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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

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FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended March 31, 2002

Commission File No. 0-10552

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SCHERER HEALTHCARE, INC.(Exact name of registrant as specified in its Charter)

Delaware(State or other jurisdiction of
incorporation or organization)

59-0688813(I.R.S. Employer
Identification No.)


120 Interstate North Parkway, S.E., Suite 305, Atlanta, Georgia 30339(Address of principal executive offices, including Zip Code)

Registrant's
telephone number, including area code: (770) 933-1800

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered (Title of Class) pursuant to Section 12(g) of the Act: Common Stock, $0.01 par value

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

The
aggregate market value of the Registrant's common stock held by nonaffiliates of the Registrant on May 24, 2002 was $5,508,719. There were 4,340,221 shares of common stock outstanding on
May 24, 2002.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's Proxy Statement for the 2002 Annual Meeting of Shareholders are incorporated by reference into Parts I and III of this report.

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SCHERER HEALTHCARE, INC.
Annual Report on Form 10-K
For the Fiscal Year Ended March 31, 2002

Table of Contents

|Item
Number |  |                                                                                       |  | Page
Number
|----------- |  | ------------------------------------------------------------------------------------- |  | -----------
|PART I     
|1.          |  | Business                                                                              |  | 3          
|2.          |  | Properties                                                                            |  | 7          
|3.          |  | Legal Proceedings                                                                     |  | 8          
|4.          |  | Submission of Matters to a Vote of Security Holders                                   |  | 8          
|4a.         |  | Executive Officers of the Registrant                                                  |  | 8          
|PART II    
|5.          |  | Market for Registrant's Common Equity and Related Stockholder Matters                 |  | 9          
|6.          |  | Selected Financial Data.                                                              |  | 9          
|7.          |  | Management's Discussion and Analysis of Financial Condition and Results of Operations |  | 10         
|7a.         |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 19         
|8.          |  | Financial Statements and Supplementary Data                                           |  | 19         
|9.          |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure  |  | 19         
|PART III   
|10.         |  | Directors and Executive Officers of the Registrant                                    |  | 20         
|11.         |  | Executive Compensation                                                                |  | 20         
|12.         |  | Security Ownership of Certain Beneficial Owners and Management                        |  | 20         
|13.         |  | Certain Relationships and Related Transactions                                        |  | 20         
|PART IV    
|14.         |  | Exhibits, Financial Statement Schedules, and Reports on Form 8-K                      |  | 21         
|            |  | SIGNATURES                                                                            |  | 23         
|            |  | INDEX OF EXHIBITS                                                                     |  |            

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SCHERER HEALTHCARE, INC.        FORM 10-K        PART I

In addition to historical information, this Annual Report on Form 10-K contains "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended, which represent the Company's expectations or beliefs. When
used in this report, the words "may," "could," "should," "would," "believe," "anticipate," "estimate," "expect," "intend," "plan" and similar expressions are intended to identify forward-looking
statements. These statements by their nature involve substantial risks and uncertainties, certain of which are beyond the Company's control. The Company cautions that various factors, including the
factors described in the Company's filings with the Securities and Exchange Commission, as well as general economic conditions, changes in applicable laws and regulations, industry trends, a
dependence upon and/or loss of key employees, reliance on union employees and ability to negotiate acceptable collective bargaining agreements with the labor unions, vendors or customers, the loss of
strategic product shipping relationships, customer demand, product availability, competition (including pricing and availability), concentrations of credit risks, distribution efficiencies, capacity
constraints and technological difficulties could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements of the Company. Any forward-looking
statement speaks only as of the date of this report and the Company undertakes no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on
which such statements are made or to reflect the occurrence of an unanticipated event. New factors emerge from time to time, and it is not possible for the Company to predict all of such factors.
Further, the Company cannot assess the impact of each such factor on its business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those
contained in any forward-looking statements.

ITEM 1. BUSINESS

Overview

Scherer Healthcare, Inc. (the "Company") was incorporated under the laws of the State of Delaware on December 18, 1981, as the successor to Aloe
Creme Laboratories, Inc., incorporated on February 7, 1953. The Company's common stock is listed on The Nasdaq National Market under the symbol "SCHR".

The
Company, through its subsidiaries, operates in two business segments. The Company's waste management services segment assists hospitals, clinics, doctors, and other health care
facilities with the containment, control, collection and processing of sharp-edged medical waste such as needles, syringes, razors, scissors and scalpels. The consumer healthcare products segment
distributes brand name and generic over-the-counter health care products. At March 31, 2002, the following wholly-owned subsidiaries operated within the Company's two
business segments:

Waste Management Services Segment:

(a)    BioWaste Systems, Inc., a Georgia corporation.

(b)    Medical
Waste Systems, Inc., a Delaware corporation.

Consumer Healthcare Products Segment:

Scherer Laboratories Inc., a Texas corporation.

As
used herein, the term "Company" includes Scherer Healthcare, Inc. and, where appropriate, its subsidiaries.

3

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Financial Information Relating to Segment Operations

Set forth below is certain financial information with respect to each of the Company's operating segments.

|                         |                                      | Year Ended March 31, |  
|------------------------ | ------------------------------------ | -------------------- | -
|
|Net Sales:               |                                      |                      |  
|                         | Waste Management Services Segment    |                      | $
|                         | Consumer Healthcare Products Segment |                      |  
|                         |                                      |                      |  
|                         |                                      | Total                |  
|                         |                                      |                      |  
|Operating Income (Loss): |                                      |                      |  
|                         | Waste Management Services Segment    |                      | $
|                         | Consumer Healthcare Products Segment |                      |  
|                         | Corporate                            |                      |  
|                         |                                      |                      |  
|                         |                                      | Total                |  
|                         |                                      |                      |  
|Identifiable Assets:     |                                      |                      |  
|                         | Waste Management Services Segment    |                      | $
|                         | Consumer Healthcare Products Segment |                      |  
|                         | Corporate (a)                        |                      |  
|                         |                                      |                      |  
|                         |                                      | Total                |  
|                         |                                      |                      |  
|Depreciation Expense:    |                                      |                      |  
|                         | Waste Management Services Segment    |                      | $
|                         | Consumer Healthcare Products Segment |                      |  
|                         | Corporate                            |                      |  
|                         |                                      |                      |  
|                         |                                      | Total                |  
|                         |                                      |                      |  
|Capital Expenditures:    |                                      |                      |  
|                         | Waste Management Services Segment    |                      | $
|                         | Consumer Healthcare Products Segment |                      |  
|                         | Corporate                            |                      |  
|                         |                                      |                      |  
|                         |                                      | Total                |  
|                         |                                      |                      |  

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The
Company recorded interest income at Corporate of $621,000, $806,000, and $738,000 for the years ended March 31, 2002, 2001, and 2000, respectively.

Waste Management Services Segment

Overview.The Company operates its waste management services segment through Bio Waste
Systems, Inc. and Medical Waste Systems, Inc. (collectively, "Bio Systems"). Each of these companies is wholly-owned by the Company.

Services.Bio Systems provides special waste handling and logistical services to hospitals, doctors'
offices, clinics and other health care facilities including the biotechnology industry. These services are principally focused on assisting these facilities with the proper containment, control,
collection and processing of sharp-edged medial waste or "sharps". Bio Systems provides its services in ten Northeastern and Mid-Atlantic states plus the District of Columbia.

4

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The
risk of AIDS and other blood borne disease such as hepatitis, coupled with public concerns regarding the safe packaging, transportation and disposal of medical waste, has for many
years been mandated by federal, state and local governmental regulatory agencies. Sharps medical waste poses a threat to health care workers and the public because of its potential to transmit
disease. Consequently, health care facilities have worked to improve the safety of their sharps waste management systems, however, many have found that an in-house system may not be the
most cost effective method for their sharps disposal.

Bio
Systems' sharps management programs are designed to reduce a medical facility's costs and risks associated with sharps disposal. Bio Systems incorporates reusable containers of
various sizes and designs in its systems, which are installed by Bio Systems' personnel at the locations within a medical facility where sharps are discarded. These reusable containers provide a
medical facility with a cost effective and environmentally friendly alternative to traditional disposable plastic containers. Bio Systems' personnel periodically collect and replace the containers at
the point of use and then transport the full containers to Bio Systems' processing facility where they are emptied and decontaminated for reuse.

Bio
Systems maintains a fleet of licensed trucks and trailers to transport medical waste to its processing facility, where the waste is sterilized, pulverized and made available for
recycling or disposal via landfill or incineration. Bio System's medical waste processing operations are located at its processing facility in Farmingdale, New York. Bio Systems uses its facility
located near Philadelphia, Pennsylvania to assemble, manage and store its reusable medical waste containers. Bio Systems operates a transfer station in Haverhill, Massachusetts.

Bio
Systems also provides medical waste management services designed for medical clinics, physicians' offices and other facilities that generate relatively small quantities of regulated
medical waste (small quantity generators). Bio Systems provides these customers with both a reusable container for sharps and a specially designed corrugated box for non-sharp regulated
medical waste. This service for small quantity generators includes pick-up, removal and disposal of the medical waste.

Sales and Marketing.Bio Systems markets its services, which are not seasonal and are not subject to
backlog, via a direct sales force and supports its programs with experienced account managers and field operations managers. In addition, it has refined its presence on the Internet and plans to use
this channel as an additional marketing tool. Bio Systems operates 365 days a year.

Bio
Systems' management believes that the trend toward consolidation of hospitals, medical clinics and physicians' offices into managed health care networks provides companies with
existing medical facility contracts, such as Bio Systems, an advantage in securing contracts with newly affiliated network members.

Customers.Bio Systems' customers include hospitals, nursing homes, medical clinics, physicians and
laboratories. Services to hospitals are typically provided under contracts with a term of at least one year. As of March 31, 2002, Bio Systems had contracts with 303 hospitals, including
agreements with the Greater New York Hospital Association, New Jersey Hospital Association, and 17 of the largest hospital networks in the Northeast. Additionally, Bio Systems provides medical
services to over 3,500 small quantity generators, including medical clinics, laboratories, and physicians' offices.

No
single customer accounted for over 3% of Bio Systems' net sales during the years ended March 31, 2002, 2001, and 2000.

Competition.Bio Systems' principal competition comes from in-house management of sharps
wherein the hospital purchases disposable containers from one of several manufacturers, uses hospital personnel to collect and replace containers when full, and disposes of the containers and waste
with

5

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on-site equipment or through a third party medical waste hauler. Additionally, Bio Systems has two direct competitors which offer similar full-service programs.

With
regard to its small quantity generator services, Bio Systems competes with several national and local medical waste service providers.

Though
Bio Systems faces significant competition in its market areas, it believes it has a strong competitive position because of its reusable sharps containers, specialized service
infrastructure and strategically located transfer and processing facilities.

Regulation.The medical waste industry is subject to a variety of federal, state and local
regulations regarding its collection, transport, processing, and disposal. Bio Systems has obtained licenses or authorizations from the appropriate governmental regulatory agencies to operate its
processing and transfer facilities in Farmingdale, New York and Haverhill, Massachusetts.

New
regulations are frequently promulgated, compliance with which could have a material adverse effect on Bio Systems' business. Management is not aware of any pending regulations in Bio
Systems' market areas that would have such a material adverse effect.

Employees.At March 31, 2002, Bio Systems had 180 employees. Drivers, technicians and
processing personnel in New York and drivers and warehouse personnel in Pennsylvania are covered by collective bargaining agreements representing approximately 83% of Bio Systems' employees. Bio
Systems entered into a three-year collective bargaining agreement in June 1999 with the union for its New York employees, a three-year agreement in October 1999
with the union for its Pennsylvania employees, and a three-year agreement in August 2001 with a union for its Massachusetts employer. Bio Systems has begun negotiations for the
renewal of its collective bargaining agreement with the union for its New York employees.

Consumer Healthcare Products Segment

Overview.In 1981, the Company acquired Scherer Laboratories, Inc. ("Scherer Labs"), a Texas
corporation originally incorporated in 1903. Scherer Labs distributes its own brand name, over-the-counter, healthcare products. These products are primarily used for treatment
of colds and coughs, eye and ear irritations and insect bites. Scherer Labs' products are manufactured by third party contractors using Scherer Labs' formulas. Scherer Labs carries an inventory
sufficient to cover planned sales requirements. Scherer Labs' return policy is consistent with the drug industry, with annual returns during the last three years of less than 1.5% of total annual
sales.

Scherer
Labs shares office and warehouse space with the Company at the Company's corporate headquarters in Atlanta, Georgia. At March 31, 2002, Scherer Labs had two
full-time employees. They work from the Atlanta, Georgia facility and administer all sales, marketing, purchasing, all customer service, warehouse and distribution functions and also
perform certain accounting functions, including order processing, accounts receivable, and inventory control. Scherer Labs generates the majority of its sales through office staff, outside
consultants, general print advertising and trade shows.

Seasonality.The sales of most of Scherer Labs' products are evenly distributed throughout the year.
However, the majority of three of Scherer Labs' products are purchased by consumers during the summer months. As a result of this seasonal activity, approximately 30% of Scherer Labs' sales occur
during the first fiscal quarter (April through June) of each fiscal year.

