UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, DC 20549

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FORM 10-K

|(Mark One)                                                                                   |                                                                                         
|-------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------
|ý                                                                                            | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934    
|For the Fiscal Year Ended January 2, 2005                                                   
|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

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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's telephone number including area code                              |  | (678) 728-2000                                   

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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

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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 ý    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 ý    No o

The aggregate market value of the shares of our Common Stock held by non-affiliates (based upon the closing sale price on The Nasdaq Stock Market on
June 27, 2004) was approximately $511,232,000. As of March 8, 2005, there were 34,566,733 shares of our Common Stock outstanding.

Documents Incorporated by Reference.

Portions of the definitive proxy statement for the Registrant's 2005 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 January 2, 2005) are incorporated by reference into Part III.



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TABLE OF CONTENTS

|PART I.    |          |   
|---------- | -------- | --
|           | Item 1.  |   
|           | Item 2.  |   
|           | Item 3.  |   
|           | Item 4.  |   
|PART II.   |          |   
|           | Item 5.  |   
|           | Item 6.  |   
|           | Item 7.  |   
|           | Item 7A. |   
|           | Item 8.  |   
|           | Item 9.  |   
|           | Item 9A. |   
|           | Item 9B. |   
|PART III.  |          |   
|           | Item 10. |   
|           | Item 11. |   
|           | Item 12. |   
|           | Item 13. |   
|           | Item 14. |   
|PART IV.   |          |   
|           | Item 15. |   
|SIGNATURES |          | 60

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PART I.        SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains certain "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," "we," "our" or "us") that are subject to risks and uncertainties. Statements that are
not historical facts, including statements about our beliefs and expectations, are forward-looking statements. Forward-looking statements may be identified by the use of words such as "may," "will,"
"expect," "anticipate," "intend," "estimate," "plan," "believe," or "continue" and other words of similar meaning or future or conditional verbs such as "should," "would" and "could." Forward-looking
statements include discussions of our expected business outlook, future operations, financial performance, pending acquisitions, financial strategies, future working capital needs and projected
industry trends, as well as our 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 and are based on our
current views and assumptions regarding future events and operating performance. These assumptions could prove inaccurate, or unknown risks or uncertainties could materialize, which could cause our
actual results to differ materially from our expectations or predictions. Many of these factors are beyond our ability to control or predict.

All
forward-looking statements contained in this Annual Report on Form 10-K are qualified in their entirety by reference to the factors discussed throughout this
Annual Report. The following cautionary statements identify important factors that could cause our actual results to differ materially from those discussed in the forward-looking statements made in
this Annual Report. Among the factors that could cause our actual results to differ materially are:



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You
should not place undue reliance on any forward-looking statements, which are based on current expectations. Forward-looking statements speak only as of the date they are made, and we
undertake no obligation to update any of them in light of new information or future events. The factors listed above (in addition to other possible factors not listed) could affect our actual results
and cause these results to differ materially from those expressed in forward-looking statements made by us or on our behalf.

Item 1.    Business.

The development of our business

We are a global provider of consumable biological products, enabling technologies and services to a diverse customer base that includes major life science
companies and leading research institutions. Our customers use our products, technologies and services in a wide variety of their activities, including basic research, drug discovery, diagnosis and
biomanufacturing. Our products, technologies and services are essential tools for research in key disciplines, including neurology, oncology, hematology, immunology, cardiology, proteomics, infectious
diseases, cell signaling, stem cell research and molecular biology. In addition, we provide a comprehensive range of monoclonal antibodies for the blood typing industry. We were founded in 1971 and
incorporated under the laws of the State of Delaware in 1994. Our principal executive offices are located at 5655 Spalding Drive, Norcross, Georgia, and our telephone number at this address is
(678) 728-2000.

In
2001, we embarked on a strategy of focusing on businesses with higher growth rates and higher margins than our historical core business. As a result of our strategic redirection, we
believe we are well positioned to take advantage of the strong growth potential of the markets in which we compete. The significant milestones in our development were as follows:



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When
we made the decision to sell our therapeutic plasma business in the third quarter of fiscal 2003, we were required to change the way we report our financial information. We now
classify the therapeutic plasma business as "discontinued operations." In our financial statements, the results of the operations of our former therapeutic plasma business are now reported as
discontinued operations. We reclassified all the financial statements presented in this Annual Report on Form 10-K to report results of discontinued operations separately from
results of continuing operations. The information contained in this Annual Report on Form 10-K relates to our continuing operations unless otherwise noted.

Our markets

We compete primarily in the life sciences research and biomanufacturing markets. We also compete in a niche segment of the diagnostics market. The principal end
users in the life sciences research market are academic and institutional research laboratories, as well as research departments at both biotechnology and pharmaceutical companies. The research
laboratories and departments include those operated by universities, medical research centers and governmental institutions where researchers typically conduct small scale experiments in basic
molecular and cellular biology. The other principal laboratories in this market are operated by biotechnology and pharmaceutical companies in which researchers conduct small scale experiments and
large scale operations, such as drug screening and target validation, and typically have a commercial focus.

We
acquired Upstate in order to enter the drug screening and drug target validation segment of the life sciences research market. This segment consists of developers of therapeutic
agents that conduct screening and target validation to determine the efficacy of a particular agent against a particular biological process. The market for drug screening and drug target validation
products and services has grown significantly. We believe the market will continue to experience significant growth as researchers discover new potential therapeutic agents and new biological
processes against which to screen them. New drug development requires a significant investment of time and money. As a result, we expect drug researchers will increase outsourcing of the drug
screening and drug validation processes.

The
biomanufacturing market consists of biotechnology and pharmaceutical companies that use cell culture products to grow cells for either research or production of commercial quantities
of proteins. Cell culture products include sera, media and supplements. As the number and usage of biological therapeutic drugs increases, we expect the demand for cell culture products and services
to increase.

We
also compete in the blood typing segment of the diagnostics market. The ultimate consumer in this market segment consists of blood banks and hospital transfusion services that use
monoclonal antibodies to assure blood-type compatibility.

Our segments and operations

We are organized into three operating segments: Research, Cell Culture and Diagnostics. Our segments are based primarily on the differing production,
manufacturing and other value-added processes that we perform with respect to our products and, to a lesser extent, the differing nature of the ultimate end use of our products.

Research.We sell a broad range of research products, including specialty reagents, kits, antibodies and molecular biology
tools to research customers working in the areas of neuroscience, infectious

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disease,
oncology, stem cell research and cell signaling. We are also a leading supplier of monoclonal antibodies, conjugates, antibody blends and molecular biology-based detection kits for use in
diagnostic laboratories. As a result of our acquisition of Upstate, we are one of the leading suppliers of tools for kinase research and one of the leading providers of drug discovery services to
pharmaceutical companies targeting kinase biology-based drugs. We market our research products and services under our Chemicon and Upstate brand names. Chemicon,
headquartered in Temecula, California, has manufacturing and distribution operations in California, New Jersey, Australia and the United Kingdom. Upstate is headquartered in Charlottesville, Virginia.
It has manufacturing and distribution operations in Virginia, New York and the United Kingdom.

Cell Culture.We sell a variety of cell culture products, including highly purified proteins and tissue culture media
components. These products are used primarily by biopharmaceutical and biotechnology companies as nutrient additives in cell culture media. Our most significant product within the Cell Culture segment
is EX-CYTE®, a patented serum-free solution of cholesterol, lipoproteins and fatty acids. EX-CYTE® is used, in combination with other cell
culture supplements, to reduce or replace animal serum in cell culture processes. We believe that EX-CYTE® is superior to animal serum because it is less expensive and
significantly reduces the risk of bovine contaminants, such as bovine spongiform encephalopathy ("BSE"), or mad-cow disease. We also provide a range of serum-based products in this
segment, including bovine serum albumin ("BSA"), for which we are the world's leading supplier, and fetal bovine serum. We market our BSA products under the brand name Probumin. We also
sell recombinant human insulin for use as a media supplement. We market recombinant human insulin under the brand name Incelligent. In addition, we provide contract research services in
the areas of cell-line development, process development, protein expression, in vivo research and molecular biology. We market our cell culture products and services under our
Celliance brand name. Celliance is headquartered in Atlanta, Georgia. It has manufacturing and distribution facilities in Illinois, Kansas, Massachusetts and Canada, and a contract
research facility in California.

Diagnostics.Our Diagnostics segment manufactures monoclonal antibodies that are used in products such as blood typing
reagents and in controls for diagnostic tests for certain infectious diseases. Our products comprise the world's most comprehensive range of commercially available human monoclonal antibodies for
blood grouping. Our diagnostic products are marketed under our Celliance brand name. We manufacture our diagnostic products at a facility in the United Kingdom.

See
"Note 14Segment and Geographical Information" in Item 8 Financial Statements and Supplementary Data for disclosure of revenue and gross profit by segment
and long-lived assets by geographical area for our three most recently completed fiscal years. We do not currently segregate assets by segments as a significant portion of our total assets
are shared or non-segmental assets that we do not assign to our three operating segments.

Prior
to our decision to exit the therapeutics plasma business, we reported a fourth operating segment, Therapeutic Products, for the first two quarters of fiscal 2003. During fiscal
2002, we reported three operating segments, Biotechnology and Molecular Biology Products, Therapeutic Products and Diagnostic Products. The financial statements set forth in this Annual Report on
Form 10-K reflect the restatement of the 2002 segments so that they are consistent with the current year presentation.

Description of our industry

We operate in the life science industry. We serve three principal types of life science customers:



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The
following is a description of the industry segments in which we operate:

Life Science Research.Life science researchers require special biochemical research tools capable of performing precise
functions in a given experimental procedure. Two of the principal disciplines within the life science research market are cellular biology research and molecular biology research. 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 this study
has broad application in the field of developmental biology and is important in the study of carcinogenesis, cell signaling, virology, immunology, vaccine design and production and agriculture. To
grow the cells required for research, researchers use cell or tissue culture media that simulate under laboratory conditions ("in vitro") the environment in which cells live naturally ("in vivo") and
that provide 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
production 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 therapeutic agents. These are small
molecule drugs and large molecule drugs. Small molecule therapeutics are chemical compounds that are made through an organic or inorganic process. Chemical or pharmaceutical companies manufacture
these therapeutics and their active ingredients in bulk. Large molecule therapeutics are mostly protein-based with amino acids as their building blocks. Large molecules must be grown in living cells,
such as bacteria, yeast or mammalian cells (or other living organisms) since they cannot be synthesized chemically. Protein-based therapeutics are usually injected because they cannot be absorbed
orally due to their size, composition and sensitivity to the gastrointestinal environment. Another major category of protein therapeutics is monoclonal antibodies. Monoclonal antibodies are antibodies
that are highly specific towards a biological target, known to be implicated in the development of disease. There is an increasing trend of monoclonal antibody development for therapeutic use.

The
process for manufacturing large molecule therapeutics requires a number of components, including:



Cell
culture is an important technology that is also used in many other essential biomedical applications such as the production of proteins that serve as key components of clinical
diagnostic

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assays,
vaccine production, the development of cell and tissue therapies, screening for toxicity during drug discovery and numerous research applications involving the study of genes and cell biology.

Diagnostic Products.Antibodies are used in the manufacture of products that are used to screen patients for exposure to
disease-causing agents, to detect proteins of clinical importance, determine blood type, and many other applications where there is a need to detect a biological target with high specificity. These
products are called diagnostic products. Diagnostic products may involve the use of either monoclonal or polyclonal antibodies. Monoclonal antibodies are produced using the cell culture process
described above. Polyclonal antibodies are produced by a living organism that is exposed to a specific antigen. Typically, polyclonal antibodies are obtained from human donors who have been exposed to
a specific disease and have developed resistance to it. The specificity of antibodies makes them powerful diagnostic tools. Antibodies can be used to locate substances that occur in minute amounts and
to measure the substances with great accuracy. Monoclonal antibodies may be used to locate environmental pollutants, detect harmful microorganisms in food, distinguish cancer cells from normal cells
and diagnose infections in human, animals and plants. Monoclonal antibodies are also used to determine blood type. Antibodies are also used to classify the antigens on red cells and to detect regular
antibodies and irregular antibodies in blood specimens.

Our products and services

Overview.In fiscal 2004, we derived approximately 40% of our revenues from our Research segment, approximately 44% from our
Cell Culture segment, and approximately 16% from our Diagnostic segment. The following table presents individual products making up greater than 10% of our consolidated net revenues during fiscal
2004, 2003 and 2002:

2004

2003

2002EX-CYTE®

15
%
20
%
31
%Probumin BSA

*

11
%
16
%Incelligent Recombinant Human Insulin

15
%
*

*


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EX-CYTE®,
Probumin and Incelligent are products of our Cell Culture segment.

The
following sets forth a description of the products in each of our segments, the processes by which such products are manufactured or obtained and the markets for such products:

Research.The activities of our Research segment primarily consist of the manufacture and sale of a broad range of products
and services to research customers working in the areas of neuroscience, infectious disease, oncology, stem cell research and cell signaling. Products sold as reagents include antibodies, enzymes and
other proteins, as well as general-use consumable supplies. Products sold as kits include assays for the detection of viruses, protein and gene activity and stem cell differentiation, as
well as RNAi gene silencing systems. This segment also sells in vitro diagnostic products, either 510(k) diagnostic kits or as analyte specific reagents, for use by certified diagnostic laboratories.
The products of our Research segment are a blend of in-house developed and manufactured products, licensed products manufactured in-house and products manufactured by third
parties. Our antibody products are generally developed and manufactured through in vitro cell culture and animal immunization processes. Molecular biology products are generally developed and
manufactured using DNA cloning and recombinant protein expression techniques. Development and manufacturing of products in the Research segment are performed through Chemicon and Upstate at facilities
in Temecula, California, Charlottesville, Virginia, Lake Placid, New York, Phillipsburg, New Jersey, Southampton, England, Dundee, Scotland and Melbourne, Australia.

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Our
Research segment offers many services to our customers, including the development and production of custom antibodies, peptides, assays and other products. In support of certain of
these services, our Research segment operates large and small animal facilities in Ramona, California, along with a similar operation in Australia, for the production of polyclonal antibodies. The
animal facilities have been certified by the United States Department of Agriculture ("USDA"). Our Research segment also provides drug discovery services to pharmaceutical companies targeting kinase
and G-protein coupled receptor (GPCR) based drugs. Most of these services are performed at our Dundee, Scotland facility.

Our
products and services within the Research segment are primarily used as research tools by scientists performing experiments in an effort to uncover the sequence and function of genes
and to understand their corresponding proteins and roles in biological pathways. These scientists are involved in academic research at universities and research institutes as well as drug discovery
research at pharmaceutical and biotechnology companies. Therefore, market growth is driven by the amount of academic and industrial research conducted throughout the world. Funding for this research
in the academic setting is derived primarily from grants awarded by the National Institutes of Health ("NIH") and, to a lesser extent, other government agencies and private endowments.

Our
Research segment offers nearly 10,000 products. We maintain inventories of these products based on our expectations regarding future sales of the products because our customers
expect rapid delivery of the products they order. As a result, we typically keep a significant portion of these products in inventory. Most sales of our Research products are for small amounts, the
average sale being under $1,000. The typical purchaser of our Research products is a researcher who pays for the order under an established customer account or with a credit card. We sell some of our
Research products in bulk to large users. Typical payment terms for our bulk customers are net 30.

Cell Culture.The activities of our Cell Culture segment primarily consist of the manufacture and sale of a broad range of
cell culture media components used principally in mammalian cell culture, including



Our
Cell Culture segment also provides contract research services, consisting of cell-line development, process development, protein expression, in vivo research and molecular biology.

Recent
advances in the commercialization of large molecule therapeutic products have increased demand for cell culture media and cell culture components. Our Cell Culture segment
produces its products at manufacturing facilities in Kankakee, Illinois, Lawrence, Kansas, and Toronto, Ontario. Our manufacturing process isolates specific proteins contained primarily in animal sera
or plasma through specialized manufacturing processes known as protein fractionation. The segment uses core technologies, such as organic solvent precipitation, heat shock, molecular and microporous
filtration, ion-exchange chromatography and salt precipitation, to isolate and purify major plasma protein classes, including albumin, gamma globulin, transferrin, lipoproteins, aprotinin
and clotting factors.

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The
primary raw materials used in the manufacture of our cell culture media components are bovine serum and plasma. Concerns have been expressed that the agent that causes bovine
spongiform encephalopathy could be present in cell culture supplements that are derived from bovine serum or bovine plasma, including those that we manufacture. Bovine spongiform encephalopathy is a
disease that afflicts cattle and is called "BSE" or "mad-cow disease." If the agent were present in cell culture supplements, there is a risk that it might be introduced into a therapeutic
substance manufactured by one of our customers. We seek to address this risk in a number of ways. With respect to EX-CYTE® and several other of our cell culture supplements, we
developed a purification process that inactivates the agent. During 2004, we were awarded a patent on this process as it applies to the manufacture of EX-CYTE®. As an
additional safeguard, we obtain the bovine serum and plasma that we use to manufacture our products only from beef cattle that are less than 30 months of age. We believe our selectivity in this
regard substantially reduces the risk that the agent that causes BSE will be present in our products because, due to the nature of BSE disease pathology and based on historical data, the incidence of
BSE in cattle of this type and age is extremely rare. Furthermore, we are able to confirm that the cattle from which we obtain our bovine serum and plasma have never been fed ruminant protein.
Consumption of ruminant feed is considered the primary source of BSE transmission. Finally, we have completed viral clearance studies on a number of our products. These studies, which we publish,
demonstrate that our products do not contain the agent that causes BSE.

We
maintain inventories of our Cell Culture products based on our expectations regarding future sales of the products and based on our contractual commitments to supply the products to
our customers. We typically manufacture our cell culture products in large lots or batches to achieve production efficiencies. A significant amount of the sales of our cell culture products are for
large amounts of products to large, industrial customers. The payment terms vary from customer to customer; however the typical payment term is net 30.

Diagnostic.The activities of our Diagnostic segment primarily consist of the manufacture and sale of monoclonal and
polyclonal antibodies that are used in diagnostic products, such as blood typing reagents and diagnostic test kits. 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. More than
15 billion human blood tests are performed annually worldwide. These blood
tests are performed mostly in commercial laboratories, hospitals, urgent care centers or physicians' offices. Although over 1,000 different tests are performed on blood, fewer than 50 different tests
account for approximately 75% of all blood testing. These tests are important because physicians routinely use them to diagnose and monitor the treatment of disease and a significant portion of the
top 50 tests prescribed by physicians fall within the clinical chemistry category. We believe that increased concerns relating to blood safety and increased demand for more diverse diagnostic tests
will increase the demand for the products of our Diagnostic segment. Historically, blood typing reagents were made primarily from human-sourced, or polyclonal, antibodies. Over the past
20 years, monoclonal antibodies have been developed to provide certain high quality antibodies on a consistent basis. Many monoclonal antibodies are FDA approved for diagnostic purposes.
Monoclonal antibodies have largely, but not completely, replaced polyclonal antibodies for use in blood typing.

We
produce monoclonal antibodies at an FDA-licensed manufacturing facility in Livingston, Scotland. We use cell lines obtained from independent laboratories and cell culture
materials to produce the products of our Diagnostic segment. We currently store 87 cell lines with which we provide over 60 different antibodies used in the production of blood typing reagents. We
also procure and further manufacture a wide range of processed plasma, serum and serum substitutes from many different sources at our facility in Milford, Massachusetts. We maintain inventories of our
monoclonal products based on our expectations regarding future sales of the products and based on our contractual commitments to supply the products to our customers. We typically manufacture our
monoclonal

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products
in large lots or batches to achieve production efficiencies. Most sales of our monoclonal products are for large quantities of products to large, industrial customers. The processed plasma
and serum products tend to be customized. We do not maintain large inventories of such products. The payment terms vary from customer to customer; however the typical payment term ranges from net 30
to net 60.

Research and Development

We believe that a commitment to research and development is an essential component of our future growth opportunities. Accordingly, we expect to continue to
increase our investment in research and development over the next several years. We spent approximately $10.1 million, $6.2 million and $5.6 million on research and development
activities in fiscal 2004, 2003 and 2002, respectively. Our research and development activities are focused on developing new products and applications. Our research and development activities with
respect to our Research segment primarily relate to the development of polyclonal and monoclonal antibodies, enzymes and other proteins, cell-based assays and molecular biology products,
including kits using these products and technologies and ancillary products to enhance the utility of our products. During fiscal 2004, our Research segment developed approximately 1,200 new products.
With respect to our Cell Culture segment, our research and development efforts are focused on the development of new products for specific cell-culture applications. The first such
product, Hybri-CYTE, was released during the first quarter of fiscal 2005. In
addition, research efforts include the study and development of new recombinant supplements. As of January 2, 2005, we had approximately 136 employees principally engaged in research and
development.

Sales and Marketing

The majority of our sales of Research products result from orders placed from our catalogues. Both Chemicon and Upstate issue catalogs every 12 to
18 months, with frequent updates and supplements as product lines change and grow. We sell the majority of our cell culture and diagnostic products through our own direct sales force. We also
use distributors to market and sell our products in places where we do not maintain a direct sales force. We directly market our products in over 48 countries; we sell products through independent
distributors or agents in approximately 11 additional countries. Our independent distributors may also market products of other companies, including some companies that supply products that are
competitive with our products. As of January 2, 2005, we employed over 132 people world-wide in our combined sales, customer service, technical support and marketing organizations.

During
fiscal 2004, our customer base increased to over 6,400 customers. Sales to our top ten customers accounted for approximately 36%, 45% and 54% of total sales in fiscal 2004, 2003
and 2002, respectively. In 2004, 2003 and 2002, sales to customers located in the United States of America represented approximately 62%, 64% and 46%, respectively, of our net revenues. The following
table presents sales to a customer that represented more than 10% of consolidated net revenues:

2004

2003

2002Johnson & Johnson

15
%
17
%
20
%


We
do not currently have a significant backlog of product orders and do not anticipate that we will develop a material backlog in the future.

Quality Assurance

We maintain a global quality assurance system and program designed to assure the efficacy and safety of our products and compliance with the requirements of
regulatory authorities, voluntary quality standards, industry trade associations and our customers. Using our quality assurance program and an

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internally
maintained regulatory compliance program, we conduct periodic audits of each of our facilities to ascertain the status and compliance of the quality system as implemented. The audits are
designed to ensure adherence to applicable regulations and our procedures and to assess the effectiveness of our quality system as a whole. The audits are one component of the key performance
indicators that we collect, review and monitor in order to maintain our program of continuous improvement and compliance with our established systems and programs.

Most
of our operating facilities are registered to ISO 9000:2000 Quality Standards. The ISO 9000:2000 series of standards is a voluntary quality standard recognized
throughout the world. Many of our customers require compliance with this standard. Additionally, our monoclonal manufacturing facility in Livingston, Scotland, complies with the European Union's In
Vitro Diagnostic Directive ("IVDD"). The monoclonal manufacturing facility and Chemicon's manufacturing facilities are also registered to ISO 13485, a voluntary quality standard for in vitro
diagnostic products. Chemicon is approved to use European Certification, or CE, marking on some of its in vitro diagnostic products pursuant to European Community Directive 98/79/ EC
Annex IV, Article 3. This certification and approval is for the design, manufacturing and distribution of in vitro diagnostic devices, research and laboratory use products.

Competition

Research.The market for the products and services of our Research segment is highly competitive. We estimate that
approximately 80 companies serve all or part of the markets served by our Research segment. We believe that a company's competitive position in the markets served by our Research segment is determined
by product consistency and function, product quality, speed of delivery, technical support, price, breadth of product line and commitment to product development. Our customers are diverse and place
varying degrees of importance on the competitive attributes listed above. We believe that the following factors give us a competitive advantage in the markets served by our Research segment:



Certain
of our competitors offer a broader range of products than we do. We may be at a competitive disadvantage with respect to these competitors because potential customers may prefer to deal with a
single supplier for all of their research-product needs.

Cell Culture.The market for the products and services of our Cell Culture segment is very competitive. We estimate that
approximately 12 companies serve all or part of the markets served by our Cell Culture segment. We believe that a company's competitive position in the markets served by our Cell Culture segment is
determined by price, product function, product quality, speed of delivery and technical support. Of these factors, we believe that quality, including conformity to specifications, is the most
important to the majority of our customers. We believe that the following factors give us a competitive advantage in the markets served by our Cell Culture segment:



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We
believe that we may be at a competitive disadvantage in the markets served by our Cell Culture segment because many of our products are derived from bovine serum. We believe that
concerns about the transmission of BSE through cell culture products that are derived from bovine serum could cause prospective customers of our Cell Culture segment to seek synthetic alternatives to
our products. Several companies, including us, are attempting to develop synthetic alternatives. We also believe that we are at a competitive disadvantage with respect to some grades of BSA because
other companies sell the product for less than our price.

Diagnostic.The market for our monoclonal products is very competitive. However, we currently enjoy a significant share of
the market for these products. The primary competition for monoclonal antibodies used in blood typing reagents 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 products than we offer. We estimate that there are approximately four companies involved in the supply of
products similar to our monoclonal products. Some fully integrated manufacturers also offer
OEM and bulk services. As we do not have a significant presence in the end market and are thus not perceived as being in direct competition with our customers, we believe that we are generally favored
over fully integrated manufacturers that offer OEM and bulk antibodies. We believe that the breadth of our Diagnostic segment's product line gives us a competitive advantage because our customers
often desire to buy an entire panel of different antibodies for blood typing reagents from one manufacturer.

Government and Industry Regulation

Many of our activities are subject to regulation by governmental authorities, such as the United States Food and Drug Administration ("FDA") and similar bodies
outside of the United States of America. The regulatory authorities govern the collection, testing, manufacturing, safety, efficacy, labeling, storage, record keeping, transportation, approval,
advertising and promotion of our products, as well as the training of our employees. We manufacture and distribute a significant number of products that are not subject to governmental regulation;
however, some of these products are subject to import and export regulations specific to the country of import. We believe that we are in substantial compliance with all relevant laws and regulations.

The
facilities we use in our Cell Culture and Diagnostic segments are subject to extensive FDA regulation, primarily through the requirements of the Public Health Service Act and the
Food, Drug and Cosmetic Act. New facilities, products and operating procedures at such locations must undergo FDA approval processes. These facilities are also subject to periodic inspection by the
FDA to ensure their compliance with applicable laws and regulations. Significant changes to existing facilities, products

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or
operating procedures must also undergo FDA review prior to implementation. Celliance's monoclonal antibody manufacturing facility in Livingston, Scotland, and Chemicon's facility in Temecula,
California, are required to adhere to the FDA's Quality System Regulations ("QSR"), which were formerly known as Good Manufacturing Practices or cGMP. Such facilities are periodically inspected by the
FDA. Chemicon's animal husbandry operations are also licensed by the USDA and are periodically inspected by the USDA.

In
the United Kingdom, our operations are 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, our customers are subject to regulatory requirements
that require additional inspection and approval of our facilities prior to the shipment of products to such countries. Changes in existing federal, state or foreign laws or regulations, or our
inability to comply with such laws and regulations, could have an adverse effect on our business and financial condition.

Celliance
produces certain bovine-derived products at its protein fractionation facilities in Kankakee, Illinois and Toronto, Ontario. The cattle industry, which supplies Celliance with
raw materials for its bovine-derived products, is regulated by the USDA to prevent the spread of BSE. The regulations restrict the use of feed containing ruminant meat and bone protein, require
spot-testing of cattle and require testing of cattle manifesting symptoms of BSE affliction. Cows afflicted with BSE were discovered in Canada and the northwestern United States in 2003.
These animals were the first known cases of mad-cow disease in North America. The discovery of mad-cow disease in North America caused disruptions in the production and sales
of some of our cell culture products during the first quarter of fiscal 2004. As a result of both discoveries, we were forced to close our Canadian manufacturing facility for a period of time and to
delay shipments of inventory to a number of international customers due to foreign government regulations. We were also unable to import raw material sourced in the United States into Canada and vice
versa for a period of time following the discovery of BSE in each imposed country. Similar scares or actual outbreaks of disease could have a material adverse effect on our business and results of
operations. We take steps to assure the continued availability and highest possible safety of our bovine-derived products. The regulatory agencies may impose additional regulations on the cattle
industry or us in response to the discovery of BSE afflicted cattle in North America. We intend to work closely with the USDA, the Canadian Food Inspection Agency and the FDA to assure compliance with
any new regulations that are issued.

Certain
of our products 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, QSR, labeling and prohibitions against misbranding and adulteration. These products, which represent an insignificant amount of our sales, nonetheless subject us
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 cell culture media products, such as
our 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 a minimum, manufacturers of cell culture media should adhere to QSR standards. We currently produce
EX-CYTE® in a dedicated facility that was constructed to QSR standards. The imposition of additional regulatory requirements for our protein fractionation facilities could
adversely affect our business and financial condition.

We
are also subject to government regulation under, among other things, 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 similar laws and regulations outside the United States. We are also subject to
workplace safety regulations under the Occupational Safety and Health Act and similar laws and regulations outside the United States.

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Technology Licensing, Patents, Proprietary Rights and Trademarks

Part of our business strategy is the development of value-added products. We develop value-added products by, among other things, obtaining intellectual property
protection for our products. As a result of our efforts to increase our intellectual property portfolio, over 60% of our revenues in fiscal 2004 were derived from products that are licensed, patented
or proprietary in nature. We expect to accelerate our research and our new product development efforts by targeting research and development spending of a least 10% of our gross revenues. We will also
continue to seek intellectual property protection for new products as we determine to be appropriate. Furthermore, we will continue to in-license new technologies from academic and
government institutions, as well as biotechnology and pharmaceutical companies. We use licensed technologies to create new products, including high value kits, many of which address bottlenecks in the
research or drug discovery laboratories.

The
protection of our proprietary technologies, trademarks and trade secrets is important to the success of our business strategy. We rely on a combination of patents, trade secrets,
licenses and trademarks to protect and differentiate our products from our competitors' products. We attempt to protect our trade secrets by entering into written confidentiality agreements with our
employees, potential collaborators and third parties. Such written agreements may be breached by such contracting parties and, if this occurs, a sufficient remedy of such breach may not be available.
If our trade secrets become known to third parties, we may lose a competitive advantage.

We
seek patent protection for our inventions when appropriate. As of January 2005, we owned approximately 60 patents and had approximately 14 patent applications pending, most of
which relate to our Research segment. Our issued patents expire at various dates through October 2020. Several of our patents are on EX-CYTE®, which is our most
important cell culture product. We have also obtained federal and foreign trademark registrations on the name of the product. One patent on the process used to make EX-CYTE®
expires in October 2006 in the United States and in April 2006 in Europe and Japan. Other patents associated with the process for making EX-CYTE® expire in 2012
and beyond. After the expiration of our process patents on EX-CYTE®, other companies could produce products similar to EX-CYTE® using our process. If
other companies did so, sales of EX-CYTE® could be materially adversely affected. We believe that our intellectual property protection with respect to
EX-CYTE® is material to our business. We do not believe that any of our other patents are material to our business.

A
large percentage of the products of our Research segment are sold pursuant to licenses that have varying terms and conditions. Therefore, our ability to obtain licenses to allow the
introduction of new products is very important to allow us to offer new, innovative and technologically superior products. As of January 2005, we had approximately 1,000 licenses from others
and we had approximately 140 licenses to others. Most of our licenses from others relate to our Research segment. The licenses from others typically cover patents or biological materials, such as cell
lines, that we use to develop new products. Most of them are for fixed terms with options for renewal. No single license is material to our business.

Third Party Reimbursement

In both domestic and foreign markets, sales to our customers may depend in part on the availability of reimbursement from third-party payors such as the NIH,
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 our customers will not adversely affect our financial condition and results of operations
because of a determination that these products are not cost effective or because of inadequate third-party reimbursement levels to such customers.

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Employees

As of March 7, 2005, we employed 1,029 people, 726 in the United States, 59 in Canada, 24 in Australia and 220 in Europe. We have 39 employees at our
manufacturing site in Illinois and 36 employees at our manufacturing site in Toronto who are members of a collective bargaining unit. We believe that our relationship with our employees is generally
satisfactory.

Product Liability and Insurance

The sourcing, processing, manufacturing and sale of our products involve a risk of product and professional liability claims. We believe that we have obtained
sufficient levels of product and professional liability insurance to insure the risk of catastrophic claims. Currently we carry a $500,000 deductible for liability coverage. There can be no assurance
that the coverage limits of our insurance policies and/or any rights of indemnification and contribution that we may have will offset potential claims. A successful claim against us in excess of our
insurance coverage and not subject to indemnification could have a material adverse effect on our financial position and results of operations. We are not aware of any such pending claims.

