings per share(1)           |  |       | 0.18   |        |  |       | 0.20   |        |  |   | 0.12   |  |  |   | 0.20   |  



---



|    |                                                                                                                                                                                                                                                    
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Basic and diluted earnings per share are computed
    independently for each of the quarters presented. As such, the
    summation of the quarterly amounts may not equal the total basic
    and diluted earnings per share reported for the year.



|    |                  
|--- | -----------------
|14. | Subsequent Events

On February 11, 2003, the Company announced
that it entered into an agreement to acquire Chemicon
International, Inc. (Chemicon), a privately-owned
company based in Temecula, California that supplies a variety of
specialty reagents, antibodies and molecular research tools to
the life science industry. Under the terms of the agreement,
Serologicals will purchase Chemicon and certain affiliated
companies for $95.0 million in cash, less Chemicons
outstanding debt as of the closing date. Serologicals expects to
finance the transaction using proceeds from a new
$100.0 million five-year term loan. This term loan,
combined with a new revolving credit facility, which is
currently expected to be $25.0 million, will replace the
Companys existing $65.0 million facility. The
transaction is expected to close on March 31, 2003, pending
regulatory approvals and completion of the aforementioned
financing.

In first quarter 2003, the Company closed 3 of
its thirteen donor centers, located in Birmingham, Alabama;
Washington D.C.; and Provo, Utah. The donor base for the Provo
center will be integrated into the Companys Salt Lake
City, Utah center. As a result of these closings, the Company
expects to record in first quarter 2003 a special charge of
approximately $1.0 million for severance at the centers and
its central testing laboratory, asset write-offs and lease
termination costs at these three centers. As a result of the
capacity optimization procedures completed in 2002, the Company
does not expect a reduction in plasma collection capacity upon
completion of these closings.

F-31



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##### Table of Contents



SEROLOGICALS CORPORATION

SCHEDULE II  VALUATION AND QUALIFYING
ACCOUNTS

An analysis of the allowance for doubtful
accounts for the three fiscal years ended December 29, 2002
is as follows (in thousands):

|                             |  |              |       |            |  |          |      |            |  |           |     |     |  |   |      |   |  |   |       | 
|---------------------------- |  | ------------ | ----- | ---------- |  | -------- | ---- | ---------- |  | --------- | --- | --- |  | - | ---- | - |  | - | ----- | 
|                             |  | Balance at   |       | Charged to |  | Charged  |      |            |  | Balance  
|                             |  | Beginning of |       | Costs and  |  | to Other |      |            |  | at End of
|                             |  | Period       |       | Expenses   |  | Accounts |      | Deductions |  | Period   
|                             |  |              |       |            |  |          |      |            |  |          
|Year Ended December 29, 2002 |  | $            | 1,975 |            |  | $        | (400 | )(a)       |  | $         |    |     |  | $ | (753 | ) |  | $ | 822   | 
|Year Ended December 30, 2001 |  |              | 750   |            |  |          | 511  |            |  |           | 714 | (b) |  |   |     |   |  |   | 1,975 | 
|Year Ended December 31, 2000 |  |              | 1,034 |            |  |          |     |            |  |           |    |     |  |   | (284 | ) |  |   | 750   | 



---



|    |                                                                                      
|--- | -------------------------------------------------------------------------------------
|(a) | Reversal of allowance established upon purchase
    of Intergen on December 13, 2001.
|   
|(b) | Allowance established upon purchase of Intergen
    on December 13, 2001.            



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##### Table of Contents



SEROLOGICALS CORPORATION