Customers.Scherer Labs markets its products primarily to drug and food stores,
mass-market retailers, drug wholesalers, and government agencies. Sales to McKesson HBOC represented approximately 68% of Scherer Labs' total sales in each of the years ended
March 31, 2002 and 2001. McKesson HBOC is the primary wholesaler for Wal-Mart, Inc. Wal-Mart accounts for over 80% of McKesson HBOC's purchases from Scherer Labs.
The loss of Wal-Mart's business would have a

6

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material adverse effect on Scherer Labs' ability to continue to operate profitably. In the years ended March 31, 2001 and 2000, sales to Albertsons, Inc. represented approximately 10%
and 13% of Scherer Labs' total sales, respectively.

Competition.Scherer Labs' products are subject to competition from national, regional, and store
brands of similar or identical formulations. Emphasis is placed on Scherer Labs' long history, product quality and pricing at or near the pricing levels of generic products. Marketing activities focus
on in-store price specials and other promotional allowances.

Regulation.Scherer Labs' products are regulated by the U.S. Food and Drug Administration. Also,
licensing and product registration is required by certain states where product sales occur and are renewed annually. There have been no government inspections of Scherer Labs in the last three years
and there are no pending matters between Scherer Labs and any federal, state or local governmental regulatory agency.

Discontinued Pharmaceutical Research and Development Segment

Biofor, Inc. ("Biofor"), a majority owned subsidiary of the Company which had been operating the Company's pharmaceutical research and development segment,
was engaged in research to identify and develop new drug compounds. In March 1996, Biofor discontinued all operations and the Company abandoned all operations of Biofor.

The
remaining property and equipment of Biofor primarily consists of 29 acres of vacant land, a 30,000 square foot building on 5.5 acres of land owned by Biofor, and computer and
laboratory equipment. The Company intends to sell the remaining assets of Biofor, which have been written down to their estimated net realistic value, but it anticipates that it may take several years
to sell all of the assets.

ITEM 2. PROPERTIES

The Company's major facilities follow:



7

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The
Company believes the facilities in all locations are adequate for the current and anticipated future level of activities.

ITEM 3. LEGAL PROCEEDINGS

The Company is, from time to time, a party to certain legal proceedings, however, it does not anticipate that any current proceedings will have any material
adverse effects on its financial condition or results of operations.

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

There were no matters submitted to security holders for vote during the quarter ended March 31, 2002.

ITEM 4A. EXECUTIVE OFFICERS OF THE COMPANY

The names, ages at May 30, 2002, and current positions of the Company's current executive officers and by each person who served as an officer at
March 31, 2002, are listed below in accordance with General Instruction G(3) of Form 10-K and Instruction 3 of Item 401(b) of
Regulation S-K. Unless otherwise stated, each executive officer has held their position for at least the last five years. All officers are elected for one year terms or until their
respective successors are chosen. There are no family relationships among the executive officers nor is there any agreement or understanding between any officer and any other person pursuant to which
the officer was elected.

|Name and Age               |  | Positions with the Company                                                                                                                                                                                                                                                                                                                                                                     
|-------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Robert P. Scherer, Jr., 69 |  | Director of the Company since 1977; Chairman of the Board of Directors and Chief Executive Officer of the Company since February 1995; President of the Company since May 1998. A director, executive officer and controlling
stockholder of RPS Investments, Inc., a privately held investment company, since its formation.                                                                  
|Donald P. Zima, 69         |  | Vice President and Chief Financial Officer since joining the Company on June 26, 2000. Prior to joining the Company, Mr. Zima was Chief Financial Officer of Servidyne Systems, Inc. from April 1999 to June 2000, Chief Financial Officer of Sybra,
Inc. from October 1996 to April 1999 and Financial Manager for Atlanta Committee for the Olympic Games from February 1996 to October 1996.

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PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Common Stock

At March 31, 2002, there were approximately 1,900 shareholders of record of the Company's common stock. The Company's common stock is traded on The Nasdaq
National Market under the symbol "SCHR". The following table sets forth the high and low closing sale prices per share as reported by Nasdaq for the periods indicated:

Fiscal 2002

Fiscal 2001High

Low

High

LowFirst Quarter

$
3.49

$
2.75

$
4.000

$
3.312Second Quarter


3.35


3.15


4.438


3.188Third Quarter


4.00


3.10


4.000


3.062Fourth Quarter


5.05


3.60


4.437


3.375


On
May 24, 2002, the closing price of the common stock on The Nasdaq National Market was $3.70.

While
there are no restrictions to prevent the payment of dividends, the Company has not paid a cash dividend in its history. The current policy of the Company's Board of Directors is to
retain any available earnings for use in the operations and expansion of the Company's business. Therefore, the Company has no current intention to pay cash dividends on its common stock. Any future
determination to pay cash dividends will be at the discretion of the Board of Directors and will depend upon the Company's earnings, capital requirements, financial condition, the ability of the
Company's subsidiaries to pay cash dividends to the Company and any factors deemed relevant by the Board of Directors.

The
information required by Item 201(d) of Regulation S-K is included under "Item 12. Security Ownership of Certain Beneficial Owners and Management."

ITEM 6. SELECTED FINANCIAL DATA

The following selected financial data concerning the Company for and as of the end of each of the years in the five year period ended March 31, 2002, are
derived from the audited consolidated financial statements of the Company. The selected financial data is qualified in its entirety by the more detailed information and financial statements, including
the notes thereto, included elsewhere in this report. The audited consolidated financial statements of the Company as of March 31, 2002 and 2001, and for each of the years in the three year
period ended March 31, 2002, and the report of Arthur Andersen LLP thereon, are included elsewhere in this report.

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SELECTED FINANCIAL DATA  (In Thousands, Except Per Share Data)

|                                                     |  | Year Ended March 31,
|---------------------------------------------------- |  | --------------------
|
|Net sales                                            |  | $                   
|Cost of goods sold                                   |  | $                   
|Selling, general, and administrative expenses        |  | $                   
|Litigation settlements                               |  | $                   
|Operating income                                     |  | $                   
|Other income (expense), net                          |  | $                   
|Income (loss) before income taxes                    |  | $                   
|Income (loss) before income taxes per sharebasic    |  | $                   
|Income (loss) before income taxes per sharediluted  |  | $                   
|Gain (loss) from discontinued operations             |  | $                   
|Net income (loss)                                    |  | $                   
|Basic net income (loss) per common share             |  | $                   
|Diluted net income (loss) per common share           |  | $                   
|Weighted average shares outstandingbasic            |  |                     
|Weighted average shares outstandingdiluted          |  |                     
|Total assets                                         |  | $                   
|Capital lease obligations, net of current maturities |  | $                   
|Stockholders' equity                                 |  | $                   
|Cash dividends                                       |  | $                   

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion contains, in addition to historical information, "forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended, which represent the Company's expectations or beliefs. When used in this report, the words
"may," "could," "should," "would," "believe," "anticipate," "estimate," "expect," "intend," "plan" and similar expressions are intended to identify forward-looking statements. These statements by
their nature involve substantial risks and uncertainties, certain of which are beyond the Company's control. The Company cautions that various factors, including the factors described in the Company's
filings with the Securities and Exchange Commission, as well as general economic conditions, changes in applicable laws and regulations, industry trends, a dependence upon and/or loss of key
employees, reliance on union employees and ability to negotiate acceptable collective bargaining agreements with the labor unions, vendors or customers, the loss of strategic product shipping
relationships, customer demand, product availability, competition (including pricing and availability), concentrations of credit risks, distribution efficiencies, capacity constraints and
technological difficulties could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements of the Company. Any forward-looking statement speaks only
as of the date of this report and the Company undertakes no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statements
is made or to reflect the occurrence of an unanticipated event. New factors emerge from
time to time, and it is not possible for the Company to predict all of such factors. Further, the Company cannot assess the impact of each such factor on its business or the extent to which any
factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

10

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Critical Accounting Policies

Investments

The Company uses the equity method of accounting for companies and other investments in which the Company has significant influence. Generally this represents
common stock ownership or convertible rights of at least 20%, and not greater than 50%, of the company in which the Company has the investment and, for investments in limited liability companies,
investments of at least 5% of ownership percentages.

The
Company had investments in unconsolidated companies, recorded on the equity method of accounting, of $303,000 and $3,167,000 as of March 31, 2002 and 2001, respectively. The
Company's equity in net losses of unconsolidated companies was $24,000 and $667,000 for the years ended March 31, 2002 and 2001, respectively.

The
Company performs analysis of the operations and financial position of all investments on a quarterly basis subsequent to its initial investment, including a review of quarterly
unaudited financial statements. The Company considers any increase/decrease in the Company's investments to be temporary unless other information related to sale or cessation exist.

Revenue Recognition

The Company records revenue for services provided when the Company has completed the service. The Company records product revenue when products are received by
customers or independent distributors. The Company's payment terms are the same for all customers, i.e. 1% discount if paid in 10 days net due in 30 days. The Company does not offer
price protection. In accordance with SFAS
No. 48, "Revenue Recognition When Right of Return Exists," transactions with customers and distributors qualify as sales at shipment. The Company's return and exchange policy is as follows:



New Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board issued Statements of Financial Accounting Standards No. 141,Business
Combinations, and No. 142,Goodwill and Other Intangible Assets, effective for fiscal years beginning after
December 15, 2001. Under the new rules, goodwill and intangible assets deemed to have indefinite lives will no longer be amortized, but will be subject to annual impairment tests in accordance
with the Statements. Other intangible assets will continue to be amortized over their useful lives.

The
Company will apply the new rules on accounting for goodwill and other intangible assets beginning in the first quarter of fiscal 2003. Application of the nonamortization provisions
of the Statement is expected to result in an increase in net income of approximately $100,000, net of tax effects, for fiscal 2003. Prior to the completion of the second quarter of fiscal 2003, the
Company will

11

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complete a transitional impairment review for goodwill and indefinite lived intangible assets as of the date of adoption. Subsequently, the Company will perform similar impairment reviews annually.
Management does not believe that the adoption of the impairment review provisions of the standard will have a material effect on the Company's financial position or results of operations.

In
August 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 144,Accounting for the Impairment
or Disposal of Long-Lived Assets(FAS 144), which addresses financial accounting and reporting for the impairment or disposal of long-lived
assets. FAS 144 supersedes SFAS No. 121,Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of, and the accounting and reporting provisions of APB Opinion No. 30,Reporting the Results of Operations for a Disposal of a Segment of a
Business. The Company will adopt FAS 144 as of April 1, 2002 and does not believe that the adoption of FAS 144 will have a material impact on the Company's
financial position or results of operations.

Results of Operations

Net Sales and Operating Income (Loss).The following table sets forth the net sales and operating
income (loss) for each segment of the Company's business for the last three fiscal years:

Year Ended March 31,2002

2001

2000NET SALES:Waste Management Services Segment

$
18,832,000

$
17,278,000

$
15,435,000Consumer Healthcare Products Segment


1,566,000


1,460,000


1,353,000Company Totals


20,398,000

$
18,738,000

$
16,788,000OPERATING INCOME (LOSS):Waste Management Services Segment

$
1,763,000

$
1,712,000

$
1,656,000Consumer Healthcare Products Segment


546,000


507,000


460,000Corporate


(926,000
)

(789,000
)

(698,000
)Company Totals

$
1,383,000

$
1,430,000

$
1,418,000


Fiscal 2002 vs. Fiscal 2001

The Company's net sales increased by 9% to $20,398,000 for the year ended March 31, 2002 from $18,738,000 for the year ended March 31, 2001. The
Company's operating income decreased 3% to $1,383,000 for the year ended March 31, 2002 from $1,430,000 for the year ended March 31, 2001. The Company's cost of sales increased to 65% of
net sales for the year ended March 31, 2002 from 63% of net sales for the year ended March 31, 2001. The Company's selling, general, and administrative expenses decreased to 28% of net
sales for the year ended March 31, 2002, from 30% of net sales for the year ended March 31, 2001.

The
results of operations of the Company are dependent upon the results of operations of each of its subsidiaries operating in the individual business segments. Set forth below is a
discussion of the results of operations of each of these segments.

Waste Management Services Segment

Net sales in the Company's waste management services segment, which operates through Bio Systems, increased 9% to $18,832,000 for the year ended March 31,
2002 from $17,278,000 for the year ended March 31, 2001. The sales growth is primarily due to securing new contracts with additional hospitals and hospital networks for Bio Systems' core
business of providing "sharps" (sharp-edged medical waste such as scalpels, syringes, and needles) disposal services which utilize cost effective

12

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reusable containers and price increases initiated for contract renewals. Additionally, the industry trend toward the formation of hospital networks and Bio Systems' success in marketing its services
to these networks has enhanced Bio Systems' sales and market share.