Available Information

We make available free of charge through our website,www.serologicals.com,our Annual Report on
Form 10-K, our Quarterly Reports on Form 10-Q, our 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 (the "Exchange Act"), as soon as reasonably possible after we file such material with, or furnish it to, the Securities
and Exchange Commission.

Cautionary Statements

You should consider the following factors, together with other matters described in this Annual Report on Form 10-K, in evaluating us and our
prospects. Any of the following risks could seriously harm our business and financial results. In such case, the trading price of our securities could decline.

If we are unable to implement our growth strategy, the price of our securities may be adversely affected.

Our growth strategy is to increase our sales and profitability by increasing our rate of growth. We have historically achieved, and intend to continue to achieve,
our growth primarily through the acquisition or internal development of new product lines, the expansion of our customer base and the addition of new businesses. However, we cannot guarantee that we
will continue to expand successfully or that growth or expansion will result in continued profitability. Our ability to implement our growth strategy will depend upon a variety of factors that are not
entirely within our control, including:



Our
growth strategy includes growth by acquisitions. We compete for acquisition opportunities with companies that have significantly greater financial resources than we have. Therefore,
there is a risk that we may be unable to complete an acquisition that we believe could be important to our growth

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strategy
because one of our competitors may be willing to pay more for a potential acquisition candidate or may be able to use its financial resources to acquire a potential acquisition candidate
before we are able to obtain financing.

We face considerable business and financial risks related to our acquisition of Upstate Group, Inc.

On October 14, 2004, we completed the acquisition of Upstate Group, Inc., a privately held company based in Charlottesville, Virginia, for
$205 million. The acquisition of Upstate required a substantial expenditure and involves substantial risks on our part. For a variety of reasons, we cannot provide assurance that the
acquisition of Upstate will produce the revenues, earnings or business synergies that we anticipate, or that it will perform as expected. The reasons for our uncertainty include:



Any
one or a combination of these factors may cause our revenues or earnings to decline. Furthermore, despite the strong growth Upstate demonstrated as an independent company prior to the acquisition,
we cannot be sure that the business will continue to have strong growth after the acquisition

If we implement our growth strategy but are unable to manage our growth, our sales and profitability might be adversely affected.

The implementation of our growth strategy may place additional demands on our administrative, operational and financial resources and increase the demands on our
financial systems and controls. Our ability to manage our growth successfully may require us to continue to improve and expand these resources, systems and controls. If our management is unable to
manage growth effectively, our operating results could be adversely affected. If we are unable to manage our growth, our financial condition and results of operations may be adversely affected.

We may not be able to raise the additional capital necessary to implement our growth strategy.

Our growth strategy requires that we make expenditures in connection with new products and the acquisition of other companies. Although we believe we have
sufficient resources to finance these expenditures, we may be required to seek additional sources of financing, which may include issuing additional debt or equity securities to finance potential
acquisitions. We cannot predict the amount of our expenditures in connection with our growth strategy because opportunities for implementing our growth strategy arise unexpectedly. This is
particularly the case for acquisition opportunities. In the past, when an acquisition opportunity arose, we were required to obtain financing simultaneously with our negotiation of the terms of the
acquisition. Our dependence on additional financing may place us at a disadvantage in competing for acquisitions. When a future acquisition opportunity arises, we will be required to evaluate the
sources of financing, which may be limited on short notice, and the terms of the financing available at the time. If we cannot find financing on acceptable terms, we may be unable to make the
acquisition.

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Our competitors may increase the sales of their products in a way that results in decreased sales of our products and our loss of market share.

The markets for many of our products, particularly our research products, are highly competitive. We believe that the following companies are our most significant
competitors:



Some
of our competitors have significant financial, operational, sales and marketing resources, and significant experience in research and development. Our competitors may develop new
technologies that compete with our products or render our products obsolete. If a competitor develops superior technology or cost-effective alternatives to our products, our business,
operating results and financial condition could be negatively impacted. In addition, demand for our products may weaken due to reduction in research and development budgets, loss of distributors and
other factors identified in this Annual Report on Form 10-K, which could have an adverse effect on
our financial condition. We believe that customers in our markets display a significant amount of loyalty to their initial supplier of a particular product. Therefore, it may be difficult to generate
sales to potential customers who have purchased products from competitors. To the extent we are unable to be the first to develop and supply new products, our competitive position may suffer. We
intend to compete in our industry by leveraging and expanding upon our business and operational structure. Among other things, we intend to leverage our expanded sales and marketing structure, to
expand our investment in research and development and to continue to evaluate acquisitions of businesses and technologies that will further accelerate our growth in both revenue and profitability.
However, we cannot assure you that our plans will be successful or that we will be able to maintain or increase our market share.

If our supply of bovine serum or recombinant human insulin is interrupted or if the price of such materials increases and we are unable to pass the increases to our customers,
our Cell Culture segment would be materially adversely affected.

Our Cell Culture segment relies on the continued availability of bovine serum, which is the raw material from which our EX-CYTE® product
is derived and which is a component used in the manufacture of other cell culture products and of recombinant human insulin, which we distribute to our cell-culture-product customers. The
availability and price of bovine serum has been affected by scares or outbreaks of disease or similar health concerns or perceptions about the safety of bovine serum, government regulation and trade
restrictions. Cows afflicted with BSE, or "mad-cow disease",

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were
discovered in Canada and the northwestern United States in 2003. These animals were the first known cases of mad-cow disease in North America. The discovery of mad-cow
disease in North America caused disruptions in the production and sales of some of our cell culture products. As a result of both discoveries, we were forced to close our Canadian manufacturing
facility for a period of time and to delay shipments of inventory to a number of international customers due to foreign government regulations during the first quarter of fiscal 2004. We were also
unable to import raw material sourced in the United States into Canada and vice versa for a period of time following the discovery of BSE in each country. Similar scares or actual outbreaks of disease
could have a material adverse effect on our business, results of operations and financial condition.

We
now obtain all the bovine serum we use to manufacture our cell culture products from a single privately held supplier who sources materials from two abattoirs in the Midwestern United
States. If we are unable to obtain bovine serum from our existing supplier because of a future outbreak of BSE, we will contact other suppliers and attempt to find a source of supply in one of the few
countries that are believed to be free from BSE. We have not arranged a source of supply from a source in one of these countries and do not know that we will be able to do so. However, we are now
exploring an Australian based supply, which we plan to introduce into the United States in 2005. If we cannot find another source, our Cell Culture segment could be materially adversely affected.

We
obtain the recombinant human insulin that we distribute to our cell-culture-supplement customers from Novo Nordisk A/S, a company based in Denmark. We entered into a three
year contract with this supplier early in fiscal 2004. We do not have an alternate source of supply for recombinant human insulin. We do not believe that we could readily obtain another source of
recombinant human insulin if our supply from Novo Nordisk A/S were interrupted. If our supply were interrupted, our Cell Culture segment and our results of operations would be materially adversely
affected.

Our EX-CYTE® product sales are driven by market demand for therapeutic drugs that we do not manufacture or sell. If such drugs are not commercially
successful, the companies that manufacture them will not purchase EX-CYTE®, and our results of operations may be materially adversely affected.

EX-CYTE® is our most significant product within our Cell Culture segment. The majority of our sales of EX-CYTE®
are to companies with approved, marketed drugs, or with drugs in advanced phases of clinical trials. Reduced demand or acceptance, or delays or denial of approval of the underlying pharmaceutical
product could adversely impact the demand for EX-CYTE® and adversely affect our results of operations.

Demand
for EX-CYTE® has been flat for the past three years. As a result, the demand is substantially lower than we forecasted when we decided to construct our new
manufacturing facility in Lawrence, Kansas. If we were to commence operations as originally planned at our new plant, our capacity to manufacture the product would exceed current demand. To address
this situation, we have decided to delay the commencement of commercial production of EX-CYTE® at our Lawrence plant until early 2006. We will re-evaluate demand
for the product during 2005. There is a risk that we could be required to record an impairment charge with respect to our investment in our facilities. The charge could have a material adverse effect
on our business, results of operations and financial condition.

Concern about the transmission of BSE could reduce the demand for the products of our Cell Culture segment that are derived from bovine serum.

The demand for several products of our Cell Culture segment, including EX-CYTE® and Probumin bovine serum albumin could be
adversely affected by concerns about some of their components being derived from bovine serum. The concern arises from the risk that the agent causing

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BSE
might be present in the raw materials used in the production process and that the agent might be introduced into a therapeutic substance manufactured by one of our customers.

The outsourcing trend in the pre-clinical and non-clinical stages of drug discovery and development may decrease, which could slow our growth.

Our Research segment derives a portion of its revenues from the provision of drug discovery services to its customers. This business has grown significantly over
the past several years as a result of the increase in pharmaceutical and biotechnology companies outsourcing their pre-clinical and non-clinical research support activities. A
substantial decline in pre-clinical and non-clinical outsourcing activity could result in a diminished growth rate in the revenues of our Research segment.

Violation of government regulations or voluntary quality programs could result in loss of sales and customers and additional expense to attain compliance.

Several of our facilities are subject to extensive regulation by the FDA, primarily through the requirements of the Public Health Service Act and the Food, Drug
and Cosmetic Act, and similar governmental bodies in other countries. The facilities are also subject to periodic inspection by the FDA and other similar governmental bodies to ensure their compliance
with applicable laws and regulations. New facilities, products and operating procedures also must be approved by the FDA and/or similar governmental bodies in other countries. Failure to comply with
these laws and regulations could lead to sanctions by the governmental bodies, such as written observations of deficiencies made following inspections, warning letters, product recalls, fines, product
seizures and consent decrees, which would be made available to the public. Such actions and publicity could affect our ability to sell our products and to provide our services. In the past, we have
received notifications and warning letters from the FDA relating to deficiencies in our compliance with FDA requirements. We were required to take measures to respond to the deficiencies. There can be
no assurance that the FDA will not request that we take additional steps to correct these deficiencies or other deficiencies in
compliance raised by the FDA in the future. Correction of any such deficiencies could have a material adverse affect on our business.

We
are also indirectly held accountable for complying with some of the regulations to which our customers are subject, even though we are not the regulated entity. For example, some of
our customers use our products in the manufacturing process for their drug and medical device products. Such products are regulated by the FDA under the FDA's QSR. Although the customer is ultimately
responsible for QSR compliance for their products, the customers expect that the materials we sell to them will meet QSR requirements. We could lose sales and customers, and incur products liability
claims, if our products do not meet QSR requirements, to the extent applicable. In this regard, during 2002 and 2003, we experienced a delay in demonstrating to our customers' satisfaction that our
Toronto manufacturing facility complied with their QSR requirements. This delay resulted in lost sales and increased costs during fiscal 2002 and 2003.

We
are subject to USDA regulations and various foreign regulations for the sourcing, manufacturing and distribution of animal based proteins. Our failure to comply with these
requirements could negatively impact our business and potentially cause the loss of customers and sales. ISO 9000:2000 quality standards are an internationally recognized set of voluntary quality
standards that require compliance with a variety of quality requirements somewhat similar to the QSR requirements. The operations of our cell culture manufacturing facilities, as well as our
manufacturing facility in Scotland and our research products facilities in California, Australia and the United Kingdom, are registered under the ISO standards. Failure to comply with this voluntary
standard can lead to observations of non-compliance or even suspension of ISO certification by the certifying unit. Loss of ISO certification could cause some customers to purchase
products from other suppliers.

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Our research and development efforts for new products may be unsuccessful.

We incur research and development expenses to develop new products and technologies. There can be no assurance that any of these products or technologies will be
successfully developed or that, if developed, will be commercially successful. If we are unable to develop and commercialize products from our research and development efforts or we are unable or
unwilling to allocate amounts beyond our currently anticipated research and development investment, we could lose our entire investment in these new products and technologies.

If we are not able to identify new licensing opportunities or to enter into licenses for new products on acceptable terms, we may be unable to offer new products, which would
adversely affect our results of operations.

A component of our business strategy is to increase the number of products we offer by licensing products developed by other biotechnology companies or academic
research laboratories. We attempt to market such products to our customers. Often, we attempt to improve the licensed products using our technologies. Therefore, we depend on the success of our
licensing efforts for a portion of our new products. There can be no assurance that our licensing efforts will be successful.

We
license technology that enables us to access proprietary biological materials that we use to manufacture our products. Some of the licenses do not provide guarantees that we will have
all legal rights to sell products that are derived from the licensed technology. Therefore, we may be prevented from selling products produced with the licensed biological materials because of
competing technologies owned by others, including patented technologies. If our products are found by a court to infringe intellectual property rights of a third party, we may be prevented from
practicing that technology. Moreover, if found by a court to infringe the patent of the third party, we may be liable for compensatory damages, treble damages and attorney's fees and subject to a
royalty obligation or enjoined from practicing the technology altogether, notwithstanding the license from the licensor. Although we attempt to obtain indemnification from our licensors, we do not
always receive indemnification against third party claims of patent infringement. In the ordinary course of business, we receive notices alleging that one or more of our approximately 10,000 research
products violates a patent or other intellectual property right. Although we have not in the past incurred material liabilities as a result of infringement claims with respect to our research
products, we have no assurance that we will not incur material liability as a result of an infringement claim in the future, which could materially adversely affect our results of operations.

If we fail to introduce new products, or our new products are not accepted by potential customers, we may lose market share.

Our Research segment is highly dependent on frequent new product introductions. Our future success will depend in part on continuous, timely development and
introduction of new products that address evolving market requirements. To the extent we fail to introduce new and innovative products, we may lose market share to our competitors, which could be
difficult to regain. Any inability to develop and introduce new products successfully could reduce our growth rate or damage our business.

If we do not protect our intellectual property, our business could be materially adversely affected.

Many of our current products are not protected by patents that we own or license. We attempt to protect these products by maintaining our intellectual property
related to them as trade secrets. Our products that are not patented may be susceptible to reverse engineering or parallel development efforts and sales by our competitors. We attempt to protect our
trade secrets by entering into confidentiality agreements with third parties, our employees and consultants. In that regard, our policy is to require all of our current employees to sign
confidentiality and non-disclosure agreements;

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however,
it is possible that some employees have failed to do so or that these agreements are not enforceable. The agreements restrict the ability of our employees to disclose proprietary company data
without our prior permission. We enforce these agreements when appropriate. However, if one of our current or former employees discloses proprietary company data in violation of these agreements, our
business could be materially adversely affected. Furthermore, confidentiality agreements with third parties may be breached by the third party. If so, we may not have an adequate remedy against the
third party. If our trade secrets become known, we may lose our competitive position. To prevent competitors from using technologies and trademarks in which we hold intellectual property rights, it
may be necessary for us to litigate against those competitors. Any litigation could result in substantial expense, may distract our management and may not adequately protect the proprietary
technologies and trademarks. Furthermore, litigation may result in a finding of invalidity and unenforceability of our intellectual property rights. In any case in which we are unable to protect our
proprietary technologies and trademarks, we may be subject to increased competition, resulting in lost sales and reduced profits, and even discontinuance of or non-entry into a product
line.

We
own or have rights through licenses to many technologies used to manufacture and sell our products that have limited life spans due to patent or license term expiration. When patents
expire or licenses are not renewed, we may lose our proprietary advantage over our competitors. We may not be able to obtain new licenses or to renew existing licenses on favorable terms or if at all
due to expiration of the license term, failure in selling certain minimum quantities of products, or changes in the licensor's licensing strategy. If we lose our licensed rights, we may be forced to
stop making and selling the products that depend on the license. Furthermore, our competitors could license the rights, which could erode or eliminate our market share for such products and could
adversely affect our results of operations and financial condition. Our ability to gain access to new products and new technologies required to perform services and manufacture new products is partly
dependent on our ability to convince inventors, and the institutions that support them, that we will be successful in the commercialization of their inventions. We have no assurance that we will be
able to continue to negotiate access for such new products or technologies on acceptable terms or if at all.

We
attempt to obtain patent protection for our inventions in appropriate cases. We have no assurance that patents will be granted pursuant to any of our pending patent applications.
Furthermore, we have no assurance that the scope of our issued patents will be sufficiently broad to offer meaningful protection from our competitors. Accordingly, the possibility exists that our
competitors or other third
parties could make and sell products thought to be covered by our patents or patents pending. Further, our owned or exclusively licensed patents could be challenged, invalidated or rendered
inapplicable so that such patent rights would not bar our competitors from selling competing products.

In
the ordinary course of business we receive notices alleging that one or more of our products may violate the intellectual property rights of others. Although we have not in the past
incurred material liabilities as a result of such infringement claims, we have no assurance that we will not incur material liability as a result of an infringement claim in the future, which could
materially adversely affect our business.

Reduction or delays in research and development budgets and in government funding may negatively impact sales in our research products segments.

Our customers include researchers at pharmaceutical and biotechnology companies, academic institutions and government and private laboratories. A significant
portion of the revenues of our Research segment is attributable to sales to researchers, universities, government laboratories and private foundations whose funding is dependent upon grants from
government agencies such as the NIH and similar domestic and international agencies. Fluctuations in the research and development budgets of these researchers and their organizations could affect the
demand for our research products. Research and development budgets fluctuate due to numerous factors that are outside our control and

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are
difficult to predict, including changes in available resources, spending priorities and institutional budgetary policies.

We rely on international sales, which are subject to additional risks.

International sales accounted for approximately 38% of our revenues in fiscal 2004, 36% of our revenues in fiscal 2003 and 54% of our revenues in fiscal 2002.
International sales can be subject to many inherent risks that are difficult or impossible for us to predict or control, including:



Each
of these risks might impact our cash flow or impair our ability to borrow funds, which ultimately could affect our business, financial condition or operating results. We have not
attempted to mitigate the risk of fluctuations in currency exchange rates by entering into hedging financial arrangements. We have not entered into foreign exchange hedging financial arrangements
because the foreign sales of our Research segment, which are frequently denominated in foreign currencies, have historically offset the U.S. sales of our Diagnostics segment, which are frequently
denominated in U.S. dollars. Therefore, we
currently believe that the risk to our results of operations posed by fluctuations in foreign exchange rates does not currently warrant a hedging arrangement.

Litigation may harm our business or otherwise distract our management.

Substantial, complex or extended litigation could cause us to incur large expenditures and distract our management. For example, lawsuits by employees,
stockholders, collaborators, distributors, competitors, customers, or end-users of our products or services, including liability claims and patent infringement based on our products and
services, could be very costly and substantially disrupt our business. Disputes from time to time with such companies or individuals are not uncommon, and we cannot provide assurance that we will
always be able to resolve such disputes out of court or on terms favorable to us. If we are sued for patent infringement, and a court agrees that we are infringing a third party's patent, we may be
forced to remove a product from the market or enter into a license agreement, which may not be available on reasonable terms, if at all. Further, in such a circumstance, we could be exposed to
significant attorneys' fees and costs.

Compliance with environmental laws and regulations could adversely affect our results of operations.

We are subject to environmental laws and regulations governing the use of materials and chemicals used in our business. We use many chemicals that are classified
as hazardous substances in our manufacturing operations, including organic solvents. We believe that our safety and environmental policies for handling and disposing of such materials comply with
standards prescribed by state and

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federal
agencies. There is a risk, however, that we might accidentally release a hazardous substance into the environment. In addition, we cannot assure you that laws, rules and regulations or
enforcement policies that are more restrictive than those with which we now comply will not be adopted in the future. If so, we would be required to change our compliance programs, which could make
compliance more expensive or otherwise adversely affect our results of operations.

Item 2.    Properties.

Our principal executive office is located in approximately 50,000 square feet of office space in Norcross, Georgia. We lease this space under an agreement that
expires in 2011. We share this space with Celliance, which also has its headquarters there. Celliance's 40,000 square foot monoclonal antibody manufacturing facility is located in Livingston,
Scotland. Two buildings at this site are leased for terms that expire in 2021, and a third 20,000 square foot manufacturing building in Livingston is owned by Celliance. Celliance operates its protein
fractionation business in a 61,000 square foot facility in Kankakee, Illinois, a 40,000 square foot facility in Toronto, Ontario and a 36,000 square foot facility in Lawrence, Kansas. Celliance owns
the facilities used in the protein fractionation business. Celliance leases two buildings in Milford, Massachusetts, totaling approximately 36,000 square feet, which are used as a distribution and
manufacturing facility. Celliance leases this space under an agreement that expires in 2008. Celliance also leases laboratory facilities for its Bioservices group in Morgan Hill, California, totaling
29,000 square feet, under three separate agreements with terms expiring through 2009.

Chemicon's
executive offices are located in an 85,000 square foot facility in Temecula, California. It also operates two facilities in Ramona, California, totaling 120,000 square feet; a
36,000 square foot facility in Australia; an 18,000 square foot facility in South Hampton, England, and a 6,000 square foot facility in Philipsburg, New Jersey. All of Chemicon's facilities are
leased, except for those in Ramona, California, and New Jersey, which Chemicon owns. The terms of Chemicon's leases expire between 2005 and 2018.

Upstate's
executive offices are located in a 20,000 square foot facility in Charlottesville, Virginia. It operates a 47,400 square foot manufacturing and distribution facility in Lake
Placid, New York, and two manufacturing facilities in Dundee, Scotland, totaling approximately 26,000 square feet. All of Upstate's facilities are leased except for its facility in Lake Placid, New
York, which it owns. The terms of Upstate's leases expire between 2007 and 2018.

Item 3.    Legal Proceedings

We are involved in certain litigation that arose in the ordinary course of business. We do not believe that the ultimate resolution of these matters will have a
material adverse effect on our financial position or results of operations.

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

We did not submit any matter to a vote of our security holders in the fourth quarter of fiscal 2004.

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PART II.

Item 5.    Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

Our Common Stock is listed on the Nasdaq National Market under the symbol "SERO." As of March 8, 2005, there were 82 holders of record of our Common Stock.
The following table shows, for the periods indicated, the high and low sale prices per share for our Common Stock on the Nasdaq National Market.

High

LowFiscal Year Ended December 28, 2003First Quarter

$
11.28

$
7.43Second Quarter


14.41


7.54Third Quarter


16.92


11.27Fourth Quarter


18.80


12.51Fiscal Year Ending January 2, 2005First Quarter

$
21.17

$
14.34Second Quarter


22.35


17.10Third Quarter


23.85


18.60Fourth Quarter


24.95


21.49


We
have never paid cash dividends on our Common Stock. We do not expect to declare cash dividends on our Common Stock in the future. We intend to retain all earnings for business
development. Any possible future cash dividends will depend on our earnings, capital requirements and financial condition and will be made at the discretion of our board of directors. In addition, our
ability to pay dividends is prohibited by the terms of our credit facility. Any declaration and payment of cash dividends on our Common Stock will result in an adjustment of the conversion rate for
our 4.75% Convertible Senior Subordinated Debentures due 2033 (the "Debentures").

Information regarding shares reserved for issuance

The section captioned "Equity Compensation Plan Information" within the proxy statement for our 2005 Annual Meeting of Stockholders, which will be held on
May 11, 2005 (the "2005 Proxy Statement"), is incorporated herein by reference.

Information regarding sales of unregistered securities

On October 1, 2004, we issued 4,333,315 unregistered shares of our Common Stock at an average price of $23.6539 per share, based on the average trading
price of Serologicals' common stock as traded on
NASDAQ during the 20 trading days between September 14, 2004 and October 11, 2004, to certain stockholders of Upstate as part of the consideration for our acquisition of Upstate. We paid
the balance of the consideration in cash. We issued the shares without registration in reliance upon the exemption from registration set forth in Section 4(2) of the Securities Act of 1933, as
amended. We relied on this exemption based on our determination that the stockholders of Upstate to whom the shares were issued were accredited investors within the meaning of Regulation D
promulgated pursuant to such Act.

25

---





Item 6.    Selected Financial Data

The following selected financial data as of and for the years ended January 2, 2005, December 28, 2003, December 29, 2002,
December 30, 2001 and December 31, 2000 have been derived from our audited Consolidated Financial Statements. This data should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and our Consolidated Financial Statements and the notes thereto included elsewhere in this Annual Report on Form 10-K. All
amounts in the following table are in thousands, except per share data.

|                                      |                                               | 2004 |         | 2003    |   | 2002   |         | 2001 |        | 2000    |  
|------------------------------------- | --------------------------------------------- | ---- | ------- | ------- | - | ------ | ------- | ---- | ------ | ------- | -
|INCOME STATEMENT DATA:                |                                               |      |         |         |   |        |         |      |        |         |  
|                                      | Net revenues                                  |      | $       | 195,923 |   | $      | 146,915 |      | $      | 99,289  |  
|                                      | Cost of revenues                              |      |         | 87,482  |   |        | 64,741  |      |        | 47,076  |  
|                                      |                                               |      |         |         |   |        |         |      |        |         |  
|GROSS PROFIT                          |                                               |      | 108,441 |         |   | 82,174 |         |      | 52,213 |         |  
|                                      | Selling, general and administrative expenses  |      |         | 59,293  |   |        | 44,602  |      |        | 33,811  |  
|                                      | Research and development                      |      |         | 10,144  |   |        | 6,214   |      |        | 5,628   |  
|                                      | Amortization of intangibles                   |      |         | 3,771   |   |        | 2,175   |      |        | 895     |  
|                                      | Purchased in process research and development |      |         | 3,263   |   |        |        |      |        |        |  
|                                      | Special charges                               |      |         |        |   |        | 2,778   |      |        | 1,909   |  
|                                      |                                               |      |         |         |   |        |         |      |        |         |  
|OPERATING INCOME                      |                                               |      | 31,970  |         |   | 26,405 |         |      | 9,970  |         |  
|                                      | Other expense (income), net                   |      |         | (54     | ) |        | 180     |      |        | 31      |  
|                                      | Write-off of deferred financing costs         |      |         | 965     |   |        | 4,492   |      |        |        |  
|                                      | Interest expense                              |      |         | 6,052   |   |        | 4,384   |      |        | 239     |  
|                                      | Interest income                               |      |         | (587    | ) |        | (255    | )    |        | (637    | )
|                                      |                                               |      |         |         |   |        |         |      |        |         |  
|INCOME FROM CONTINUING OPERATIONS     |                                               |      | 25,594  |         |   | 17,604 |         |      | 10,337 |         |  
|                                      | Provision for income taxes                    |      |         | 7,933   |   |        | 5,537   |      |        | 3,617   |  
|                                      |                                               |      |         |         |   |        |         |      |        |         |  
|NET INCOME FROM CONTINUING OPERATIONS |                                               |      | 17,661  |         |   | 12,067 |         |      | 6,720  |         |  
|                                      | Income (loss) from discontinued operations    |      |         |        |   |        | (10,561 | )    |        | 7,229   |  
|                                      |                                               |      |         |         |   |        |         |      |        |         |  
|NET INCOME                            |                                               | $    | 17,661  |         | $ | 1,506  |         | $    | 13,949 |         | $
|                                      |                                               |      |         |         |   |        |         |      |        |         |  
|BASIC EARNINGS (LOSS) PER SHARE:      |                                               |      |         |         |   |        |         |      |        |         |  
|                                      | Continuing operations                         |      | $       | 0.68    |   | $      | 0.49    |      | $      | 0.28    |  
|                                      | Discontinued operations                       |      |         |        |   |        | (0.43   | )    |        | 0.29    |  
|                                      |                                               |      |         |         |   |        |         |      |        |         |  
|                                      | Net income                                    |      | $       | 0.68    |   | $      | 0.06    |      | $      | 0.57    |  
|                                      |                                               |      |         |         |   |        |         |      |        |         |  
|DILUTED EARNINGS (LOSS) PER SHARE:    |                                               |      |         |         |   |        |         |      |        |         |  
|                                      | Continuing operations                         |      | $       | 0.59    |   | $      | 0.47    |      | $      | 0.27    |  
|                                      | Discontinued operations                       |      |         |        |   |        | (0.37   | )    |        | 0.29    |  
|                                      |                                               |      |         |         |   |        |         |      |        |         |  
|                                      | Net income                                    |      | $       | 0.59    |   | $      | 0.10    |      | $      | 0.56    |  
|                                      |                                               |      |         |         |   |        |         |      |        |         |  
|WEIGHTED AVERAGE SHARES OUTSTANDING:  |                                               |      |         |         |   |        |         |      |        |         |  
|                                      | Basic                                         |      |         | 26,148  |   |        | 24,549  |      |        | 24,357  |  
|                                      |                                               |      |         |         |   |        |         |      |        |         |  
|                                      | Diluted                                       |      |         | 35,524  |   |        | 28,134  |      |        | 24,837  |  
|                                      |                                               |      |         |         |   |        |         |      |        |         |  
|BALANCE SHEET DATA:                   |                                               |      |         |         |   |        |         |      |        |         |  
|                                      | Working capital                               |      | $       | 122,443 |   | $      | 104,760 |      | $      | 65,468  |  
|                                      | Total assets                                  |      |         | 639,807 |   |        | 358,178 |      |        | 191,165 |  
|                                      | Long-term debt, less current maturities       |      |         | 132,814 |   |        | 130,916 |      |        | 39      |  
|                                      | Stockholders' equity(1)                       |      |         | 416,531 |   |        | 181,506 |      |        | 170,988 |  

---

26

---



Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations

Overview

We are a global provider of consumable biological products, enabling technologies and services to a diverse customer base that includes major life science
companies and leading research institutions. Our customers use our products, technologies and services in a wide variety of their activities, including basic research, drug discovery, diagnosis and
biomanufacturing. Our products, technologies and services are essential tools for research in key disciplines, including neurology, oncology, hematology, immunology, cardiology, proteomics, infectious
diseases, cell signaling, stem cell research and molecular biology. In addition, we provide a comprehensive range of monoclonal antibodies for the blood typing industry.

We
are organized into three operating segments: Research, Cell Culture and Diagnostics. Our segments are based primarily on the differing production, manufacturing and other value-added
processes that we perform with respect to our products and, to a lesser extent, the differing nature of the ultimate end use of our products. Our historical core business was the manufacture and sale
of therapeutic plasma products. We decided to exit that business in the second quarter of fiscal 2003. Prior to our decision to exit the therapeutic plasma business, we reported a fourth operating
segment, Therapeutics Products, for the first two quarters of fiscal 2003. The Therapeutics Products business is now classified as "discontinued operations," and the results of operations of this
former segment are no longer reported as a separate segment but are reported as discontinued operations. See "Discontinued Operations" below. During fiscal 2002, we reported three operating segments,
Biotechnology and Molecular Biology Products, Therapeutic Products and Diagnostic Products. All amounts in this Annual Report on Form 10-K reflect the restatement of the 2002
segments so that they are consistent with the current year presentation.

Our
Research segment sells a broad range of research products, including specialty reagents, kits, antibodies and molecular biology tools to research customers working in the areas of
neuroscience,
infectious disease, oncology, stem cell research and cell signaling. We are also a leading supplier of monoclonal antibodies, conjugates, antibody blends and molecular biology-based detection kits for
use in diagnostic laboratories. As a result of our acquisition of Upstate, we are one of the leading suppliers of tools for kinase research and one of the leading providers of drug discovery services
to pharmaceutical companies targeting kinase biology-based drugs. We market our research products and services under our Chemicon and Upstate brand names.

Our
Cell Culture segment sells a variety of cell culture products, including highly purified proteins and tissue culture media components. These products are used primarily by
biopharmaceutical and biotechnology companies as nutrient additives in cell culture media. Our most significant product within the Cell Culture segment is EX-CYTE®, a patented
serum-free solution of cholesterol, lipoproteins and fatty acids. EX-CYTE® is used, in combination with other cell culture supplements, to reduce or replace animal
serum in cell culture processes. We also provide a range of serum-based products in this segment, including BSA, for which we are the world's leading supplier, and fetal bovine serum. We also sell
recombinant human insulin for use as a media supplement. In addition, we provide contract research services in the areas of cell-line development, process development, protein expression,
in vivo research and molecular biology optimization and media formulation. We market our cell culture products and services under our Celliance brand name.

Our
Diagnostics segment manufactures and sells monoclonal antibodies that are used in products such as blood typing reagents and in controls for diagnostic tests for certain infectious
diseases. Our products comprise the world's most comprehensive range of commercially available human monoclonal antibodies for blood grouping. Our diagnostic products are marketed under our
Celliance brand name.

27

---



See
"Note 14Segment and Geographical Information" in Item 8 Financial Statements and Supplementary Data for disclosure of revenue and gross profit by segment and
long-lived assets by geographical area for our three most recently completed fiscal years.

