---

---

SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

---

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2001

Commission File No. 0-10552

---

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)

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

Indicate
by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES
X                        NO

Indicate
the number of shares of each of the issuer's classes of Common Stock, as of the latest practicable date:

Class

Outstanding as of February 8, 2002Common Stock, $0.01 par value

4,339,056


---

---

---



SCHERER HEALTHCARE, INC.

Quarterly Report on Form 10-Q
For the Quarter Ended December 31, 2001

Table of Contents

|Item
Number |  |                                                                                                                |  | Page
Number
|----------- |  | -------------------------------------------------------------------------------------------------------------- |  | -----------
|            |  | PART I. FINANCIAL INFORMATION                                                                                  |  |            
|1           |  | Financial Statements:                                                                                          |  |            
|            |  | Condensed Consolidated Balance Sheets as of December 31, 2001 and March 31, 2001                               |  | 3          
|            |  | Condensed Consolidated Statements of Operations for the Three and Nine Months Ended December 31, 2001 and 2000 |  | 5          
|            |  | Condensed Consolidated Statements of Cash Flows for the Nine Months Ended December 31, 2001 and 2000           |  | 6          
|            |  | Notes to Condensed Consolidated Financial Statements                                                           |  | 7          
|2           |  | Management's Discussion and Analysis of Financial Condition and Results of Operations                          |  | 9          
|            |  | PART II. OTHER INFORMATION                                                                                     |  |            
|6           |  | Exhibits and Reports on Form 8-K                                                                               |  | 13         
|            |  | SIGNATURES                                                                                                     |  | 14         

2

---



PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

SCHERER HEALTHCARE, INC.  CONDENSED CONSOLIDATED BALANCE SHEETS  (Unaudited)

ASSETS

|                       |                                                                                                  | December 31, 2001    |            | March 31, 2001 |           
|---------------------- | ------------------------------------------------------------------------------------------------ | -------------------- | ---------- | -------------- | ----------
|CURRENT ASSETS         |                                                                                                  |                      |            |                |           
|                       | Cash and cash equivalents                                                                        |                      | $          | 5,448,000      |           
|                       | Accounts receivable, less allowance for doubtful accounts of $345,000 and $257,000, respectively |                      |            | 4,307,000      |           
|                       | Interest receivable                                                                              |                      |            | 166,000        |           
|                       | Inventories                                                                                      |                      |            | 402,000        |           
|                       | Prepaid and other                                                                                |                      |            | 553,000        |           
|                       |                                                                                                  |                      |            |                |           
|                       |                                                                                                  | Total current assets |            |                | 10,876,000
|                       |                                                                                                  |                      |            |                |           
|PROPERTY AND EQUIPMENT |                                                                                                  |                      | 10,156,000 |                |           
|                       | Less accumulated depreciation                                                                    |                      |            | (5,663,000     | )         
|                       |                                                                                                  |                      |            |                |           
|                       | Net property and equipment                                                                       |                      |            | 4,493,000      |           
|                       |                                                                                                  |                      |            |                |           
|OTHER ASSETS           |                                                                                                  |                      |            |                |           
|                       | Intangibles, net                                                                                 |                      |            | 3,384,000      |           
|                       | Investments                                                                                      |                      |            | 9,476,000      |           
|                       | Deferred income taxes                                                                            |                      |            | 1,875,000      |           
|                       | Other                                                                                            |                      |            |               |           
|                       | Net assets of discontinued operations                                                            |                      |            | 481,000        |           
|                       |                                                                                                  |                      |            |                |           
|                       |                                                                                                  | Total other assets   |            |                | 15,216,000
|                       |                                                                                                  |                      |            |                |           
|TOTAL ASSETS           |                                                                                                  | $                    | 30,585,000 |                | $         
|                       |                                                                                                  |                      |            |                |           

See
notes to condensed consolidated financial statements.

3

---



SCHERER HEALTHCARE, INC.  CONDENSED CONSOLIDATED BALANCE SHEETS  (Unaudited)