Bio
Systems' operating income increased 3% to $1,763,000 for the year ended March 31, 2002, from $1,712,000 for the year ended March 31, 2001. Bio Systems' cost of sales
increased to 67% of its net
sales for the year ended March 31, 2002, from 65% of net sales for the year ended March 31, 2001. Cost of sales is primarily comprised of: direct labor and related costs and benefits to
collect and process waste amounting to 31% of net sales; vehicle and equipment maintenance, repair, capital lease financing, and depreciation amounting to 5% of net sales; waste disposal costs
amounting to 12% of net sales; and warehouse expenses amounting to 6% of net sales. Selling, general, and administrative expenses as a percentage of Bio Systems' net sales decreased to 21% for the
year ended March 31, 2002, from 25% for the year ended March 31, 2001, primarily related to increasing the workers compensation reserves. Selling, general, and administrative expenses
are primarily comprised of: management, administrative and office compensation, related costs and benefits; and utilities, insurance, property taxes, depreciation, bad debt, professional fees, rent,
amortization, advertising promotion, travel and miscellaneous other expenses. Starting early in the year ended March 31,1999 and continuing through the year ended March 31, 2002, Bio
Systems has had substantial new hospital activity. Preparing new accounts for service requires, among other things, installation of Bio Systems' reusable containers and sometimes considerable
operational follow-up which causes temporary increases in certain costs and expenses with respect to those accounts. Additionally, Bio Systems' operating payroll and transportation costs
and expenses have increased due to the addition of personnel and medical waste transportation vehicles needed to service the new hospital accounts.

Consumer Healthcare Products Segment

Net sales for Scherer Labs, which operates in the Company's consumer healthcare products segment, increased 7% to $1,566,000 for the year ended March 31,
2002 from $1,460,000 for the year ended March 31, 2001. The increase in Scherer Labs' net sales is due primarily to the following factors: (i) the general increase in the level of
business for the year ended March 31, 2002, (ii) extension of the contract with Wal-Mart, and (iii) the addition of CVS Corporation's southeastern stores initially
selling just one of Scherer Lab's products.

Scherer
Labs' operating income increased to $546,000 for the year ended March 31, 2002 from $507,000 for the year ended March 31, 2001. Scherer Labs' cost of sales
decreased slightly to 38% of its net sales for the year ended March 31, 2002 from 40% for the year ended March 31, 2001. Cost of sales is primarily comprised of the cost of materials for
products the Company distributes and the related shipping expenses. Selling, general, and administrative expenses decreased to 23% of net sales for the year ended March 31, 2002 from 29% for
the year ended March 31, 2001. The reduction was primarily due to closing the Texas office. Selling, general, and administrative expenses are primarily comprised of: management, administrative
and office compensation, related costs and benefits; and utilities, insurance, property taxes, depreciation, bad debt, professional fees, rent, amortization, advertising promotion, travel and
miscellaneous other expenses.

Corporate

The Company's operating expenses at the corporate level increased to $926,000 for the year ended March 31, 2002 from $789,000 for the year ended
March 31, 2001. Certain administrative, accounting, management oversight, and payroll services are performed by the Company's Corporate office for its subsidiaries. The Corporate operating
expenses primarily include the salaries, wages and related
benefits of the personnel who perform these functions (including the Company's executive officers), rent expense, professional, accounting and legal fees. Salaries and wages increased from $361,000
for the year ended March 31, 2001 to $468,000 for the year ended March 31, 2002. This increase was due

13

---

to a full year of employment for two new staff members. Professional, accounting and legal fees increased from $204,000 for the year ended March 31, 2001 to $257,000 for the year ended
March 31, 2002.

Investments

Following is a discussion of the Company's investments during the year ended March 31, 2002:

MedicareFacts,
LLC:



Econometrics, Inc.:



Compliance1, Inc.



14

---



Renaissance
Pharmaceuticals, Inc.



Due
to the recent difficult economic conditions affecting Econometrics, Compliance1 and Renaissance Pharmaceuticals resulting in the inability to generate sufficient cash flow and the
amount of liabilities ranking ahead of the Company's investment in these entities, the Company has concluded that the decrease in value of its total investment in Econometrics, Compliance1 and
Renaissance Pharmaceuticals is other than temporary and has written down the respective investments to zero. Accordingly, the Company recorded impairment charges of $3,129,000 in the quarter ended
September 20, 2001, and $242,000 in the quarter ended March 31, 2002.

Fiscal 2001 vs. Fiscal 2000

The Company's net sales increased by 12% to $18,738,000 for the year ended March 31, 2001 from $16,788,000 for the year ended March 31, 2000. The
Company's operating income increased 1% to $1,430,000 for the year ended March 31, 2001 from $1,418,000 for the year ended March 31, 2000. The Company's cost of sales increased to 63% of
net sales for the year ended March 31, 2001 from 61% of net sales for the year ended March 31, 2000. The Company's selling, general, and administrative expenses increased to 30% of net
sales for the year ended March 31, 2001, from 29% of net sales for the year ended March 31, 2000.

The
results of operations of the Company are dependent upon the results of operations of each of its subsidiaries operating in the individual business segments. Set forth below is a
discussion of the results of operations of each of these segments.

Waste Management Services Segment

Net sales in the Company's waste management services segment, which operates through Bio Systems, increased 12% to $17,278,000 for the year ended March 31,
2001 from $15,435,000 for the

15

---

year ended March 31, 2000. The sales growth is primarily due to securing new hospital contracts for Bio Systems' core business of providing "sharps" (sharp-edged medical waste such as
scalpels, syringes, and needles) disposal services which utilize cost effective reusable containers and price increases initiated for contract renewals. Additionally, the industry trend toward the
formation of hospital networks and Bio Systems' success in marketing its services to these networks has enhanced Bio Systems' sales and market share growth.

Bio
Systems' operating income increased 3% to $1,712,000 for the year ended March 31, 2001, from $1,656,000 for the year ended March 31, 2000. Bio Systems' cost of sales
increased to 65% of its net sales for the year ended March 31, 2001, from 63% of net sales for the year ended March 31, 2000. Cost of sales is primarily comprised of: direct labor and
related costs and benefits to collect and process waste amounting to 31% of net sales; vehicle and equipment maintenance, repair, capital lease financing, and depreciation amounting to 5% of net
sales; waste disposal costs amounting to 12% of net sales; and warehouse expenses amounting to 6% of net sales. Selling, general, and administrative expenses as a percentage of Bio Systems' net sales
increased to 25% for the year ended March 31, 2001, from 24% for the year ended March 31, 2000. Selling, general, and administrative expenses are primarily comprised of: management,
administrative and office compensation, related costs and benefits; and utilities, insurance, property taxes, depreciation, bad debt, professional fees, rent, amortization, advertising promotion,
travel and miscellaneous other expenses. Starting early in the year ended March 31,1999 and continuing through the year ended March 31, 2001, Bio Systems has had substantial new hospital
activity. Preparing new accounts for service requires, among other things, installation of Bio Systems' reusable containers and sometimes considerable operational follow-up which causes
temporary increases in certain costs and expenses with respect to those accounts. Additionally, Bio Systems' operating payroll and transportation costs and expenses have increased due to the addition
of personnel and medical waste transportation vehicles needed to service the new hospital accounts.

Consumer Healthcare Products Segment

Net sales for Scherer Labs, which operates in the Company's consumer healthcare products segment, increased 8% to $1,460,000 for the year ended March 31,
2001 from $1,353,000 for the year ended March 31, 2000. The increase in Scherer Labs' net sales is due primarily to the following factors: (i) the general increase in the level of
business for the year ended March 31, 2001, (ii) extension of the contract with Wal-Mart, and (iii) the addition of CVS Corporation's southeastern stores initially
selling just one of Scherer Lab's products.

Scherer
Labs' operating income increased to $507,000 for the year ended March 31, 2001 from $460,000 for the year ended March 31, 2000. Scherer Labs' cost of sales
increased slightly to 40% of its net sales for the year ended March 31, 2001 from 39% for the year ended March 31, 2000. Cost of sales is primarily comprised of the cost of materials for
products the Company distributes and the related shipping expenses. Selling, general, and administrative expenses increased to 29% of net sales for the year ended March 31, 2001 from 27% for
the year ended March 31, 2000. Selling, general, and administrative expenses are primarily comprised of: management, administrative and office compensation, related costs and benefits; and
utilities, insurance, property taxes, depreciation, bad debt, professional fees, rent, amortization, advertising promotion, travel and miscellaneous other expenses.

Corporate

The Company's operating expenses at the corporate level increased to $789,000 for the year ended March 31, 2001 from $698,000 for the year ended
March 31, 2000. Certain administrative, accounting, management oversight, and payroll services are performed by the Company's Corporate office for its subsidiaries. The Corporate operating
expenses primarily include the salaries, wages and related benefits of the personnel who perform these functions (including the Company's executive officers),

16

---

rent expense, professional, accounting and legal fees. Salaries and wages decreased from $440,000 for the year ended March 31, 2000 to $361,000 for the year ended March 31, 2001. This
decrease was partially due to one fewer employee and offset by the increase of $34,000 for outside clerical services. The Company did not incur any lawsuit settlement expenses in the year ended
March 31, 2001 versus $298,000 for the year ended March 31, 2000, $255,00 of which was accounted for in Bio Systems. Professional, accounting and legal fees increased from $113,000 for
the year ended March 31, 2000 to $204,000 for the year ended March 31, 2001.

Other Income (Expense).The Company recorded interest income of $621,000, $806,000, and $738,000 in the years ending
March 31, 2002, 2001, and 2000, respectively. The increase in interest income is a result of the investment of the Company's cash, principally in marketable securities.

During
the year ended March 31, 2002, the Company recognized equity in net losses of unconsolidated companies of $24,000, relating to its equity method investments in
MedicareFacts, LLC, Econometrics, Inc. and Compliance1, Inc. The Company also recognized a $3,371,000 of impairment charges for the balance of its investments in
Econometrics, Inc., Compliance1, Inc. and Renaissance Pharmaceuticals, Inc. (see Note 3 of Notes to Consolidation Financial Statement included elsewhere herein).

Income Taxes.The Company recorded an income tax provision (benefit) of $616,000, $(532,000), and
$202,000 for the years ending March 31, 2002, 2001 and 2000, respectively. For the year ended March 31, 2002, based on its recent earnings history and uncertainty related to certain
taxable items, an asset valuation allowance of $1,281,000 was established versus no valuation for the year ended March 31, 2001. This, combined with $445,000 of other taxes, net, resulted in
the $616,000 of income tax expense at March 31, 2002. For the year ended March 31, 2001, and in prior years, the Company utilized tax loss carryforwards to offset taxable income.

Quarterly Results of Operations

The following table presents certain unaudited quarterly statement of operations data for each of the last 12 quarters through the quarter ended March 31,
2002. The information has been derived from the
Company's unaudited consolidated financial statements. In the opinion of management, the unaudited financial statements have been prepared on a basis consistent with the financial statements which
appear elsewhere in this Form 10-K and include all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the financial position and results
of operations for such unaudited periods. Historical results are not necessarily indicative of results to be expected in the future.

17

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QUARTERLY RESULTS OF OPERATIONS  (In thousands except per share data)

|                                                   |                                                  | Fiscal year ended March 31, 2002 |       | Fiscal year ended March 31, 2001 |     | Fiscal year ended March 31, 2000
|-------------------------------------------------- | ------------------------------------------------ | -------------------------------- | ----- | -------------------------------- | --- | --------------------------------
|
|NET SALES                                          |                                                  | $                                | 5,034 |                                  | $   | 5,132                           
|                                                   |                                                  |                                  |       |                                  |     |                                 
|                                                   | Cost of sales                                    |                                  |       | 3,192                            |     |                                 
|                                                   | Selling, general, and administrative expenses    |                                  |       | 1,288                            |     |                                 
|                                                   | Litigation expense                               |                                  |       |                                 |     |                                 
|                                                   |                                                  |                                  |       |                                  |     |                                 
|OPERATING INCOME (LOSS)                            |                                                  |                                  | 554   |                                  |     | 463                             
|OTHER (EXPENSE) INCOME:                            |                                                  |                                  |       |                                  |     |                                 
|                                                   | Interest income                                  |                                  |       | 192                              |     |                                 
|                                                   | Equity in net losses of unconsolidated companies |                                  |       | 39                               |     |                                 
|                                                   | Impairment charge for other investments, at cost |                                  |       |                                 |     |                                 
|                                                   | Other, net                                       |                                  |       | (3                               | )   |                                 
|                                                   |                                                  |                                  |       |                                  |     |                                 
|                                                   |                                                  | Total (expense) other income     |       |                                  | 228 |                                 
|                                                   |                                                  |                                  |       |                                  |     |                                 
|Income before income taxes                         |                                                  |                                  | 782   |                                  |     | (2,621                          
|Provision (benefit) for income taxes               |                                                  |                                  | 282   |                                  |     | (1,089                          
|                                                   |                                                  |                                  |       |                                  |     |                                 
|NET (LOSS) INCOME                                  |                                                  | $                                | 500   |                                  | $   | (1,532                          
|                                                   |                                                  |                                  |       |                                  |     |                                 
|BASIC NET (LOSS) INCOME PER COMMON SHARE           |                                                  | $                                | 0.12  |                                  | $   | (0.35                           
|                                                   |                                                  |                                  |       |                                  |     |                                 
|DILUTED (LOSS) INCOME PER COMMON SHARE             |                                                  | $                                | 0.11  |                                  | $   | (0.34                           
|                                                   |                                                  |                                  |       |                                  |     |                                 
|WEIGHTED AVERAGE COMMON SHARES OUTSTANDINGBASIC   |                                                  |                                  | 4,323 |                                  |     | 4,323                           
|                                                   |                                                  |                                  |       |                                  |     |                                 
|WEIGHTED AVERAGE COMMON SHARES OUTSTANDINGDILUTED |                                                  |                                  | 4,525 |                                  |     | 4,517                           
|                                                   |                                                  |                                  |       |                                  |     |                                 

Liquidity and Capital Resources

The Company's cash and cash equivalents totaled $5,561,000 at March 31, 2002, an increase of $1,163,000 from $4,398,000 at March 31, 2001. Since
March 31, 2000, the Company has made additional investments of $150,000 in fiscal year 2001 and $112,000 in fiscal year 2002 in Econometrics, Inc. and $1,115,000 in fiscal year 2001 in
Compliance1 Inc. In October 2000, the Company made an investment of $400,000 in MedicareFacts, LLC. Also, since March 31, 2001, the Company has sold $467,000 of marketable
securities which increased cash and cash equivalents. The Company's working capital increased to $8,155,000 at March 31, 2002, from $7,096,000 at March 31, 2001. This increase was
primarily for the reasons described below and the result of investment transactions described above.