Discontinued Operations

On July 10, 2003, we announced our intention to exit the therapeutic plasma business, which consisted of a network of ten plasma collection centers that
specialized in the collection of hyper-immune human blood antibodies and a central testing laboratory. As a result, during the third quarter of fiscal 2003, we classified the therapeutic plasma
business as a discontinued operation. On December 19, 2003, we signed a definitive agreement to sell the business. On January 15, 2004, effective December 28, 2003, we completed
the sale of this business to Life Therapeutics ("Life") (formerly Gradipore Limited).
Financial statements for all years presented have been reclassified to report results of discontinued operations separately from results of continuing operations. Disclosures included herein pertain
to our continuing operations unless otherwise noted.

During
2003, we recorded an impairment loss of $12.6 million, based on the total consideration received for our therapeutic plasma business. The impairment loss was included as a
component of "Income (loss) from discontinued operations." No additional gain or loss was recorded in January 2004 at the time of closing. We received $3.5 million in cash at closing and
Life assumed approximately $1.3 million of current and long-term liabilities of the business. The balance of the proceeds consisted of two secured promissory notes: a
short-term, interest-bearing note in the amount of $1.5 million and a long-term, non-interest bearing note, which was recorded at its estimated net
realizable value of $6.4 million. We retained approximately $1.8 million of accrued liabilities related to the therapeutic plasma business, which were satisfied in full during 2004.

In
December 2004, we renegotiated the terms of the two promissory notes, combining them into one secured promissory note ("new note") with a stated face value of
$7.8 million. The new note receivable bears interest at the applicable federal funds rate and is payable in variable quarterly installments through December 2007. The note is secured by
the underlying assets of the business acquired and is guaranteed by Life. All indemnity claims between the parties were resolved and we have no further indemnification obligations to Life. We recorded
an imputed interest charge on this new note because the stated interest rate on the new note was considered below market. Imputed interest, net of reversals of certain accruals arising from the sale,
amounted to $0.4 million and is included in other expense in the 2004 consolidated statement of income. In January 2005 Life made its first quarterly principal payment of
$0.5 million on the new note. See "Note 4Discontinued Operations" in Item 8 Financial Statements and Supplementary Data for further discussion of discontinued operations.

Critical Accounting Policies

Our consolidated financial statements are presented on the basis of accounting principles that are generally accepted in the United States of America. Such
accounting principles require management to make estimates that affect the amount of revenues, expenses, assets and liabilities reported. There are five critical accounting policies that are both very
important to the portrayal of our financial condition and results of operations and that required management's most difficult, subjective or complex judgments. The accounting for 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. We use a combination of historical results, anticipated future events and detailed assessment of relevant facts and
circumstances to estimate and make assumptions relating

28

---



to
our critical accounting policies. Actual results could differ from these estimates. The five critical accounting policies are as follows:

Accounts receivable

We perform ongoing credit evaluations of our customers and adjust credit limits based upon payment history and the customer's current creditworthiness, as
determined by review of current credit information. We monitor collections and payments from our customers and maintain a provision for estimated credit losses based upon historical experience and any
specific customer collection issues that have been identified. Our allowance for bad debts was $0.9 million and $1.2 million at January 2, 2005, and December 28, 2003,
respectively. We wrote off $0.6 million and $0.7 million of bad debts in fiscal 2004 and 2003, respectively. Our allowance for bad debts may prove to be inaccurate, in which case we may
have overstated or understated our accounts receivable, net and selling, general and administrative expense, accordingly.

Inventory

We carry our inventories 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. We frequently review inventory to determine the necessity of adjustments for excess, obsolete or unsaleable inventory. The reviews require us to assess customer and market
demand. We analyze several different factors to evaluate the net realizable value of inventory, including the age of inventory, excess supply based on anticipated demand, specific identification and
lower of cost or market. We are not aware of any
instances where our previous estimates or assumptions, which were used to determine the net realizable value of inventory at January 2, 2005 and December 28, 2003, materially varied from
actual results. We do not expect our estimates or assumptions to change in the future.

Gross
inventories at January 2, 2005 and December 28, 2003, were $57.5 million and $39.6 million, respectively. Inventories are presented on the balance sheet
net of adjustments for excess, obsolete and unsalable inventory of $7.6 million and $5.8 million at January 2, 2005 and December 28, 2003, respectively.

The
following table sets forth a roll forward of the inventory adjustments for the years ended January 2, 2005, December 28, 2003 and December 29, 2002 (in
millions):

|                      |                   | Balance at
Beginning of
Period |   | Charged to
Costs and
Expenses |  | Charged to
Goodwill |     | Foreign
Currency Effect
on Transaction |   | Deductions |     | Balance at
End of Period
|--------------------- | ----------------- | ------------------------------ | - | ----------------------------- |  | ------------------- | --- | -------------------------------------- | - | ---------- | --- | ------------------------
|Inventory Adjustments |                   |                                |   |                               |  |                     |     |                                        |   |            |     |                         
|Year Ended:           |                   |                                |   |                               |  |                     |     |                                        |   |            |     |                         
|                      | January 2, 2005   |                                | $ | 5.8                           |  | $                   | 3.0 |                                        | $ | 2.6        | (a) | $                       
|                      | December 28, 2003 |                                |   | 4.6                           |  |                     | 3.0 |                                        |   | 1.6        | (b) |                         
|                      | December 29, 2002 |                                |   | 2.9                           |  |                     | 1.8 |                                        |   | 3.0        | (c) |                         

---

The
estimates may prove to be inaccurate, in which case we may have overstated or understated the adjustment required for excess, obsolete or unsaleable inventory and our cost of goods
sold, accordingly.

At
January 2, 2005, inventory adjustments determined on specific products, age of inventory and excess supply represented 19.6%, 64.6%, and 15.8%, respectively, of the inventory
adjustment balance.

29

---



The
following table presents the sensitivity analysis on the inventory adjustment at January 2, 2005, adjusted for the items that are age sensitive and potentially in excess supply, assuming
the age and forecast were expanded by increasing the time periods by 25% or reduced by decreasing the time periods by 25%, which we consider to be an extreme-case scenario. Adjustments for
specific products cannot be evaluated for sensitivity. Amounts in the table are in millions.

As Reported

Reduced by 25%

Increased by 25%Inventory adjustment

$
7.6

$
6.1

$
9.2


Valuation of goodwill and other intangible assets

We evaluate our goodwill and intangible assets for potential impairment whenever events or changes occur that indicate that 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. We completed our annual impairment review of the Research,
Cell Culture and Diagnostic segments as of June 27, 2004. Based on the evaluation, we determined that no impairment existed. The estimates used to evaluate the fair value of goodwill and other
intangible assets may prove to be inaccurate, in which case we may be required to take a future impairment charge for goodwill and other intangible assets. The most significant assumptions in the
impairment analysis are revenue growth and the discount rate. The following table presents the ratio of fair values of Research, Cell Culture and Diagnostic segments as computed in our annual
impairment analysis to their carrying values as of June 28, 2004. Amounts less than 1.0 would indicate that impairment may exist. Additionally, the table includes this ratio as if the discount
rate were 100 basis points higher and the growth rate were 10% lower than those used in our analysis:

Originally
Computed

100 Basis
Points Higher
Discount Rate

10% Lower
Sales GrowthResearch

1.84

1.68

1.24Cell Culture

1.43

1.30

1.23Diagnostic

2.94

2.74

2.80


Income Taxes

We recognize deferred tax assets and liabilities related to temporary differences arising between the tax basis of assets and liabilities and their reported
amounts in the financial statements. These differences will result in taxable or deductible amounts in future periods when the reported amounts are recovered or settled, using enacted tax rates in
effect for the year in which the differences are expected to reverse. On a quarterly basis, we evaluate the realizability of deferred tax assets and assess the need for a valuation allowance.
Valuation allowances are recorded to the extent that we believe it is not more likely than not that a deferred tax asset will be realized; factors considered in determining the necessity of a
valuation allowance include future taxable income projections and potential tax planning strategies. We deem all undistributed earnings of foreign subsidiaries permanently invested and, accordingly,
we have not established a tax provision for any repatriation of earnings from these entities.

Our
effective tax rate differs from the statutory rate primarily as a result of research and development tax credits and the extraterritorial income tax regime. Because we operate in a
number of domestic and foreign jurisdictions, the statutory rates within these various jurisdictions are considered in determining the overall effective tax rate. Our judgment is required to determine
our consolidated provision for income tax, deferred income tax balances, and any valuation allowances associated with deferred tax assets. We also consider the potential impact of any adverse
adjustments resulting from current or anticipated audits for open statutory periods on our current and prospective overall effective tax rate; we believe our reserves for these uncertainties are
adequate.

30

---



Warranty reserve

We record an allowance for the estimated amount of future warranty costs when the related revenue is recognized, primarily based on claims incurred. Although
historical warranty costs have been within expectations, there can be no assurance that future warranty costs will not exceed historical amounts. The warranty reserve was $0.9 million,
$0.5 million and $0.2 million at January 2, 2005, December 28, 2003 and December 29, 2002, respectively. Warranty claims were $2.0 million,
$2.2 million and $1.2 million in fiscal 2004, 2003 and 2002, respectively. If actual future warranty costs exceed historical amounts, additional allowances may be required, which could
have a material adverse impact on our operating results in future periods.

Results of Operations

Overview

The following discussion and analysis of our 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 as a percentage of net revenue for the
fiscal years indicated below.

2004

2003

2002Net revenues

100.0
%
100.0
%
100.0
%Gross profit

55.3
%
55.9
%
52.6
%Selling, general and administrative expenses

30.3
%
30.4
%
34.1
%Research and development

5.2
%
4.2
%
5.7
%Amortization of intangibles

1.9
%
1.5
%
0.9
%Purchased in-process research and development

1.7
%


Special charges



1.9
%
1.9
%Operating income

16.3
%
18.0
%
10.0
%


The
comparability of our results of operations between years is impacted by our acquisitions during the periods presented. We acquired Intergen in December 2001, Chemicon in
April 2003 and Sierra and Upstate in July and October 2004, respectively. We include the results of operations of Upstate and Chemicon in our Research segment. We include the results of
Sierra in our Cell Culture segment. We include portions of Intergen's results of operations in all three of our segments. The following table sets forth a breakdown of revenue and gross profit
contributed by segment for the years ended January 2, 2005, December 28, 2003 and December 29, 2002 (in thousands):

2004

2003

2002Actual

% Total

Actual

% Total

Actual

% TotalNet revenues:Research

$
78,506

40
%
$
43,043

29
%
$
4,137

4
%Cell Culture


86,606

44
%

73,986

51
%

68,140

69
%Diagnostic


30,811

16
%

29,886

20
%

27,012

27
%$
195,923

100
%
$
146,915

100
%
$
99,289

100
%


Actual

GM %

Actual

GM %

Actual

GM %Gross profit:Research

$
50,828

65
%
$
26,677

62
%
$
1,577

38
%Cell Culture


43,951

51
%

39,555

54
%

37,083

54
%Diagnostic


13,662

44
%

15,942

53
%

13,553

50
%$
108,441

55
%
$
82,174

56
%
$
52,213

53
%


31

---



Comparison of Fiscal Years ended January 2, 2005 and December 28, 2003



Consolidated.Consolidated net revenue increased 33%, or approximately $49.0 million, from $146.9 million in
2003 to $195.9 million in 2004. Consolidated net revenue increased due to organic growth in revenues at Chemicon and the inclusion of Chemicon for the full year in 2004 versus only nine months
in 2003. Also, the acquisition of Upstate in the fourth quarter of 2004 contributed $15.4 million. Growth in sales of recombinant human insulin yielded a net increase in Cell Culture segment
revenue of $11.6 million. Diagnostic segment sales of monoclonal antibodies increased from $22.6 million in 2003 to $26.1 million 2004, offset by decreased sales of human-sourced
disease state polyclonal antibodies, detection products and other diagnostic products.

Research.The net revenue of our Research segment increased from $43.0 million in 2003 to $78.5 million in
2004, primarily due to organic growth in revenues at Chemicon and the inclusion of Chemicon for the full year in 2004 versus only nine months in 2003 and the acquisition of Upstate in the fourth
quarter of 2004, which contributed $15.4 million. Chemicon contributed $63.0 million to the net revenue of the segment in 2004 and $38.0 million in 2003. Chemicon achieved an
annual revenue growth rate of 27%, which was driven by significant contributions in the areas of neuroscience, molecular biology, bulk reagents and custom services. Upstate revenue, while not included
in the operating results for 2003 or the first nine months of 2004, increased 27% from 2003 to 2004. Upstate growth was driven primarily by a 94% increase in revenue from kinase profiling services.
Geographically, Research segment revenue increased 85% in Asia, 119% in Europe and 135% in North America over the prior year.

Cell Culture.The net revenue of our Cell Culture segment increased $12.6 million, or 17.0%, from $74.0 million
in 2003 to $86.6 million in 2004. This increase is due to increased sales of recombinant human insulin and BSA. Recombinant human insulin sales were up $11.6 million, from
$15.0 million in 2003 to $26.6 million in 2004. Sales of recombinant human insulin have steadily increased over the last several years, primarily because of the introduction of a new
insulin product in 2004 and additional
availability of this product from our supplier. Sales of BSA increased $0.7 million, from $16.8 million in 2003 to $17.5 million in 2004. BSA sales were negatively impacted during
2003 and again in 2004 due to partial shutdowns of our Toronto plant during June 2003 and January 2004, following the discoveries of two unrelated instances of a single cow infected with
BSE in Canada and the US, respectively. The closure reduced the amount of saleable product during each year due to the manufacturing cycle time required for certain products. Sales of
EX-CYTE® were $29.3 million in 2003 and $29.6 million in 2004. Sales of EX-CYTE® in both years were affected by lower demand for one of
our customers' products that utilizes EX-CYTE® in its manufacturing process. In the fourth quarter of 2003, we recorded $3.5 million from a
take-or-pay contract for EX-CYTE® with a major customer without having to deliver any product. Accordingly, total and Cell Culture segment net revenue,
gross profit and operating income in 2003 were favorably impacted by $3.5 million. Selling prices in this segment remained relatively constant between the two years as the majority of sales
volume was under contractual pricing agreements that expire through 2006.

Diagnostic.The net revenue of our Diagnostic segment increased approximately $0.9 million, or 3%, from
$29.9 million in 2003 to $30.8 million in 2004. This increase is primarily due to higher sales of monoclonal antibodies offset by decreased sales of human-sourced disease state
polyclonal antibodies, detection products and other diagnostic products. Net revenue from sales of monoclonal antibodies increased from $22.6 million in 2003 to $26.1 million in 2004.
Sales of monoclonal antibodies increased $3.2 million due to higher volumes and $0.3 million due to increases in foreign currency. Selling prices in this segment remained relatively
constant between the two years as the majority of sales volume was under contractual pricing agreements that expire through 2006. The increase in monoclonal antibodies was offset by decreased sales of
human-sourced disease state polyclonal

32

---



antibodies,
detection products and other diagnostic products. The decline in 2004 sales of these products was anticipated because we sold the majority of the products in the human-sourced disease
state polyclonal antibody group with the sale of the therapeutic plasma business. Human-sourced disease state polyclonal antibody sales were further negatively impacted by the Health Insurance
Portability and Accountability Act ("HIPAA"), which adversely affected access to qualified donors.



Consolidated.Consolidated gross profit increased approximately $26.2 million, from $82.2 million in 2003 to
$108.4 million in 2004. Gross margin was 55% in 2004 and 56% in 2003. Research segment gross profits increased primarily from sales growth at stronger margins at Chemicon and the contribution
from Upstate in the fourth quarter of 2004. These increases were offset by decreases in Cell Culture segment and Diagnostic segment margins. Cell Culture segment gross profits increased on increased
sales volumes, but the margins declined from 54% in 2003 to 51% in 2004, due primarily to product mix and production variances arising from capacity issues at certain manufacturing sites. Diagnostic
segment margins declined from 53.3% in 2003 to 44.3% in 2004, primarily due to production variance in manufacturing of monoclonal antibodies.

Research.Gross profits from our Research segment increased $24.1 million, or 90%, from $26.7 million in 2003
to $50.8 million in 2004. Research segment gross margins increased from 62% in 2003 to 65% in 2004. The increase in gross profit was primarily due to the inclusion of Chemicon for a full year
in 2004 versus nine months in 2003. Research segment gross profit contributed by Chemicon included $40.5 million in 2004 and $24.6 million in 2003. Upstate contributed
$10.2 million at a 66% gross margin in 2004. Gross profit for 2003 was negatively impacted by a $0.4 million charge to cost of sales as a result of inventory adjustments to Chemicon's
opening inventory, which was required under purchase accounting rules. Gross profit for 2004 was negatively impacted by a $0.4 million charge to cost of sales as a result of inventory
adjustments to Upstate's opening inventory, which was required under purchase accounting rules. We expect an additional charge of $0.4 million to gross profit in the first quarter of 2005 as we
continue to sell Upstate's opening inventory.

Cell Culture.Gross profit from our Cell Culture segment increased $4.4 million, or 14%, from $38.6 million in
2003 to $44.0 million in 2004. Gross profits increased on higher sales volumes, but the margins declined slightly from 54% in 2003 to 51% in 2004, due primarily to product mix and production
variances arising from capacity issues at certain manufacturing sites and the shut down of our Toronto facility in early 2004 due to the BSE scare. Gross margins were lower in 2004, primarily due to
product mix between EX-CYTE®, which is a higher margin product, and recombinant human insulin, which is a distributed product with a lower gross margin. Additionally, the
margins were approximately 1% to 2% lower in 2004 and 2003 than expected due to manufacturing cost variances arising from excess manufacturing capacity at certain sites. Gross margins for our Cell
Culture segment were positively impacted in 2003 due to a sale of EX-CYTE® at 100% gross margin under the terms of a take-or-pay contract with one of
our customers. Gross margins for our Cell Culture segment would have been 53% in 2003, if this sale had been recorded at a normal margin.

Diagnostic.Gross profit from our Diagnostic segment decreased $2.2 million, or 14%, from $15.9 million in 2003
to $13.7 million in 2004. Gross margin decreased from 53% in 2003 to 44% in 2004. Gross margins on monoclonal antibodies decreased by 15%, primarily due to lower production utilization in 2004,
which resulted in absorption of fixed costs by fewer units. Changes in product mix from traditionally higher margin to lower margin products also adversely impacted 2004 margins. Effects of foreign
currency exchange rates lowered gross margin by approximately 2.6% in 2004 and increased gross margin by approximately 1% in 2003. As previously discussed, pricing was relatively stable between 2003
and 2004. Gross margins in 2004 were negatively impacted by the reduction in sales of human-sourced disease state polyclonal antibody products, the majority of which were sold with

33

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the
therapeutic plasma business as mentioned above. Availability of these products within human-sourced disease state polyclonal antibody product group was also negatively impacted by HIPAA, which
adversely affected access to qualified donors.



Consolidated selling, general and administrative expenses ("SG&A") increased approximately $14.7 million, or 33%, from $44.6 million in 2003 to
$59.3 million in 2004. As a percentage of revenues, SG&A was 30% in 2004 compared with 30% in 2003. Chemicon accounted for $22.5 million in SG&A for the full year in 2004 and
$17.2 million for nine months in 2003. The acquisition of Upstate in the fourth quarter of 2004 contributed $6.3 million to SG&A. We expanded our sales and marketing efforts in our Cell
Culture segment during the second half of 2003 and early in 2004. During 2004, we incurred higher public company costs and higher performance incentive compensation expense. The additional external
costs to comply with the Sarbanes-Oxley Act of 2002 were approximately $0.5 million in 2004. We expect this cost to be recurring. It may increase if our business grows. In the fourth quarter of
2004, we incurred approximately $1.2 million of business integration costs primarily associated with the acquisition of Upstate. We expect to incur additional integration costs during the first
half of 2005 as we continue to evaluate synergies in our Research segment and company-wide arising from the Upstate acquisition.



Research and development expenses ("R&D") increased from $6.2 million in 2003 to $10.1 million in 2004. The increase was primarily due to the
expansion of our research and development activities, including those acquired as a result of the Upstate acquisition. R&D included $2.1 million incurred by Upstate in the fourth quarter of
2004. R&D at Chemicon was included in 2004 for a full year and for nine months during 2003 resulting in an increase of $2.1 million in 2004. During 2004 Chemicon and Upstate internally
developed approximately 1,200 new products.

We
also continued to advance various projects in the Cell Culture segment related to the characterization and performance of EX-CYTE® and other cell culture
supplements. We also made progress in developing novel cell culture supplements. See "Outlook" below for additional discussion of R&D efforts. With our acquisition of Sierra in July 2004,
certain internal research and development efforts undertaken by Sierra that are dedicated to internal cell culture applications are included in research and development expense at cost in the
statements of income from the acquisition date. During 2004, through the date of acquisition, and during 2003, we paid to Sierra $2.3 million and $2.5 million, respectively, for contract
research and development. After our acquisition of Sierra in 2004, it incurred $0.7 million in R&D expenses in these areas.



Amortization of intangibles increased from $2.2 million in 2003 to $3.8 million in 2004. Approximately $1.0 million of the increase was due
to the acquisition of Upstate in the fourth quarter of 2004. Amortization from the Chemicon acquisition was included in 2004 for a full year and for nine months during 2003, resulting in an additional
$0.6 million in 2004.



Purchased in-process research and development ("IPRD") of $3.3 million in 2004 resulted from the acquisition of Upstate and represents acquired
current research and development projects in process. There were no charges for IPRD arising from previous acquisitions.

34

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Other expenses are presented net and arise primarily from realized and unrealized gains and losses on foreign currency transactions, which were immaterial in 2004
and 2003.



In 2004, upon the closing of our acquisition of Upstate, we entered into a new $125.0 million Credit Agreement with a syndicate of banks (the "2004 Credit
Agreement") and terminated our previous $30.0 million revolving credit facility (the "2003 Credit Facility"). Pursuant to the 2004 Credit Agreement, we obtained an $80.0 million term
loan, the proceeds of which we used to finance, in part, the purchase price for Upstate (the "Upstate Term Loan"). We recorded a non-cash charge of approximately $0.2 million
related to the write-off of deferred financing costs associated with the termination of the 2003 Credit Facility. On December 21, 2004, we issued 4,830,000
shares of our Common Stock. We used a portion of the proceeds to repay the Upstate Term Loan. We recorded an additional non-cash charge of approximately $0.8 million related to the
early repayment of the Upstate Term Loan.



Interest expense increased from $4.4 million in 2003 to $6.1 million in 2004. The increase in interest expense was because our $130 million
principal amount of our Debentures, which we issued in August 2003, were outstanding for a full year in 2004 and only five months in 2003. As described in the market risk discussion below, we
entered into a $70 million fixed to variable rate swap with respect to our Debentures. During 2004, the variable rate rose 1.7%, further contributing to the increase in interest expense. Also
in the fourth quarter of 2004, we had additional borrowings under the Upstate Term Loan, which were outstanding for approximately 60 days. The term loan was subsequently repaid from proceeds
from our equity offering in December, 2004.



We recorded interest income of $0.6 million in 2004 and $0.3 million in 2003. The increase in interest income was primarily due to more favorable
investment rates in 2004 and higher available cash, cash equivalents and short-term investment balances on hand for much of 2004 over those available in 2003.



The provision for income taxes as a percentage of income before taxes remained constant at 31% in 2004 and 2003. Our effective tax rate remains below the federal
statutory rate as a result of foreign tax credits, research and development credits and generation of taxable income in lower tax jurisdictions.



As previously discussed, in July, 2003, we announced our intention to exit the therapeutic plasma business. As a result, during the third quarter of fiscal 2003,
we classified the therapeutic plasma business as a discontinued operation. In January 2004, effective December 28, 2003, we completed the sale of this business. There were no
discontinued operations included in the results for 2004. Loss from discontinued operations, net of income taxes, was $10.6 million in 2003.

35

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Comparison of Fiscal Years ended December 28, 2003 and December 29, 2002



Consolidated.Consolidated net revenue increased 48%, or approximately $47.6 million, from $99.3 million in
2002 to $146.9 million in 2003. Consolidated net revenue increased primarily due to contributions from Chemicon and growth in sales of monoclonal antibodies. Consolidated net revenue during
2003 included $38.0 million contributed by Chemicon. Sales of monoclonal antibodies increased from $16.1 million in 2002 to $22.6 million in 2003.

Research.The net revenue of our Research segment increased from $4.1 million in 2002 to $43.0 million in 2003,
primarily due to the acquisition of Chemicon, which was effective as of April 1, 2003. Chemicon contributed $38.0 million to the net revenue of the segment in 2003. During 2003, the
operations of our previous research products operations in Gaithersburg, Maryland were combined and integrated into Chemicon. Chemicon's revenue for the full year 2003 increased 22% over the
comparable period in 2002.

Cell Culture.The net revenue of our Cell Culture segment increased $5.9 million, or 9%, from $68.1 million in
2002 to $74.0 million in 2003. This increase was due to increased sales of recombinant human insulin and BSA, offset partially by lower sales of EX-CYTE®. Recombinant
human insulin sales were up $5.3 million, from $9.7 million in 2002 to $15.0 million in 2003. Sales of recombinant human insulin increased primarily because of additional
availability of this product from our supplier during 2003 and because a competitor ceased selling the product to the cell culture market. Sales of BSA increased $1.4 million from
$15.4 million in 2002 to $16.8 million in 2003 due to completion of the Cohn BSA expansion at our Toronto facility. BSA sales were negatively impacted during 2003 due to a partial
shutdown of our Toronto plant during June 2003, following the discovery of a single cow infected with BSE in Canada. The closure reduced the amount of saleable product during the year due to
manufacturing cycle time required for certain products. Sales of EX-CYTE® declined slightly from $30.8 million in 2002 to $29.3 million in 2003 due to timing of
shipments and lower demand for one of our customers' products that utilizes EX-CYTE® in its manufacturing process. In the fourth quarter of 2003, we recorded
$3.5 million in revenue in the Cell Culture segment from a take-or-pay contract for EX-CYTE® with a major customer without having to deliver any
product. Accordingly, total and Cell Culture segment net revenue, gross profit and operating income in 2003 were favorably impacted by $3.5 million. We were able to reduce production of
EX-CYTE® in the fourth quarter of 2003 in anticipation of this event; therefore, it had no impact on inventory on hand.

Diagnostic.The net revenue of our Diagnostic segment increased approximately $2.9 million, or 11%, from
$27.0 million in 2002 to $29.9 million in 2003. This increase was primarily due to higher sales of monoclonal antibodies, which increased from $16.1 million in 2002 to
$22.6 million in 2003. Sales of monoclonal antibodies increased $2.2 million due to increased prices and $0.4 million due to increases in foreign currency, with the remainder
related to higher volumes. The increase in net revenue from sales of monoclonal antibodies was partially offset by decreased sales of human-sourced disease state polyclonal antibodies, detection
products and other diagnostic products. Human-sourced disease state polyclonal antibody sales were negatively impacted by HIPAA, which adversely affected access to qualified donors. We sold the
majority of the products in the human-sourced disease state polyclonal antibody group with the sale of the therapeutic plasma business.



Consolidated.Consolidated gross profit increased approximately $30 million, from $52.2 million in 2002 to
$82.2 million in 2003. Gross margin increased from 53% in 2002 to 56% in 2003. The increase primarily related to the acquisition of Chemicon and stronger margins on monoclonal antibodies as a

36

---



result
of manufacturing efficiencies gained from increased production and the increase in sales prices of monoclonal antibodies. Consolidated gross profit included $24.6 million contributed by
Chemicon.

Research.Gross profit from our Research segment was $1.6 million and $26.7 million in 2002 and 2003,
respectively. Gross margins in our Research segment increased from 38% to 62% in 2002 and 2003, respectively. This increase was primarily due to the acquisition of Chemicon effective April 1,
2003. Research segment gross profit in 2003 included $24.6 million contributed by Chemicon. Gross profit for 2003 was negatively impacted by a $0.4 million charge to cost of sales as a
result of inventory adjustments to Chemicon's opening inventory required under purchase accounting rules.

Cell Culture.Gross profit from our Cell Culture segment increased $2.5 million, from $37.1 million in 2002 to
$39.6 million in 2003. Gross margin was 54% in 2002 and 2003. Gross margins for our Cell Culture segment were positively impacted in 2003 due to a sale of EX-CYTE® at
100% gross margin under the terms of a take or pay contract with one of our customers. Gross margins for our Cell Culture segment would have been 53% if this sale had been recorded at a normal margin.
Gross margins were lower in 2003 primarily due to product mix, as EX-CYTE®, which is a higher margin product, represented a significantly lower percentage of total Cell Culture
segment revenue than in 2002. Additionally, the margins were approximately 1% lower in 2003 due to manufacturing cost variances arising from excess manufacturing capacity.

Diagnostic.Gross profit from our Diagnostic segment increased $2.3 million, or 17%, from $13.6 million in 2002
to $15.9 million in 2003. Gross margin increased from 50% in 2002 to 53% in 2003. Gross margins increased primarily due to efficiencies gained from increased production, increased sales prices
of monoclonal antibodies and the increase in the monoclonal antibody volumes, which are relatively higher margin products. Gross margins from our Diagnostic segment were negatively impacted by our
human-sourced disease state polyclonal antibody products, the majority of which were sold with the therapeutic plasma business as mentioned above. Gross margins on the human-sourced disease state
polyclonal antibody products categories sold were 52% and 5% in 2002 and 2003, respectively. Gross margins were negatively impacted on these products due to lower production volumes which resulted in
absorption of fixed costs by fewer units. Collection of the products within human-sourced disease state polyclonal antibody product group was negatively impacted by HIPAA, which adversely affected
access to qualified donors.



Consolidated SG&A increased approximately $10.8 million, or 32%, from $33.8 million in 2002 to $44.6 million in 2003. As a percentage of
revenues, SG&A was 30% in 2003 compared with 34% in 2002. Chemicon accounted for $17.2 million of 2003 SG&A. The increase attributable to Chemicon was partially offset as we continued to
emphasize cost controls over SG&A at all locations. Excluding Chemicon, we reduced our headcount by more than 25 people between December 29, 2002 and December 28, 2003.



R&D expenses increased slightly from $5.6 million in 2002 to $6.2 million in 2003. The increase was primarily due to the expansion of our research
and development activities, including those acquired as a result of the Chemicon acquisition. R&D included $1.9 million incurred by Chemicon. The increase attributable to Chemicon was partially
offset as we restructured our existing research and development group, which included eliminating the R&D group in Scotland in late 2002 and reorganized certain of our U.S.-based R&D functions upon
the transfer of Intergen's Gaithersburg, Maryland operations to Chemicon in 2003. During 2003, Chemicon internally developed 295 new products. We also continued to advance various projects in the Cell
Culture segment related to the characterization and performance of EX-CYTE® and other cell culture supplements, as well as progress in developing novel cell culture
supplements. See "Outlook" below for additional discussion of R&D efforts.

37

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Amortization of intangibles increased from $0.9 million in 2002 to $2.2 million in 2003 due to the acquisition of Chemicon effective April 1,
2003. The Chemicon acquisition added $1.1 million in amortization during 2003.



During 2003 and 2002, we incurred $2.8 million and $1.9 million, respectively, in special charges. See "Note 5Special Charges"
in Item 8 Financial Statements and Supplementary Data for additional discussion of special charges.



Other expenses are presented net and arise primarily from realized and unrealized gains and losses on foreign currency transactions, which were immaterial in 2003
and 2002.



At closing of the issuance of the Debentures and a new $30.0 million revolving credit facility, we repaid the balances in full and terminated our previous
$82.5 million term loan and $35.0 million revolving credit facility. We recorded a non-cash charge of approximately $4.1 million related to the write-off
of deferred financing costs associated with the terminated facilities. During 2003, we also recorded an additional non-cash charge of approximately $0.4 million
related to the write-off of deferred financing costs related to our revolving credit facility that was in place prior to the $82.5 million term loan.



Interest expense increased from $0.2 million in 2002 to $4.4 million in 2003. The increase in interest expense was due to borrowings used to finance
the Chemicon acquisition and subsequent refinancing arising from the issuance of the Debentures.



We recorded interest income of $0.6 million in 2002 and $0.3 million in 2003. Interest income decreased primarily due to 2002 interest income,
including $0.4 million of interest income associated with outstanding tax refunds from prior years as well as lower interest rates in 2003.



The provision for income taxes as a percentage of income before taxes decreased from 35% in 2002 to 31% in 2003. Our effective tax rate declined in 2003 as a
result of higher than expected foreign tax credits and because we generated more of our income in lower tax jurisdictions.