LIABILITIES AND STOCKHOLDERS' EQUITY

|                                           |                                                                                                                                                                                                                        | December 31, 2001          |            | March 31, 2001 |           
|------------------------------------------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ---------- | -------------- | ----------
|CURRENT LIABILITIES                        |                                                                                                                                                                                                                        |                            |            |                |           
|                                           | Accounts payable                                                                                                                                                                                                       |                            | $          | 1,245,000      |           
|                                           | Accrued expenses                                                                                                                                                                                                       |                            |            | 1,010,000      |           
|                                           | Unearned revenues                                                                                                                                                                                                      |                            |            | 492,000        |           
|                                           | Current maturities of debt obligations                                                                                                                                                                                 |                            |            | 256,000        |           
|                                           | Income taxes payable                                                                                                                                                                                                   |                            |            |               |           
|                                           |                                                                                                                                                                                                                        |                            |            |                |           
|                                           |                                                                                                                                                                                                                        | Total current liabilities  |            |                | 3,003,000 
|                                           |                                                                                                                                                                                                                        |                            |            |                |           
|LONG-TERM DEBT, net of current maturities  |                                                                                                                                                                                                                        |                            | 504,000    |                |           
|                                           |                                                                                                                                                                                                                        |                            |            |                |           
|OTHER LIABILITIES                          |                                                                                                                                                                                                                        |                            | 63,000     |                |           
|                                           |                                                                                                                                                                                                                        |                            |            |                |           
|COMMITMENTS AND CONTINGENCIES              |                                                                                                                                                                                                                        |                            |            |                |           
|STOCKHOLDERS' EQUITY                       |                                                                                                                                                                                                                        |                            |            |                |           
|                                           | Convertible preferred stock$.01 par value, 2,000,000 shares authorized; 17,939 shares issued and outstanding at December 31, 2001 (21,704 at March 31, 2001)                                                          |                            |            |               |           
|                                           | Common stock$.01 par value, 12,000,000 shares authorized; 4,730,085 shares issued at December 31, 2001 (4,713,411 at March 31, 2001); 4,339,056 shares outstanding at December 31, 2001 (4,323,382 at March 31,
2001) |                            |            | 47,000         |           
|                                           | Capital in excess of par value                                                                                                                                                                                         |                            |            | 22,394,000     |           
|                                           | Unrealized loss on marketable securities                                                                                                                                                                               |                            |            | (241,000       | )         
|                                           | Retained earnings                                                                                                                                                                                                      |                            |            | 7,906,000      |           
|                                           | Less treasury stock, at cost                                                                                                                                                                                           |                            |            | (3,091,000     | )         
|                                           |                                                                                                                                                                                                                        |                            |            |                |           
|                                           |                                                                                                                                                                                                                        | Total stockholders' equity |            |                | 27,015,000
|                                           |                                                                                                                                                                                                                        |                            |            |                |           
|TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |                                                                                                                                                                                                                        | $                          | 30,585,000 |                | $         
|                                           |                                                                                                                                                                                                                        |                            |            |                |           

See
notes to condensed consolidated financial statements.

4

---



SCHERER HEALTHCARE, INC.  CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  (Unaudited)

|                                                   |                                                  | Three months ended
December 31,   |           | Nine months ended
December 31, |          
|-------------------------------------------------- | ------------------------------------------------ | --------------------------------- | --------- | ------------------------------ | ---------
|
|NET SALES                                          |                                                  | $                                 | 5,048,000 |                                | $        
|                                                   |                                                  |                                   |           |                                |          
|COSTS AND EXPENSES                                 |                                                  |                                   |           |                                |          
|                                                   | Cost of goods sold                               |                                   |           | 3,372,000                      |          
|                                                   | Selling, general, and administrative             |                                   |           | 1,241,000                      |          
|                                                   | Discontinued operations                          |                                   |           | 52,000                         |          
|                                                   |                                                  |                                   |           |                                |          
|                                                   |                                                  | Total costs and expenses          |           |                                | 4,665,000
|                                                   |                                                  |                                   |           |                                |          
|OPERATING INCOME                                   |                                                  |                                   | 383,000   |                                |          
|                                                   |                                                  |                                   |           |                                |          
|OTHER INCOME (EXPENSE)                             |                                                  |                                   |           |                                |          
|                                                   | Interest income                                  |                                   |           | 166,000                        |          
|                                                   | Equity in net losses of unconsolidated companies |                                   |           | (1,000                         | )        
|                                                   | Impairment charges on investments                |                                   |           |                               |          
|                                                   | Other, net                                       |                                   |           | 10,000                         |          
|                                                   |                                                  |                                   |           |                                |          
|                                                   |                                                  | Total other income (expense), net |           |                                | 175,000  
|                                                   |                                                  |                                   |           |                                |          
|INCOME (LOSS) BEFORE INCOME TAXES                  |                                                  |                                   | 558,000   |                                |          
|PROVISION (BENEFIT) FOR INCOME TAXES               |                                                  |                                   | 70,000    |                                |          
|                                                   |                                                  |                                   |           |                                |          
|NET INCOME (LOSS)                                  |                                                  | $                                 | 488,000   |                                | $        
|                                                   |                                                  |                                   |           |                                |          
|Basic earnings per common share                    |                                                  | $                                 | 0.11      |                                | $        
|                                                   |                                                  |                                   |           |                                |          
|Diluted earnings per common share                  |                                                  | $                                 | 0.11      |                                | $        
|                                                   |                                                  |                                   |           |                                |          
|Weighted average common shares outstandingbasic   |                                                  |                                   | 4,339,056 |                                |          
|                                                   |                                                  |                                   |           |                                |          
|Weighted average common shares outstandingdiluted |                                                  |                                   | 4,515,818 |                                |          
|                                                   |                                                  |                                   |           |                                |          

See
notes to condensed consolidated financial statements.