Cash Flows from Operating Activities.

The Company's cash provided by operating activities from continuing operations totaled $3,692,000 for the year ended March 31, 2002, as compared to
$3,040,000 for the year ended March 31, 2001. The increase at March 31, 2002, is primarily due to increased sales of $1,660,000 at Bio Systems and Scherer Labs.

18

---

Cash Flows from Investing and Financing Activities.

The Company's investing activities used cash of $2,205,000, $596,000 and $5,614,000 for the years ending March 31, 2002, 2001 and 2000, respectively.
During the year ended March 31, 2002, the Company received proceeds of $467,000 from the sale of its investments in marketable securities versus the year ended March 31, 2001, when the
Company received proceeds of $2,743,000 from the sale of investments in marketable securities. The Company's marketable securities are composed of municipal bonds and corporate bonds and mature over
periods ranging from 2 years to 29 years (see Note 3 of the Notes to Consolidated Financial Statements included elsewhere herein).

During
the year ended March 31, 2002, the Company made additional investments in unconsolidated companies, accounted for using the equity method, of $112,000 in
Econometrics, Inc. During the year ended March 31, 2001, the Company made cash investments of $150,000 in Econometrics, Inc., $1,115,000 in Compliance1, Inc. and $400,000
in MedicareFacts, LLC. (See Note 3 of Notes to Condensed Consolidated Financial Statements included elsewhere herein).

As
a result of the growth in business, Bio Systems made capital expenditures for vehicles, equipment, and containers of $841,000, $1,509,000, and $1,344,000 in the years ending
March 31, 2002, 2001, and 2000, respectively.

Cash
(used in) provided by the Company's financing activities was $(307,000) and $265,000 for the years ended March 31, 2002, and 2001, respectively, caused by (repayment) capital
lease financing of new vehicles. Cash flows used in financing activities was $93,000 in the year ending March 31, 2000, when the Company paid off certain capital leases and purchased treasury
shares.

Management
of the Company believes that its current cash on hand and its current cash flow is sufficient to maintain operations on a short-term and long-term
basis. The Company continues to evaluate its long-term options with regard to the use of its remaining cash on hand including possible investment and acquisition opportunities.

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

None.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements of the Company are set forth on pages F-1 through F-21 of this report.

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

None.

19

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PART III

Certain information required by Part III is omitted from this report but is incorporated herein by reference to the Company's definitive Proxy Statement
for the 2002 Annual Meeting of Shareholders (the "Proxy Statement"). Such Proxy Statement will be filed with the Securities and Exchange Commission not later than 120 days after
March 31, 2002.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT

In accordance with General Instruction G(3) of the Form 10-K, the information relating to the directors of the Company, including directors who
are executive officers of the Company, is set forth under the caption "Election of Directors" in the Proxy Statement and is incorporated herein by reference. Pursuant to Instruction 3 of
Item 401(b) of Regulation S-K and General Instruction G(3) of Form 10-K, information relating to the executive officers of the Company is set forth
under the caption "Executive Officers of the Company" in Part I, Item 4A of this report. Compliance with Section 16(a) of the Securities Exchange Act of 1934: Section 16(a)
of the Securities Exchange of 1934, as amended, and regulations of the Securities and Exchange Commission thereunder require the Company's directors and executive officers and any persons who own more
than 10% of the Company's common stock, as well as certain affiliates of such persons, to file reports with the Securities and Exchange Commission and the National Association of Securities
Dealers, Inc. with respect to their ownership of the Company's common stock. Directors, executive officers and persons owning more than 10% of the Company's common stock are required by
Securities and Exchange Commission regulations to furnish the Company with copies of all Section 16(a) reports they file. Based solely on its review of the copies of such reports received by it
and written representations that no other reports were required of those persons, the Company believes that during the year ended March 31, 2002, all filing requirements applicable to its
directors and executive officers were complied with in a timely manner except that Donald P. Zima and Joel M. Segal filed late Form 3's. The Company is not aware of any other persons other than
directors and executive officers and their affiliates who own more than 10% of the Company's common stock.

ITEM 11. EXECUTIVE COMPENSATION

In accordance with General Instruction G(3) of Form 10-K, the information relating to executive compensation set forth under the caption
"Compensation of Executive Officers" in the Proxy Statement
is incorporated herein by reference; provided, such incorporation by reference shall not be deemed to include or incorporate by reference the information referred to in Item 402 (a)(8) of
Regulation S-K.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

In accordance with General Instruction G(3) of Form 10-K, the information relating to security ownership by certain persons set forth under the
captions "Principal Stockholders" and "Election of Directors" in the Proxy Statement is incorporated herein by reference.

|Plan Category                                             |       | Number of securities to be issued upon exercise of outstanding options, warrants and rights |         | Weighted average exercise price of outstanding options, warrants and rights |      | Number of securities remaining available for future issuance under equity compensation plans, warrants and rights
|--------------------------------------------------------- | ----- | ------------------------------------------------------------------------------------------- | ------- | --------------------------------------------------------------------------- | ---- | -----------------------------------------------------------------------------------------------------------------
|Equity compensation plans approved by security holders    |       | 445,000                                                                                     |         | $                                                                           | 3.86 |                                                                                                                  
|Equity compensation plans not approved by securityholders |       |                                                                                            |         |                                                                             |     |                                                                                                                  
|                                                          | Total |                                                                                             | 445,000 |                                                                             | $    | 3.86                                                                                                             

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In accordance with General Instruction G(3) of Form 10-K, the information relating to certain relationships and related transactions set forth
under the caption "Related Party Transactions" in the Proxy Statement is incorporated herein by reference.

20

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PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K

(a) Documents Filed as Part of this Report:

(1) Financial Statements.

The
financial statements of the Company and the related report of independent accountants thereon are set forth immediately following the Index to Financial Statements and Financial
Statement Schedule which appears on page F-1 of this report.

(2)
Financial Statement Schedule.

The
financial statement schedule is on page S-1 of this report. All other schedules for which provision is made in the applicable accounting regulations of the Securities and
Exchange Commission have been omitted because such schedules are not required under the related instructions or are not applicable or because the information required is included in the consolidated
financial statements or notes thereto.

(3)
Exhibits.

The
following exhibits are filed with or incorporated by reference in this report. Where filing is made by incorporation by reference to a previously filed registration statement or
report, such registration statement or report is identified in parenthesis. The Company will furnish any exhibit upon request to Debra A. Poston, Secretary, Scherer Healthcare, Inc.,
120 Interstate North Parkway, S.E., Suite 305, Atlanta, Georgia 30339. There is a charge of $.50 per page to cover expenses for copying and mailing.

|3.1     |  | Certificate of Incorporation of the Company, as amended (Exhibit 3.1 to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1994).                                                                                                                                                                           
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.2     |  | By-Laws of the Company (Exhibit 3.2 to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1994).                                                                                                                                                                                                            
|4       |  | Certificate of Designation, Preferences and Rights of Preferred Stock by Resolution of the Board of Directors Providing for an Issue of 7,000 Shares of Preferred Stock Designated "Series A" Cumulative Convertible
Preferred Stock (Exhibit 4 to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1994).
|10.1(a) |  | Property Lease between Bio Systems Partners and Flushing Operating Corp. for 210 Sherwood Avenue, Farmingdale, New York, and Addendum (Exhibit 10.2 to the Company's Annual Report on Form 10-K for the fiscal
year ended March 31, 1994).                                                                                            
|(b)     |  | Property Lease between Bio Systems Partners and Owners of 210 Sherwood Avenue for 210 Sherwood Avenue, Farmingdale, New York (Exhibit 10 to the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1999).                                                                                                         
|10.2    |  | Property Lease between Med X Services of PA, Inc. and successors and Mark Hankin and Hamnar Associates XVII for 380 Constance Drive, Warminster, Pennsylvania, and Addendum (Exhibit 10.4 to the Company's Annual
Report on Form 10-K for the fiscal year ended March 31, 1994).                                                      
|10.3    |  | 10% Convertible Promissory Note dated April 5, 2000, by and between Compliance1, Inc., a Delaware corporation, and Scherer Healthcare, Inc., a Delaware corporation (Exhibit 10.1 to the Company's
amended Quarterly Report on Form 10-Q/A for the period ended September 31, 2000).                                                  

21

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|10.4 |  | Subscription Agreement dated April 5, 2000, by and between Compliance1, Inc., a Delaware corporation, and Scherer Healthcare, Inc., a Delaware corporation (Exhibit 10.3 to the Company's amended
Quarterly Report on Form 10-Q/A for the period ended September 30, 2000).        
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.5 |  | 10% Convertible Promissory Note dated July 1, 2000, by and between Compliance1, Inc., a Delaware corporation, and Scherer Healthcare, Inc., a Delaware corporation (Exhibit 10.2 to the Company's amended
Quarterly Report on Form 10-Q/A for the period ended September 30, 2000).
|10.6 |  | 10% Series B Convertible Promissory Note dated October 15, 2000, by and between MedicareFacts, LLC, a Delaware LLC, and Scherer Healthcare, Inc. a Delaware corporation (Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended December 31, 2000).     
|10.7 |  | Subscription Agreement dated October15, 2000, by and between MedicareFacts, LLC, a Delaware LLC, and Scherer Healthcare, Inc., a Delaware corporation (Exhibit 10.2 to the Company's Quarterly Report on
Form 10-Q for the quarter ended December 31, 2000).                       
|21   |  | Subsidiaries of Registrantfiled herewith.                                                                                                                                                                                                                                         
|23   |  | Consent of Arthur Andersen LLPfiled herewith.                                                                                                                                                                                                                                     
|99   |  | Letter from Scherer Healthcare, Inc. to the SEC regarding Arthur Andersen LLPfiled herewith.                                                                                                                                                                                      

(b) Reports on Form 8-K.

The following Current Reports on form 8-K were filed by the Company for the year ended March 31, 2002:

None

22

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized on May 29, 2002.

| |  | SCHERER HEALTHCARE, INC.
| |  | ------------------------
| |  | By:                     

KNOW
ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints Robert P. Scherer, Jr. and Donald P. Zima, and each of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution, for him and in his name, place and stead, in any and all capacities, to sign the Annual Report on
Form 10-K of Scherer Healthcare, Inc. for the fiscal year ended March 31, 2002, and any and all amendments thereto, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange Commission and the National Association of Securities Dealers, Inc., granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite or necessary to be done, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his or her
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant
to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities
indicated on May 29, 2002.

|Signature                                       |  | Title                                                                   |  | 
|----------------------------------------------- |  | ----------------------------------------------------------------------- |  | 
|                                                |  |                                                                         |  | 
|/s/ROBERT P. SCHERER, JR.Robert P. Scherer, Jr. |  | Chairman of the Board, Director, Chief Executive Officer, and President |  | 
|/s/DONALD P. ZIMADonald P. Zima                 |  | Vice President and Chief Financial Officer                              |  | 
|/s/STEPHEN LUKAS, SR.Stephen Lukas, Sr.         |  | Director                                                                |  | 
|/s/KENNETH H. ROBERTSONKenneth H. Robertson     |  | Director                                                                |  | 
|/s/JOEL M. SEGALJoel M. Segal                   |  | Director                                                                |  | 
|/s/WILLIAM J. THOMPSONWilliam J. Thompson       |  | Director                                                                |  | 

23

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SCHERER HEALTHCARE, INC.    FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE

The following consolidated financial statements and schedule of the Registrant and its subsidiaries are submitted herewith in response to Item 8:

|Report of Independent Public Accountants                                                                                              |  | F-2
|------------------------------------------------------------------------------------------------------------------------------------- |  | ---
|Consolidated Balance SheetsMarch 31, 2002 and 2001                                                                                   |  | F-3
|Consolidated Statements of OperationsYears Ended March 31, 2002, 2001, and 2000                                                      |  | F-4
|Consolidated Statements of Stockholders' EquityYears Ended March 31, 2002, 2001, and 2000                                            |  | F-5
|Consolidated Statements of Cash FlowsYears Ended March 31, 2002, 2001, and 2000                                                      |  | F-6
|Notes to Consolidated Financial Statements                                                                                            |  | F-7
|The following financial statement schedule of the Registrant and its subsidiaries is submitted herewith in response to Item 14(a)(2): |  |    
|Schedule IIValuation and Qualifying Accounts                                                                                         |  | S-1

F-1

---



REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To
Scherer Healthcare, Inc.:

We
have audited the accompanying consolidated balance sheets ofSCHERER HEALTHCARE, INC.(a Delaware corporation) AND SUBSIDIARIESas of March 31,
2002 and 2001, and the related consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended March 31, 2002. These consolidated financial statements and the schedule referred to below are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and the schedule based on our audits.