Income (loss) from discontinued operations, net of income taxes, decreased from earnings of $7.2 million in 2002, to a loss of $10.6 million in 2003. The
loss from discontinued operations in 2003 included an impairment charge of $12.6 million. The impairment was based on our estimate of the net realizable value of the consideration received from
the sale of the therapeutic plasma business. The remaining decline was primarily due to the continued weakness in sales and gross margins of the therapeutic plasma business. Sales of therapeutic
plasma were $46.2 million and $29.7 million in 2002 and 2003, respectively. Additionally, gross margins declined from 36% in 2002 to 10% in 2003. Gross margins were negatively impacted
on these products due to lower production volumes, which resulted in absorbing fixed costs over fewer units.

38

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The following table sets forth certain indicators of our consolidated financial condition and liquidity as of the end of fiscal years shown (in thousands):

2004

2003

2002Cash, cash equivalents and short-term investments

$
62,054

$
48,564

$
15,242Working capital


122,443


104,760


65,468Total debt and capital lease obligations


135,008


130,923


424Stockholders' equity(1)


416,531


181,506


170,988Total debt to equity


32.4
%

72.1
%


%


---

We
have three principal sources of near-term liquidity:



As
of March 1, 2005, we had $64.6 million in cash, cash equivalents and short-term investments and $45.0 million available under the 2004 Revolving
Credit Facility. We believe that our liquidity and capital resources are sufficient to meet our working capital, capital expenditure and other anticipated cash requirements over the next twelve
months.

Net
cash provided by operating activities was $37.6 million, $18.1 million and $7.2 million in 2004, 2003 and 2002, respectively. Changes in operating assets and
liabilities used were $4.2 million, $9.3 million and
$9.1 million during 2004, 2003 and 2002, respectively. The increase in working capital from 2003 to 2004, $17.7 million, resulted from the continued growth of our business. During 2004
and 2003, trade accounts receivable increased $12.8 million and $12.0 million, respectively, over the previous year primarily as a result of our acquisitions. Days sales outstanding
("DSO") at the end of 2004 and 2003 were 62 and 69 days, respectively.

DSO
was lower in 2004 than in 2003 because of the timing of shipments at year end. DSO was higher in 2003 than in 2002 because we billed a significant EX-CYTE®
customer for their contractual obligation under a take-or-pay contract on December 28, 2003. Excluding accounts receivable related to this take or pay contract, DSO
would have been 70 days at December 28, 2003. The amount billed would have been shipped and billed throughout the year, if the customer had taken delivery of the product. We collected
all amounts under this take or pay contract in February 2004.

Inventories
increased overall by $16.0 in 2004 over 2003. The acquisition of Upstate in the fourth quarter of 2004 increased inventory by $9.5 million. Chemicon's inventory
increased $1.4 million due to continued growth in sales volume. The balance of the increase was in our Cell Culture segment and resulted primarily from increased quantities of recombinant human
insulin on hand at the end of 2004. Inventory turns at the end of 2004 and 2003 were 2.2 and 2.4 respectively. Inventory increased in 2003 due to the continued growth of our business as well as
restoring inventory levels at our Scotland facility after the backlog of orders that occurred during the third quarter of 2002 and a large purchase of insulin at the end of the third quarter of 2003,
which was partially on hand at year-end.

Accounts
payable and accrued liabilities increased $22.3 million in 2004 over 2003 and increased $12.2 million in 2003 over 2002 because of the increased operating and
other costs associated with businesses acquired during those periods. Additionally, accounts payable and accrued liabilities increased in 2003 primarily due to accrued interest associated with the
Debentures, and taxes payable

39

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associated
with higher taxable income from continuing operations in the fourth quarter of 2003 compared to the fourth quarter of 2002.

The
incremental decrease in cash used by changes in operating assets and liabilities in 2004 compared to 2003 was offset by incremental increases in adjustments such as depreciation and
amortization, non-cash special charges and the write-off of deferred financing costs. Depreciation and amortization increased in 2004 compared to 2003 because we acquired
Upstate in October 2004 and Chemicon was included for a full year in 2004 versus only nine months in 2003. Depreciation and amortization increased in 2003 compared to 2002 because we acquired
Chemicon in April 2003 and because we made capital expenditures in connection with the implementation of an enterprise resource management system in 2003. In 2004, non-cash charges
and write-off of deferred financing costs related to the write-off of $1.0 million of deferred financing costs in connection with the termination of our 2003 Credit
Facility and our
prepayment of the Upstate Term Loan. In addition we incurred a non-cash charge of $3.3 million for purchased in-process research and development arising from the
acquisition of Upstate in 2004. In 2003, non-cash charges and write-off of deferred financing costs related primarily to the write-off of $4.5 million in
deferred financing costs during the year, $0.8 million related to asset impairment associated with the relocation of research products produced at our Gaithersburg, Maryland facility to
Chemicon and $1.0 million related to asset impairments associated with the Toronto BSE shutdown. See "Note 5Special Charges" and "Note 8Convertible
Senior Subordinated Debentures" in Item 8 Financial Statements and Supplementary Data for additional discussion of special charges and write-off of deferred financing costs.

Net
cash used in investing activities was $138.9 million, $139.7 million and $16.4 million in 2004, 2003 and 2002, respectively. Investing activities during 2004
included cash expenditures primarily for the acquisition of Upstate in 2004 and the acquisition of Chemicon in 2003 of $103.6 and $97.3 million, net of cash received, respectively. Investing
activities during 2004, 2003 and 2002 included capital expenditures of $19.5 million, $19.6 million and $11.5 million, respectively. Capital expenditures during 2004 and 2003
consisted primarily of construction of our new bioprocessing facility in Lawrence, Kansas, completion of the implementation of our enterprise resource management system and completion of the expansion
of Upstate's new drug screening facility in Scotland. Capital expenditures during 2002 consisted primarily of implementation of the enterprise resource planning system, expansion of monoclonal
manufacturing operations in Scotland and completion of the expansion of our manufacturing facility in Toronto. As part of our cash investment strategy, we have from time to time purchased and sold
auction rate securities at face value, earning market interest rates. These investments are considered as available for sale securities; purchases and proceeds from sale are reflected as investing
activities.

Net
cash provided by financing activities in 2004 was $109.8 million, compared with $123.0 million in 2003. Net cash provided by financing activities in 2003 was
$123.0 million, compared with $2.3 million of net cash used during the same period in 2002. Financing activities in 2004 primarily consisted of the $80.0 million Upstate Term
Loan, which was repaid in 2004 from the proceeds of the issuance of 4,830,000 shares of our Common Stock. Net proceeds from the sale of this stock were approximately $104.8 million. Also in
2004, we entered into a $3.6 million 24-month capital lease for certain assets installed in the Lawrence facility. Financing activities in 2003 primarily consisted of $130.0 million from
the issuance of the Debentures and payment of debt issuance costs of $8.9 million; $4.4 million related to the term loan and $4.5 million related to the Debentures. During 2003,
we also received proceeds of $82.5 million from a term loan entered into during the second quarter of 2003. We subsequently repaid the outstanding balance of the term loan upon issuing the
Debentures during the third quarter of 2003. Financing activities in 2002 primarily consisted of payment of long-term debt and capital leases of $4.0 million and proceeds from stock
options of $2.7 million.

We
anticipate that capital expenditures during 2005 will be between $18 million and $20 million. The most significant expenditures will be for continued implementation of
our enterprise resource planning and financial system at Chemicon and Upstate and expansion of manufacturing, distribution

40

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and
research facilities, primarily in our Research segment. Completion of the installation of our enterprise resource planning and financial system at Chemicon is expected by mid year. Implementation
of the system at Upstate is expected to begin in the second half of the year.

As
of January 2, 2005, we had outstanding debt of approximately $135.0 million consisting primarily of the Debentures. We have no borrowings outstanding under the 2004
Revolving Credit Facility. The following table sets forth our contractual obligations as of January 2, 2005 (in thousands):

Payment due by periodTotal

1 year

2 - 3 years

4 - 5 years

5+ yearsDebentures(1)

$
130,395

$


$


$


$
130,395Capital lease obligations


4,613


2,419


2,066


128


Operating lease obligations


30,629


4,598


8,264


5,448


12,319Royalty obligation(2)


2,200


853


1,347








---

On
August 20, 2003, we issued $130.0 million principal amount of Debentures to certain institutional investors. After expenses, we received net proceeds of
$126.1 million. Interest on the Debentures accrues at 4.75% per annum and is payable semi-annually on February 15th and August 15th. The Debentures are convertible
into shares of our Common Stock at an initial rate of 67.6133 shares of common stock per $1,000 principal amount of the Debentures (or approximately 8.8 million shares of our Common Stock at a
conversion price of $14.79 per share of our Common Stock), subject to the satisfaction of certain conditions which were met during the first quarter of 2004. The terms of the Debentures do not impose
any restrictive covenants on us. The holders of the Debentures may require us to repurchase some or all of their Debentures on August 15, 2008, August 15, 2010, August 15, 2013,
August 15, 2018, August 15, 2023 or August 15, 2028 at a repurchase price equal to 100% of the principal amount of the Debentures being repurchased, plus any accrued and unpaid
interest. The holders of the Debentures may also require us to repurchase some or all of their Debentures at any time if we undergo a fundamental change, such as the consummation of any share
exchange, consolidation or merger or any sale of all or substantially all of our assets. See "Note 8Convertible Senior Subordinated Debentures" in Item 8 Financial Statements and
Supplementary Data for a discussion of the Debentures.

On
October 17, 2003, we entered into an interest rate swap on $70.0 million principal amount of our Debentures. The objective of the swap is to convert the 4.75% fixed
interest rate on this portion of the Debentures to a variable interest rate based on the 6-month LIBOR at the end of each interest period plus a spread of 66 basis points. The gain or loss
from changes in the fair value of the swap is expected to offset the gain or loss from the changes in the fair value of the cash flows from the Debentures throughout the expected term of the
Debentures. At January 2, 2005, the fair market value of the interest rate swap was a receivable of $0.4 million.

On
October 14, 2004, we entered into the 2004 Credit Agreement, which includes the $45.0 million 2004 Revolving Credit Facility. The 2004 Revolving Credit Facility bears
interest at a floating rate of interest determined by reference to a base rate or to Eurodollar interest rates, plus a margin. The margin on the Eurodollar interest rate ranges from 1.50% to 2.00% and
the margin on the base rate ranges from .50% to 1.00% based on our leverage ratio. We are required to pay a commitment fee ranging from .375% to .50% per annum on the undrawn balance of the 2004
Revolving Credit Facility,

41

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based
on our leverage ratio. The 2004 Credit Agreement is secured by a lien on substantially all of our assets. The 2004 Credit Agreement contains certain financial covenants that require the
maintenance of a minimum fixed charge coverage ratio and earnings before interest, taxes, depreciation and amortization and also provides for a maximum leverage ratio and limitations on capital
expenditures. Furthermore, under the terms of the 2004 Credit Agreement, there are restrictions on our ability to make acquisitions, repurchase common stock and to pay dividends. As of
January 2, 2005, there were no amounts outstanding under the 2004 Revolving Credit Facility. See "Note 9Long-Term Debt and Capital Lease Obligations" in Item 8
Financial Statements and Supplementary Data for discussion of the 2004 Credit Agreement and the 2004 Revolving Credit Facility.

At
January 2, 2005, we had a commitment with a vendor, which requires us to use the vendor in connection with the processing of BSA at our Toronto facility for a minimum of
$120,000 per quarter. The contract can be terminated by us or the supplier at any time with 180 days' notice. The contract expires in 2005, but can be renewed on a rolling one-year
basis.

We
have guaranteed real estate lease obligations totaling approximately $3.7 million related to the sale of the therapeutic plasma business. If Life defaults on the lease
payments, we would be required to assume these leases. We have accrued a stand ready obligation of $0.1 million in accordance with Financial Accounting Standards Board ("FASB") Interpretation
No. 45, "Guarantor Accounting and Disclosure Requirement for Guarantees" for these guarantees.

We
have no off-balance sheet financing arrangements and have not created any special purpose entities. Additionally, we do not undertake any trading activities within our
business with respect to non-exchange traded contracts accounted for at fair value.

Market Risk

We are exposed to market risk from changes in foreign currency exchange rates and, to a lesser extent, interest rates, which could affect our future results of
operations and financial condition. We manage our exposure to these risks through our operating and financing activities.

Foreign Currency Exchange Rates.We conduct our foreign-based operations through manufacturing operations located in the
United Kingdom, Australia and Canada. In 2004, 2003 and 2002, foreign-based operations accounted for approximately 33%, 30% and 23% of our net revenue and approximately 32%, 27% and 19% of our gross
profit, respectively. The net investment in foreign subsidiaries translated into United States dollars using year-end exchange rates at January 2, 2005, was $34.9 million.
The potential loss in fair value impacting other comprehensive income resulting from a hypothetical 10% change in quoted foreign currency exchange rates would amount to $3.5 million. We do not
currently use derivative financial instruments to hedge our exposure to changes in foreign currency exchange rates.

The
functional currency of our operations in the United Kingdom is the British pound sterling, the functional currency for our Australian operations is the Australian dollar and the
functional currency for our Canadian operations is the Canadian dollar. Fluctuations in foreign exchange rates can impact our 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, we transact business in various foreign currencies, which subjects
us to exposure from movements in the exchange rates of those countries. However, a large portion of our sales to foreign countries is denominated in United States dollars, thus mitigating a
significant portion of this risk. It has not been our practice to hedge our assets and liabilities in these countries or our intercompany transactions, and accordingly, we have not used derivatives or
other off-balance sheet items to manage any significant foreign currency exchange risk. Recognized transactional foreign currency gains (losses) were immaterial in 2004, 2003 and 2002.

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Interest Rates.We issue long-term debt obligations to support acquisitions and general corporate purposes,
including capital expenditures and working capital needs. All of our long-term debt obligations bear a fixed rate of interest. On October 17, 2003, we entered into a
$70.0 million fixed to variable interest rate swap. A one-percentage point change in interest rates affecting our floating rate long-term debt would change
pre-tax income by $0.7 million over the next twelve months. A one-percentage point change in interest rates would have approximately a $2.8 million effect on the
fair value of our fixed rate long-term debt.

Recent Accounting Pronouncements

In November 2004, the Financial Accounting Standards Board ("FASB") issued SFAS No. 151 "Inventory Costs, an amendment of Accounting Research
Bulletin No. 43, Chapter 4" ("SFAS 151"). SFAS 151 requires that abnormal amounts of idle facility expense, freight, handling costs and spoilage be recognized as current period
charges, and it requires the allocation of fixed production overhead costs
to the costs of conversion based upon the normal capacity of the production facility. SFAS 151 is effective for fiscal years beginning after June 14, 2005. We do not expect the adoption
of SFAS 151 to have a material effect on our results of operations or financial position.

In
December 2004, the FASB issued Statement of Financial Accounting Standards No. 123 (revised 2004), "Share-Based Payment" ("SFAS 123R"), which is a revision of
SFAS 123, "Accounting for Stock Issued to Employees," and amends SFAS 95, "Statement of Cash Flows." SFAS 123R requires that the compensation cost associated with all share-based
payments should be recognized in the financial statements based on the fair value of the equity or liability instruments issued. Pro forma disclosure will no longer be presented as an alternative.
Publicly held companies will be required to apply SFAS 123R as of the first interim or annual reporting period that begins after June 15, 2005. We will fully adopt the provisions of
SFAS 123R on July 1, 2005.

As
currently allowed by SFAS 123, we currently account for share-based payments using the intrinsic value method and generally do not recognize compensation cost. The future
impact of the adoption of SFAS 123R is not forecasted at this time because it is dependent on future share-based payments, including employee stock options, that are not certain at this time
and their impact on the calculation of compensation cost is unknown.

In
July 2004, the American Institute of Certified Public Accountants issued Emerging Issues Task Force Abstracts Issue No. 04-8, "The Effect of Contingently
Convertible Debt on Diluted Earnings per Share" ("EITF 04-8") that requires the inclusion of contingently convertible securities in diluted earnings per share calculations (if dilutive)
regardless of whether the market price trigger or other contingent features have been met. Prior to the issuance of EITF 04-8, SFAS 128 was interpreted to allow the exclusion of the
dilution of common shares underlying contingently convertible debt instruments from the calculation of diluted earnings per share in circumstances where the conversion depends on the achievement of a
specified market price of the issuer's shares. The EITF is effective for reporting periods ending after December 15, 2004 and would be applied to previously reported earnings under
SFAS 128. We have adopted EITF 04-8 and have applied it to the diluted earnings per share calculation for the year ended December 28, 2003 due to the dilutive effect of the
Debentures in accordance with the presentation requirements for a change in accounting method.

Outlook

Our major focus in 2005 will be to continue the implementation of our strategic growth plan that has been put in place over the past several years. The key
elements of this strategic growth plan are to continue to grow the business significantly faster than inherent market growth rates, continue to improve our gross margin percentages, continue the
emphasis on leveraging and controlling overhead costs, increasing our investment in research and development activities and increasing overall

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profitability
and earnings. We have a focused business strategy with emphasis on consistent execution in order to drive growth, profitability and increased stockholder value.

In
2004, we continued our transformation from what once was a company focused on specialty therapeutic plasma products to a life science company supporting drug discovery, drug
development and drug production. The therapeutic plasma business was divested in early 2004, including the related donor centers and laboratory facilities. The acquisition of Sierra was completed in
July 2004 providing a significant entrée into the contract research market and providing internal research resources to support our Cell Culture segment. In October 2004,
we completed the acquisition of the Upstate Group, significantly expanding our research reagents business and providing an entrance into the rapidly growing market of drug screening and target
validation products and services. Today, we are positioned with a strong product portfolio supported by significant intellectual property in markets that are expected to provide opportunities for
revenue growth and profitability improvement.

We
are focused on revenue growth through both internal organic growth of our products and services as well as external growth through both licensing and acquisition opportunities. In
terms of organic growth, we have both expanded and strengthened our sales structure and organization over the past year through the addition of more sales representatives with strong technical
backgrounds and expanded product training of all sales representatives and sales support personnel. We continue to expand our marketing staff and marketing communications groups to provide more
technical product support information to our sales staff. Our goal is also to reduce our reliance on outside distributors to sell our products while continuing to deepen our customer relationships.
This is particularly true in Europe where we are currently transitioning to more direct sales representation. In order to improve product and market awareness, we have also taken steps to brand more
of our key marketed products including our proprietary bovine serum albumin (Probumin) and our recombinant human insulin (Incelligent).

We
continue our emphasis on the introduction of new products in all business segments to accelerate our revenue growth. We recently introduced Hybri-CYTE, the
first of a new line of serum-free cell culture products formulated for hybridoma cell lines and designed to eliminate the need for fetal bovine serum. We expect this development will lead
to subsequent products that will focus on other cell lines. Our Chemicon and Upstate groups also continue to introduce new products and services to the research marketplace. The two groups
introduced approximately 1,200 products in 2004 and expect to introduce at least 1,200 products in 2005. The focus for new product introductions continues to be on adding new products with a higher
product value and increasing gross margins. In 2004, Chemicon increased its revenue per new product, on a rolling twelve month basis, from approximately $2,100 per product in 2003 to over $3,100 per
product in 2004. Combined with Upstate for 2004, our new product revenue per product was over $6,600 for the year and is expected to increase further.

We
are also continuing to focus on new products and services in markets that have potentially higher growth rates. With increased outsourcing of drug discovery services by both
pharmaceutical and biotech firms, we see significant opportunities to rapidly increase our drug screening and target validation services. Our Upstate unit recently completed a significant expansion of
its drug screening operation in Dundee, Scotland from 11,000 square feet to over 25,000 square feet. Upstate continues to expand its leadership in both kinase products and services with approximately
200 kinases available and continues to establish agreements with leading firms to provide outsourcing drug screening services. We plan to continue to expand our kinase panel and service offering
during 2005.

We
also continue to look for external opportunities to increase our revenue. We have an aggressive program to work with researchers and their institutions to identify and license new
products to expand our portfolio. In addition, we continue to identify and evaluate potential acquisitions that will either strengthen or expand our product portfolio. We completed the acquisition of
Specialty Media in

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February 2005,
which expanded our stem cell product offering. With the addition of a Corporate Development group in 2004, this activity is expected to increase in 2005.

Our
overall organic growth in 2004 was approximately 16% over 2003 revenue. We have a long term goal to increase our revenue 15% per year organically without considering acquisitions.

Another
aspect of our strategic growth plan is to increase our overall gross margins. The focus in 2005 will be in several areas. First, we continue to focus on adding new products and
services that have higher gross margins. Our emphasis will continue to be on adding products and services that are protected through some form of intellectual property protection, such as patents or
license agreements. Currently more than 60% of our revenue comes from products with some form of intellectual property protectionthis emphasis is expected to continue in 2005. We are also
focused on a number of initiatives to reduce our costs of production. These projects are focused on lean manufacturing initiatives, optimization of existing facilities and consolidation of functions
and facilities to reduce costs of production, distribution and overhead. Our long term goal is to increase gross margins to over 60% on a consolidated basis.

We
have successfully completed the construction and the internal phases of initial product manufacturing and testing at our new EX-CYTE® plant in Lawrence,
Kansas on schedule and below budget. This facility demonstrated that it can manufacture EX-CYTE® that meets all internal quality and performance characteristics as a cell
culture supplement for the production of biological products. The plant has recently commenced the next phase of activity, which includes detailed customer audits of the new facility and extensive
testing of the initial batches of production to ensure compliance with all customer specifications. This next phase of development is expected to take approximately six to nine months to complete
based upon scheduling commitments and testing requirements of our various customers. While plant staff will continue to work with our customers to expedite this process, we expect that full
manufacturing operations will not commence until the completion of this next validation phase, which is anticipated to be in early 2006.

We
also expect to continue our efforts to control and reduce all SG&A costs as a percentage of revenue. This is expected to include completing integration activities related to the
recent Upstate acquisition. In addition, we have invested significant capital in our information systems infrastructure over the past two years and are looking to achieve economies and performance
improvements as a result of those investments. Overall, we are looking to leverage our overhead structure through both organizational structure and process improvements as revenues increase. Our long
term goal is to reduce SG&A costs to less than 25% of consolidated revenue.

We
also recognize the importance of investing in R&D activities for all our business units. This investment is required to achieve the portfolio development described above and to
maintain our leadership position in all of our key markets. We view our investment in R&D as critical to achieving our strategic growth goals and have stated that we expect to invest at least 10% of
our consolidated revenue into R&D activities in the coming years.

In
order to increase the accountability for both revenue growth and our profitability, we made the decision in late 2004 to switch from a company organized primarily by functional
organizational units to a company with three separate business units along with a smaller corporate group. The Celliance business unit was announced in November 2004 and is focused on the
bioprocessing marketplace. Celliance is responsible for the research, development, manufacturing and commercialization of our cell culture products, diagnostic products and contract research services
through our Celliance BioServices unit. Beginning in 2005, we will begin reporting operating results in two business segments, "Bioprocessing Products and Services" and "Research Products and
Services." The operations of Celliance will represent the Bioprocessing segment and the operations of Chemicon and Upstate will continue to represent the Research segment.

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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 our consolidated financial statements beginning on Page F-1 of this Annual Report on
Form 10-K, which are incorporated herein by reference.

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

There were no changes in or disagreements with accountants on accounting and financial disclosure.

Item 9A.    Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an
evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange
Act, as of the end of the period covered by this report (the "Evaluation Date"). Based on this evaluation, our principal executive officer and principal financial officer concluded as of the
Evaluation Date that our disclosure controls and procedures were effective such that the information relating to us, including our consolidated subsidiaries, required to be disclosed in our Securities
and Exchange Commission ("SEC") reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and (ii) is accumulated and
communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. During the course of
our internal control reviews and preparation of our consolidated financial statements for the year ended January 2, 2005, we determined that we had improperly accounted for the income tax
effects of foreign currency translations in the computation of "Other Comprehensive Income" in prior years and each of the interim quarters in 2004. See "Note 17Restatement" in
Item 8 Financial Statements and Supplementary Data for additional discussions regarding this matter. We believe that this error was a result of a design failure in certain disclosure controls. We
redesigned those disclosure controls and determined that they were operating effectively prior to the end of fiscal year 2004. There have been no other significant changes in our internal controls
over financial reporting during the quarter ended January 2, 2005 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

Management's Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in
Rule 13a-15(f) of the Exchange Act. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external reporting purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;
(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that
our receipts and expenditures are being made only in accordance with authorizations of our management; and

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(3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial
statements.

Because
of its inherent limitations, our internal controls over financial reporting provide reasonable, not absolute, assurance that the financial statements and footnotes thereto are
free of material error. In addition, no internal control structure can provide absolute assurance that all instances of fraud have been detected. Also, projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.

We,
under the supervision of and with the participation of our management, including the Chief Executive Officer and the Chief Financial Officer, assessed our internal controls over
financial reporting as of January 2, 2005, based on criteria for effective internal control over financial reporting described in "Internal ControlIntegrated Framework" issued by
the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, we concluded that we maintained effective internal controls over financial reporting as of
January 2, 2005, based on the specified criteria. We excluded from our assessment the internal control over financial reporting at Upstate Group, Inc., which was acquired effective
October 1, 2004 and whose financial statements reflect total assets and revenues constituting 37.3% and 7.9% respectively, of the related consolidated financial
statement amounts as of and for the year ended January 2, 2005. Accordingly, our report does not include the internal control over financial reporting at Upstate Group, Inc.

Management's
assessment of the effectiveness of our internal control over financial reporting has been audited by Deloitte & Touche LLP, an independent registered public
accounting firm, as stated in their report which is included herein.

/s/SEROLOGICALS CORPORATIONMarch 18, 2005

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To
the Board of Directors and Stockholders of
Serologicals Corporation:

We
have audited management's assessment, included in the accompanying Management's Report on Internal Control over Financial Reporting ("Management's Report"), that Serologicals
Corporation and Subsidiaries (the "Company") maintained effective internal control over financial reporting as of January 2, 2005, based on criteria established in Internal
ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. As described in Management's Report, management excluded from their assessment
the internal control over financial reporting at Upstate Group, Inc., which was acquired effective October 1, 2004 and whose financial statements reflect total assets and revenues
constituting 37.3% and 7.9%, respectively, of the related consolidated financial statement amounts as of and for the year ended January 2, 2005. Accordingly, our audit did not include the
internal control over financial reporting at Upstate Group, Inc. The Company's management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management's assessment and an opinion on the effectiveness of the
Company's internal control over financial reporting based on our audit.

We
conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain
reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over
financial reporting, evaluating management's assessment testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

A
company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or
persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance of records, that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that
receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because
of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material
misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to
future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In
our opinion, management's assessment that the Company maintained effective internal control over financial reporting as of January 2, 2005, is fairly stated, in all material
respects, based on the criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Also, in our opinion,
the Company maintained, in all material respects, effective internal control over financial reporting as of January 2, 2005, based on the

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criteria
established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We
have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement
schedule as of and for the year ended January 2, 2005 of the Company and our report dated March 18, 2005 expressed an unqualified opinion on those financial statements and financial
statement schedule.

/s/DELOITTE & TOUCHE LLP

Atlanta,
Georgia
March 18, 2005

Item 9B.    Other Information

Not applicable

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PART III.

Item 10.    Directors and Executive Officers of the Registrant

Directors of the Company

For information regarding our Directors, the sections captioned "Proposal to Elect Directors," "Corporate Governance and Board Matters," "Report of the Audit
Committee of the Board of Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance" within our 2005 Proxy Statement are incorporated herein by reference. Our Board has a
separately designated Audit Committee. Information regarding the Audit Committee is incorporated by reference to the section in our 2005 Proxy Statement captioned "Corporate Governance and Board
Matters; Meetings of the Board; Committees; Audit Committee."

Officers and Key Management

The following table sets forth the names, ages and all positions and offices held by our executive officers:

|Name                    |  | Age |  | Positions and Offices Presently Held                                                     
|----------------------- |  | --- |  | -----------------------------------------------------------------------------------------
|David A. Dodd           |  | 55  |  | President, Chief Executive Officer and Director                                          
|David L. Bellitt        |  | 56  |  | Vice President and President, Celliance Corporation                                      
|Robert J. Brown         |  | 53  |  | Vice President, Corporate Development                                                    
|Robert P. Collins       |  | 51  |  | Vice President, Human Resources                                                          
|Dennis W. Harris, Ph.D. |  | 48  |  | Vice President, Research & Development, Business Development and Chief Scientific Officer
|Harold W. Ingalls       |  | 57  |  | Vice President, Finance and Chief Financial Officer                                      
|Sue Sutton-Jones        |  | 52  |  | Vice President, Global Quality Technology and Regulatory Systems                         
|James J. Kramer, Ph. D. |  | 49  |  | Vice President, Global Manufacturing Operations                                          
|Jeffrey D. Linton       |  | 42  |  | Vice President and President, Chemicon International, Inc.                               
|Ian W. Ratcliffe        |  | 44  |  | Vice President and President, Upstate Group LLC                                          
|Samuel R. Schwartz      |  | 55  |  | Vice President, Controller and Chief Accounting Officer                                  
|Philip A. Theodore      |  | 51  |  | Vice President, General Counsel and Corporate Secretary                                  
|M. Dwain Wilcox         |  | 37  |  | Vice President, Global Information Systems                                               

David A. Doddhas served as our President, Chief Executive Officer and as a Director since June 2000. From August 1995 to
June 2000, Mr. Dodd served as President and Chief Executive Officer of Solvay Pharmaceuticals, Inc., the U.S. subsidiary 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 three non-profit organizations,
the American Foundation for Suicide Prevention, of which he is the Chairman, the Metro Atlanta Chamber of Commerce and the Georgia Biomedical Partnership.

David L. Bellitthas served as Vice President and President of Celliance Corporation since November 2004. He served as Vice
President, Global Commercial Operations from January 2003 until

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he
was appointed to his current position. During his career, 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 J. Brownhas served as Vice President, Corporate Development since August 2004. Over the past 22 years,
Mr. Brown has served in numerous management positions in corporate development and licensing for major pharmaceutical companies, including 15 years with Bristol-Myers Squibb, where he
led their corporate development function for the United States. Most recently he served as Senior Vice President of Corporate Development with Andrx Corporation, responsible for acquisition
initiatives.

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 Officer of Group Practice Affiliates, Inc. Mr. Collins is a member of the Georgia State Human Resource Roundtable, the Human Resource Planning
Society, the Society for Human Resource Management and the Biotechnology Industry Organization.

Dennis W. Harris, PhD, has served as Vice President, Global Research & Development, Business Development and Chief Scientific
Officer since May 2004. Prior to joining us, Dr. Harris served as the Executive Vice President, Research and Development of Vitra Biosciences, a private company engaged in the
development of multiplexed cell based imaging systems, from November 2003 through May 2004. From May 2003 through October 2003, Dr. Harris was an independent
consultant to a number of life sciences companies. From April 2001 until April 2003, Dr. Harris served at ACLARA Biosciences, a public company engaged in research and development
of microfluidic and multiplexing systems, most recently as Senior Vice President, System Integration and Business Development. Prior to April 2001, Dr. Harris worked in a number of
positions of increasing responsibility at Amersham Pharmacia Biotech. In his most recent position, as Vice President, Research and Development, North America, Dr. Harris had responsibility for
AP Biotech's global genomics R&D strategy, and managed a North American R&D organization of approximately 250 scientists and engineers. Dr. Harris is a member of the Board of Directors of
Microchip Technologies, Inc., a privately held company engaged in the research and development of microfluidic technologies for integrated sample preparation and analysis.

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 is a member of the Board of Directors of Metaphore

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Pharmaceuticals, Inc.,
a privately held pharmaceutical company specializing in therapeutic products for pain, rheumatoid arthritis and other inflammatory diseases.

Sue Sutton-Joneshas served as Vice President, Quality Technology and Regulatory Systems since March 2004. Prior to that she served
as Vice President, Global Regulatory Affairs, Quality Assurance, Compliance and Medical Affairs since January 2001. From July 1998 until December 2000, Ms. Sutton-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.

James Kramer, Ph.D.has served as Vice President, Global Manufacturing Operations since March 2003. From August 2002
to March 2003, Dr. 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 and President of Chemicon since April 2003. From October 2000 to
April 2003, Mr. Linton served as Vice President, Corporate Business Development, Legal and Public Affairs. 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 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.