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

In
our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Scherer Healthcare, Inc. and subsidiaries as of
March 31, 2002 and 2001, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 2002, in conformity with accounting principles
generally accepted in the United States.

Our
audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule listed in the index of financial statements and financial
statement schedule is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This information has been subjected to
the auditing procedures applied in our audits of the basic financial statements and, in our opinion, is fairly stated, in all material respects in relation to the basic financial statements taken as a
whole.



Atlanta,
Georgia
May 29, 2002

F-2

---



SCHERER HEALTHCARE, INC.        CONSOLIDATED BALANCE SHEETS

|                                                     |                                                                                                                                                                                                                                      | As of March 31,                   |           
|---------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | --------------------------------- | ----------
|
|ASSETS                                               |                                                                                                                                                                                                                                     
|CURRENT ASSETS                                       |                                                                                                                                                                                                                                      |                                   |           
|                                                     | Cash and cash equivalents                                                                                                                                                                                                            |                                   | $         
|                                                     | Accounts receivable, less allowance for doubtful accounts of $299,000 in 2002 and $319,000 in 2001                                                                                                                                   |                                   |           
|                                                     | Interest receivable                                                                                                                                                                                                                  |                                   |           
|                                                     | Inventories                                                                                                                                                                                                                          |                                   |           
|                                                     | Income taxes receivable                                                                                                                                                                                                              |                                   |           
|                                                     | Prepaid and other                                                                                                                                                                                                                    |                                   |           
|                                                     |                                                                                                                                                                                                                                      |                                   |           
|                                                     |                                                                                                                                                                                                                                      | Total current assets              |           
|                                                     |                                                                                                                                                                                                                                      |                                   |           
|PROPERTY AND EQUIPMENT                               |                                                                                                                                                                                                                                      |                                   | 10,010,000
|                                                     | Less accumulated depreciation                                                                                                                                                                                                        |                                   |           
|                                                     |                                                                                                                                                                                                                                      |                                   |           
|                                                     |                                                                                                                                                                                                                                      | Total property and equipment, net |           
|                                                     |                                                                                                                                                                                                                                      |                                   |           
|OTHER ASSETS                                         |                                                                                                                                                                                                                                      |                                   |           
|                                                     | Intangible assets, net                                                                                                                                                                                                               |                                   |           
|                                                     | Investments                                                                                                                                                                                                                          |                                   |           
|                                                     | Deferred income taxes                                                                                                                                                                                                                |                                   |           
|                                                     | Other                                                                                                                                                                                                                                |                                   |           
|                                                     | Net assets of discontinued operations                                                                                                                                                                                                |                                   |           
|                                                     |                                                                                                                                                                                                                                      |                                   |           
|                                                     |                                                                                                                                                                                                                                      | Total other assets                |           
|                                                     |                                                                                                                                                                                                                                      |                                   |           
|TOTAL ASSETS                                         |                                                                                                                                                                                                                                      | $                                 | 29,126,000
|                                                     |                                                                                                                                                                                                                                      |                                   |           
|LIABILITIES AND STOCKHOLDERS' EQUITY                 |                                                                                                                                                                                                                                     
|CURRENT LIABILITIES                                  |                                                                                                                                                                                                                                      |                                   |           
|                                                     | Accounts payable                                                                                                                                                                                                                     |                                   | $         
|                                                     | Accrued expenses                                                                                                                                                                                                                     |                                   |           
|                                                     | Unearned revenue                                                                                                                                                                                                                     |                                   |           
|                                                     | Current maturities of capital lease obligations                                                                                                                                                                                      |                                   |           
|                                                     | Income taxes payable                                                                                                                                                                                                                 |                                   |           
|                                                     |                                                                                                                                                                                                                                      |                                   |           
|                                                     |                                                                                                                                                                                                                                      | Total current liabilities         |           
|                                                     |                                                                                                                                                                                                                                      |                                   |           
|CAPITAL LEASE OBLIGATIONS, net of current maturities |                                                                                                                                                                                                                                      |                                   | 673,000   
|OTHER LIABILITIES                                    |                                                                                                                                                                                                                                      |                                   | 56,000    
|COMMITMENTS AND CONTINGENCIES (Note 6)               |                                                                                                                                                                                                                                      |                                   |           
|STOCKHOLDERS' EQUITY                                 |                                                                                                                                                                                                                                      |                                   |           
|                                                     | Convertible preferred stock$.01 par value, 2,000,000 shares authorized; 17,939 and 21,704 shares issued and outstanding as of March 31, 2002 and 2001, respectively                                                                 |                                   |           
|                                                     | Common stock$.01 par value, 12,000,000 shares authorized; 4,730,085 and 4,713,411 shares issued as of March 31, 2002 and 2001, respectively; 4,339,056 and 4,322,382 shares outstanding as of March 31, 2002
and 2001, respectively |                                   |           
|                                                     | Capital in excess of par value                                                                                                                                                                                                       |                                   |           
|                                                     | Unrealized loss on marketable securities                                                                                                                                                                                             |                                   |           
|                                                     | Retained earnings                                                                                                                                                                                                                    |                                   |           
|                                                     | Less treasury stock, at cost                                                                                                                                                                                                         |                                   |           
|                                                     |                                                                                                                                                                                                                                      |                                   |           
|                                                     |                                                                                                                                                                                                                                      | Total stockholders' equity        |           
|                                                     |                                                                                                                                                                                                                                      |                                   |           
|TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY           |                                                                                                                                                                                                                                      | $                                 | 29,126,000
|                                                     |                                                                                                                                                                                                                                      |                                   |           

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

F-3

---



SCHERER HEALTHCARE, INC.        CONSOLIDATED STATEMENTS OF OPERATIONS

|                                                   |                                                  | Year Ended March 31,             
|-------------------------------------------------- | ------------------------------------------------ | ---------------------------------
|
|NET SALES                                          |                                                  | $                                
|                                                   |                                                  |                                  
|COSTS AND EXPENSES                                 |                                                  |                                  
|                                                   | Cost of sales                                    |                                  
|                                                   | Selling, general, and administrative             |                                  
|                                                   | Litigation settlements (Note 6)                  |                                  
|                                                   |                                                  |                                  
|                                                   |                                                  | Total costs and expenses         
|                                                   |                                                  |                                  
|OPERATING INCOME                                   |                                                  |                                  
|OTHER (EXPENSE) INCOME                             |                                                  |                                  
|                                                   | Interest income                                  |                                  
|                                                   | Equity in net losses of unconsolidated companies |                                  
|                                                   | Impairment charge for investments                |                                  
|                                                   | Other, net                                       |                                  
|                                                   |                                                  |                                  
|                                                   |                                                  | Total other (expense) income, net
|                                                   |                                                  |                                  
|(LOSS) INCOME BEFORE INCOME TAXES                  |                                                  |                                  
|(Benefit) provision for income taxes               |                                                  |                                  
|                                                   |                                                  |                                  
|NET (LOSS) INCOME                                  |                                                  | $                                
|                                                   |                                                  |                                  
|BASIC NET (LOSS) INCOME PER COMMON SHARE           |                                                  | $                                
|                                                   |                                                  |                                  
|DILUTED NET (LOSS) INCOME PER COMMON SHARE         |                                                  | $                                
|                                                   |                                                  |                                  
|WEIGHTED AVERAGE COMMON SHARES OUTSTANDINGBASIC   |                                                  |                                  
|                                                   |                                                  |                                  
|WEIGHTED AVERAGE COMMON SHARES OUTSTANDINGDILUTED |                                                  |                                  
|                                                   |                                                  |                                  

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

F-4

---



SCHERER HEALTHCARE, INC.        CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY        For the years ended March 31, 2002, 2001, and 2000

|                                         |                      | Preferred
Stock |   | Common
Stock |   | Capital In
Excess of
Par Value |  | Unrealized
Loss on
Marketable
Securities |            | Retained
Earnings |   | Treasury
Stock, At
Cost |   | Total
Stockholders'
Equity |            | Accumulated
Comprehensive
Income |  
|---------------------------------------- | -------------------- | --------------- | - | ------------ | - | ------------------------------ |  | ---------------------------------------- | ---------- | ----------------- | - | ----------------------- | - | -------------------------- | ---------- | -------------------------------- | -
|Balance at March 31, 1999                |                      | $               |  |              | $ | 47,000                         |  | $                                        | 22,394,000 |                   | $ | (45,000                 | ) | $                          | 4,905,000  |                                  | $
|                                         |                      |                 |   |              |   |                                |  |                                          |            |                   |   |                         |   |                            |            |                                  |  
|Comprehensive income:                    |                      |                 |   |              |   |                                |  |                                          |            |                   |   |                         |   |                            |            |                                  |  
|Net income                               |                      |                 |  |              |   |                               |  |                                          |           |                   |   |                         |   |                            | 2,046,000  |                                  |  
|Unrealized loss on marketable securities |                      |                 |  |              |   |                               |  |                                          |           |                   |   | (893,000                | ) |                            |           |                                  |  
|                                         |                      |                 |   |              |   |                                |  |                                          |            |                   |   |                         |   |                            |            |                                  |  
|                                         | Comprehensive income |                 |   |              |   |                                |  |                                          |            |                   |   |                         |   |                            |            |                                  |  
|                                         |                      |                 |   |              |   |                                |  |                                          |            |                   |   |                         |   |                            |            |                                  |  
|Shares Purchased                         |                      |                 |  |              |   |                               |  |                                          |           |                   |   |                         |   |                            |           |                                  |  
|                                         |                      |                 |   |              |   |                                |  |                                          |            |                   |   |                         |   |                            |            |                                  |  
|Balance at March 31, 2000                |                      |                 |  |              |   | 47,000                         |  |                                          | 22,394,000 |                   |   | (938,000                | ) |                            | 6,951,000  |                                  |  
|                                         |                      |                 |   |              |   |                                |  |                                          |            |                   |   |                         |   |                            |            |                                  |  
|Comprehensive income:                    |                      |                 |   |              |   |                                |  |                                          |            |                   |   |                         |   |                            | 1,499,000  |                                  |  
|Net income                               |                      |                 |  |              |   |                               |  |                                          |           |                   |   |                         |   |                            |            |                                  |  
|Unrealized gain on marketable securities |                      |                 |  |              |   |                               |  |                                          |           |                   |   | 659,000                 |   |                            |           |                                  |  
|                                         |                      |                 |   |              |   |                                |  |                                          |            |                   |   |                         |   |                            |            |                                  |  
|                                         | Comprehensive income |                 |   |              |   |                                |  |                                          |            |                   |   |                         |   |                            |            |                                  |  
|                                         |                      |                 |   |              |   |                                |  |                                          |            |                   |   |                         |   |                            |            |                                  |  
|Balance at March 31, 2001                |                      |                 |  |              |   | 47,000                         |  | $                                        | 22,394,000 |                   |   | (279,000                | ) | $                          | 8,450,000  |                                  | $
|                                         |                      |                 |   |              |   |                                |  |                                          |            |                   |   |                         |   |                            |            |                                  |  
|Comprehensive loss:                      |                      |                 |   |              |   |                                |  |                                          |            |                   |   |                         |   |                            |            |                                  |  
|Net loss                                 |                      |                 |  |              |   |                               |  |                                          |           |                   |   |                         |   |                            | (1,938,000 | )                                |  
|Unrealized loss on marketable securities |                      |                 |  |              |   |                               |  |                                          |           |                   |   | (51,000                 | ) |                            |           |                                  |  
|                                         |                      |                 |   |              |   |                                |  |                                          |            |                   |   |                         |   |                            |            |                                  |  
|                                         | Comprehensive loss   |                 |   |              |   |                                |  |                                          |            |                   |   |                         |   |                            |            |                                  |  
|                                         |                      |                 |   |              |   |                                |  |                                          |            |                   |   |                         |   |                            |            |                                  |  
|Balance at March 31, 2002                |                      | $               |  |              | $ | 47,000                         |  | $                                        | 22,394,000 |                   |   | (330,000                | ) | $                          | 6,512,000  |                                  | $
|                                         |                      |                 |   |              |   |                                |  |                                          |            |                   |   |                         |   |                            |            |                                  |  

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

F-5

---



SCHERER HEALTHCARE, INC.        CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                             |                                                                                                    | Year Ended March 31,                                |           
|-------------------------------------------- | -------------------------------------------------------------------------------------------------- | --------------------------------------------------- | ----------
|
|CASH FLOWS FROM OPERATING ACTIVITIES:        |                                                                                                    |                                                     |           
|Net (loss) income                            |                                                                                                    | $                                                   | (1,938,000
|                                             | Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: |                                                     |           
|                                             |                                                                                                    | Depreciation and amortization                       |           
|                                             |                                                                                                    | Deferred taxes                                      |           
|                                             |                                                                                                    | Equity in net losses of unconsolidated companies    |           
|                                             |                                                                                                    | Impairment charge for investments                   |           
|                                             |                                                                                                    | Other noncash charges and credits, net              |           
|                                             | Changes in operating assets and liabilities:                                                       |                                                     |           
|                                             |                                                                                                    | Accounts receivable                                 |           
|                                             |                                                                                                    | Interest receivable                                 |           
|                                             |                                                                                                    | Inventories                                         |           
|                                             |                                                                                                    | Prepaid and other current assets                    |           
|                                             |                                                                                                    | Other assets                                        |           
|                                             |                                                                                                    | Income taxes                                        |           
|                                             |                                                                                                    | Accounts payable and accrued expenses               |           
|                                             |                                                                                                    | Unearned revenue                                    |           
|                                             |                                                                                                    | Other liabilities                                   |           
|                                             |                                                                                                    |                                                     |           
|                                             |                                                                                                    | Net cash provided by continuing operations          |           
|                                             |                                                                                                    |                                                     |           
|                                             |                                                                                                    | Net cash used by discontinued operations            |           
|                                             |                                                                                                    |                                                     |           
|                                             |                                                                                                    | Net cash provided by operating activities           |           
|                                             |                                                                                                    |                                                     |           
|CASH FLOWS FROM INVESTING ACTIVITIES:        |                                                                                                    |                                                     |           
|                                             | Additions to property and equipment                                                                |                                                     |           
|                                             | Sale of marketable securities                                                                      |                                                     |           
|                                             | Purchase of marketable securities                                                                  |                                                     |           
|                                             | Decrease in notes receivable                                                                       |                                                     |           
|                                             | Investments in unconsolidated companies                                                            |                                                     |           
|                                             | Permit acquisition costs                                                                           |                                                     |           
|                                             |                                                                                                    |                                                     |           
|                                             |                                                                                                    | Net cash used for investing activities              |           
|                                             |                                                                                                    |                                                     |           
|CASH FLOWS FROM FINANCING ACTIVITIES:        |                                                                                                    |                                                     |           
|                                             | (Repayments of borrowings) net proceeds from                                                       |                                                     |           
|                                             | Purchase of treasury shares                                                                        |                                                     |           
|                                             |                                                                                                    |                                                     |           
|                                             |                                                                                                    | Net cash (used in) provided by financing activities |           
|                                             |                                                                                                    |                                                     |           
|CHANGE IN CASH AND CASH EQUIVALENTS          |                                                                                                    |                                                     | 1,163,000 
|CASH AND CASH EQUIVALENTS, beginning of year |                                                                                                    |                                                     | 4,398,000 
|                                             |                                                                                                    |                                                     |           
|CASH AND CASH EQUIVALENTS, end of year       |                                                                                                    |                                                     | 5,561,000 
|                                             |                                                                                                    |                                                     |           
|SUPPLEMENTAL DISCLOSURES:                    |                                                                                                    |                                                     |           
|                                             | Cash payments for income taxes                                                                     |                                                     | $         

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

F-6

---



SCHERER HEALTHCARE, INC.        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS        MARCH 31, 2002, 2001, AND 2000

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRINCIPLES OF CONSOLIDATION

Basis of Presentation

The accompanying consolidated financial statements include the accounts of the parent company, Scherer Healthcare, Inc., and its subsidiaries (the
"Company" or "Scherer Healthcare"). All significant intercompany accounts and transactions have been eliminated in consolidation.

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

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

Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.

Fair Value of Financial Instruments

As of March 31, 2002 and 2001, the carrying value of financial instruments such as cash, short-term investments, trade receivables and payables
and short-term debt approximated their fair values based on the short-term maturities of these instruments. Additionally, the carrying value of both long-term
investments and long-term debt approximated fair values.

Inventories

Inventories are stated at the lower of cost or market, using the first-in, first-out ("FIFO") method.

During
the fourth quarter of 2001, the Company changed its method of determining the cost of inventories from the last-in, first-out ("LIFO") method to the FIFO
method, as it represented a more accurate methodology for costing inventory. The change in accounting principle increased net income by $31,000 and is included in the accompanying consolidated
statements of operations for the year ended March 31, 2001.

As of March 31,2002

2001Finished products

$
53,000

$
65,000Containers, packaging, and raw material


363,000


268,000Total

$
416,000

$
333,000


F-7

---

Property and Equipment

Property and equipment is stated at cost, and depreciation is computed using the straight-line method over the estimated useful lives of the assets as
follows: automobiles and trucks5 years, leasehold improvements3-31 years, and furniture, fixtures, equipment and
containers3-10 years.

As of March 31,2002

2001Automobiles and trucks

$
2,628,000

$
2,246,000Leasehold improvements


967,000


964,000Furniture, fixtures, equipment and containers


6,415,000


6,077,000Total

$
10,010,000

$
9,287,000


Depreciation
expense for the years ending March 31, 2002, 2001, and 2000 was $1,323,000, $1,276,000, and $1,117,000, respectively.

Intangible Assets

Intangible assets include the cost in excess of net assets acquired ("goodwill") as well as various other intangibles. Intangible assets are amortized over the
following estimated useful lives:

YearsGoodwill

30Permit acquisition costs

1-5


Marketable Securities

The Company determines the appropriate classification of its marketable securities at the time of purchase and reevaluates such designation at each balance sheet
date. The Company's marketable securities are categorized as available-for-sale securities, as defined by SFAS No. 115, "Accounting for Certain Investments in Debt and
Equity Securities," and are carried at fair market value, with unrealized holding gains and losses reported in stockholders' equity (see Note 3).

Income Taxes

The Company uses the liability method to account for income taxes (see Note 9).

Revenue Recognition

Revenue for services provided is recorded when the Company has completed the service. Product revenue is recorded by the Company when products are received by
customers or independent distributors. The Company's payment terms for product sales are the same for all customers, i.e. 1% discount if paid in 10 days, net due in 30 days. The Company
does not offer price protection. In accordance with SFAS No. 48, "Revenue Recognition When Right of Return Exists," transactions with

F-8

---

customers and distributors qualify as sales at delivery. The Company's return and exchange policy is as follows:



The
Company's returns for the years ending March 31, 2002, 2001, and 2000 were $10,000, $8,000, and $9,000, respectively. The Company's policy is to reduce sales and cost of goods
sold when merchandise is returned.

Cost of Sales

Cost of sales includes the cost of product sales attributed to the Consumer Healthcare Products Segment and the cost of services associated with the Waste
Management Services Segment which includes salaries and benefits costs, transportation and overhead costs.

Unearned Revenue

Unearned revenue includes the liability for advance billings to customers for contractual services billed on the first day of monthly billing periods.

Long-Lived Assets

The Company reviews its long-lived assets, such as property and equipment and intangible assets, including goodwill, for impairment at each balance
sheet date or whenever events or changes in circumstances indicate that the carrying amount of an asset should be assessed. Management evaluates the intangible assets related to each acquisition
individually to determine whether impairment has occurred. When factors indicate that long-lived assets and intangible assets should be evaluated for possible impairment, the Company will
use an estimate of undiscounted cash flows over the remaining life of the asset in measuring whether the asset is recoverable. Management believes the Company's long-lived assets and
intangible assets are appropriately valued in the consolidated balance sheets as of March 31, 2002 and 2001.

F-9

---

Insurance/Self-Insurance

The Company uses a combination of insurance and self-insurance for a number of risks including workers' compensation, general liability, vehicle
liability and employee related health care benefits, a portion of which is paid by the employees. Liabilities associated with these risks are estimated in part by considering historical claims
experience, demographic factors, severity factors and other actuarial assumptions.

Net Income Per Common Share

Basic net income per common share is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for
the period. Diluted net income per common share reflects the potential dilution that could occur if securities or other contracts to issue common shares were exercised or converted into common shares.

For
the year ended March 31, 2002, the Company reported a loss and has not calculated dilutive weighted average common shares as the dilutive securities are
anti-dilutive. The following is a reconciliation of the Company's basic weighted average common shares outstanding to diluted weighted average common shares outstanding for the years
ending March 31, 2001 and 2000.

2001

2000Weighted average common shares outstandingbasic

4,321,367

4,336,383Dilutive potential common shares, weighted:Conversion of preferred stock to common stock

96,127

98,287Dilutive stock options, net

124,778

113,623Weighted average common shares outstandingdiluted

4,542,272

4,548,293Anti-dilutive options not included

50,000

129,800


New Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board issued Statements of Financial Accounting Standards No. 141,Business
Combinations, and No. 142,Goodwill and Other Intangible Assets, effective for fiscal years beginning after
December 15, 2001. Under the new rules, goodwill and intangible assets deemed to have indefinite lives will no longer be amortized, but will be subject to annual impairment tests in accordance
with the Statements. Other intangible assets will continue to be amortized over their useful lives.

The
Company will apply the new rules on accounting for goodwill and other intangible assets beginning in the first quarter of fiscal 2003. Application of the nonamortization provisions
of the Statement is expected to result in an increase in net income of approximately $100,000, net of tax effects, for fiscal 2003. Prior to the completion of the second quarter of fiscal 2003, the
Company will complete a transitional impairment review for goodwill and indefinite lived intangible assets as of the date of adoption. Subsequently, the Company will perform similar impairment reviews
annually.

F-10

---

Management does not believe that the adoption of the impairment review provisions of the standard will have a material effect on the Company's financial position or results of operations.

In
August 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 144,Accounting for the Impairment
or Disposal of Long-Lived Assets(FAS 144), which addresses financial accounting and reporting for the impairment or disposal of long-lived
assets. FAS 144 supersedes SFAS No. 121,Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of, and the accounting and reporting provisions of APB Opinion No. 30,Reporting the Results of Operations for a Disposal of a Segment of a
Business. The Company will adopt FAS 144 as of April 1, 2002 and does not believe that the adoption of FAS 144 will have a material impact on the Company's
financial position or results of operations.

NOTE 2. SEGMENT INFORMATION

The Company operates in two business segments. The Company's waste management services segment assists hospitals, clinics, doctors' offices, and other health care
facilities with the containment, control, collection, and processing of sharp-edged medical waste such as needles, syringes, razors, scissors, and scalpels. The consumer healthcare products segment
distributes brand name and generic over-the-counter health care products. The Company also has a corporate segment, which has no operations.

F-11

---

The
accounting policies of the business segments are the same as those described in the summary of significant accounting policies (see Note 1). Summarized financial data by
business segment as of and for the years ending March 31, 2002, 2001, and 2000 are as follows.

Year Ended March 31,2002

2001

2000Net Sales:Waste Management Services Segment

$
18,832,000

$
17,278,000

$
15,435,000Consumer Healthcare Products Segment


1,566,000


1,460,000


1,353,000Total


20,398,000

$
18,738,000

$
16,788,000Operating Income (Loss):Waste Management Services Segment

$
1,763,000

$
1,712,000

$
1,656,000Consumer Healthcare Products Segment


546,000


507,000


460,000Corporate


(926,000
)

(789,000
)

(698,000
)Total

$
1,383,000

$
1,430,000

$
1,418,000Identifiable Assets:Waste Management Services Segment

$
13,008,000

$
13,201,000

$
12,708,000Consumer Healthcare Products Segment


244,000


236,000


228,000Corporate (a)


15,874,000


17,592,000


15,744,000Total

$
29,126,000

$
31,029,000

$
28,680,000Depreciation Expense:Waste Management Services Segment

$
1,296,000

$
1,228,000

$
1,069,000Consumer Healthcare Products Segment


5,000


2,000


3,000Corporate


22,000


46,000


45,000Total

$
1,323,000

$
1,276,000

$
1,117,000Capital Expenditures:Waste Management Services Segment

$
841,000

$
1,509,000

$
1,344,000Consumer Healthcare Products Segment


0


2,000


3,000Corporate


4,000


2,000


28,000Total

$
845,000

$
1,513,000

$
1,375,000


---

The
Company recorded interest income of $621,000, $806,000, and $738,000 for the years ending March 31, 2002, 2001, and 2000, respectively, primarily related to interest-bearing
investments carried at market value. The Company records interest income at the Corporate level.

F-12

---

Waste Management Services Segment

The Company operates its medical waste management services segment through its wholly-owned subsidiaries, BioWaste Systems, Inc., and Medical Waste
Systems, Inc. (collectively, "Bio Systems"). Bio Systems has developed and implemented a system to manage and to dispose of certain infectious waste from hospitals and medical
facilitiesprimarily injectables and other sharp-edged waste. Bio Systems operates in ten Northeastern and Mid-Atlantic States, plus the District of Columbia.

Consumer Healthcare Products Segment

Scherer Laboratories, Inc. ("Scherer Labs"), a 100% owned subsidiary of the Company, distributes its own brand name
over-the-counter ("OTC") healthcare products. The OTC products are principally
products used for treatment of colds and coughs, eye and ear irritations and insect bites. In the years ended March 31, 2002, 2001 and 2000, Scherer Labs had one customer who accounted for 68%
of sales for each year.

Scherer
Labs markets its products primarily to drug and food stores, mass market retailers, drug wholesalers, and government agencies. The majority of the sales are through retailers in
the southwest region of the United States.

NOTE 3. INVESTMENTS

The Company has the following investments as of March 31, 2002 and 2001.

2002

2001Investments in marketable securities, at fair value

$
8,811,000

$
7,843,000Equity method investments in unconsolidated companies


303,000


3,167,000Other investments, at cost


29,000


270,000Total

$
9,143,000

$
11,280,000


The
Company's investments, at market value, consist of investments in long-term high-grade marketable securities composed primarily of government and corporate
fixed income bonds. These marketable securities are classified as available-for-sale and are being carried at fair market value based on quoted market prices. The net
unrealized holding gains or losses on these investments are reported in stockholders' equity in the accompanying balance sheet.