Ian W. Ratcliffehas served as Vice President and President of Upstate since October 2004. He was elected President of Upstate
Group, Inc., which we acquired in October 2004, in May 2004. Prior to his election as President, he had served as Vice President of Corporate Development, COO, CFO and Executive
Vice President of Sales, Marketing and Innovation of Upstate Group since 1995. He previously worked as a chemical engineer with Imperial Chemical Industries and Matthew Hall Engineering, before
founding Chemnique, Ltd., which provided engineering and project management services to the energy, specialty chemical and pharmaceutical industries. Mr. Ratcliffe is a Chartered
Chemical Engineer.

Samuel R. Schwartz, CPA,has served as Vice President, Controller and Chief Accounting Officer since January 2005. Prior to his
appointment to the office of Vice President, he served as Chief Accounting Officer and Corporate Controller since September 2001. From March 1998 to September 2001,
Mr. Schwartz served in various senior financial management roles with us. From October 1990 to December 1997, Mr. Schwartz served as President and Chief Executive Officer
of a privately-held manufacturing company. From 1973 to 1990, Mr. Schwartz was employed by Coopers & Lybrand, LLC where he became a partner in 1985.

Philip A. Theodorehas served as Vice President, General Counsel and Corporate Secretary since January 2004. Prior to joining us he
was a partner of King & Spalding, LLP, a law firm based in Atlanta, Georgia. Mr. Theodore joined King & Spalding, LLP in 1981 and became a partner in 1986.

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While
at King & Spalding, LLP, Mr. Theodore represented clients in a wide variety of corporate, securities and mergers and acquisitions transactions.

M. Dwain Wilcoxhas served as Vice President, Global Information Systems since October 1998. Prior to joining us, 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.

In
addition, the following individual is a key employee:

Joseph T. Kozma,54, is the Vice President, Sales of Celliance since November 2004. Mr. Kozma joined us when we acquired
Intergen in 2001. Prior to assuming his current position, he served as our Vice President, Strategic Market Development. From 1987 until joining the Company, Mr. Kozma served in various
capacities with Intergen, 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 Intergen.

Code of Ethics

We adopted a code of ethics applicable to our chief executive officer, chief financial officer, chief accounting officer and other senior financial managers. The
code is a "code of ethics" as defined by applicable rules of the Securities and Exchange Commission. Our code of ethics is publicly available on our website. The internet address of our website is
http://www.serologicals.com. Our code of ethics is posted in the "Company Overview" section of our website, under the caption "Corporate Governance." If we make amendments to this code other than
technical, administrative, or other non-substantive amendments, or if we grant any waivers, including implicit waivers, from a provision of this code to our chief executive officer, chief
financial officer or chief accounting officer, we will disclose the nature of the amendment or waiver, its effective date and to whom it applies in the "Company Overview" section of our website under
the "Corporate Governance" caption or in a Current Report on Form 8-K filed with the Securities and Exchange Commission.

Item 11.    Executive Compensation

For descriptions of our equity compensation plans, refer to the heading "Note 7Stock Compensation Plans" in Item 8 Financial Statements
and Supplementary Data.

The
sections under the heading "Executive Compensation" within the 2005 Proxy Statement are incorporated herein by reference.

Item 12.    Security Ownership of Certain Beneficial Owners and Management

The section under the heading "Security Ownership of Certain Stockholders and Management" within the 2005 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 2005 Proxy Statement is incorporated by reference.

Item 14.    Principal Accountant Fees and Services

The section under the heading "Independent AuditorsFees Paid to Independent Auditors" within the 2005 Proxy Statement is incorporated by reference.

53

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PART IV.

Item 15.    Exhibits, Financial Statement Schedules.

(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.

|2.1.1 |  | Agreement of Purchase and Sale, dated November 30, 1998, between the Registrant and Bayer Corporation (Exhibit 2.1 to the Registrant's Current Report on Form 8-K, dated January 12, 1999, is hereby
incorporated by reference).                                                                                                                                                   
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.1.2 |  | First Amendment to the Agreement of Purchase and Sale, dated December 29, 1998, between the Registrant and Bayer Corporation (Exhibit 2.2 to the Registrant's Current Report on Form 8-K, dated March 15, 1999, is hereby incorporated
by reference).                                                                                                                              
|2.2.1 |  | Plan and Agreement of Merger dated November 5, 2001, by and among the Registrant, Intergen Company, L.P., Serocor Incorporated and Intergen Investors, L.P. (Exhibit 2.1 to the Registrant's Current Report on Form 8-K, dated
December 19, 2001, is hereby incorporated by reference).                                                                                            
|2.2.2 |  | Amendment to Plan and Agreement of Merger dated December 13, 2001, to Plan and Agreement of Merger dated November 5, 2001, by and among the Registrant, Intergen Company, L.P., Serocor Incorporated and Intergen Investors, L.P.
(Exhibit 2.2 to the Registrant's Current Report on Form 8-K, dated December 19, 2001, is hereby incorporated by reference).                      
|2.2.3 |  | Earnout Agreement dated December 13, 2001, by and among the Registrant, 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 Registrant's Current Report on Form 8-K, dated December 19, 2001, is hereby incorporated by reference).
|2.3.1 |  | Amended and Restated Securities Purchase Agreement, dated as of February 11, 2003, between Serologicals Research Products, Inc. and Falcon International Investment Holdings LLC (Exhibit 2.1 to the Company's Current Report on
Form 8-K, dated April 11, 2003, is hereby incorporated by reference).                                                                             
|2.3.2 |  | European Purchase Agreement, dated February 11, 2003, between Serologicals Research Products, Inc. and Falcon International Investment Holdings LLC (Exhibit 2.6 to the Registrant's Annual Report on Form 10-K for the year ended
December 29, 2002 is hereby incorporated by reference).                                                                                         
|2.3.3 |  | Deed of Variation, dated April 4, 2003, between Serologicals Research Products, Inc. and Falcon International Investment Holdings LLC (Exhibit 2.2 to the Registrant's Current Report on Form 8-K, dated April 11, 2003, is
hereby incorporated by reference).                                                                                                                     
|      |  |                                                                                                                                                                                                                                                                                                                                                                                    

54

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|2.3.4  |  | 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 (Exhibit 10.24 to the
Registrant's Annual Report on Form 10-K for the period ending December 29, 2002 is hereby incorporated by reference).                                                                                                                                                                                  
|------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.4.1  |  | Stock Purchase Agreement, dated as of December 19, 2003, by and among Gradipore Limited, Gradipore Inc., Serologicals Finance Company and Serologicals Corporation (Exhibit 2.1 to the Registrant's Current Report on Form 8-K, dated
January 27, 2004, is hereby incorporated by reference).                                                                                                                                                                                                                                                
|2.4.2  |  | First Amendment, dated as of January 15, 2004, to the Stock Purchase Agreement, dated as of December 19, 2003, by and among Gradipore Limited, Gradipore Inc., Serologicals Finance Company and Serologicals Corporation (Exhibit 2.2
to the Registrant's Current Report on Form 8-K, dated January 27, 2004, is hereby incorporated by reference).                                                                                                                                                                                          
|2.4.3  |  | Exchange Agreement, dated as of December 17, 2004, between Life Therapeutics Limited and Serologicals Finance Company (Exhibit 1.1 to the Registrant's Current Report on Form 8-K dated December 17, 2004 is hereby incorporated by
reference).                                                                                                                                                                                                                                                                                              
|2.4.4  |  | Promissory Note, dated as of December 17, 2004, made by Life Therapeutics Limited, Life Gels, Inc., Life Therapeutics Plasma Holdings, Inc., LifeSera, Inc., LifeSera Nevada, Inc., LifeSera Business Trust, LifeSera Investments,
 LLC, LifeSera Management Partnership, LP, and Allegheny Biologicals, Inc. to Serologicals Finance Company (Exhibit 1.2 to the Registrant's Current Report on Form 8-K dated December 17, 2004 is hereby incorporated by
reference).                                                                      
|2.4.5  |  | Mutual Release Agreement, dated as of December 17, 2004, by Life Therapeutics Limited, Life Gels, Inc., Life Therapeutics Plasma Holdings, Inc., LifeSera, Inc., LifeSera Nevada, Inc., LifeSera Business Trust, LifeSera
Investments, LLC, LifeSera Management Partnership, LP, and Allegheny Biologicals, Inc., on the one hand, and Serologicals Corporation and Serologicals Finance Company, on the other hand (Exhibit 1.3 to the Registrant's Current Report on
Form 8-K dated December 17, 2004 is hereby incorporated by reference).
|2.5.1  |  | Plan and Agreement of Merger, dated as of June 29, 2004, by and among the Registrant, Carmel Acquisition Corporation, AltaGen BioSciences, Inc. and William R. Srigley (Exhibit 2.1 to the Registrant's Current Report on
Form 8-K, dated June 30, 2004, is hereby incorporated by reference).                                                                                                                                                                                                                                               
|2.5.2  |  | Earnout and Indemnity Agreement, dated as of June 29, 2004, by and among the Registrant, AltaGen BioSciences, Inc. and Mr. William R. Srigley (Exhibit 2.2 to the Registrant's Current Report on Form 8-K, dated
June 30, 2004, is hereby incorporated by reference).                                                                                                                                                                                                                                                                        
|2.6.1  |  | Agreement and Plan of Merger, dated as of September 7, 2004, by and among the Registrant, Upstate Acquisition Company, LLC, Upstate Group, Inc. and the Stockholder Representative (Exhibit 2.1 to the Registrant's Current Report on
Form 8-K dated September 7, 2004 is hereby incorporated by reference).                                                                                                                                                                                                                                 
|2.6.2. |  | Amendment to Agreement and Plan of Merger, dated as of October 14, 2004, by and among the Registrant and Upstate Group, Inc. (Exhibit 2.1 to the Registrant's Current Report on Form 8-K dated October 14, 2004 is hereby
incorporated by reference).                                                                                                                                                                                                                                                                                        
|2.6.3  |  | Registration Rights Agreement, dated as of October 14, 2004, by and among the Registrant and certain former stockholders of Upstate Group, Inc. (Exhibit 4.1 to the Registrant's Registration Statement of Form S-3 (file number
333-120379) filed on November 10, 2004 is hereby incorporated by reference).                                                                                                                                                                                                                                
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

55

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|3.1.1  |  | Amended and Restated Certificate of Incorporation (Exhibit 3.1 to the Registrant's Annual Report on Form 10-K for the year ended December 29, 2002 is hereby incorporated by reference).                                                                                                                                                                                                                                                  
|------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.2.1  |  | Amended and Restated By-laws (Exhibit 3.4 to the Registrant's Registration Statement on Form S-1 (File No. 33-91176), effective June 14, 1995, is hereby incorporated by reference).                                                                                                                                                                                                                                                      
|4.1.1  |  | Specimen Common Stock Certificate (Exhibit 4.1 to the Registrant's Registration Statement on Form S-1 (File No. 33-91176), effective June 14, 1995, is hereby incorporated by reference).                                                                                                                                                                                                                                                 
|4.1.2  |  | 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).                                                                                                                                                                                                                                                                                    
|4.1.3  |  | 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).                                                                                                                                                                                                  
|4.1.4  |  | 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).                                                                                                                                                                                                                                 
|4.1.5  |  | Summary of Rights Plan (incorporated herein by reference to Exhibit 2.4 of the Registration Statement on Form 8-A filed August 10, 1999).                                                                                                                                                                                                                                                                                                 
|4.2.1  |  | Indenture, dated as of August 20, 2003, between Serologicals Corporation and The Bank of New York, as Trustee, for the 4.75% Convertible Senior Subordinated Debentures due 2033, including the form of 4.75% Convertible Senior Subordinated
Debentures due 2033 (Exhibit 4.1 to the Company's Current Report on Form 8-K, dated August 21, 2003 is hereby incorporated by reference).                                                   
|4.2.2  |  | Registration Rights Agreement, dated as of August 20, 2003, by and among Serologicals Corporation and Banc of America Securities LLC, J.P. Morgan Securities Inc. and UBS Securities LLC, as representatives of the initial purchasers of
the Registrant's 4.75% Convertible Senior Subordinated Debentures due 2033 (Exhibit 4.2 to the Company's Current Report on Form 8-K, dated August 21, 2003 is hereby incorporated by reference).
|10.1.1 |  | $125,000,000 Credit Agreement, dated as of October 14, 2004, among the Registrant, as Borrower, the several lenders from time to time parties thereto, LaSalle Bank National Association, as Documentation Agent, Bank of America, N.A., as
Syndication Agent and JP Morgan Chase Bank, as Administrative Agent (Exhibit 10.1 to the Registrant's Current Report on Form 8-K dated October 14, 2004 is hereby incorporated by reference). 
|10.1.2 |  | Lease Agreement dated October 6, 2000, between the Registrant and Spalding Triangle, L.L.C. (Exhibit 10.29 to the Registrant's Quarterly Report on Form 10-Q for the period ended September 24, 2000 is hereby incorporated by
reference).                                                                                                                                                                                                
|10.1.3 |  | Agreement for Design/Build Services on a Guaranteed Maximum Cost Basis, dated March 19, 2003 by and between the Registrant and CRB Builders (Exhibit 10.21 to the Registrant's Annual Report on Form 10-K for the fiscal year ended
December 28, 2003 is hereby incorporated by reference).                                                                                                                                               
|10.1.4 |  | Standard Industrial/Commercial Single-Tenant Lease, dated November 22, 1999 by and David A. Beckman, as Trustee of the Beckman Family Trust and Chemicon International, Inc. (Exhibit 10.22.1 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 28, 2003 is hereby incorporated by reference).                                                                                                            
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                           

56

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|10.1.5  |  | First Amendment to Real Estate Lease, dated March 31, 2003 by and amount David A. Beckman, as Trustee of the Beckman Family Trust and Chemicon International, Inc. (Exhibit 10.22.2 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 28, 2003 is hereby incorporated by reference).
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.2.1  |  | 1994 Second Amended and Restated Omnibus Incentive Plan, as amended (Exhibit 10.7.2 to the Registrant's Quarterly Report on Form 10-Q for the period ended June 25, 2000, is hereby incorporated by reference).                                                                                                    
|10.2.2  |  | Form of Second Revised Stock Option Agreement (Exhibit 10.4.1 to the Registrant's Annual Report on Form 10-K for the year ended December 29, 2002 is hereby incorporated by reference).                                                                                                                            
|10.2.3  |  | Form of Third Revised Stock Option Agreement (Exhibit 10.4.2 to the Registrant's Annual Report on Form 10-K for the year ended December 29, 2002 is hereby incorporated by reference).                                                                                                                             
|10.2.4  |  | Amended and Restated 1995 Non-Employee Directors' Stock Option Plan, as Amended (Exhibit 10.6 to the Registrant's Annual Report on Form 10-K for the period ended December 31, 2000 is hereby incorporated by reference).                                                                                          
|10.2.5  |  | 1996 Employee Stock Purchase Plan (Exhibit 10.7 to the Registrant's Annual Report on Form 10-K for the year ended December 29, 2002 is hereby incorporated by reference).                                                                                                                                          
|10.2.6  |  | Serologicals Corporation 1996 UK Sharesave Scheme (Exhibit 3.1 to the Registrant's Annual Report on Form 10-K for the year ended December 29, 2002 is hereby incorporated by reference).                                                                                                                           
|10.2.7  |  | Serologicals Corporation UK Share Incentive Plan (Exhibit 4.1 to the Registrant's Registration Statement on Form S-8 (File No. 333-104703), effective April 23, 2003, is hereby incorporated by reference).                                                                                                        
|10.2.8  |  | Form of Change in Control Executive Severance Package between the Registrant and each Vice President. (Exhibit 10.20 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 28, 2003 is hereby incorporated by
reference).                                                              
|10.2.9  |  | Serologicals Corporation 2001 Stock Incentive Plan (Appendix B to the Registrant's definitive Schedule 14A filed with the Securities and Exchange Commission on April 4, 2001 is hereby incorporated by reference).                                                                                                
|10.2.10 |  | Employment Agreement between the Company and David A. Dodd (Exhibit 10.27 to the Registrant's Quarterly Report on Form 10-Q for the period ended June 25, 2000 is hereby incorporated by reference).                                                                                                               
|10.2.11 |  | Change in Control Executive Severance Package between the Registrant and David A. Dodd (Exhibit 10.10.2 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 28, 2003 is hereby incorporated by
reference).                                                                           
|10.2.12 |  | Employment Agreement between the Registrant and Harold W. Ingalls (Exhibit 10.2 of the Registrant's Quarterly Report on Form 10-Q for the period ending September 30, 2001 is hereby incorporated by reference).                                                                                                   
|10.2.13 |  | Revised Employment Agreement between the Registrant and Jeffrey D. Linton (Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for the period ended March 30, 2003 is hereby incorporated by reference).                                                                                                
|        |  |                                                                                                                                                                                                                                                                                                                     

57

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|10.2.14 |  | Employment Agreement between the Registrant and Robert P. Collins (Exhibit 10.1 to the Registrant's Quarterly Report on Form 10Q for the period ended September 30, 2001, is incorporated herein by reference).                                
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.2.15 |  | Employment Agreement between the Registrant and Sue Sutton-Jones (Exhibit 10.26 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2000 is hereby incorporated by reference).                                      
|10.2.16 |  | Employment Agreement between the Registrant and Joseph T. Kozma (Exhibit 10.20 to the Registrant's Annual Report on Form 10-K for the period ending December 30, 2001 is hereby incorporated by reference).                                    
|10.2.17 |  | Employment Agreement between the Registrant and James J. Kramer, Ph. D. (Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the period ending June 30, 2002 is hereby incorporated by
reference).                              
|10.2.18 |  | Employment Agreement between the Registrant and David L. Bellitt (Exhibit 10.23 to the Registrant's Annual Report on Form 10-K for the period ending December 29, 2002 is hereby incorporated by reference).                                   
|10.2.19 |  | Employment Agreement between the Registrant and Philip A. Theodore. (Exhibit 10.19 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 28, 2003 is hereby incorporated by reference).                            
|10.2.20 |  | Employment Agreement between the Registrant and Dennis W. Harris, Ph.D. (Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 28, 2004 is hereby incorporated by
reference).                             
|10.2.21 |  | Employment Agreement, dated September 7, 2004, between the Registrant and Ian W. Ratcliffe (Exhibit 10.2 to the Registrant's Current Report on Form 8-K dated September 14, 2004 is hereby incorporated by
reference).                         
|10.2.22 |  | Change in Control Executive Severance Agreement, dated September 7, 2004, between the Registrant and Ian W. Ratcliffe (Exhibit 10.3 to the Registrant's Current Report on Form 8-K dated October 14, 2004 is hereby incorporated
by reference).
|10.2.23 |  | Non-Competition Agreement, dated September 7, 2004, between the Registrant and Ian W. Ratcliffe (Exhibit 10.4 to the Registrant's Current Report on Form 8-K dated October 14, 2004 is hereby incorporated by
reference).                      
|10.2.24 |  | Employment Agreement between the Registrant and Robert J. Brown (Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 27, 2004 is hereby incorporated by reference).                                      
|10.2.25 |  | Employment Agreement between the Registrant and Samuel R. Schwartz*                                                                                                                                                                            
|14.1    |  | Code of Ethics (Exhibit 14.1 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 28, 2003 is hereby incorporated by reference).                                                                                   
|21      |  | Subsidiaries of the Registrant.*                                                                                                                                                                                                                
|23.1    |  | Consent of Deloitte & Touche LLP.*                                                                                                                                                                                                              
|31.1    |  | Certification Pursuant to Rule 13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*                                                                                                                                
|31.2    |  | Certification Pursuant to Rule 13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*                                                                                                                                
|        |  |                                                                                                                                                                                                                                                 

58

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|32.1 |  | Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002.*
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------
|32.2 |  | Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002.*

---

59

---





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 18, 2005.

| |  | SEROLOGICALS CORPORATION(Registrant)
| |  | ------------------------------------
| |  | By:                                 

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 18, 2005:

|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                         |  | Vice President, Controller and Chief Accounting Officer
|/s/DESMOND H. O'CONNELLDesmond H. O'Connell                     |  | Chairman of the Board of Directors                     
|/s/RALPH E. CHRISTOFFERSEN, PH.D.Ralph E. Christoffersen, Ph.D. |  | Director                                               
|/s/ROBERT J. CLANINRobert J. Clanin                             |  | Director                                               
|/s/WADE FETZER, IIIWade Fetzer, III                             |  | Director                                               
|                                                                |  |                                                        

60

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|/s/RONALD G. GELBMANRonald G. Gelbman                     |  | Director
|--------------------------------------------------------- |  | --------
|/s/GERARD M. MOUFFLETGerard M. Moufflet                   |  | Director
|/s/AARON J. SHATKIN, PH.DAaron J. Shatkin, Ph.D           |  | Director
|/s/GEORGE M. SHAW, M.D., PH.D.George M. Shaw, M.D., Ph.D. |  | Director
|/s/LAWRENCE E. TILTONLawrence E. Tilton                   |  | Director

61

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

|                                                                                                                                                         |  | Page
|-------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----
|Report of Independent Registered Public Accounting Firm                                                                                                  |  | F-2 
|Consolidated Balance SheetsJanuary 2, 2005 and December 28, 2003 (as restated)                                                                          |  | F-3 
|Consolidated Statements of IncomeFor the years ended January 2, 2005, December 28, 2003 and December 29, 2002                                           |  | F-4 
|Consolidated Statements of Stockholders' EquityFor the years ended January 2, 2005, December 28, 2003 (as restated) and December 29, 2002 (as restated) |  | F-5 
|Consolidated Statements of Cash FlowsFor the years ended January 2, 2005, December 28, 2003 and December 29, 2002                                       |  | F-6 
|Notes to Consolidated Financial Statements                                                                                                               |  | F-7 

F-1

---



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To
the Board of Directors and Stockholders of
Serologicals Corporation:

We
have audited the accompanying consolidated balance sheets of Serologicals Corporation and Subsidiaries (the "Company") as of January 2, 2005 and December 29, 2003, and
the related consolidated statements of income, stockholders' equity, and cash flows for each of the three years in the period ended January 2, 2005. Our audits also included the financial
statement schedule 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 audits.

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

In
our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Serologicals Corporation and Subsidiaries as of
January 2, 2005 and December 28, 2003, and the results of its operations and its cash flows for each of the three years in the period ended January 2, 2005, in conformity with
accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, 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, the Company adopted EITF 04-08, The Effect of Contingently Convertible Debt on Diluted Earnings per Share and accordingly revised the 2003
consolidated financial statements.

As
discussed in Note 17, the accompanying 2002 and 2003 consolidated financial statements have been restated.

We
have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company's internal control over
financial reporting as of January 2, 2005, based on the criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission and our report dated March 18, 2005 expressed an unqualified opinion on management's assessment of the effectiveness of the Company's internal control over financial
reporting and an unqualified opinion on the effectiveness of the Company's internal control over financial reporting.

/s/DELOITTE & TOUCHE LLP

Atlanta,
Georgia
March 18, 2005

F-2

---





SEROLOGICALS CORPORATION AND SUBSIDIARIES        CONSOLIDATED BALANCE SHEETS  January 2, 2005 and December 28, 2003  (in thousands, except share amounts)

|                                                |                                                                                                                                                            | 2004                                                                                     |                            | 2003                                       |        
|----------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------- | -------------------------- | ------------------------------------------ | -------
|
|ASSETS                                          |                                                                                                                                                            |                                                                                          |                            |                                            |        
|CURRENT ASSETS:                                 |                                                                                                                                                            |                                                                                          |                            |                                            |        
|                                                | Cash and cash equivalents                                                                                                                                  |                                                                                          | $                          | 33,024                                     |        
|                                                | Short-term investments                                                                                                                                     |                                                                                          |                            | 29,030                                     |        
|                                                | Trade accounts receivable, less allowance for doubtful accounts of $953 and $1,214 at January 2, 2005 and December 28, 2003, respectively                  |                                                                                          |                            | 46,899                                     |        
|                                                | Inventories                                                                                                                                                |                                                                                          |                            | 49,846                                     |        
|                                                | Other current assets                                                                                                                                       |                                                                                          |                            | 15,226                                     |        
|                                                | Discontinued operations (Note 4)                                                                                                                           |                                                                                          |                            |                                           |        
|                                                |                                                                                                                                                            |                                                                                          |                            |                                            |        
|                                                |                                                                                                                                                            | Total current assets                                                                     |                            |                                            | 174,025
|PROPERTY AND EQUIPMENT, NET                     |                                                                                                                                                            |                                                                                          | 96,887                     |                                            |        
|GOODWILL                                        |                                                                                                                                                            |                                                                                          | 241,038                    |                                            |        
|INTANGIBLE ASSETS, NET                          |                                                                                                                                                            |                                                                                          | 121,647                    |                                            |        
|OTHER ASSETS                                    |                                                                                                                                                            |                                                                                          | 6,210                      |                                            |        
|DISCONTINUED OPERATIONS (NOTE 4)                |                                                                                                                                                            |                                                                                          |                           |                                            |        
|                                                |                                                                                                                                                            |                                                                                          |                            |                                            |        
|                                                |                                                                                                                                                            | Total assets                                                                             |                            | $                                          | 639,807
|                                                |                                                                                                                                                            |                                                                                          |                            |                                            |        
|LIABILITIES AND STOCKHOLDERS' EQUITY            |                                                                                                                                                            |                                                                                          |                            |                                            |        
|CURRENT LIABILITIES:                            |                                                                                                                                                            |                                                                                          |                            |                                            |        
|                                                | Accounts payable                                                                                                                                           |                                                                                          | $                          | 11,827                                     |        
|                                                | Accrued liabilities                                                                                                                                        |                                                                                          |                            | 37,336                                     |        
|                                                | Current maturities of long-term debt                                                                                                                       |                                                                                          |                            | 2,419                                      |        
|                                                | Discontinued operations (Note 4)                                                                                                                           |                                                                                          |                            |                                           |        
|                                                |                                                                                                                                                            |                                                                                          |                            |                                            |        
|                                                |                                                                                                                                                            | Total current liabilities                                                                |                            |                                            | 51,582 
|CONVERTIBLE SUBORDINATED DEBENTURES (NOTE 8)    |                                                                                                                                                            |                                                                                          | 130,395                    |                                            |        
|LONG TERM DEBT LESS CURRENT MATURITIES (NOTE 9) |                                                                                                                                                            |                                                                                          | 2,194                      |                                            |        
|DEFERRED INCOME TAXES (NOTE 11)                 |                                                                                                                                                            |                                                                                          | 38,012                     |                                            |        
|OTHER LIABILITIES                               |                                                                                                                                                            |                                                                                          | 1,093                      |                                            |        
|DISCONTINUED OPERATIONS (NOTE 4)                |                                                                                                                                                            |                                                                                          |                           |                                            |        
|                                                |                                                                                                                                                            |                                                                                          |                            |                                            |        
|                                                |                                                                                                                                                            | Total liabilities                                                                        |                            |                                            | 223,276
|                                                |                                                                                                                                                            |                                                                                          |                            |                                            |        
|COMMITMENTS AND CONTINGENCIES(Note 10)          |                                                                                                                                                            |                                                                                          |                            |                                            |        
|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, 37,752,120 and 28,061,790 shares issued at January 2, 2005 and December 28, 2003, respectively |                                                                                          |                            | 377                                        |        
|                                                | Additional paid-in capital                                                                                                                                 |                                                                                          |                            | 334,429                                    |        
|                                                | Retained earnings                                                                                                                                          |                                                                                          |                            | 91,378                                     |        
|                                                | Accumulated other comprehensive income                                                                                                                     |                                                                                          |                            | 11,046                                     |        
|                                                | Less:                                                                                                                                                      |                                                                                          |                            |                                            |        
|                                                |                                                                                                                                                            | Common stock held in treasury; 3,288,000 shares at January 2, 2005 and December 28, 2003 |                            |                                            | (20,347
|                                                |                                                                                                                                                            | Unearned compensation                                                                    |                            |                                            | (352   
|                                                |                                                                                                                                                            |                                                                                          |                            |                                            |        
|                                                |                                                                                                                                                            |                                                                                          | Total stockholders' equity |                                            |        
|                                                |                                                                                                                                                            |                                                                                          |                            |                                            |        
|                                                |                                                                                                                                                            |                                                                                          |                            | Total liabilities and stockholders' equity |        
|                                                |                                                                                                                                                            |                                                                                          |                            |                                            |        

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

F-3

---





SEROLOGICALS CORPORATION AND SUBSIDIARIES        CONSOLIDATED STATEMENTS OF INCOME        For the Years Ended January 2, 2005, December 28, 2003 and December 29, 2002  (in
thousands, except per share amounts)

|                                                    |                                                        | 2004 |         | 2003   |   | 2002    |       
|--------------------------------------------------- | ------------------------------------------------------ | ---- | ------- | ------ | - | ------- | ------
|NET REVENUES                                        |                                                        | $    | 195,923 |        | $ | 146,915 |       
|COSTS AND EXPENSES:                                 |                                                        |      |         |        |   |         |       
|                                                    | Cost of revenues                                       |      |         | 87,482 |   |         | 64,741
|                                                    | Selling, general and administrative                    |      |         | 59,293 |   |         | 44,602
|                                                    | Research and development                               |      |         | 10,144 |   |         | 6,214 
|                                                    | Amortization of intangibles                            |      |         | 3,771  |   |         | 2,175 
|                                                    | Purchased in-process research and development (Note 3) |      |         | 3,263  |   |         |      
|                                                    | Special charges (Note 5)                               |      |         |       |   |         | 2,778 
|                                                    |                                                        |      |         |        |   |         |       
|OPERATING INCOME                                    |                                                        |      | 31,970  |        |   | 26,405  |       
|                                                    | Other expense, net                                     |      |         | (54    | ) |         | 180   
|                                                    | Write-off of deferred financing costs (Note 9)         |      |         | 965    |   |         | 4,492 
|                                                    | Interest expense                                       |      |         | 6,052  |   |         | 4,384 
|                                                    | Interest income                                        |      |         | (587   | ) |         | (255  
|                                                    |                                                        |      |         |        |   |         |       
|INCOME FROM CONTINUING OPERATIONS                   |                                                        |      | 25,594  |        |   | 17,604  |       
|PROVISION FOR INCOME TAXES                          |                                                        |      | 7,933   |        |   | 5,537   |       
|                                                    |                                                        |      |         |        |   |         |       
|NET INCOME FROM CONTINUING OPERATIONS               |                                                        |      | 17,661  |        |   | 12,067  |       
|Income (loss) from discontinued operations (Note 4) |                                                        |      |        |        |   | (10,561 | )     
|                                                    |                                                        |      |         |        |   |         |       
|NET INCOME                                          |                                                        | $    | 17,661  |        | $ | 1,506   |       
|                                                    |                                                        |      |         |        |   |         |       
|BASIC EARNINGS (LOSS) PER SHARE:                    |                                                        |      |         |        |   |         |       
|                                                    | Continuing operations                                  |      | $       | 0.68   |   | $       | 0.49  
|                                                    | Discontinued operations                                |      |         |       |   |         | (0.43 
|                                                    |                                                        |      |         |        |   |         |       
|                                                    | Net income                                             |      | $       | 0.68   |   | $       | 0.06  
|                                                    |                                                        |      |         |        |   |         |       
|DILUTED EARNINGS (LOSS) PER SHARE, (Note 2):        |                                                        |      |         |        |   |         |       
|                                                    | Continuing operations                                  |      | $       | 0.59   |   | $       | 0.47  
|                                                    | Discontinued operations                                |      |         |       |   |         | (0.37 
|                                                    |                                                        |      |         |        |   |         |       
|                                                    | Net income                                             |      | $       | 0.59   |   | $       | 0.10  
|                                                    |                                                        |      |         |        |   |         |       
|WEIGHTED AVERAGE SHARES OUTSTANDING:                |                                                        |      |         |        |   |         |       
|                                                    | Basic                                                  |      |         | 26,148 |   |         | 24,549
|                                                    |                                                        |      |         |        |   |         |       
|                                                    | Diluted, (Note 2)                                      |      |         | 35,525 |   |         | 28,134
|                                                    |                                                        |      |         |        |   |         |       