F-13

---

The
amortized cost and fair market value of the Company's marketable securities are as follows:

Cost
Amortized

Net Unrealized
Loss

Fair Market
ValueMarch 31, 2002Municipal bonds

$
6,408,000

$
(243,000
)
$
6,165,000Corporate bonds


2,733,000


(87,000
)

2,646,000Total

$
9,141,000

$
(330,000
)
$
8,811,000March 31, 2001Municipal bonds

$
6,608,000

$
(148,000
)
$
6,460,000Corporate bonds


1,215,000


(107,000
)

1,108,000Preferred stocks


299,000


(24,000
)

275,000Total

$
8,122,000

$
(279,000
)
$
7,843,000


The
net unrealized losses of the Company's marketable securities at March 31, 2002 and 2001, respectively, are detailed as follows:

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Net
Unrealized
LossesMarch 31, 2002Municipal bonds

$
24,000

$
(267,000
)
$
(243,000
)Corporate bonds


3,000


(90,000
)

(87,000
)Total

$
27,000

$
(357,000
)
$
(330,000
)


Gross
Unrealized
Gains

Gross Unrealized
Losses

Net Unrealized
LossesMarch 31, 2001Municipal bonds

$
21,000

$
(169,000
)
$
(148,000
)Corporate bonds


1,000


(108,000
)

(107,000
)Preferred stocks





(24,000
)

(24,000
)Total

$
22,000

$
(301,000
)
$
(279,000
)


F-14

---

The
amortized cost and estimated fair value of the marketable securities (excluding the preferred stocks) at March 31, 2002, by contractual maturity, are shown below:

Amortized Cost

Fair
ValueDue in one year or less

$


$
Due after one year through five years


2,123,000


2,121,000Due after five years through ten years


210,000


208,000Due after ten years


6,808,000


6,482,000Total

$
9,141,000

$
8,811,000


The
equity method of accounting is used for companies and other investments in which the Company has significant influence. Generally this represents common stock ownership or
convertible rights of at least 20% and not greater than 50%, and for investments in limited liability companies of at least 5% of ownership percentages.

The
Company had investments in unconsolidated companies, recorded on the equity method of accounting, of $303,000 and $3,167,000 as of March 31, 2002 and 2001, respectively. The
Company's equity in net losses of unconsolidated companies was $24,000 and $667,000 for the years ended March 31, 2002, and 2001, respectively.

The
Company performs analysis of the operations and financial position of all investments on a quarterly basis subsequent to its initial investment, including a review of quarterly
unaudited financial statements. The Company considers any increase/decrease in the Company's investments to be temporary unless other information related to sale or cessation exist. Following is a
discussion of the Company's investments during the year ended March 31, 2002:

MedicareFacts,
LLC:



Econometrics, Inc.:



F-15

---



Compliance1, Inc.



Renaissance
Pharmaceuticals, Inc.



F-16

---



Due
to the recent difficult economic conditions affecting these companies resulting in the inability to generate sufficient cash flow and the amount of liabilities ranking ahead of the
Company's investment in these entities, the Company has concluded that the decrease in value of its total investment in Econometrics, Compliance1 and Renaissance Pharmaceuticals is other than
temporary and has written down the respective investments to zero. Accordingly, the Company recorded impairment charges of $3,129,000 in the quarter ended September 30, 2001, and $242,000 in
the quarter ended March 31, 2002.

NOTE 4. INTANGIBLES AND GOODWILL

Intangible assets and the related accumulated amortization as of March 31, 2002 and 2001 are as follows:

2002

2001Goodwill

$
4,575,000

$
4,575,000Permit acquisition costs


526,000


490,000Acquisition costs for investments in Econometrics





138,0005,101,000


5,203,000Less accumulated amortization


1,770,000


1,665,000Intangible assets, net

$
3,331,000

$
3,538,000


Goodwill
represents the cost in excess of net assets acquired relating to the acquisition of Bio Systems Partners. Goodwill amortization expense was $155,000, $150,000, and $149,000 for
the years ending March 31, 2002, 2001, and 2000, respectively. Permit acquisition costs relate to the costs incurred in acquiring and amending disposal permits, as required by the state of New
York and the Department of Environmental Conservation. Permit acquisition costs amortization expense was $106,000, $105,000, and $85,000 for the years ending March 31, 2002, 2001, and 2000,
respectively. Acquisition costs for the investment in Econometrics relates primarily to acquisition consulting fees.The acquisition costs associated
with the investment in Econometrics, net of amortization, of $97,000 were included in the impairment charge of $3,371,000 included in the Statements of Operations (Note 3).

F-17

---



NOTE 5. LEASES

At March 31, 2002, future minimum annual rental commitments under lease obligations are as follows:

Years ending March 31:

Capital Leases

Operating Leases2003

$
375,000

$
624,0002004


302,000


364,0002005


248,000


260,0002006


148,000


74,0002007


56,000


75,000Total minimum lease payments


1,129,000

$
1,397,000Less: Amount representing interest


164,000Present value of net minimum lease payments


965,000Less: Current maturities of capital leases obligations


292,000Long-term capital lease obligations

$
673,000


Total
rental expense included in the consolidated statements of operations was $449,000, $392,000 and $329,000 for the years ending March 31, 2002, 2001 and 2000, respectively.

NOTE 6. COMMITMENTS AND CONTINGENCIES

Legal Proceedings

In a January 1989 merger transaction, a wholly-owned subsidiary of the Company acquired Med X Services of Pennsylvania, Inc. ("Med X")
whose President and majority stockholder was Harry Kovar. Mr. Kovar continued to be employed by Med X after the merger although a written employment agreement between Mr. Kovar
and Med X had not been executed by both parties. In July 1989, Mr. Kovar was terminated from his employment with Med X. On December 18, 1989, Mr. Kovar and
his wife filed a complaint against the Company, Med X, and other affiliated entities and persons in the Court of Common Pleas of Bucks County, Pennsylvania ("Kovar Complaint"). The Kovar
Complaint, as amended four times by Mr. Kovar, alleged, among other charges, breach of an oral agreement by the Company to cause Med X to employ Mr. Kovar on a
long-term basis and breach by Med-X of an alleged employment contract between Mr. Kovar and Med X. On March 13, 1992, the company answered
Mr. Kovar's Fourth Amended Complaint and filed a counterclaim against Mr. Kovar for breach of warranties and representations, fraud, and violations of Pennsylvania's Securities Act of
1972 in connection with the merger of the Company's subsidiary and Med X. On October 26, 1999, counsel for the parties agreed to pay Mr. Kovar $325,000 in a lump sum cash payment.
In December 1999, the Company, without admitting any wrongdoing, finalized the terms of the settlement with Mr. Kovar and the lawsuit was dismissed. The Company recorded $210,000 in
litigation settlements expense for the year ending March 31, 2000, relating to this settlement.

On
August 28, 1998, Amy Murphy, the former President of the Company, filed a sex discrimination and retaliation charge against the Company alleging a violation of Title VII of the
Civil Rights Act of 1964, as amended. Ms. Murphy filed the charge with the Atlanta, Georgia office of the Equal Employment Opportunity Commission ("EEOC"). On September 23, 1998,
Ms. Murphy

F-18

---

amended this charge to identify the Company and Robert P. Scherer, Jr., Chairman, President and Chief Executive Officer of the Company, as her employers. The Company conducted an internal
investigation of Ms. Murphy's charge and concluded that there has been no Title VII violation. On
December 22, 1998, the EEOC notified the Company that it had terminated its investigation of Ms. Murphy's charge. On March 17, 1999, Ms. Murphy filed a complaint in United
States District Court, Northern District of Georgia, Atlanta, Division, against the Company and Mr. Scherer alleging gender discrimination, sexual harassment, and intentional infliction of
emotional distress. The Company and Mr. Scherer filed an answer denying Ms. Murphy's allegations on April 23, 1999. On October 4, 1999, the Company, without admitting any
wrongdoing, settled the dispute with Ms. Murphy for a cash payment of $140,000. The Company recorded $88,000 in litigation settlements expense for the year ending March 31, 2000,
relating to this settlement. The Company also agreed to repurchase all of Ms. Murphy's 16,667 shares of Common Stock of the Company for $3.50 per share. The price was equal to the price of the
Company's common stock on the settlement date and was recorded as treasury stock. Ms. Murphy withdrew the lawsuit and retracted her allegations against the Company and Mr. Scherer.

The
Company is subject to other legal proceedings and claims that arise in the ordinary course of business. Although the outcome of such proceedings and claims cannot be determined with
certainty, management is of the opinion that their final outcome will not have a material adverse effect on the Company's consolidated operations or financial position.

NOTE 7. STOCKHOLDERS' EQUITY

Stock Options

The Company has stock options outstanding and exercisable under three stock option plans and a long-term incentive plan. Options become exercisable at
a rate ranging from 20% to 100% per year from the date of grant and expire ten years from the date of grant. The Company's 1994 Stock Incentive Plan (the "1994 Plan") is the only Plan with stock
option awards available for grant. All prior plans have expired. At March 31, 2002, the maximum shares available under the 1994 Plan for future grants was 540,000. The exercise price of options
granted to date has been the fair market value of the shares on date of grant and all options vest over a period of three to five years.

The
Company accounts for its stock-based compensation plans under Accounting Principles Board Opinion No. 25,"Accounting for Stock Issued to
Employees,"under which no compensation cost is recognized for options granted with an exercise price equal to the fair market value of the Company's common stock at the grant
date. If the Company had accounted for these plans in accordance with SFAS No. 123, "Accounting for Stock-Based Compensation," which measures compensation cost at the grant date based on the
value of the award and is recognized over the service (or vesting) period, the

F-19

---

Company's pro forma net (loss) income and (loss) earnings per share would have been reflected as follows:

Year Ended March 31,2002

2001

2000Net (loss) incomeAs reported

$
(1,938,000
)
$
1,499,000

$
2,046,000Pro forma

$
(2,015,000
)
$
1,446,000

$
2,017,000Basic (loss) earnings per shareAs reported

$
(0.45
)
$
0.35

$
0.47Pro forma

$
(0.46
)
$
0.33

$
0.47Diluted (loss) earnings per shareAs reported

$
(0.45
)
$
0.33

$
0.45Pro forma

$
(0.46
)
$
0.32

$
0.44


The
fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted assumptions used for
options granted for the year ended March 31, 2002: dividend yield of 0%, expected volatility of 70%, risk-free interest rates of return of 5.81%, and expected option lives of
6 years. There were no options issued for the years ending March 31, 2001 and 2000. The fair value of the options issued in the year ended March 31, 2002, was $460,000.

A
summary of changes in outstanding options is as follows:

Shares
Subject to
Option

Weighted
Average
Price per
ShareBalance at March 31, 1999

399,800

$
6.21Options granted




Options exercised




Options cancelled and expired




Balance at March 31, 2000

399,800


6.21Options granted




Options exercised




Options cancelled and expired

(99,800
)

10.38Balance at March 31, 2001

300,000


4.83Options granted

190,000


3.25Options exercised




Options cancelled and expired

(45,000
)

7.70Balance at March 31, 2002

445,000

$
3.86Options exercisable at March 31, 2002

318,334


F-20

---

|            |  | Outstanding |  | Exercisable
|----------- |  | ----------- |  | -----------
|
|0.00-  1.69 |  | 185,000     |  | 5.1        
|1.70-  3.25 |  | 190,000     |  | 7.6        
|3.26-  3.56 |  | 40,000      |  | 7.1        
|20.50-26.88 |  | 30,000      |  | 1.0        

Convertible Preferred Stock

As part of the Marquest acquisition in the year ended March 31, 1994, the Company issued 43,516 shares of its 5% convertible preferred stock, $.01 par
value (the "Preferred Stock") to the former holders of Marquest's defaulted Swiss bonds. The Company has 2,000,000 shares of the Preferred Stock authorized. Each share of the Preferred Stock is
convertible into approximately 4.43 shares of the Company's common stock. During the years ended March 31, 2002, 2001 and 2000, holders of the convertible Preferred Stock converted 3,765; 288;
and 783 preferred shares into 16,674; 1,274; and 3,464 common shares. At March 31, 2002, and 2001, the Company had 17,939 and 21,704 shares, respectively, of the Preferred Stock outstanding
which were convertible into approximately 79,470 and 96,149 shares,
respectively, of the Company's common stock. No dividends have been declared or are payable on the Preferred Stock since the sale of Marquest in July of 1997. In the event of any liquidation,
dissolution or winding up of the Company, the Preferred Stock will be preferred to common stock as to both earnings and assets. The holders of the Preferred Stock will be entitled to receive $100 per
share plus any cumulative dividends accrued and unpaid as of the date of distribution before a distribution of any earnings or assets will be made to the holders of the common stock.

If
the Company is consolidated with or merged into or sells or disposes of all or substantially all of its property and assets to any other corporation, the Company will provide as part
of the terms of such consolidation, merger, or sale for the holders of the Preferred Stock to receive equivalent preferred stock in the surviving corporation and be entitled to equivalent conversion
rights with respect to securities of the corporation resulting from such consolidation, merger or sale. In essence, the consolidation or merger of the Company with or into any other corporation, or
the sale, lease, exchange, or transfer of all or substantially all of the Company's assets will not be deemed to be liquidation, dissolution, or winding up of the Company and the liquidation
preference on the Preferred Stock would not be applicable.