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

F-4

---





SEROLOGICALS CORPORATION AND SUBSIDIARIES        CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY  For the Years Ended January 2, 2005, December 28, 2003 and December 29, 2002  (in
thousands)

|                                                                     |  |        |  |   |     |  |   |         |  | Accumulated
other
Comprehensive
Income
(Loss) |        |  |   |        |   |        |   |   |        
|-------------------------------------------------------------------- |  | ------ |  | - | --- |  | - | ------- |  | --------------------------------------------- | ------ |  | - | ------ | - | ------ | - | - | -------
|
|
|
|BALANCE, December 30, 2001                                           |  | 27,456 |  | $ | 275 |  | $ | 114,489 |  | $                                             | 58,262 |  | $ | (290   | ) | (3,268 | ) | $ | (20,000
|Comprehensive income:                                                |  |        |  |   |     |  |   |         |  |                                               |        |  |   |        |   |        |   |   |        
|Net income                                                           |  |       |  |   |    |  |   |        |  |                                               | 13,949 |  |   |       |   |       |   |   |       
|Foreign currency translation adjustments, (as restated, see Note 17) |  |       |  |   |    |  |   |        |  |                                               |       |  |   | 1,021  |   |       |   |   |       
|                                                                     |  |        |  |   |     |  |   |         |  |                                               |        |  |   |        |   |        |   |   |        
|Comprehensive income (as restated, see Note 17)                      |  |       |  |   |    |  |   |        |  |                                               | 13,949 |  |   | 1,021  |   |       |   |   |       
|                                                                     |  |        |  |   |     |  |   |         |  |                                               |        |  |   |        |   |        |   |   |        
|Exercise of stock options                                            |  | 249    |  |   | 2   |  |   | 2,323   |  |                                               |       |  |   |       |   |       |   |   |       
|Shares issued through employee stock purchase plans                  |  | 25     |  |   |    |  |   | 326     |  |                                               |       |  |   |       |   |       |   |   |       
|Deferred and other compensation                                      |  |       |  |   |    |  |   | 198     |  |                                               |       |  |   |       |   |       |   |   |       
|Repurchase of common stock                                           |  |       |  |   |    |  |   |        |  |                                               |       |  |   |       |   | (20    | ) |   | (347   
|Tax effect of stock option exercise                                  |  |        |  |   |    |  |   | 780     |  |                                               |       |  |   |       |   |       |   |   |       
|                                                                     |  |        |  |   |     |  |   |         |  |                                               |        |  |   |        |   |        |   |   |        
|BALANCE, December 29, 2002(as restated, see Note 17)                 |  | 27,730 |  |   | 277 |  |   | 118,116 |  |                                               | 72,211 |  |   | 731    |   | (3,288 | ) |   | (20,347
|Comprehensive income:                                                |  |        |  |   |     |  |   |         |  |                                               |        |  |   |        |   |        |   |   |        
|Net income                                                           |  |       |  |   |    |  |   |        |  |                                               | 1,506  |  |   |       |   |       |   |   |       
|Foreign currency translation adjustments, (as restated, see Note 17) |  |       |  |   |    |  |   |        |  |                                               |       |  |   | 5,994  |   |       |   |   |       
|                                                                     |  |        |  |   |     |  |   |         |  |                                               |        |  |   |        |   |        |   |   |        
|Comprehensive income (as restated, see Note 17)                      |  |       |  |   |    |  |   |        |  |                                               | 1,506  |  |   | 5,994  |   |       |   |   |       
|                                                                     |  |        |  |   |     |  |   |         |  |                                               |        |  |   |        |   |        |   |   |        
|Exercise of stock options                                            |  | 288    |  |   | 3   |  |   | 1,956   |  |                                               |       |  |   |       |   |       |   |   |       
|Shares issued through employee stock purchase plans                  |  | 42     |  |   | 1   |  |   | 352     |  |                                               |       |  |   |       |   |       |   |   |       
|Deferred and other compensation                                      |  | 2      |  |   |    |  |   | 83      |  |                                               |       |  |   |       |   |       |   |   |       
|Tax effect of stock option exercise                                  |  |       |  |   |    |  |   | 623     |  |                                               |       |  |   |       |   |       |   |   |       
|                                                                     |  |        |  |   |     |  |   |         |  |                                               |        |  |   |        |   |        |   |   |        
|BALANCE, December 28, 2003(as restated, see Note 17)                 |  | 28,062 |  |   | 281 |  |   | 121,130 |  |                                               | 73,717 |  |   | 6,725  |   | (3,288 | ) |   | (20,347
|Comprehensive income:                                                |  |        |  |   |     |  |   |         |  |                                               |        |  |   |        |   |        |   |   |        
|Net income                                                           |  |       |  |   |    |  |   |        |  |                                               | 17,661 |  |   |       |   |       |   |   |       
|Foreign currency translation adjustments                             |  |       |  |   |    |  |   |        |  |                                               |       |  |   | 4,321  |   |       |   |   |       
|                                                                     |  |        |  |   |     |  |   |         |  |                                               |        |  |   |        |   |        |   |   |        
|Comprehensive income                                                 |  |       |  |   |    |  |   |        |  |                                               | 17,661 |  |   | 4,321  |   |       |   |   |       
|                                                                     |  |        |  |   |     |  |   |         |  |                                               |        |  |   |        |   |        |   |   |        
|Shares issued in connection with business combination                |  | 4,333  |  |   | 43  |  |   | 102,456 |  |                                               |       |  |   |       |   |       |   |   |       
|Stock issued in equity offering, net                                 |  | 4,830  |  |   | 48  |  |   | 104,730 |  |                                               |       |  |   |       |   |       |   |   |       
|Exercise of stock options                                            |  | 473    |  |   | 4   |  |   | 3,976   |  |                                               |       |  |   |       |   |       |   |   |       
|Shares issued through employee stock purchase plans                  |  | 39     |  |   | 1   |  |   | 482     |  |                                               |       |  |   |       |   |       |   |   |       
|Deferred and other compensation                                      |  | 15     |  |   |    |  |   | 394     |  |                                               |       |  |   |       |   |       |   |   |       
|Tax effect of stock option exercise                                  |  |       |  |   |    |  |   | 1,261   |  |                                               |       |  |   |       |   |       |   |   |       
|                                                                     |  |        |  |   |     |  |   |         |  |                                               |        |  |   |        |   |        |   |   |        
|BALANCE, January 2, 2005                                             |  | 37,752 |  | $ | 377 |  | $ | 334,429 |  | $                                             | 91,378 |  | $ | 11,046 |   | (3,288 | ) | $ | (20,347
|                                                                     |  |        |  |   |     |  |   |         |  |                                               |        |  |   |        |   |        |   |   |        

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

F-5

---





SEROLOGICALS CORPORATION AND SUBSIDIARIES        CONSOLIDATED STATEMENTS OF CASH FLOWS  For the Years Ended January 2, 2005, December 28, 2003 and December 29, 2002  (in thousands)

|                                                              |                                                                                                              | 2004                                                                                                                |                                                      | 2003     |          | 2002   |        
|------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------ | ------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------- | -------- | -------- | ------ | -------
|OPERATING ACTIVITIES:                                         |                                                                                                              |                                                                                                                     |                                                      |          |          |        |        
|                                                              | Net income                                                                                                   |                                                                                                                     | $                                                    | 17,661   |          | $      | 1,506  
|                                                              | Income (loss) from discontinued operations                                                                   |                                                                                                                     |                                                      |         |          |        | (10,561
|                                                              |                                                                                                              |                                                                                                                     |                                                      |          |          |        |        
|                                                              | Net income from continuing operations                                                                        |                                                                                                                     |                                                      | 17,661   |          |        | 12,067 
|                                                              | Adjustments to reconcile net income from continuing operations to net cash provided by operating activities: |                                                                                                                     |                                                      |          |          |        |        
|                                                              |                                                                                                              | Depreciation and amortization                                                                                       |                                                      |          | 11,021   |        |        
|                                                              |                                                                                                              | Tax benefit from exercise of stock options                                                                          |                                                      |          | 1,238    |        |        
|                                                              |                                                                                                              | Deferred and other compensation                                                                                     |                                                      |          | 43       |        |        
|                                                              |                                                                                                              | Deferred income tax provision                                                                                       |                                                      |          | 5,538    |        |        
|                                                              |                                                                                                              | Non-cash special charges, write-off of deferred financing costs and purchased in- process research and developement |                                                      |          | 4,228    |        |        
|                                                              |                                                                                                              | Other                                                                                                               |                                                      |          | 2,040    |        |        
|                                                              | Changes in operating assets and liabilities, net of acquisitions of businesses:                              |                                                                                                                     |                                                      |          |          |        |        
|                                                              |                                                                                                              | Trade accounts receivable, net                                                                                      |                                                      |          | (5,860   | )      |        
|                                                              |                                                                                                              | Inventories                                                                                                         |                                                      |          | (5,772   | )      |        
|                                                              |                                                                                                              | Other assets                                                                                                        |                                                      |          | (1,004   | )      |        
|                                                              |                                                                                                              | Accounts payable                                                                                                    |                                                      |          | 397      |        |        
|                                                              |                                                                                                              | Accrued liabilities                                                                                                 |                                                      |          | 8,703    |        |        
|                                                              |                                                                                                              | Other, net                                                                                                          |                                                      |          | (621     | )      |        
|                                                              |                                                                                                              |                                                                                                                     |                                                      |          |          |        |        
|                                                              |                                                                                                              | Total adjustments                                                                                                   |                                                      |          | 19,951   |        |        
|                                                              |                                                                                                              |                                                                                                                     |                                                      |          |          |        |        
|                                                              |                                                                                                              |                                                                                                                     | Net cash provided by continuing operating activities |          |          | 37,612 |        
|                                                              |                                                                                                              |                                                                                                                     |                                                      |          |          |        |        
|INVESTING ACTIVITIES:                                         |                                                                                                              |                                                                                                                     |                                                      |          |          |        |        
|                                                              | Purchases of property and equipment                                                                          |                                                                                                                     |                                                      | (19,482  | )        |        | (19,644
|                                                              | Purchases of businesses, net of cash acquired                                                                |                                                                                                                     |                                                      | (117,680 | )        |        | (97,344
|                                                              | Purchases of short-term investments                                                                          |                                                                                                                     |                                                      | (121,330 | )        |        | (40,285
|                                                              | Proceeds from sales of short-term investments                                                                |                                                                                                                     |                                                      | 119,385  |          |        | 17,800 
|                                                              | Other, net                                                                                                   |                                                                                                                     |                                                      | 254      |          |        | (246   
|                                                              |                                                                                                              |                                                                                                                     |                                                      |          |          |        |        
|                                                              |                                                                                                              | Net cash used in continuing investing activities                                                                    |                                                      |          | (138,853 | )      |        
|                                                              |                                                                                                              |                                                                                                                     |                                                      |          |          |        |        
|FINANCING ACTIVITIES:                                         |                                                                                                              |                                                                                                                     |                                                      |          |          |        |        
|                                                              | Proceeds from issuance of convertible debentures                                                             |                                                                                                                     |                                                      |         |          |        | 130,000
|                                                              | Proceeds from term loan                                                                                      |                                                                                                                     |                                                      | 80,000   |          |        | 82,500 
|                                                              | Repayment of term loan                                                                                       |                                                                                                                     |                                                      | (80,000  | )        |        | (82,500
|                                                              | Proceeds from equity offering, net of offering expenses                                                      |                                                                                                                     |                                                      | 104,777  |          |        |       
|                                                              | Long-term debt and capital lease obligations                                                                 |                                                                                                                     |                                                      | 1,986    |          |        | (387   
|                                                              | Proceeds from issuance of stock under stock plans                                                            |                                                                                                                     |                                                      | 4,486    |          |        | 2,312  
|                                                              | Payment of debt issuance costs                                                                               |                                                                                                                     |                                                      | (1,454   | )        |        | (8,931 
|                                                              | Repurchase of common stock                                                                                   |                                                                                                                     |                                                      |         |          |        |       
|                                                              |                                                                                                              |                                                                                                                     |                                                      |          |          |        |        
|                                                              |                                                                                                              | Net cash provided by (used in) continuing financing activities                                                      |                                                      |          | 109,795  |        |        
|                                                              |                                                                                                              |                                                                                                                     |                                                      |          |          |        |        
|Net cash provided by discontinued operations                  |                                                                                                              |                                                                                                                     | 1,962                                                |          |          | 11,282 |        
|                                                              |                                                                                                              |                                                                                                                     |                                                      |          |          |        |        
|Effects of exchange rate changes on cash and cash equivalents |                                                                                                              |                                                                                                                     | 1,029                                                |          |          | (1,825 | )      
|                                                              |                                                                                                              |                                                                                                                     |                                                      |          |          |        |        
|Net increase (decrease) in cash and cash equivalents          |                                                                                                              |                                                                                                                     | 11,545                                               |          |          | 10,837 |        
|Cash and cash equivalents, beginning of year                  |                                                                                                              |                                                                                                                     | 21,479                                               |          |          | 10,642 |        
|                                                              |                                                                                                              |                                                                                                                     |                                                      |          |          |        |        
|Cash and cash equivalents, end of year                        |                                                                                                              | $                                                                                                                   | 33,024                                               |          | $        | 21,479 |        
|                                                              |                                                                                                              |                                                                                                                     |                                                      |          |          |        |        
|SUPPLEMENTAL DISCLOSURE:                                      |                                                                                                              |                                                                                                                     |                                                      |          |          |        |        
|Cash paid during the year for:                                |                                                                                                              |                                                                                                                     |                                                      |          |          |        |        
|                                                              |                                                                                                              | Income taxes, net of refunds                                                                                        |                                                      | $        | 2,370    |        | $      
|                                                              |                                                                                                              | Interest paid                                                                                                       |                                                      |          | 5,741    |        |        
|Non-cash investing activities:                                |                                                                                                              |                                                                                                                     |                                                      |          |          |        |        
|                                                              | Accrued acquisition consideration                                                                            |                                                                                                                     |                                                      | 956      |          |        |       
|                                                              | Accrued purchase of property and equipment                                                                   |                                                                                                                     |                                                      |         |          |        | 1,235  
|Fair market value of stock issued for acquisition             |                                                                                                              |                                                                                                                     | 102,499                                              |          |          |       |        

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

F-6

---





SEROLOGICALS CORPORATION AND SUBSIDIARIES        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  January 2, 2005, December 28, 2003 and December 29, 2002

1.    ORGANIZATION AND BUSINESS OPERATIONS

Serologicals Corporation, a Delaware corporation, (together with its subsidiaries, "we", "our", the "Company" or "Serologicals"), with facilities in North
America, Europe and Australia, is a global provider of consumable biological products, enabling technologies and services to a diverse customer base that includes major life science companies and
leading research institutions. Our customers use our products, technologies and services in a wide variety of their activities, including basic research, drug discovery, diagnosis and
biomanufacturing. Our products, technologies and services are essential tools for research in key disciplines, including neurology, oncology, hematology, immunology, cardiology, proteomics, infectious
diseases, cell signaling, stem cell research and molecular biology. In addition, we provide a comprehensive range of monoclonal antibodies for the blood typing industry.

Serologicals
embarked on a strategy of focusing on businesses with higher growth rates and higher margins than our historical core business. The significant milestones in our development
were as follows:



For
management purposes the Company's operations are organized in three primary operating segments: Research, Cell Culture and Diagnostic. Our segments are based primarily on the
differing production, manufacturing and other value-added processes performed with respect to our products and, to a lesser extent, the differing nature of the ultimate end use of the products. During
2002, the Company reported a fourth segment, Therapeutic Products. The Therapeutic Products segment was accounted for as discontinued operations for all periods presented as discussed in
Note 4.

The
Company generates significant sales outside the United States and is subject to risks generally associated with international operations. The Company's operations in the United
Kingdom, Australia and Canada, which accounted for approximately 37.6% of the Company's net sales in 2004, generate

F-7

---



certain
net sales and incur expenses in foreign currencies. Accordingly, the Company's financial results from international operations may be affected by fluctuations in currency exchange rates.

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND SIGNIFICANT ACCOUNTS

Basis of Presentation

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All 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 of each year. Fiscal year 2004 included 53 weeks while fiscal years 2003 and 2002 each included 52 weeks. All references to years relate to fiscal years rather than calendar years.

Use of Estimates and Assumptions

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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. On an ongoing basis, the Company evaluates its estimates. The Company bases its estimates on historical experience and on various other
assumptions that are believed to be reasonable under the circumstances. Actual results could differ from those estimates and assumptions.

Cash and Cash Equivalents and Marketable Securities

The Company considers all cash held in banks and highly liquid investments with an original maturity of three months or less when purchased to be cash
equivalents. Cash equivalents at January 2, 2005, December 28, 2003 and December 29, 2002, consisted primarily of overnight money market accounts, time deposits, commercial paper,
demand notes and bonds with maturities of less than three months.

The
Company invests its excess cash in marketable securities, principally auction rate securities (ARS), corporate notes and government securities. ARS, historically classified as cash
and cash equivalents, have been reclassified within the consolidated balance sheets as short-term investments for the years ending December 28, 2003 and December 29, 2002.
Cash and cash equivalents for 2003 and 2002 decreased by $27.1 million and $4.6 million respectively, while short-term investments increased by the same amounts.

In
accordance with Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities" ("SFAS 115"), the Company has
classified all short-term investments as available-for-sale.

Financial Instruments

The carrying values of cash and cash equivalents, short-term investments, accounts receivable, other assets, accounts payable, accrued expenses,
capital lease obligations and loans payable to financial and lending institutions included in the Company's consolidated balance sheets approximate their fair values at January 2, 2005 and
December 28, 2003.

The
fair value of the Debentures was approximately $172.3 million and $191.1 million at January 2, 2005 and December 28, 2003, respectively. The Debentures
had a carrying amount of $130.4 million at January 2, 2005.

F-8

---



Disclosure
about the estimated fair value of financial instruments is based on pertinent information available to the Company as of January 2, 2005 and December 28, 2003.
Although the Company 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.

Accounts Receivable and Allowances

The Company provides an allowance for doubtful accounts equal to estimated uncollectible accounts. The Company's estimate is based on a regular review of
individual account balances over 90 days, historical collection experience and consideration of other factors such as a customer's financial status and other business risk. It is reasonably
possible that the Company's estimate of the allowance for doubtful accounts will change. Write-offs of uncollectible accounts receivable were $0.6 million, $0.7 and
$0.3 million in 2004, 2003 and 2002, respectively.

Inventories

Inventories are stated at the lower of cost or market on a first-in, first-out basis. Cost includes materials, labor and overhead. Market,
with respect to all inventories, is replacement cost or net realizable value. The Company regularly reviews inventory on hand for slow-moving, obsolete inventory or impaired inventory and
records appropriate reserves or writes off inventory balances for permanent loss of value. Finished goods and work-in-process inventory acquired in connection with business
acquisitions typically includes purchase price adjustments that record a write-up in value to estimated selling prices less costs to complete, costs to dispose and a reasonable profit
allowance for the distribution of products.

Inventories
at January 2, 2004 and December 28, 2003 consisted of the following (in thousands):

2004

2003Raw materials

$
10,950

$
9,097Work in process


12,995


10,554Finished goods


25,901


14,175$
49,846

$
33,826


Property and Equipment

Property and equipment are stated at cost less accumulated depreciation and amortization. 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. When assets are sold or otherwise disposed of, the cost and associated accumulated
depreciation is removed from the accounts and a resulting gain or loss is included in the operating results for the period. 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. Purchased software and capitalized software project costs are depreciated over five 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 twenty to thirty five years.

Interest
is capitalized as part of the historical cost of certain property, plant and equipment constructed by the Company for its use. The amount of interest capitalized is based upon a
weighted average of the interest rates of outstanding borrowings during the construction period.

F-9

---



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"), issued by the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants.
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 data management and training are expensed as incurred. During
2004 and 2003, the Company capitalized costs associated with various projects totaling approximately $1.3 million and $1.0 million, respectively. As of January 2, 2005 and
December 28, 2003, the net book value of capitalized software project costs was approximately $3.4 million and $3.5 million, respectively. Software is included in furniture,
fixtures and equipment.

Construction
in progress at January 2, 2005 relates primarily to expenditures and capitalized interest on the implementation costs of the enterprise resource planning ("ERP")
system at certain subsidiaries. The Company estimates completion of these currently underway system implementations in the second quarter of 2005.

Property
and equipment at January 2, 2005 and December 28, 2003 consisted of the following (in thousands):

2004

2003Land, buildings and improvements

$
37,128

$
21,315Leasehold improvements


10,371


7,912Furniture, fixtures and equipment


76,733


46,876Construction in progress


2,779


18,760Total property and equipment


127,011


94,863Accumulated depreciation and amortization


(30,124
)

(21,659
)Property and equipment, net

$
96,887

$
73,204


Depreciation
and amortization expense was $7.3 million, $6.6 million and $4.2 million in 2004, 2003 and 2002, respectively.

Goodwill and Other Intangible Assets

Goodwill represents the excess of cost over fair value of the net assets of businesses acquired. Statement of Financial Accounting Standards No. 142,
"Goodwill and Other Intangible Assets" ("SFAS 142") required companies to cease amortizing goodwill and establish 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. 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 tested separately for impairment using a fair value based approach.

F-10

---



The
changes in the carrying amount of goodwill during 2004 and 2003 are summarized as follows (in thousands):

Research

Cell Culture

Diagnostics

TotalBalance as of December 29, 2002

$
1,211

$
26,591

$
3,010

$
30,812Goodwill acquired


62,765








62,765Balance as of December 28, 2003


63,976


26,591


3,010


93,577Goodwill acquired


134,907


10,933





145,840Acquisition earn-out payments





1,621





1,621Balance as of January 2, 2005

$
198,883

$
39,145

$
3,010

$
241,038


The
Company evaluates the long-lived assets, including other intangibles and goodwill, of identifiable business activities for impairment when events or changes in
circumstances indicate that the carrying value may not be recoverable. The Company tested goodwill and intangible assets with indefinite useful lives for impairment, 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 Company completed its annual impairment test for
goodwill and indefinite lived intangible assets, for the year ending January 2, 2005 on June 27, 2004, as required by SFAS 142 and determined that there was no impairment for
fiscal 2004.

Developed
products, patents and proprietary know-how, customer relationships, and other intangibles are initially measured based on their fair values and amortized over their
estimated economic lives. The Company does not amortize trademarks unless certain products have been specifically identified for phase out. Costs relating to issuing the Debentures (Note 8) and
obtaining other credit facilities (Note 9) are capitalized and amortized over the term of the related debt using the straight-line method which approximates the effective interest
method. The following table sets forth the gross balance and accumulated amortization of all intangible assets as of January 2, 2005 and December 28, 2003 (in thousands):

|                                    |  |            |  | 2004 |         | 2003 |  
|----------------------------------- |  | ---------- |  | ---- | ------- | ---- | -
|
|Finite lived intangible assets:     |  |            |  |      |         |      |  
|Developed products                  |  | 16.8 years |  | $    | 78,175  |      | $
|Patents and proprietary know-how    |  | 15 years   |  |      | 11,362  |      |  
|Customer relationships              |  | 15.9 years |  |      | 14,700  |      |  
|Debt issuance costs                 |  | 5 years    |  |      | 4,933   |      |  
|Other intangibles                   |  | 6.5 years  |  |      | 2,272   |      |  
|                                    |  |            |  |      |         |      |  
|                                    |  |            |  |      | 111,442 |      |  
|Indefinite lived intangible assets: |  |            |  |      |         |      |  
|Trademarks                          |  |            |  |      | 18,800  |      |  
|                                    |  |            |  |      |         |      |  
|Total intangible assets             |  |            |  | $    | 130,242 |      | $
|                                    |  |            |  |      |         |      |  

The
amortization expense of intangible assets was approximately $3.8 million, $2.9 million and $1.2 million in 2004, 2003 and 2002, respectively. Amortization
expense is expected to be $6.8 million per year through 2007 and $6.6 million per year in 2008 and 2009. Amortization of debt issuance costs is included in "Interest expense" and
amortization of the remaining intangible assets is included in "Amortization of intangibles" in the income statement.

F-11

---



Accrued Liabilities

Accrued liabilities at January 2, 2005 and December 28, 2003 consisted of the following (in thousands):

Description

2004

2003Accrued payroll, bonuses, severance and related benefits

$
11,955

$
7,211Accrued taxes


3,067


3,873Accrued exit activity expenses


4,248


Accrued royalties


4,278


2,880Accrued interest


2,104


1,890Accrued purchase of property and equipment





1,235Accrued inventory


642


957Deferred revenue


3,270


750Other


7,772


3,550$
37,336

$
22,346


Revenue Recognition and Deferred Revenue

The Company generally recognizes product revenue when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or
determinable, and collectibility is probable. In instances where final acceptance of the product is specified by the customer, revenue is deferred until all acceptance criteria have been met. Cash
payments received in advance are recorded as deferred revenue. In certain situations, the Company permits returns of products, in accordance with contractual agreements with certain customers, if
returned in a timely manner, in good condition, from normal channels of distribution. The Company records an allowance for estimated future returns, price concessions, and other discounts based upon
an analysis of the Company's historical pattern of returns matched against the sales from the period in which they originated. The allowance is recognized in the same period revenue is recorded in
accordance with Statement of Financial Accounting Standards No. 48, "Revenue Recognition When Right of Return Exists." When the Company grants specific customer credit for such items, the
allowance is reflected as a reduction to accounts receivable. The Company's allowance was approximately $0.9 million and $0.5 million at January 2, 2005 and December 28,
2003, respectively.

Shipping and Handling Costs

Shipping and handling fees charged to customers are included in net revenues in accordance with EITF 00-10, "Accounting for Shipping and Handling Fees
and Costs." The shipping and handling costs incurred by the Company are included in "Cost of revenues."

Research and Development Costs

Research and development costs are charged to operations as incurred. Research and development activities generally relate to creating new products, improving or
creating variations of existing products, or modifying existing products to meet new applications.

Foreign Currency Translation

The financial statements of the Company's manufacturing operations located in the United Kingdom, Australia, and Canada have been translated into U.S. dollars
from their local functional currency in accordance with Statement of Finanical Accounting Standards No. 52, "Foreign Currency Translation" ("SFAS 52"). Under SFAS 52, all assets and liabilities
are translated at year-end exchange

F-12

---



rates.
Income statement items are translated at average exchange rates for the year. Translation adjustments are not included in determining net income, but are accumulated and reported as a component
of stockholders' equity as accumulated other comprehensive income. Realized and unrealized gains and losses, which result from foreign currency transactions, are included in "Other expenses, net."
Realized foreign currency losses were approximately $0.1 million and $0.2 million in 2004 and 2003, respectively. Realized and unrealized foreign currency gains (losses) were immaterial
in 2002.

Earnings Per Share

Basic earnings per share is 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 that is
dilutive and the weighted average number of shares includes the dilutive effect of stock options, stock awards, convertible indebtedness and similar instruments.

In
December 2004, Emerging Issues Task Force 04-8, "The Effect of Contingently Convertible Debt on Diluted Earnings per Share" ("EITF 04-8") was ratified
which required the treatment of contingent convertible securities as dilutive for earnings per share calculations (if dilutive) regardless of whether the market price trigger or other contingent
features have been met. EITF 04-8 is effective for periods ending after December 15, 2004, and shall be applied to diluted earnings per share reported previously.

The
dilutive effect of the Company's 4.75% Convertible Senior Subordinated Debentures issued on August 20, 2003 ("Debentures") (Note 8) was previously not recognized in
2003 because the market price trigger at December 28, 2003 was not met. In the Company's previously issued consolidated financial statements as of December 28, 2003, the dilutive effect
of the Debentures was excluded from diluted earnings per share purposes for interim periods of 2003 and the year ended December 28, 2003 under the provisions of SFAS 128. In accordance
with EITF 04-8, the Company has adopted the requirements for reporting and revised its earnings per share for interim periods of 2003 and the year ended December 28, 2003 due to the
dilutive effect of the Debentures.

F-13

---



The
following table sets forth the calculation of basic and diluted earnings per share in accordance with SFAS No. 128, "Earnings per Share" ("SFAS 128") (in thousands,
except per share amounts):

|                                                                         |                                            | 2004       |        | 2003
(As Revised) |        | 2002  
|------------------------------------------------------------------------ | ------------------------------------------ | ---------- | ------ | ----------------- | ------ | ------
|Numerator:                                                               |                                            |            |        |                   |        |       
|                                                                         | Net income from continuing operations      |            | $      | 17,661            |        | $     
|                                                                         | Income (loss) from discontinued operations |            |        |                  |        |       
|                                                                         |                                            |            |        |                   |        |       
|                                                                         |                                            | Net income |        |                   | 17,661 |       
|Add back interest expense on convertible debentures, net of income taxes |                                            |            | 3,320  |                   |        | 1,269 
|                                                                         |                                            |            |        |                   |        |       
|Numerator for diluted earnings per share                                 |                                            | $          | 20,981 |                   | $      | 2,775 
|                                                                         |                                            |            |        |                   |        |       
|Denominator:                                                             |                                            |            |        |                   |        |       
|Basic earnings (loss) per shareweighted average shares outstanding      |                                            |            | 26,148 |                   |        | 24,549
|                                                                         | Effect of dilutive securities:             |            |        |                   |        |       
|                                                                         | Stock options and warrants                 |            |        | 554               |        |       
|                                                                         | Convertible debentures                     |            |        | 8,790             |        |       
|                                                                         | Common stock awards                        |            |        | 33                |        |       
|                                                                         |                                            |            |        |                   |        |       
|Diluted earnings (loss) per shareweighted average shares outstanding    |                                            |            | 35,525 |                   |        | 28,134
|                                                                         |                                            |            |        |                   |        |       
|Basic earnings (loss) per share:                                         |                                            |            |        |                   |        |       
|                                                                         | Continuing operations                      |            | $      | 0.68              |        | $     
|                                                                         | Discontinued operations                    |            |        |                  |        |       
|                                                                         |                                            |            |        |                   |        |       
|                                                                         |                                            | Net income |        | $                 | 0.68   |       
|                                                                         |                                            |            |        |                   |        |       
|Diluted earnings (loss) per share:                                       |                                            |            |        |                   |        |       
|                                                                         | Continuing operations                      |            | $      | 0.59              |        | $     
|                                                                         | Discontinued operations                    |            |        |                  |        |       
|                                                                         |                                            |            |        |                   |        |       
|                                                                         |                                            | Net income |        | $                 | 0.59   |       
|                                                                         |                                            |            |        |                   |        |       

The
diluted earnings per share calculation for 2004, 2003 and 2002 excludes the effect of options to purchase approximately 0.3 million, 1.0 million and 0.9 million,
respectively, shares of the Company's common stock as the option price exceeded the average market price for the Company's common stock during the period and thus their effect was
anti-dilutive.

F-14

---



The
following table sets forth the reconciliation of the calculation of diluted earnings per share and weighted average shares outstanding as previously presented to the presentation
required in EITF 04-08 (amounts in thousands except per share amounts):

|                                                                               |  | 2003 |       
|------------------------------------------------------------------------------ |  | ---- | ------
|Diluted earnings per share computation:                                        |  |      |       
|Weighted average shares for diluted earnings per share, as previously reported |  |      | 24,960
|Adjustment for effect of change in accounting method                           |  |      | 3,174 
|                                                                               |  |      |       
|Weighted average shares for diluted earnings per share, as revised             |  |      | 28,134
|                                                                               |  |      |       
|Net income per share from continuing operations, as previously reported        |  | $    | 0.48  
|Effect on net income per share from dilutive convertible debentures            |  |      | (0.01 
|                                                                               |  |      |       
|Net income per diluted share from continuing operations, as revised            |  |      | 0.47  
|                                                                               |  |      |       
|Loss per share from discontinued operations, as previously reported            |  |      | (0.42 
|Effect on earnings per share from dilutive convertible debentures              |  |      | (0.05 
|                                                                               |  |      |       
|Loss per diluted shares from discontinued operations, as revised               |  |      | (0.37 
|                                                                               |  |      |       
|Net income (loss) per share, as previously reported                            |  |      | 0.06  
|Effect on earnings per share from dilutive convertible debentures              |  |      | 0.04  
|                                                                               |  |      |       
|Net income per diluted share, as revised                                       |  | $    | 0.10  
|                                                                               |  |      |       

Stock-Based Compensation Plan

The Company has three stock-based compensation plans, which are described more fully in Note 7. The Company accounts for these plans under the recognition
and measurement principles of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations. Excluding amortization of restricted stock, no
other stock-based employee compensation cost was reflected in net income, as all options granted under these plans 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 (loss) per share if the Company had applied the fair value recognition provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation," to stock-based employee compensation (in thousands, except per share amounts):

2004

2003

2002Net income, as reported

$
17,661

$
1,506

$
13,949Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects


1,948


2,482


1,119Pro forma net income (loss)

$
15,713

$
(976
)
$
12,830Earnings (loss) per share:Basicas reported

$
0.68

$
0.06

$
0.57Basicpro forma


0.60


(0.04
)

0.53Dilutedas reported


0.59


0.10


0.56Dilutedpro forma


0.54


(0.04
)

0.53


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,

F-15

---



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 Lattice option-pricing model for grants made during 2004 and
the Black-Scholes option-pricing model for all grants made prior to 2004 using the following assumptions:

2004

2003

2002Expected life (weighted-average in years)

4.7

4.3

4.2Dividend yield

0%

0%

0%Expected stock price volatility

25% to 37%

65%

65%Risk-free interest rate (weighted-average in 2003 and 2002)

1.31% to 4.18%

2.06%

4.14%


Using
these assumptions, the fair value of options calculated under the Lattice method ranged from $5.72 to $7.68 per share. The weighted average fair value per share of options granted
in 2003 and 2002 calculated under the Black-Scholes method was $6.10 and $10.73, respectively. Had the Black-Scholes method been used to compute the fiscal 2004 stock-based compensation expense, the
fiscal 2004 pro forma net income would not have been materially different.



The Company accounts for income taxes under the provisions of Financial Accounting Standards Board Statement No. 109, "Accounting for Income Taxes"
("SFAS 109"). Under SFAS 109, the Company recognizes liabilities or assets for the deferred tax consequences of temporary differences between the tax basis of assets and liabilities and
their reported amounts in the financial statements. These differences will result in taxable or deductible amounts in future periods when the reported amounts are recovered or settled, using enacted
tax rates in effect for the year in which the differences are expected to reverse. The Company's effective tax rate differs from the statutory rate primarily as a result of tax credits and the
extraterritorial income tax regime. Because the Company operates in a number of domestic and foreign jurisdictions, the statutory rates within these various jurisdictions are considered in determining
the overall effective tax rate.



In accordance with Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130") comprehensive income (loss) is
reported on the Consolidated Statements of Stockholders' Equity and accumulated other comprehensive income (loss) on the Consolidated Balance Sheets. Other comprehensive income includes certain
changes to stockholders' equity that are excluded from net income and includes the effect of foreign currency translation adjustments of the Company's foreign owned operations.

Recent Accounting Pronouncements

In November 2004, the Financial Accounting Standards Board ("FASB") issued SFAS No. 151 "Inventory Costs, an amendment of Accounting Research
Bulletin No. 43, Chapter 4" ("SFAS 151"). SFAS 151 requires that abnormal amounts of idle facility expense, freight, handling costs and spoilage be recognized as current period
charges, and it requires the allocation of fixed production overhead costs to the costs of conversion based upon the normal capacity of the production facility. SFAS 151 is effective for fiscal
years beginning after June 14, 2005. The Company does not expect the adoption of SFAS 151 to have a material effect on its results of operations or financial position.

In
December 2004, the FASB issued Statement of Financial Accounting Standards No. 123 (revised 2004), "Share-Based Payment" ("SFAS 123R"), which is a revision of
SFAS 123, "Accounting for Stock

F-16

---



Issued
to Employees," and amends SFAS 95, "Statement of Cash Flows." SFAS 123R requires that the compensation cost associated with all share-based payments should be recognized in the financial
statements based on the fair value of the equity or liability instruments issued. Pro forma disclosure will no longer be an alternative. Publicly held companies will be required to apply
SFAS 123R as of the first interim or annual reporting period that begins after June 15, 2005. The Company will fully adopt the provisions of SFAS 123R on July 1, 2005.

As
currently allowed by SFAS 123, the Company currently accounts for share-based payments using the intrinsic value method and generally does not recognize compensation cost. The
future impact of the adoption of SFAS 123R is not forecasted at this time because it is dependent on future share-based payments, including employee stock options, that are not certain at this
time and their impact on the calculation of compensation cost is unknown.

In
July 2004, the American Institute of Certified Public Accountants issued Emerging Issues Task Force Abstracts Issue No. 04-8, "The Effect of Contingently
Convertible Debt on Diluted Earnings per Share" ("EITF 04-8") that requires the inclusion of contingently convertible securities in diluted earnings per share calculations (if dilutive)
regardless of whether the market price trigger or other contingent features have been met. Prior to the issuance of EITF 04-8, SFAS 128 was interpreted to allow the exclusion of the
dilution of common shares underlying contingently convertible debt instruments from the calculation of diluted earnings per share in circumstances where the conversion depends on the achievement of
specified market price of the issuer's shares. The EITF is effective for reporting periods ending after December 15, 2004 and would be applied to previously reported earnings under
SFAS 128. The Company has adopted EITF 04-8 and has applied it to the diluted earnings per share calculation for the year ended
December 28, 2003 due to the dilutive effect of the Debentures issued on August 20, 2003 in accordance with the presentation requirements for a change in accounting method.

3.     ACQUISITIONS

Acquisition of Upstate Group, Inc.

Effective October 1, 2004, Serologicals completed the acquisition of Upstate Group, Inc. ("Upstate"), a privately held company headquartered in
Charlottesville, Virginia with operations in the United States and Scotland. Upstate is a leading supplier of innovative cell signaling products, technologies, platforms and services. Upstate provides
researchers at pharmaceutical and biotechnology companies, universities and government agencies with advanced tools to accelerate life science research and drug discovery. The acquisition extended and
expanded the Company's strategic position in the research market and provided an entry into the growing market for drug screening and target validation services. The Company acquired 100% of the
outstanding preferred and common shares of Upstate for total consideration of $203.3 million. The acquisition was financed through a combination of Serologicals common stock, cash on hand and
proceeds from a new credit agreement. In addition, Serologicals paid approximately $4.0 million in related transaction costs, primarily for investment banking and professional services in
connection with the acquisition.

Serologicals
issued approximately 4.3 million unregistered shares of its common stock at an average price of $23.6539 per share, based on the average trading price as traded on
NASDAQ during the 20 trading days between September 14, 2004 and October 11, 2004, to stockholders of Upstate. The remaining purchase price was paid through a combination of cash on hand
and proceeds from an $80.0 million term loan available under a new $125.0 million credit agreement. The term loan was subsequently repaid in December 2004 from proceeds received
from a secondary public offering of common stock. (See Notes 6 and 9).

The
transaction was accounted for using the purchase method of accounting as required by Statement of Financial Accounting Standards No. 141, "Business Combinations"
("SFAS 141"). The

F-17

---



allocation
of the purchase price has not yet been finalized and further refinements are likely to be made based upon the completion of final valuation studies. The preliminary allocation was made
based on the estimated fair value of the assets acquired and liabilities assumed. The Company expects to finalize the valuation of certain long-lived assets in 2005. Additionally, deferred
tax liabilities will also be finalized once the final allocation of the purchase price has been completed and the tax basis of the assets has been determined. The excess of the purchase price over the
fair value of assets acquired and liabilities assumed was $135.6 million, and has been recorded as goodwill. The results of operations of Upstate have been included in the Research segment
since the effective date of acquisition.

Portions
of the assets acquired are currently being valued by management, with assistance from independent appraisers, using customary valuation procedures and techniques. The valuation
of the purchased in-process research and development of $3.3 million was based upon the preliminary results of the appraisal using the income approach for the primary and
significant projects in-process. The purchased in-process research and development was not considered to have reached technological feasibility, and it was not deemed to have
an alternative future use; accordingly, it was recorded as an expense in the fourth quarter of 2004. The in-process projects related primarily to the development of technologies that
isolate proteins, enzyme production and blotting reagents. These projects were in various stages of completion with future release dates ranging from two to fifteen months.

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

Stock issued and cash paid to Upstate shareholders

$
203,325Direct costs of acquisition


3,998Liabilities assumed


31,587Total consideration and acquisition costs

$
238,910


The
Company has preliminarily allocated the purchase price based on the estimated fair values of the assets and liabilities assumed as of the date of purchase. The initial purchase price
allocations may be adjusted as the Company continues to assess its estimates of the fair value at the date of acquisition. The allocation is as follows (in thousands):

Intangibles Weighted
Average Useful LifeCash and cash equivalents

$
1,238Accounts receivable, net


6,403Inventory


9,420Other current assets


1,701Property and equipment


9,515Developed products


53,200

16 yearsTrademarks and trade names


9,800

IndefiniteOther intangible assets


12,200

15 yearsPurchased in-process research and development


3,263

ExpensedGoodwill


132,170

Indefinite$
238,910


None
of the goodwill related to the acquisition is expected to be deductible for tax purposes.

The
Company is continuing its evaluation and plan of integration of certain activities at Upstate. These activities are accounted for in accordance with EITF 95-3,
"Recognition of Liabilities in Connection with a Purchase Business Combination" ("EITF 95-3"), primarily include the closure of facilities, the abandonment or redeployment of equipment,
employee terminations that arose at the

F-18

---



time
of acquisition and other related activities in the United States and Scotland. Such costs have been recognized as a liability assumed in the acquisition.

The
following table summarizes integration reserve activity related to the exit activities during 2004 (in thousands):

Upstate Integration Plan

Severance

Facility
Closure

Other

Total Cash
ChargesOriginal amounts recorded

$
293

$
1,470

$
530

$
2,293Amounts paid in 2004


(185
)

(10
)




(195
)Balance at January 2, 2005

$
108

$
1,460

$
530

$
2,098


Acquisition of AltaGen Biosciences, Inc.

Effective July 27, 2004, Serologicals completed the acquisition of AltaGen Biosciences, Inc., the parent company of Sierra Bioresource, Inc.
("Sierra"). Sierra, a privately owned company based in Morgan Hill, California offers research and development services in the areas of cellular and molecular biology, immunology, animal pharmacology,
monoclonal antibodies and recombinant proteins, as well as in specialty cell culture development and purification. The total purchase price was approximately $13.1 million, including assumed
debt and a cash payment of approximately $12.6 million at the closing date. Additionally, approximately $0.9 million of purchase price was accrued at January 2, 2005 under an
earn-out agreement.

The
Company assigned $12.8 million of the purchase price to goodwill. None of the goodwill related to the acquisition is expected to be deductible for tax purposes. Revenues and
expenses associated with services provided to external customers are included in the Cell Culture segment and consolidated financial results since the date of acquisition.

Acquisition of Chemicon International, Inc.

Effective April 1, 2003, Serologicals completed the acquisition of 100% of the outstanding common stock of Chemicon, based in Temecula, California.
Chemicon has its principal manufacturing, distribution and research and development operations in California, Australia and the United Kingdom. Chemicon provides a broad range of specialty reagents,
kits, antibodies and molecular biology tools to biotechnology, pharmaceutical and academic research customers working in the areas of neuroscience, infectious diseases, stem cell biology, cancer, drug
discovery and proteomics. Chemicon is also a leading supplier of monoclonal antibodies, conjugates, antibody blends and kits for use in diagnostic laboratories. The acquisition of Chemicon greatly
expanded the Company's range of products and customers within the research market. The cash purchase price of $95.0 million was initially funded with the proceeds from an $82.5 million
five-year term loan and available cash on hand. The results of operations of Chemicon are included in the Company's consolidated financial statements beginning April 1, 2003.

The
components of the total purchase price are presented below (in thousands):

Cash paid at closing

$
95,000Direct costs of acquisition


2,392Current liabilities assumed


9,197Long-term liabilities assumed


10,008$
116,597


F-19

---



The Company's allocation of the purchase price was based on the estimated fair values of the assets and liabilities and weighted average life of depreciable intangible assets acquired as
follows (in thousands):

Intangibles Weighted
Average Useful LifeCash and cash equivalents

$
295Accounts receivable, net of allowance


4,932Inventory


7,234Other current assets


1,983Property and equipment


5,556Developed products


24,000

18.6 yearsTrademarks and trade names


9,000

IndefiniteOther intangible assets


1,330

6.5 yearsGoodwill


62,267

Indefinite$
116,597


The
Company allocated the purchase price to the fair value of identifiable long-lived assets and intangibles based on a number of factors, including an independent third
party appraisal.
Goodwill related to the acquisition of Chemicon is not deductible for tax purposes. Chemicon is included in the Research segment. During the fourth quarter of 2004, the Company finalized its
determination of the deferred tax liability at the date of purchase resulting in a reduction in deferred tax liabilities and a corresponding reduction in goodwill of $2.0 million.

In
connection with the allocation of the purchase price, and after considering the results of the independent appraisal, the Company determined that none of the purchase price should be
allocated to in-process research and development projects, since Chemicon's research and development efforts are focused primarily on developing applications and uses of existing
technologies.

During
the first quarter of 2004, the Company completed its evaluation of a restructuring of certain components of Chemicon's operations, which was contemplated at the date of
acquisition. As a result, the Company accrued $1.8 million related to lease terminations and site relocation costs. This amount was recorded to goodwill in the first quarter of 2004 as an
adjustment to the purchase price of Chemicon in accordance with EITF 95-3.

(in thousands)

Facility
Closure

Other

Total Cash
ChargesOriginal amounts recorded

$
1,250

$
503

$
1,753Amounts paid in 2004


(46
)

(46
)

(92
)Balance at January 2, 2005

$
1,204

$
457

$
1,661


F-20

---



The
unaudited pro forma results of operations for the Company, assuming the acquisition of Upstate and Sierra had occurred on December 29, 2002 and Chemicon on December 30,
2001 are as follows (in thousands, except per share amounts):

2004

2003

2002Revenue

$
237,735

$
204,117

$
139,594Net income from continuing operations


17,208


7,725


4,355Net income (loss)


17,208


(2,836
)

11,584Net income from continuing operations per common share:Basic

$
0.58

$
0.23

$
0.18Diluted


0.52


0.24


0.18Net income (loss) per common share:Basic

$
0.58

$
(0.09
)
$
0.48Diluted


0.52


(0.04
)

0.47


The
pro forma amounts in the previous table exclude the in-process research and development charges of $3.3 million. The unaudited pro forma financial information is
provided for informational purposes only and is not necessarily indicative of the Company's operating results that would have occurred had the acquisitions been consummated on the dates for which the
consummation of the acquisitions are being given effect, nor is it necessarily indicative of the Company's future operating results. The pro forma amounts do not reflect any operating efficiencies,
synergies or cost savings.

4.     DISCONTINUED OPERATIONS

On July 10, 2003, the Company announced its intention to exit the therapeutic plasma business, which consisted of a network of ten plasma collection
centers and a central testing laboratory. The divestiture was completed on January 15, 2004, effective December 28, 2003, with Life Therapeutics ("Life") (formerly Gradipore Limited), a
company based in Sydney, Australia. Under the provisions of Statement of Financial Accounting Standards No. 144, "Impairment of Long-Lived Assets and Discontinued Operations"
("SFAS 144") this business was classified as a discontinued operation. The results of operations for this business have been classified as discontinued operations in all periods presented.

The
following table contains results of operations from discontinued operations (in thousands):

2003

2002Net revenues

$
29,736

$
46,181Cost of revenues


26,676


29,551Gross profit


3,060


16,630Selling, general and administrative


3,772


4,164Research and development


550


Amortization of intangibles


13


57Impairment loss


12,554


Special charges


1,657


1,319Operating income (loss)


(15,486
)

11,090Other (income) expenses, net


110


(32
)Income (loss) before taxes


(15,596
)

11,122Income tax (benefit) provision


(5,035
)

3,893Income (loss) from discontinued operations

$
(10,561
)
$
7,229


F-21

---



During
2003, the Company recorded an impairment loss of $12.6 million, based on the total consideration received for this transaction, which is included as a component of "Income
(loss) from discontinued operations." No additional gain or loss was recorded in January 2004 at the time of closing.

The
Company received $3.5 million in cash at closing and Life assumed approximately $1.3 million of current and long-term liabilities of the business. The
balance of the proceeds consisted of two secured promissory notes: a short-term, interest-bearing note in the amount of $1.5 million and a long-term,
non-interest bearing note ("Long-Term Note"), which was recorded at its estimated net realizable value of $6.4 million. The Company retained approximately
$1.8 million of accrued liabilities related to the therapeutic plasma business which were satisfied in full during 2004.

In
December 2004, the Company renegotiated the terms of the two promissory notes, combining them into one secured promissory note ("new note") with a stated face value of
$7.8 million. The new note receivable bears interest at the applicable federal funds rate and is payable in variable quarterly installments through December 2007. The note is secured by
the underlying assets of the business
acquired and is guaranteed by Life. All indemnity claims between the parties were resolved and the Company has no further indemnification obligations to Life. The Company has recorded an imputed
interest charge on this new note because the stated interest rate on the new note was considered below market. Imputed interest, net of reversals of certain accruals arising from the sale, amounted to
$0.4 million and is included in other expense in the 2004 consolidated statement of income.

Following
is a summary of the note receivable at January 2, 2005 (in thousands):

Note receivable at face value

$
7,800Less imputed interest


(551
)Net present value of note


7,249Less current portion


(1,948
)Long term portion

$
5,301


The
current and long term portions of the new note are included in other current assets and other assets, respectively, in the January 2, 2005 consolidated balance sheet. In
January 2005, Life made its first quarterly principal payment of $0.5 million on the new note.

The
Company has guaranteed real estate lease obligations totaling approximately $3.7 million related to the therapeutic plasma business. If Life defaults on the lease payments,
the Company would be required to assume these leases. The Company has accrued a stand ready obligation of $0.1 million in accordance with FASB Interpretation No. 45, "Guarantor
Accounting and Disclosure Requirement for Guarantees" for these guarantees.

The
Company has retained the rights to any amounts realized from a pending claim asserted against a therapeutic plasma customer for an equitable adjustment relating to a plasma supply
agreement. The claim seeks recovery of approximately $4.8 million in excess costs incurred by the Company in connection with changes in the protocol for collection of vaccinia immune globulin.
No amounts with respect to this claim have been recorded in the accompanying income statements because the Company is unable to predict the outcome of this claim.

At
December 28, 2003, the assets and liabilities of discontinued operations have been reclassified on the balance sheets to reflect the anticipated realization based on the
maturities of the net realizable

F-22

---



value
of the total consideration. The following table presents the assets and liabilities related to discontinued operations (in thousands):

December 28, 2003Assets:Current assets

$
11,650Non current assets


982Total assets


12,632Less: amounts presented as current


(7,019
)Amounts presented as long-term

$
5,613Liabilities:Current liabilities

$
2,864Non-current liabilities


172$
3,036


5.     SPECIAL CHARGES

2003

During 2003, the Company transferred the responsibility for manufacturing and distribution of research products produced at the Gaithersburg, Maryland facility to
Chemicon. In addition, the Company completed a review of its infrastructure to ensure optimal focus on the primary growth areas related to its strategic plan. As a result of those efforts, the Company
reduced its workforce at various locations. As a result of these restructurings, the Company recorded $1.9 million in special charges. The components of these charges included approximately
$0.6 million for employee severance, $0.8 million related to the impairment of certain long-lived assets at Gaithersburg, Maryland, and $0.5 million of other
miscellaneous costs. Additionally the Company recorded a special charge of $0.9 million for a temporary plant shutdown in Toronto due to a Bovine Spongiform Encephalopathy scare in Canada.

2002

During 2002, the Company recorded a charge of $1.9 million related primarily to the reorganization of its research and development organization, as well as
personnel restructurings within the sales organization and manufacturing locations in Canada and Scotland. The components of the charge included $1.3 million for severance and
$0.6 million in other related obligations. Severance payments and other obligations were paid by the end of 2003.

The
following table summarizes special charges by segment (in thousands):

2003

2002Research

$
1,163

$
112Cell culture


1,218


174Diagnostics


127


940Corporate


270


683$
2,778

$
1,909


F-23

---



The
following table summarizes the activity in the accrual for termination benefits and other costs for the periods ended January 2, 2005, December 28, 2003 and
December 29, 2002, respectively (in thousands):

|Description                |  | Balance,
12/28/03 |     | Cash
Expenditures |   | Balance,
01/02/05
|-------------------------- |  | ----------------- | --- | ----------------- | - | -----------------
|Employee termination costs |  | $                 | 150 |                   | $ | (150             
|                           |  |                   |     |                   |   |                  

|Description                |  | Balance,
12/29/02 |       | Expenses |   | Cash
Expenditures |  | Noncash
Write-offs |        | Balance,
12/28/03
|-------------------------- |  | ----------------- | ----- | -------- | - | ----------------- |  | ------------------ | ------ | -----------------
|Employee termination costs |  | $                 | 942   |          | $ | 647               |  | $                  | (1,439 | )                
|Asset impairment           |  |                   |      |          |   | 1,719             |  |                    |       |                  
|Other                      |  |                   | 70    |          |   | 412               |  |                    | (291   | )                
|                           |  |                   |       |          |   |                   |  |                    |        |                  
|                           |  | $                 | 1,012 |          | $ | 2,778             |  | $                  | (1,730 | )                
|                           |  |                   |       |          |   |                   |  |                    |        |                  

|Description                |  | Balance,
12/30/01 |     | Expenses |   | Cash
Expenditures |  | Non-cash
Write-offs |      | Balance,
12/29/02
|-------------------------- |  | ----------------- | --- | -------- | - | ----------------- |  | ------------------- | ---- | -----------------
|Employee termination costs |  | $                 | 200 |          | $ | 1,281             |  | $                   | (539 | )                
|Other                      |  |                   |    |          |   | 628               |  |                     | (190 | )                
|                           |  |                   |     |          |   |                   |  |                     |      |                  
|                           |  | $                 | 200 |          | $ | 1,909             |  | $                   | (729 | )                
|                           |  |                   |     |          |   |                   |  |                     |      |                  

6.     STOCKHOLDERS' EQUITY



Under the terms of its amended and restated articles of incorporation, the Company is authorized to issue 1,000,000 shares of Preferred Stock that may contain
such preferences, rights and restrictions as
may be determined by the Company's Board of Directors. There are no preferred stock shares outstanding.



In December 2004, the Company completed a public equity offering in which 4.8 million shares of common stock were sold for a share price of $22.80.
The net proceeds received from the sale were approximately $104.7 million after deducting underwriting discounts, commissions and other direct issuance costs. The Company used a portion of the
proceeds to retire the $80.0 million Term Note used to complete the Upstate purchase. The remaining proceeds are available to provide funding to support future strategic growth initiatives and
business operations.

In
November 2004, the Company completed the registration of the 4.3 million shares of its common stock issued in the Upstate acquisition under the terms of a registration
rights agreement with the selling shareholders of Upstate.

In
June 2004, the Company completed the registration of approximately 8.8 million shares of its common stock under the terms of its Debentures (Note 8). The
debentures are convertible into shares at an initial rate of 67.6133 shares of common stock per $1,000 principal amount of the debentures. In January 2004, the Debentures became convertible
(Notes 2 and 8).

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

F-24

---



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, shares of 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.

Common Shares Reserved for Issuance

Shares of common stock reserved for issuance at January 2, 2005 and December 28, 2003 consisted of the following:

2004

2003Various stock option plans

3,745,645

4,237,370Employee stock purchase plans

456,812

489,648Convertible debentures

8,789,729

8,789,72912,992,186

13,516,747


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 $17.35 per share. The Company had
acquired, prior to 2002, 3.3 million shares of common stock at an aggregate cost of approximately $20.0 million. The Company records treasury shares at cost. The purchase of the shares
was funded primarily through cash provided by operating activities. The Company did not repurchase any shares during 2004 or 2003.

7.     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 2.8 million shares of its common stock for options, stock appreciation rights, restricted stock awards and other approved
stock-based awards to key employees, certain non-employees and directors. The shares available for issuance under the Incentive Plan include approximately 1.3 million options that
were available for issuance under existing Company option plans at the time the Incentive 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 2004, 2003 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

F-25

---



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. As of January 2, 2005, options to purchase approximately 1.9 million shares were outstanding under the
Incentive Plan, approximately 0.6 million of which were exercisable. As of January 2, 2005, the Company had approximately 0.8 million 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 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 three to twenty four months following termination. As of January 2, 2005, options to purchase approximately
0.5 million shares were outstanding and 0.5 million were exercisable under the Omnibus Plan. No further grants will be issued under the Omnibus Plan.

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 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 vested over a four-year period. As of January 2, 2005,
options to purchase approximately 0.2 million shares were outstanding and exercisable under the Director Plan. No further grants will be issued under the Director Plan.

Stock Option Activity

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

|                                   |  | 2004      |   | 2003 |       | 2002
|---------------------------------- |  | --------- | - | ---- | ----- | ----
|
|Outstanding at beginning of year   |  | 2,394,552 |   | $    | 13.28 |     
|Granted                            |  | 959,686   |   | $    | 19.33 |     
|Exercised                          |  | (473,038  | ) |      | 8.42  |     
|Forfeited or expired               |  | (321,128  | ) | $    | 22.47 |     
|                                   |  |           |   |      |       |     
|Outstanding at end of year         |  | 2,560,072 |   | $    | 15.31 |     
|                                   |  |           |   |      |       |     
|Options exercisable at end of year |  | 1,176,145 |   | $    | 12.81 |     
|                                   |  |           |   |      |       |     

F-26

---



The
following table summarizes information about all stock outstanding and exercisable at January 2, 2005 (share amounts in thousands):

|                  |  | Options Outstanding |  |     |  |  
|----------------- |  | ------------------- |  | --- |  | -
|
|
|
|$  0.01 - $  5.00 |  | 122,993             |  | 1.3 |  | $
|$  5.01 - $10.00  |  | 310,937             |  | 1.5 |  |  
|$10.01 - $15.00   |  | 596,061             |  | 4.1 |  |  
|$15.01 - $20.00   |  | 1,145,053           |  | 4.7 |  |  
|$20.01 - $25.00   |  | 345,028             |  | 4.1 |  |  
|$25.01 - $30.00   |  | 40,000              |  | 4.0 |  |  
|                  |  |                     |  |     |  |  
|                  |  | 2,560,072           |  | 3.9 |  | $
|                  |  |                     |  |     |  |  

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 shares of the Company's
common stock through a payroll deduction program. The Company has reserved 0.6 million shares for issuance pursuant to the Purchase Plan. 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 January 2, 2005,
approximately 0.2 million shares had been acquired pursuant to the Purchase Plan.

Pursuant
to the terms of the Company's UK Share Incentive Plan (the "UK Plan"), eligible employees are able to purchase shares of the Company's common stock through a payroll deduction
program. The Company has reserved 0.1 million shares for issuance pursuant to the UK Plan. Employees may have up to 10% of their compensation withheld to purchase shares of the Company's common
stock at the lower of fair market value at the beginning of the accumulation period or the acquisition date, as defined in the UK Plan. The Company will match 1 share for every 6 shares purchased in
an accumulation period. Employees are required to hold these matching shares for a period of at least 3 years. As of January 2, 2005, approximately 1,500 shares had been acquired
pursuant to the UK Plan.

Restricted Stock

The Company has awarded restricted common stock and restricted stock units to eligible key employees under the Incentive Plan. These awards have restriction
periods tied primarily to employment and service. The awards are recorded at market value on the date of the grant as unearned compensation and compensation expense is recognized over the restriction
period on a straight-line basis, net of forfeitures. In the fourth quarter of 2004, the Company issued 15,600 shares under this program to certain key employees in connection with the
Upstate acquisition. These shares were recorded at their fair market value on date of issue, or approximately $0.4 million. These restricted shares cliff vest three years from date of issuance.
The Company recorded these shares as outstanding with an offsetting entry to "Deferred Compensation", a component of stockholders' equity. The value of these shares is being charged to compensation
expense ratably over the vesting period.

F-27

---



8.     CONVERTIBLE SENIOR SUBORDINATED DEBENTURES

On August 20, 2003, the Company completed a private placement of 4.75% Convertible Senior Subordinate Debentures ("Debentures") to certain institutional
investors totaling $130.0 million, or $126.1 million after expenses. The offering costs of $3.9 million are recorded as "Other assets" and are being amortized over five years,
which is the expected term of the Debentures. The Debentures are convertible into shares of Serologicals' common stock at an initial rate of 67.6133 shares of common stock per $1,000 principal amount
of the Debentures, or approximately 8.8 million shares of common stock at a conversion price of $14.79 per share. These Debentures became convertible in January 2004 under the conversion
features in the Debenture agreements. Interest on the Debentures is payable semi-annually on February 15th and August 15th.

The
Debentures may be redeemed, in whole or in part, at the Company's option on or after August 22, 2008 at 100% of the principal amount. In addition, the holders of the
Debentures may require the Company to repurchase all or a portion of the Debentures for 100% of the principal amount, plus accrued interest, on August 15, 2008, August 15, 2010,
August 15, 2013, August 15, 2018, August 15, 2023, August 15, 2028, or at any time prior to their maturity following a fundamental change in the business, as defined in the
Indenture for the Debentures. For any Debentures that the holders require the Company to repurchase, other than on August 15, 2008, the Company may, at its option, pay the repurchase price in
cash or shares of the Company's common stock. The Company has established a policy that all repurchases will be in cash. The Debentures are unsecured obligations of the Company and are subordinated to
all of the Company's senior debt, including any debt incurred under the new credit facility (Note 9).

On
October 17, 2003, the Company entered into an interest rate swap with respect to $70.0 million principal amount of the Debentures. The objective of the swap is to
convert the 4.75% fixed interest rate on this portion of the Debentures to a variable interest rate based on the 6-month LIBOR at the end of each interest period plus a spread of 66 basis
points. The gain or loss from changes in the fair value of the swap is expected to offset the gain or loss from the changes in the fair value of the cash flows from the Debentures throughout the
expected life of the Debentures. The fair market value of the interest rate swap was a receivable of $0.4 million and $0.9 million at January 2, 2005 and December 28, 2003,
respectively. There was no ineffectiveness recorded during 2004 or 2003. This interest rate swap was designated and qualified as a fair value hedge in accordance with SFAS No. 133, "Accounting
for Derivative and Hedging Activities" and related interpretations and amendments. The fair value of the interest rate swap is included in "Other assets" in the accompanying consolidated balance
sheet.

9.     LONG TERM DEBT AND CAPITAL LEASE OBLIGATIONS

In October 2004, the Company and a bank syndicate entered into a new $125.0 million credit agreement consisting of an $80.0 million
seven-year term loan and a $45.0 million five-year revolving credit facility ("Revolver"), and terminated its previously existing $30.0 million revolving credit
facility. In connection with the termination of the existing facility, the Company incurred a non-cash charge of $0.2 million associated with the write-off of the
unamortized deferred financing costs. There were no amounts outstanding under the $30.0 million facility. The Company used the proceeds of the $80.0 million term loan, less deferred
financing issuance costs of approximately $1.1 million, to fund a portion of the Upstate acquisition. (See Note 3)

As
discussed in Note 6, the Company used a portion of the proceeds from its common stock offering to repay the $80.0 million term loan in December 2004. The Company
incurred a non-cash charge of $0.8 million associated with the write-off of the unamortized deferred financing costs which had been allocated to the term loan. The
remaining deferred financing costs, $0.3 million, associated

F-28

---



with
the Revolver, were capitalized and included in other assets and are being amortized to interest expense over the five-year term of the Revolver.

Borrowings
under the terms of the Revolver bear interest payable quarterly at the Company's option at a rate of either the bank's base rate plus a margin of .50% to 1.00%, or the
prevailing Eurodollar rate plus a margin of 1.50% to 2.00%, depending on certain financial ratios. The Company is required to pay an annual commitment fee ranging from .375% to .500%, depending on the
Company's leverage and amounts borrowed under the Revolver. The applicable margins for the revolver and commitment fees on the unused portion of the revolver are subject to adjustment on future
adjustment dates based on the consolidated leverage ratio of the Company on the adjustment dates. The credit agreement is
secured by substantially all of the assets of the Company. Under the terms of the credit agreement, the Company is obligated to abide by certain affirmative and negative covenants, including but not
limited to total leverage ratio, fixed charge coverage ratio, total indebtedness, restriction of acquisitions, disposition of property, repurchasing common stock and the Company's ability to pay
dividends. As of January 2, 2005, there were no amounts outstanding under the Revolver.

In
July 2004, the Company entered into a lease for $3.6 million for production equipment at its new bioprocessing facility in Lawrence, Kansas. The Company accounted for
this transaction as a capital lease in accordance with Statement of Financial Accounting Standards No. 13, "Accounting for Leases." The lease obligation requires eight quarterly payments of
$0.5 million with a bargain purchase at the end of the lease in June 2006. In connection with the acquisition of Upstate, the Company assumed outstanding obligations under capital
leases, primarily for production and office equipment with various terms and conditions.

In
August 2003, the Company repaid in full and terminated the outstanding principal and interest due on an $82.5 million term loan and $35.0 million revolving credit
facility. A non-cash charge of approximately $4.1 million related to the write-off of deferred financing costs associated with the terminated facilities was recorded.
Additionally, during 2003, the Company recorded a charge of approximately $0.4 million related to the write-off of deferred financing costs related to the Company's revolving credit
facility that was in place prior to the $82.5 million term loan.