NOTE 8. RETIREMENT PLAN

A contributory 401(k) salary reduction plan (the "401(k) Plan") covers all nonunion employees, and union employees in a few states, who are 21 years of age
or older and have been employed at least one year. An eligible employee may elect to contribute from 2% up to 10% of their compensation and the Company may make a matching contribution, at its
discretion, equal to a set percentage of employee compensation for all 401(k) Plan participants still employed on the last day of the 401(k) Plan year. The amount of employee contributions to which
the match percentage is applied is limited to 6% of an employee's compensation. For fiscal 2002, the Company made a matching contribution equal to 100% of employee contributions up to the maximum of
6% of employee compensation.

F-21

---

Company contributions were approximately $109,000, $110,000, and $155,000 for the years ending March 31, 2002, 2001, and 2000, respectively.

NOTE 9. INCOME TAXES

As of March 31, 2002 and 2001, the Company's net deferred tax assets consisted of the following:

2002

2001Deferred tax assets:Accrued expenses

$
261,000

$
270,000Net operating loss carryforwards





269,000Equity losses in unconsolidated companies


217,000


208,000Impairment of investment


1,464,000


183,000Allowance for doubtful accounts


150,000


121,000Alternative minimum tax credit


159,000


Total deferred tax assets


2,251,000


1,051,000Deferred tax liabilities:Depreciation


(180,000
)

(59,000
)Other


(200,000
)

(231,000
)Total deferred tax liabilities


(380,000
)

(290,000
)Net gross deferred tax assets


1,871,000


761,000Valuation allowance


1,281,000


Net deferred tax assets

$
590,000

$
761,000


The
increase in the valuation allowance of $1,281,000 during the year ended March 31, 2002, was attributable to the uncertainty of realizing the loss created by
impairing investments. Based on management's assessment, it is more likely than not that the deferred tax asset created by the impairment of investments will be realized through future capital
transactions. A reconciliation of the income tax provision at the federal statutory rates to the actual tax provision for the years ending March 31, 2002, 2001, and 2000 is as follows:

2002

2001

2000Computed statutory amount

$
(218,000
)
$
514,000

$
742,000Increase (decrease) in taxes resulting from:State income taxes, net of federal income tax benefit


(26,000
)

60,000


87,000Amortization of goodwill and intangible assets


43,000


43,000


43,000Net change in valuation allowance


1,281,000


(860,000
)

(505,000
)Tax exempt interest income


(116,000
)

(140,000
)

Other, net


(51,000
)

78,000


(165,000
)Federal taxes


(297,000
)

(227,000
)

Provision (benefit) for income taxes


616,000

$
(532,000
)
$
202,000


F-22

---

Components
of the provision (benefit) for income taxes for the years ending March 31, 2002, 2001, and 2000 are as follows:

2002

2001

2000Current taxes:Deferred tax

$
171,000

$
(642,000
)
$
210,000Federal


330,000


45,000


23,000State


115,000


65,000


(31,000
)Provision (benefit) for income taxes

$
616,000

$
(532,000
)
$
202,000


At
March 31, 2002, all of the Company's federal tax loss carryforwards had been utilized. However, the Company has $159,000 of alternative minimum tax credits to
use against future federal tax. The Company paid income taxes of $574,000, $67,000 and $60,000 for the years ending March 31, 2002, 2001 and 2000.

NOTE 10. DISCONTINUED OPERATIONS

Pharmaceutical Research and Development Segment

Biofor, Inc. ("Biofor"), a majority owned subsidiary of the Company which had been operating the Company's Pharmaceutical Research and Development Segment,
was engaged in research to identify and develop new drug compounds. Biofor utilized "artificial intelligence" computer technology (known as "MultiCASE") which employed a system of rational drug design
(known as M-CADD). This technology was used for new drug compound development and for contracted research and development.

Biofor
focused its drug design efforts on arthritis and osteoarthritis as well as the treatment for acute pain. Biofor's lead compound, BF-389, was an
anti-inflammatory analgesic which preliminary Phase I clinical trials indicated was not sufficiently bioavailable when administered orally in humans. Other delivery methods that would
allow oral administration of the compound were pursued by Biofor without success.

In
fiscal 1991, Biofor and Ono Pharmaceutical Company, Ltd. ("Ono") entered into the first of two research and collaboration agreements pursuant to which they jointly researched
compounds. Biofor provided the use of its exclusive M-CADD software and its scientists experienced in using M-CADD, while Ono provided funding and clinical testing of any
compounds discovered. The first contract expired in fiscal 1994 and the second expired March 1996.

In
July 1995, after attempts to locate a purchaser for Biofor, Biofor ceased further drug design efforts and concentrated solely on the Ono research contract. When the Ono
contract expired in March 1996, Biofor discontinued all operations and the Company abandoned all operations of Biofor.

The
abandonment of the operations of Biofor was accounted for as a discontinued segment, and accordingly, the operations of Biofor were segregated and reported as discontinued operations
in the prior period consolidated financial statements.

F-23

---

There
are no results of operations attributable to the discontinued operations of Biofor for the years ended March 31, 2002, 2001 and 2000.

The
net assets of the discontinued operations of Biofor at March 31, 2002 and 2001 are as follows:

2002

2001Assets:Property and equipment, net of disposal costs (a)

$
498,000

$
487,000Total assets


498,000


487,000Liabilities:Accounts payable and accrued expenses





6,000Total liabilities





6,000Net assets of Biofor

$
498,000

$
481,000


---

The
Company intends to sell the remaining assets of Biofor, but anticipates that it may take several years (primarily to sell the building). No income taxes or interest expense was
allocated to the discontinued operations of Biofor for the years ending March 31, 2002, 2001, and 2000.

F-24

---

NOTE 11. QUARTERLY RESULTS OF OPERATIONS (Unaudited)

QUARTERLY RESULTS OF OPERATIONS  (In thousands except per share data)

|                                                   |                                                  | Fiscal year ended March 31, 2002 |       | Fiscal year ended March 31, 2001 |     | Fiscal year ended March 31, 2000
|-------------------------------------------------- | ------------------------------------------------ | -------------------------------- | ----- | -------------------------------- | --- | --------------------------------
|
|NET SALES                                          |                                                  | $                                | 5,034 |                                  | $   | 5,132                           
|                                                   |                                                  |                                  |       |                                  |     |                                 
|                                                   | Cost of sales                                    |                                  |       | 3,192                            |     |                                 
|                                                   | Selling, general, and administrative expenses    |                                  |       | 1,288                            |     |                                 
|                                                   | Litigation settlements                           |                                  |       |                                 |     |                                 
|                                                   |                                                  |                                  |       |                                  |     |                                 
|OPERATING INCOME (LOSS)                            |                                                  |                                  | 554   |                                  |     | 463                             
|OTHER (EXPENSE) INCOME:                            |                                                  |                                  |       |                                  |     |                                 
|                                                   | Interest income                                  |                                  |       | 192                              |     |                                 
|                                                   | Equity in net losses of unconsolidated companies |                                  |       | 39                               |     |                                 
|                                                   | Impairment charge for other investments, at cost |                                  |       |                                 |     |                                 
|                                                   | Other, net                                       |                                  |       | (3                               | )   |                                 
|                                                   |                                                  |                                  |       |                                  |     |                                 
|                                                   |                                                  | Total (expense) other income     |       |                                  | 228 |                                 
|                                                   |                                                  |                                  |       |                                  |     |                                 
|Income (loss) before income taxes                  |                                                  |                                  | 782   |                                  |     | (2,621                          
|Provision (benefit) for income taxes               |                                                  |                                  | 282   |                                  |     | (1,089                          
|                                                   |                                                  |                                  |       |                                  |     |                                 
|NET INCOME (LOSS)                                  |                                                  | $                                | 500   |                                  | $   | (1,532                          
|                                                   |                                                  |                                  |       |                                  |     |                                 
|BASIC NET INCOME (LOSS) PER COMMON SHARE           |                                                  | $                                | 0.12  |                                  | $   | (0.35                           
|                                                   |                                                  |                                  |       |                                  |     |                                 
|DILUTED INCOME (LOSS) PER COMMON SHARE             |                                                  | $                                | 0.11  |                                  | $   | (0.34                           
|                                                   |                                                  |                                  |       |                                  |     |                                 
|WEIGHTED AVERAGE COMMON SHARES OUTSTANDINGBASIC   |                                                  |                                  | 4,323 |                                  |     | 4,323                           
|                                                   |                                                  |                                  |       |                                  |     |                                 
|WEIGHTED AVERAGE COMMON SHARES OUTSTANDINGDILUTED |                                                  |                                  | 4,525 |                                  |     | 4,517                           
|                                                   |                                                  |                                  |       |                                  |     |                                 

F-25

---



Schedule II    SCHERER HEALTHCARE, INC.    VALUATION AND QUALIFYING ACCOUNTS    Three Years Ended March 31, 2002

|                                |  |   |         | Additions |   |         |   |  
|------------------------------- |  | - | ------- | --------- | - | ------- | - | -
|
|
|2002:                           |  |   |         |           |   |         |   |  
|Allowance for doubtful accounts |  | $ | 319,000 |           | $ | 8,000   |   | $
|                                |  |   |         |           |   |         |   |  
|2001:                           |  |   |         |           |   |         |   |  
|Allowance for doubtful accounts |  | $ | 257,000 |           | $ | 111,000 |   | $
|                                |  |   |         |           |   |         |   |  
|2000:                           |  |   |         |           |   |         |   |  
|Allowance for doubtful accounts |  | $ | 293,000 |           | $ | (10,000 | ) | $
|                                |  |   |         |           |   |         |   |  

---

S-1

---

SCHERER HEALTHCARE, INC.    Index of Exhibits

The following exhibits are filed with or incorporated by reference in this report. Where such filing is made by incorporation by reference to a previously filed
registration statement or report, such registration statement or report is identified in parentheses.

|Exhibit
Number |  | Description                                                                                                                                                                                                                                                                                                                            |  | Page
Number
|-------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -----------
|3.1            |  | Certificate of Incorporation of the Company, as amended (Exhibit 3.1 to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1994).                                                                                                                                                                            |  |            
|3.2            |  | By-Laws of the Company (Exhibit 3.2 to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1994).                                                                                                                                                                                                             |  |            
|4              |  | Certificate of Designation, Preferences and Rights of Preferred Stock by Resolution of the Board of Directors Providing for an Issue of 7,000 Shares of Preferred Stock Designated "Series A" Cumulative Convertible Preferred Stock (Exhibit 4 to the
Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1994). |  |            
|10.1(a)        |  | Property Lease between Bio Systems Partners and Flushing Operating Corp. for 210 Sherwood Avenue, Farmingdale, New York, and Addendum (Exhibit 10.2 to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1994).                                                                                             |  |            
|(b)            |  | Property Lease between Bio Systems Partners and Owners of 210 Sherwood Avenue for 210 Sherwood Avenue, Farmingdale, New York (Exhibit 10 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1999).                                                                                                          |  |            
|10.2           |  | Property Lease between Med X Services of PA, Inc. and successors and Mark Hankin and Hamnar Associates XVII for 380 Constance Drive, Warminster, Pennsylvania, and Addendum (Exhibit 10.4 to the Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 1994).                                                       |  |            
|10.3           |  | 10% Convertible Promissory Note dated April 5, 2000, by and between Compliance1, Inc., a Delaware corporation, and Scherer Healthcare, Inc., a Delaware corporation (Exhibit 10.1 to the Company's amended Quarterly Report on Form 10-Q/A for the period
ended September 31, 2000).                                                   |  |            
|10.4           |  | Subscription Agreement dated April 5, 2000, by and between Compliance1, Inc., a Delaware corporation, and Scherer Healthcare, Inc., a Delaware corporation (Exhibit 10.3 to the Company's amended Quarterly Report on Form 10-Q/A for the period ended
September 30, 2000).                                                            |  |            
|10.5           |  | 10% Convertible Promissory Note dated July 1, 2000, by and between Compliance1, Inc., a Delaware corporation, and Scherer Healthcare, Inc., a Delaware corporation (Exhibit 10.2 to the Company's amended Quarterly Report on Form 10-Q/A for the period
ended September 30, 2000).                                                    |  |            
|10.6           |  | 10% Series B Convertible Promissory Note dated October 15, 2000, by and between MedicareFacts, LLC, a Delaware LLC, and Scherer Healthcare, Inc. a Delaware corporation (Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended
December 31, 2000).                                                         |  |            
|               |  |                                                                                                                                                                                                                                                                                                                                        |  |            

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|10.7 |  | Subscription Agreement dated October 15, 2000, by and between MedicareFacts, LLC, a Delaware LLC, and Scherer Healthcare, Inc., a Delaware corporation (Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended December 31,
2000). |  |   
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --
|21   |  | Subsidiaries of Registrantfiled herewith.                                                                                                                                                                                                                    |  | 20
|23   |  | Consent of Arthur Andersen LLPfiled herewith.                                                                                                                                                                                                                |  |   
|99   |  | Letter from Scherer Healthcare, Inc. to the SEC regarding Arthur Andersen LLPfiled herewith.                                                                                                                                                                 |  |   

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