Obligations
under capital leases at January 2, 2005 consist of the following (in thousands):

Equipment under capital leases

$
4,613Less: current portion


(2,419
)Obligations under capital leasesnon-current

$
2,194


The
following table sets forth the cash payments, interest expense and capitalized interest during active construction periods of major capital projects for outstanding debt and capital
leases (in thousands):

2004

2003

2002Interest payments made

$
885

$
2,269

$
391Interest expense


885


2,545


239Interest capitalized


1,094


443


465


10.   COMMITMENTS AND CONTINGENCIES

Operating Leases

The Company has entered into non-cancelable operating lease agreements for its corporate headquarters, manufacturing facilities, laboratory equipment,
and other equipment that expire at

F-29

---



various
dates. The information below includes commitment amounts related to vacated facilities associated with exited activities (Note 3). In addition, the Company entered into a sublease
agreement for a vacated laboratory facility in 2003. Future minimum annual rental obligations and related sublease income under the non-cancelable portion of operating leases as of
January 2, 2005 were as follows (in thousands):

Obligation

Sublease
Income2005

$
4,599

$
2682006


4,334


2742007


3,930


2802008


3,162


2852009


2,285


972010 and thereafter


12,319


$
30,629

$
1,204


Rent
expense was approximately $3.9 million, $2.6 million and $2.1 million during 2004, 2003 and 2002, respectively. Sublease rental income was approximately
$0.3 million and $0.1 million in 2004 and 2003, respectively.

Litigation

The Company is involved in certain litigation arising from 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.

Royalty Commitments

The Company has entered into various license agreements whereby the Company uses and sales certain technologies and products. Such license agreements call for
royalties to be paid at 1% to 65% of net sales with minimum guarantees and advance payments. Royalty expense under these agreements, which is included in "Cost of Sales," was approximately
$4.9 million and $3.1 million in 2004 and 2003, respectively, and immaterial in 2002. Future annual minimum royalty commitments as of January 2, 2005, are as follows (in
thousands):

2005

$
8532006


7052007


642$
2,200


F-30

---



11.   INCOME TAXES

The income tax provision for the years ended January 2, 2005, December 28, 2003 and December 29, 2002 consisted of the following (in
thousands):

2004

2003

2002Current:U.S. federal and state

$
(372
)
$
3,294

$
208Foreign


2,767


3,500


5012,395


6,794


709Deferred:U.S. federal and state


5,396


(1,090
)

2,855Foreign


142


(167
)

535,538


(1,257
)

2,908Income tax provision

$
7,933

$
5,537

$
3,617


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):

2004

2003

2002Federal income taxes at statutory rate

$
8,957

$
6,161

$
3,617State income taxes, net of federal income tax benefit








149Impact of foreign tax rates and credits


(948
)

(1,108
)

(737
)Other


(76
)

484


588$
7,933

$
5,537

$
3,617


Income
from continuing operations before taxes summarized by region for the years ended January 2, 2005, December 28, 2003 and December 29, 2002 was as follows (in
thousands):

2004

2003

2002United States

$
17,199

$
6,998

$
8,751Foreign


8,395


10,606


1,586$
25,594

$
17,604

$
10,337


Deferred
income tax assets and liabilities reflect the impact of temporary differences between the amounts of assets and liabilities for financial reporting and income tax reporting
purposes. Temporary

F-31

---



differences
which gave rise to deferred tax assets and liabilities at January 2, 2005 and December 28, 2003, were as follows (in thousands):

2004

2003Deferred tax assets:Current deferred tax assets:Accruals and reserves

$
1,738

$
2,527Unearned compensation


750


170Loss on sale of discontinued operations





3,912Other


1,835


1,362Total current deferred tax assets


4,323


7,971Long-term deferred tax assets:Net operating loss and credit carryforwards


10,292


3,751Less valuation allowances


(4,038
)

(3,751
)Total long-term deferred tax assets


6,254


Deferred tax assets


10,577


7,971Deferred tax liabilities:Goodwill and intangible amortization


(37,431
)

(14,504
)Excess tax depreciation


(4,824
)

(1,675
)Other





(218
)(42,255
)

(16,397
)Net deferred tax liability

$
(31,678
)
$
(8,426
)


The
Company has approximately $6.9 million of US net operating loss (NOL) carryforwards resulting from its acquisitions of Sierra and Upstate during 2004 which begin to expire in
2018. Although the utilization of these losses is subject to limitations pursuant to Section 382 of the Internal Revenue Code, the Company expects to fully utilize the acquired
NOL's prior to their expiration. As of January 2, 2005, the Company has NOL carryforwards of approximately $2.0 million in Canada and $4.0 million in the UK with an
indefinite expiration period. The Company has a foreign tax credit carryover of approximately $1.5 million and a Research & Development Tax Credit of approximately $0.4 million in
the U.S. as of January 2, 2005, which expire in 2014 and 2024, respectively. Management considers projected future taxable income and tax planning strategies in assessing the need for valuation
allowances that reduce deferred tax assets. Based upon historical taxable income, management believes it is more likely than not that the Company will fully realize the benefits of the above NOL and
tax
credit carryforwards; accordingly, no valuation allowance has been recorded against these related deferred tax assets as of January 2, 2005.

As
of January 2, 2005, the Company has approximately $1.5 million of NOL carryforwards in Australia with an indefinite expiration period. Due to uncertainty over the
Company's ability to utilize these NOLs based upon its cumulative operating loss position, a full valuation allowance was recorded against the net deferred tax asset in Australia of approximately
$0.5 million and $0.3 million as of January 2, 2005 and December 28, 2003, respectively. Should the Company eventually realize the deferred tax asset, $0.3 million
of the tax benefit will be reflected as an adjustment to goodwill. The Company has state income tax NOL carryforwards in states where it continues to conduct business totaling approximately
$59.5 million as of January 2, 2005, expiring in various amounts over the next 15 years. Due to the uncertainty over the Company's ability to utilize these state NOLs prior to
expiration, a full valuation allowance was recorded against the deferred tax asset totaling $3.5 million and $3.5 million as of January 2, 2005 and December 28, 2003,
respectively.

F-32

---



On
October 22, 2004, the American Jobs Creation Act ("AJCA") was enacted. The AJCA includes a one-time opportunity that allows US-based multinational
corporations to repatriate foreign earnings at a reduced rate of tax. Subject to meeting certain conditions and restrictions, 85% of qualifying repatriated foreign earnings, as defined by the AJCA,
can be excluded from US taxable income. The Company may elect to apply this provision to qualifying dividends made in 2005. Serologicals has begun evaluating the impact of this repatriation provision.
However, until the U.S. Congress enacts certain technical corrections to the AJCA and the interpretation of certain provisions can be clarified, the evaluation cannot be completed. The Company expects
to complete its evaluation shortly after the issuance of additional legislative guidance. The Company is considering repatriation of up to $12.0 million. The related income tax effect of
repatriation, if any, cannot be reasonably estimated at this time.

The
AJCA also provides a deduction for income from qualified domestic production activities, which will be phased in from 2005 through 2010 as the extraterritorial tax regime is
phased-out. The Company is also in the process of fully evaluating the impact of this new legislation, if any, on its future provision for income taxes, but does not expect any impact to
be material to its financial position or results of operations.

The
Company has not provided for US federal income and foreign withholding taxes on approximately $34.4 million of undistributed earnings of foreign subsidiaries as of
January 2, 2005. The Company considers these undistributed earnings as permanently invested in the operations of such subsidiaries. Upon distribution of those earnings in the form of dividends
or otherwise, the Company would be subject to US income taxes, adjusted for foreign tax credits. Determination of the amount of unrecognized deferred U.S. income tax liability is not practicable
because of the complexities associated with its hypothetical calculation.

The
Company believes that its tax reserves are adequate to cover any additional tax liability that may result from any federal, state, or foreign audits for all years still subject to
audit.

The
Company made income tax payments of approximately $3.9 million, $3.2 million and $5.6 million during 2004, 2003 and 2002, respectively. As of January 2,
2005, and December 28, 2003 the Company had an income tax payable of approximately $1.8 million and $2.7 million, respectively. Income tax payable is included in "Accrued
liabilities."

12.   CONCENTRATION OF CUSTOMERS AND SUPPLIERS

The Company's ten largest customers accounted for approximately 38%, 45% and 54% of total net revenues for the years ended January 2, 2005,
December 28, 2003 and December 29, 2002, respectively. Only one customer made up greater than 10% of net revenues of the Company during each period as follows:

2004

2003

2002Johnson & Johnson

15
%
17
%
20
%


At
January 2, 2005 and December 28, 2003, the Company's five largest customers represented 29% and 46%, respectively, of the Company's accounts receivable balance.

At
January 2, 2005, the Company purchased all of its bovine serum from a single vendor who sources from two abattoirs in the Midwestern United States. 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.

At
January 2, 2005, the Company purchased all of its recombinant human insulin from Novo-Nordisk, under a long-term agreement which guaranteed minimum
levels of insulin.

F-33

---



13.   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 approximately $1.0 million,
$0.7 million and $0.5 million in 2004, 2003 and 2002, respectively.

14.   SEGMENT AND GEOGRAPHIC INFORMATION

In accordance with the aggregation criteria set forth in SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information"
("SFAS 131") operating segments are defined 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. These segments are based primarily on the differing production; manufacturing and other
value-added processes performed with respect to the products and, to a lesser extent, the differing end use and customer bases to which each reportable segment sells its products.

The
accounting policies of the reporting segments are the same as those described in Note 2. The operations of the Company were organized and sales and gross profit performance
evaluated by its three operating segments. These segments are based primarily on 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 end use and customer bases to which each reportable segment sells its products. Prior to 2003, the Company reported a fourth segment, the Therapeutic
Products segment, which was accounted for as discontinued operations in 2003 (Note 4).

The
reporting segments and their principal products and services are:



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.

F-34

---



The
Company's segment information for the years ended January 2, 2005, December 28, 2003 and December 29, 2002 is as follows (in thousands):

2004

2003

2002Net revenuesResearch

$
78,506

$
43,043

$
4,137Cell Culture


86,606


73,986


68,140Diagnostics


30,811


29,886


27,012Total

$
195,923

$
146,915

$
99,289Gross profit:Research

$
50,828

$
26,677

$
1,577Cell Culture


43,951


39,555


37,083Diagnostics


13,662


15,942


13,553Total


108,441


82,174


52,213Reconciling items:Selling, general and administrative expenses


59,293


44,602


33,811Research and development


10,144


6,214


5,628Amortization of intangibles


3,771


2,175


895Purchased in process research and development


3,263





Special charges





2,778


1,909Other expense, net


(54
)

180


31Write-off of deferred financing costs


965


4,492


Interest expense


6,052


4,384


239Interest income


(587
)

(255
)

(637
)Income from continuing operations, before tax

$
25,594

$
17,604

$
10,337


The
Company does not segregate assets by segment because a significant portion of the Company's total assets are shared nor does the Company assign assets to its three operating
segments.

Geographic Information

The Company markets its products and services to numerous countries worldwide and has operations in the United States, Canada, the United Kingdom and Australia.
Other than in the United States, the Company does not conduct business in any one country in which its revenues in that country are more than 10% of the Company's consolidated net revenues. However,
the majority of the Company's remaining foreign sales are to Western Europe. Net revenues 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 revenues to unaffiliated customers between those in

F-35

---



the
United States and other foreign locations and of the Company's long-lived assets for the years ended January 2, 2005, December 28, 2003 and December 29, 2002 are
set forth below (in thousands):

2004

2003

2002Net revenues to unaffiliated customers:United States

$
122,244

$
93,523

$
45,266Other foreign


73,679


53,392


54,023$
195,923

$
146,915

$
99,289Long-lived assets:United States

$
433,046

$
191,040

$
69,682Canada


22,999


17,166


15,454United Kingdom


9,248


9,317


8,490Australia


489


525


$
465,782

$
218,048

$
93,626


15.   QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The quarterly results of operations for the years ended January 2, 2005 and December 28, 2003, respectively, are as follows (in thousands, except
per share amounts):

2004

First

Second

Third

FourthNet revenues

$
36,504

$
43,963

$
46,294

$
69,162Gross profit


19,470


24,931


24,981


39,059Net income(3)


2,983


5,398


5,739


3,541Basic net income per share(1)


0.12


0.22


0.23


0.12Diluted net income per share(1)


0.11


0.18


0.19


0.12


2003

First

Second

Third

FourthNet revenues

$
21,983

$
36,562

$
42,010

$
46,360Gross profit


11,769


20,148


23,296


26,027Special charges (Note 5)


181


2,093


504


Net income from continuing operations


1,920


1,737


1,394


7,016Discontinued operations


102


(606
)

(7,930
)

(2,127
)Net income (loss)


2,022


1,131


(6,536
)

4,889Basic net income (loss) per share(1)(2)


0.08


0.05


(0.26
)

0.20Diluted net income (loss) per share(1)(2)


0.08


0.05


(0.23
)

0.17


---

F-36

---



16.   SUBSEQUENT EVENT

On February 22, 2005, the Company announced it had acquired through its wholly-owned subsidiary, Chemicon, the assets of Specialty Media, a division of,
Cell & Molecular Technologies, Inc. for $6.5 million in cash. Specialty Media, based in Phillipsburg, New Jersey, develops and supplies a variety of specialty stem cell culture
media formulations and supplements, cells and research reagent tools to the life science industry.

17.   RESTATEMENT

Subsequent to the issuance of the Company's Consolidated Financial Statements for the year ended December 28, 2003, it was determined that the foreign
currency translation adjustments ("CTA"), which are included as a component of other comprehensive income in the Consolidated Balance Sheets and
Consolidated Statements of Stockholders' Equity were incorrectly presented net of tax. The Company considers its investment in its foreign subsidiaries to be a permanent reinvestment and accordingly,
under SFAS No. 52 "Foreign Currency Translation" and SFAS No. 109 "Accounting for Income Taxes," a deferred tax liability should not have been recognized on the CTA. The Company had in
prior years incorrectly provided a deferred tax liability on the CTA. The effect of this error on each of the prior periods presented is shown in the table below:

|                                       |  | December 28, 2003 |         | December 29, 2002 |   | December 30, 2001 | 
|-------------------------------------- |  | ----------------- | ------- | ----------------- | - | ----------------- | 
|
|Long term deferred income taxes        |  | $                 | 18,181  |                   | $ | 15,647            | 
|Comprehensive Income                   |  |                   | 4,078   |                   |   | 5,994             | 
|Accumulated Other Comprehensive Income |  |                   | 4,191   |                   |   | 6,725             | 
|Total Stockholders Equity              |  |                   | 178,972 |                   |   | 181,506           | 

This
restatement did not have any impact on the Company's Consolidated Statements of Income or its Consolidated Statements of Cash Flows.

F-37

---





SEROLOGICALS CORPORATION        SCHEDULE IIVALUATION AND QUALIFYING ACCOUNTS

An analysis of the allowance for doubtful accounts and warranty reserve for the three fiscal years ended January 2, 2005 is as follows (in thousands):

|                                |  | Balance at
Beginning of
Period |       | Charged to
Costs and
Expenses |   | Charged
to Other
Accounts |     | Deductions |     | Balance
at End of
Period
|------------------------------- |  | ------------------------------ | ----- | ----------------------------- | - | ------------------------- | --- | ---------- | --- | ------------------------
|Allowance for Doubtful Accounts |  |                                |       |                               |   |                           |     |            |     |                         
|Year Ended January 2, 2005      |  | $                              | 1,214 |                               | $ | 36                        |     | $          | 339 | (a)                     
|Year Ended December 28, 2003    |  |                                | 954   |                               |   | 497                       |     |            | 500 | (b)                     
|Year Ended December 29, 2002    |  |                                | 1,186 |                               |   | 131                       | (c) |            |    |                         

|                             |  | Balance at
Beginning of
Period |     | Charged to
Net Sales |   | Charged
to Other
Accounts |  | Deductions |     | Balance
at End of
Period
|---------------------------- |  | ------------------------------ | --- | -------------------- | - | ------------------------- |  | ---------- | --- | ------------------------
|Warranty Reserve             |  |                                |     |                      |   |                           |  |            |     |                         
|Year Ended January 2, 2005   |  | $                              | 486 |                      | $ | 2,157                     |  | $          | 243 | (a)                     
|Year Ended December 28, 2003 |  |                                | 227 |                      |   | 2,353                     |  |            | 114 | (b)                     
|Year Ended December 29, 2002 |  |                                | 137 |                      |   | 1,247                     |  |            |    |                         

---

F-38

---



EXHIBIT INDEX

|Exhibit
No. |  | Description                                                                                                                                                                                                                                                                                                                                                                        
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.1.1       |  | Agreement of Purchase and Sale, dated November 30, 1998, between the Registrant and Bayer Corporation (Exhibit 2.1 to the Registrant's Current Report on Form 8-K, dated January 12, 1999, is hereby
incorporated by reference).                                                                                                                                                   
|2.1.2       |  | First Amendment to the Agreement of Purchase and Sale, dated December 29, 1998, between the Registrant and Bayer Corporation (Exhibit 2.2 to the Registrant's Current Report on Form 8-K, dated March 15, 1999, is hereby incorporated
by reference).                                                                                                                              
|2.2.1       |  | Plan and Agreement of Merger dated November 5, 2001, by and among the Registrant, Intergen Company, L.P., Serocor Incorporated and Intergen Investors, L.P. (Exhibit 2.1 to the Registrant's Current Report on Form 8-K, dated
December 19, 2001, is hereby incorporated by reference).                                                                                            
|2.2.2       |  | Amendment to Plan and Agreement of Merger dated December 13, 2001, to Plan and Agreement of Merger dated November 5, 2001, by and among the Registrant, Intergen Company, L.P., Serocor Incorporated and Intergen Investors, L.P.
(Exhibit 2.2 to the Registrant's Current Report on Form 8-K, dated December 19, 2001, is hereby incorporated by reference).                      
|2.2.3       |  | Earnout Agreement dated December 13, 2001, by and among the Registrant, 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 Registrant's Current Report on Form 8-K, dated December 19, 2001, is hereby incorporated by reference).
|2.3.1       |  | Amended and Restated Securities Purchase Agreement, dated as of February 11, 2003, between Serologicals Research Products, Inc. and Falcon International Investment Holdings LLC (Exhibit 2.1 to the Company's Current Report on
Form 8-K, dated April 11, 2003, is hereby incorporated by reference).                                                                             
|2.3.2       |  | European Purchase Agreement, dated February 11, 2003, between Serologicals Research Products, Inc. and Falcon International Investment Holdings LLC (Exhibit 2.6 to the Registrant's Annual Report on Form 10-K for the year ended
December 29, 2002 is hereby incorporated by reference).                                                                                         
|2.3.3       |  | Deed of Variation, dated April 4, 2003, between Serologicals Research Products, Inc. and Falcon International Investment Holdings LLC (Exhibit 2.2 to the Registrant's Current Report on Form 8-K, dated April 11, 2003, is
hereby incorporated by reference).                                                                                                                     
|2.3.4       |  | 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 (Exhibit 10.24 to the
Registrant's Annual Report on Form 10-K for the period ending December 29, 2002 is hereby incorporated by reference).                        
|2.4.1       |  | Stock Purchase Agreement, dated as of December 19, 2003, by and among Gradipore Limited, Gradipore Inc., Serologicals Finance Company and Serologicals Corporation (Exhibit 2.1 to the Registrant's Current Report on Form 8-K, dated
January 27, 2004, is hereby incorporated by reference).                                                                                      
|2.4.2       |  | First Amendment, dated as of January 15, 2004, to the Stock Purchase Agreement, dated as of December 19, 2003, by and among Gradipore Limited, Gradipore Inc., Serologicals Finance Company and Serologicals Corporation (Exhibit 2.2
to the Registrant's Current Report on Form 8-K, dated January 27, 2004, is hereby incorporated by reference).                                
|            |  |                                                                                                                                                                                                                                                                                                                                                                                    

---



|2.4.3  |  | Exchange Agreement, dated as of December 17, 2004, between Life Therapeutics Limited and Serologicals Finance Company (Exhibit 1.1 to the Registrant's Current Report on Form 8-K dated December 17, 2004 is hereby incorporated by
reference).                                                                                                                                                                                                                                                                                              
|------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.4.4  |  | Promissory Note, dated as of December 17, 2004, made by Life Therapeutics Limited, Life Gels, Inc., Life Therapeutics Plasma Holdings, Inc., LifeSera, Inc., LifeSera Nevada, Inc., LifeSera Business Trust, LifeSera Investments,
 LLC, LifeSera Management Partnership, LP, and Allegheny Biologicals, Inc. to Serologicals Finance Company (Exhibit 1.2 to the Registrant's Current Report on Form 8-K dated December 17, 2004 is hereby incorporated by
reference).                                                                      
|2.4.5  |  | Mutual Release Agreement, dated as of December 17, 2004, by Life Therapeutics Limited, Life Gels, Inc., Life Therapeutics Plasma Holdings, Inc., LifeSera, Inc., LifeSera Nevada, Inc., LifeSera Business Trust, LifeSera
Investments, LLC, LifeSera Management Partnership, LP, and Allegheny Biologicals, Inc., on the one hand, and Serologicals Corporation and Serologicals Finance Company, on the other hand (Exhibit 1.3 to the Registrant's Current Report on
Form 8-K dated December 17, 2004 is hereby incorporated by reference).
|2.5.1  |  | Plan and Agreement of Merger, dated as of June 29, 2004, by and among the Registrant, Carmel Acquisition Corporation, AltaGen BioSciences, Inc. and William R. Srigley (Exhibit 2.1 to the Registrant's Current Report on
Form 8-K, dated June 30, 2004, is hereby incorporated by reference).                                                                                                                                                                                                                                               
|2.5.2  |  | Earnout and Indemnity Agreement, dated as of June 29, 2004, by and among the Registrant, AltaGen BioSciences, Inc. and Mr. William R. Srigley (Exhibit 2.2 to the Registrant's Current Report on Form 8-K, dated
June 30, 2004, is hereby incorporated by reference).                                                                                                                                                                                                                                                                        
|2.6.1  |  | Agreement and Plan of Merger, dated as of September 7, 2004, by and among the Registrant, Upstate Acquisition Company, LLC, Upstate Group, Inc. and the Stockholder Representative (Exhibit 2.1 to the Registrant's Current Report on
Form 8-K dated September 7, 2004 is hereby incorporated by reference).                                                                                                                                                                                                                                 
|2.6.2. |  | Amendment to Agreement and Plan of Merger, dated as of October 14, 2004, by and among the Registrant and Upstate Group, Inc. (Exhibit 2.1 to the Registrant's Current Report on Form 8-K dated October 14, 2004 is hereby
incorporated by reference).                                                                                                                                                                                                                                                                                        
|2.6.3  |  | Registration Rights Agreement, dated as of October 14, 2004, by and among the Registrant and certain former stockholders of Upstate Group, Inc. (Exhibit 4.1 to the Registrant's Registration Statement of Form S-3 (file number
333-120379) filed on November 10, 2004 is hereby incorporated by reference).                                                                                                                                                                                                                                
|3.1.1  |  | Amended and Restated Certificate of Incorporation (Exhibit 3.1 to the Registrant's Annual Report on Form 10-K for the year ended December 29, 2002 is hereby incorporated by reference).                                                                                                                                                                                                                                                                                                                                                     
|3.2.1  |  | Amended and Restated By-laws (Exhibit 3.4 to the Registrant's Registration Statement on Form S-1 (File No. 33-91176), effective June 14, 1995, is hereby incorporated by reference).                                                                                                                                                                                                                                                                                                                                                         
|4.1.1  |  | Specimen Common Stock Certificate (Exhibit 4.1 to the Registrant's Registration Statement on Form S-1 (File No. 33-91176), effective June 14, 1995, is hereby incorporated by reference).                                                                                                                                                                                                                                                                                                                                                    
|4.1.2  |  | 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).                                                                                                                                                                                                                                                                                                                                                                                       
|4.1.3  |  | 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).                                                                                                                                                                                                                                                                                                     
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

---



|4.1.4  |  | 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).                                                                                                                                                                                                                                 
|------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.1.5  |  | Summary of Rights Plan (incorporated herein by reference to Exhibit 2.4 of the Registration Statement on Form 8-A filed August 10, 1999).                                                                                                                                                                                                                                                                                                 
|4.2.1  |  | Indenture, dated as of August 20, 2003, between Serologicals Corporation and The Bank of New York, as Trustee, for the 4.75% Convertible Senior Subordinated Debentures due 2033, including the form of 4.75% Convertible Senior Subordinated
Debentures due 2033 (Exhibit 4.1 to the Company's Current Report on Form 8-K, dated August 21, 2003 is hereby incorporated by reference).                                                   
|4.2.2  |  | Registration Rights Agreement, dated as of August 20, 2003, by and among Serologicals Corporation and Banc of America Securities LLC, J.P. Morgan Securities Inc. and UBS Securities LLC, as representatives of the initial purchasers of
the Registrant's 4.75% Convertible Senior Subordinated Debentures due 2033 (Exhibit 4.2 to the Company's Current Report on Form 8-K, dated August 21, 2003 is hereby incorporated by reference).
|10.1.1 |  | $125,000,000 Credit Agreement, dated as of October 14, 2004, among the Registrant, as Borrower, the several lenders from time to time parties thereto, LaSalle Bank National Association, as Documentation Agent, Bank of America, N.A., as
Syndication Agent and JP Morgan Chase Bank, as Administrative Agent (Exhibit 10.1 to the Registrant's Current Report on Form 8-K dated October 14, 2004 is hereby incorporated by reference). 
|10.1.2 |  | Lease Agreement dated October 6, 2000, between the Registrant and Spalding Triangle, L.L.C. (Exhibit 10.29 to the Registrant's Quarterly Report on Form 10-Q for the period ended September 24, 2000 is hereby incorporated by
reference).                                                                                                                                                                                                
|10.1.3 |  | Agreement for Design/Build Services on a Guaranteed Maximum Cost Basis, dated March 19, 2003 by and between the Registrant and CRB Builders (Exhibit 10.21 to the Registrant's Annual Report on Form 10-K for the fiscal year ended
December 28, 2003 is hereby incorporated by reference).                                                                                                                                               
|10.1.4 |  | Standard Industrial/Commercial Single-Tenant Lease, dated November 22, 1999 by and David A. Beckman, as Trustee of the Beckman Family Trust and Chemicon International, Inc. (Exhibit 10.22.1 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 28, 2003 is hereby incorporated by reference).                                                                                                            
|10.1.5 |  | First Amendment to Real Estate Lease, dated March 31, 2003 by and amount David A. Beckman, as Trustee of the Beckman Family Trust and Chemicon International, Inc. (Exhibit 10.22.2 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 28, 2003 is hereby incorporated by reference).                                                                                                                      
|10.2.1 |  | 1994 Second Amended and Restated Omnibus Incentive Plan, as amended (Exhibit 10.7.2 to the Registrant's Quarterly Report on Form 10-Q for the period ended June 25, 2000, is hereby incorporated by reference).                                                                                                                                                                                                                          
|10.2.2 |  | Form of Second Revised Stock Option Agreement (Exhibit 10.4.1 to the Registrant's Annual Report on Form 10-K for the year ended December 29, 2002 is hereby incorporated by reference).                                                                                                                                                                                                                                                  
|10.2.3 |  | Form of Third Revised Stock Option Agreement (Exhibit 10.4.2 to the Registrant's Annual Report on Form 10-K for the year ended December 29, 2002 is hereby incorporated by reference).                                                                                                                                                                                                                                                   
|10.2.4 |  | Amended and Restated 1995 Non-Employee Directors' Stock Option Plan, as Amended (Exhibit 10.6 to the Registrant's Annual Report on Form 10-K for the period ended December 31, 2000 is hereby incorporated by reference).                                                                                                                                                                                                                
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                           

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|10.2.5  |  | 1996 Employee Stock Purchase Plan (Exhibit 10.7 to the Registrant's Annual Report on Form 10-K for the year ended December 29, 2002 is hereby incorporated by reference).                                                                            
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.2.6  |  | Serologicals Corporation 1996 UK Sharesave Scheme (Exhibit 3.1 to the Registrant's Annual Report on Form 10-K for the year ended December 29, 2002 is hereby incorporated by reference).                                                             
|10.2.7  |  | Serologicals Corporation UK Share Incentive Plan (Exhibit 4.1 to the Registrant's Registration Statement on Form S-8 (File No. 333-104703), effective April 23, 2003, is hereby incorporated by reference).                                          
|10.2.8  |  | Form of Change in Control Executive Severance Package between the Registrant and each Vice President. (Exhibit 10.20 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 28, 2003 is hereby incorporated by
reference).
|10.2.9  |  | Serologicals Corporation 2001 Stock Incentive Plan (Appendix B to the Registrant's definitive Schedule 14A filed with the Securities and Exchange Commission on April 4, 2001 is hereby incorporated by reference).                                  
|10.2.10 |  | Employment Agreement between the Company and David A. Dodd (Exhibit 10.27 to the Registrant's Quarterly Report on Form 10-Q for the period ended June 25, 2000 is hereby incorporated by reference).                                                 
|10.2.11 |  | Change in Control Executive Severance Package between the Registrant and David A. Dodd (Exhibit 10.10.2 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 28, 2003 is hereby incorporated by
reference).             
|10.2.12 |  | Employment Agreement between the Registrant and Harold W. Ingalls (Exhibit 10.2 of the Registrant's Quarterly Report on Form 10-Q for the period ending September 30, 2001 is hereby incorporated by reference).                                     
|10.2.13 |  | Revised Employment Agreement between the Registrant and Jeffrey D. Linton (Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for the period ended March 30, 2003 is hereby incorporated by reference).                                  
|10.2.14 |  | Employment Agreement between the Registrant and Robert P. Collins (Exhibit 10.1 to the Registrant's Quarterly Report on Form 10Q for the period ended September 30, 2001, is incorporated herein by reference).                                      
|10.2.15 |  | Employment Agreement between the Registrant and Sue Sutton-Jones (Exhibit 10.26 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2000 is hereby incorporated by reference).                                            
|10.2.16 |  | Employment Agreement between the Registrant and Joseph T. Kozma (Exhibit 10.20 to the Registrant's Annual Report on Form 10-K for the period ending December 30, 2001 is hereby incorporated by reference).                                          
|10.2.17 |  | Employment Agreement between the Registrant and James J. Kramer, Ph. D. (Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the period ending June 30, 2002 is hereby incorporated by
reference).                                    
|10.2.18 |  | Employment Agreement between the Registrant and David L. Bellitt (Exhibit 10.23 to the Registrant's Annual Report on Form 10-K for the period ending December 29, 2002 is hereby incorporated by reference).                                         
|10.2.19 |  | Employment Agreement between the Registrant and Philip A. Theodore. (Exhibit 10.19 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 28, 2003 is hereby incorporated by reference).                                  
|        |  |                                                                                                                                                                                                                                                       

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|10.2.20 |  | Employment Agreement between the Registrant and Dennis W. Harris, Ph.D. (Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 28, 2004 is hereby incorporated by
reference).                             
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.2.21 |  | Employment Agreement, dated September 7, 2004, between the Registrant and Ian W. Ratcliffe (Exhibit 10.2 to the Registrant's Current Report on Form 8-K dated September 14, 2004 is hereby incorporated by
reference).                         
|10.2.22 |  | Change in Control Executive Severance Agreement, dated September 7, 2004, between the Registrant and Ian W. Ratcliffe (Exhibit 10.3 to the Registrant's Current Report on Form 8-K dated October 14, 2004 is hereby incorporated
by reference).
|10.2.23 |  | Non-Competition Agreement, dated September 7, 2004, between the Registrant and Ian W. Ratcliffe (Exhibit 10.4 to the Registrant's Current Report on Form 8-K dated October 14, 2004 is hereby incorporated by
reference).                      
|10.2.24 |  | Employment Agreement between the Registrant and Robert J. Brown (Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 27, 2004 is hereby incorporated by reference).                                      
|10.2.25 |  | Employment Agreement between the Registrant and Samuel R. Schwartz*                                                                                                                                                                            
|14.1    |  | Code of Ethics (Exhibit 14.1 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 28, 2003 is hereby incorporated by reference).                                                                                   
|21      |  | Subsidiaries of the Registrant.*                                                                                                                                                                                                                
|23.1    |  | Consent of Deloitte & Touche LLP.*                                                                                                                                                                                                              
|31.1    |  | Certification Pursuant to Rule 13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*                                                                                                                                
|31.2    |  | Certification Pursuant to Rule 13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*                                                                                                                                
|32.1    |  | Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002.*                                                                                             
|32.2    |  | Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002.*                                                                                             

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