5

---



SCHERER HEALTHCARE, INC.  CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  (Unaudited)

|                                               |                                                                                   | Nine months ended
December 31,                   |          
|---------------------------------------------- | --------------------------------------------------------------------------------- | ------------------------------------------------ | ---------
|
|CASH FLOWS FROM OPERATING ACTIVITIES:          |                                                                                   |                                                  |          
|                                               | Net income (loss)                                                                 |                                                  | $        
|                                               | Adjustments to reconcile net income to net cash provided by operating activities: |                                                  |          
|                                               |                                                                                   | Depreciation and amortization                    |          
|                                               |                                                                                   | Provision for bad debts                          |          
|                                               |                                                                                   | 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                                      |          
|                                               |                                                                                   | Workers compensation collateral refund           |          
|                                               |                                                                                   | Other assets                                     |          
|                                               |                                                                                   | Income tax payable                               |          
|                                               |                                                                                   | Accounts payable and accrued expenses            |          
|                                               |                                                                                   | Unearned revenue                                 |          
|                                               |                                                                                   | Other liabilities                                |          
|                                               |                                                                                   |                                                  |          
|                                               | Net cash provided by operating activities of continuing operations                |                                                  |          
|                                               | Net operating activities of discontinued operations                               |                                                  |          
|                                               |                                                                                   |                                                  |          
|                                               | Net cash provided by operating activities                                         |                                                  |          
|                                               |                                                                                   |                                                  |          
|CASH FLOWS FROM INVESTING ACTIVITIES:          |                                                                                   |                                                  |          
|                                               | Additions to property and equipment, net                                          |                                                  |          
|                                               | Sale of investments, at market value, net                                         |                                                  |          
|                                               | Purchase of municipal bonds                                                       |                                                  |          
|                                               | Cash proceeds from sale of municipal bonds                                        |                                                  |          
|                                               | Cash proceeds from sale of preferred stock                                        |                                                  |          
|                                               | Investments in unconsolidated companies, at equity                                |                                                  |          
|                                               | Other investments, at cost                                                        |                                                  |          
|                                               | Change in permit acquisition cost, net                                            |                                                  |          
|                                               | Other investing activities, net                                                   |                                                  |          
|                                               |                                                                                   |                                                  |          
|                                               | Net cash used for investing activities                                            |                                                  |          
|                                               |                                                                                   |                                                  |          
|CASH FLOWS FROM FINANCING ACTIVITIES           |                                                                                   |                                                  |          
|                                               | Net issuances (repayment) of borrowings                                           |                                                  |          
|                                               |                                                                                   |                                                  |          
|CHANGE IN CASH AND CASH EQUIVALENTS            |                                                                                   |                                                  | 1,050,000
|CASH AND CASH EQUIVALENTS, beginning of period |                                                                                   |                                                  | 4,398,000
|                                               |                                                                                   |                                                  |          
|CASH AND CASH EQUIVALENTS, end of period       |                                                                                   | $                                                | 5,448,000
|                                               |                                                                                   |                                                  |          

See notes to condensed consolidated financial statements.

6

---



SCHERER HEALTHCARE, INC.  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1.

The accompanying unaudited condensed consolidated financial statements of Scherer Healthcare, Inc. and its subsidiaries (the "Company") include all
adjustments that, in the opinion of management, are necessary for a fair presentation of the results for the period indicated. Quarterly results of operations are not necessarily indicative of annual
results.

These
statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's Annual Report on Form 10-K
for the fiscal year ended March 31, 2001.

Certain
fiscal 2001 amounts have been reclassified to conform with the fiscal 2002 presentation.

NOTE 2.

The components of inventory at December 31, 2001 and March 31, 2001 consisted of the following:

December 31, 2001

March 31, 2001Finished products

$
40,000

$
65,000Containers, packaging, and raw materials


362,000


268,000Total

$
402,000

$
333,000


NOTE 3.

Obligations under capital leases at December 31, 2001 and March 31, 2001 consisted of the following:

December 31, 2001

March 31, 2001Obligations under capital leases, due in varying installments through fiscal 2006

$
760,000

$
816,000Less current maturities


(256,000
)

(265,000
)Long-term debt

$
504,000

$
551,000


NOTE 4.

The Company has the following investments at December 31, 2001 and March 31, 2001:

December 31, 2001

March 31, 2001Investments, at market value

$
8,881,000

$
7,843,000Investments in unconsolidated companies, at equity


325,000


3,167,000Other investments, at cost


270,000


270,000$
9,476,000

$
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 (losses) on these investments are reported

7

---

as a separate component of stockholders' equity and were $159,000 and $38,000 for the three months and nine months ended December 31, 2001, respectively, and the accumulated balance was
($241,000) as of December 31, 2001.

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

Amortized
Cost

Net
Unrealized
Losses

Fair
Market
ValueDecember 31, 2001Municipal bonds

$
6,408,000

$
(228,000
)
$
6,180,000Corporate bonds


2,714,000


(13,000
)

2,701,000Preferred stocks








Total

$
9,122,000

$
(241,000
)
$
8,881,000March 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 December 31, 2001, and March 30, 2001, are detailed as follows:

December 31, 2001

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Net
Unrealized
LossesMunicipal bonds

$
16,000

$
(244,000
)
$
(228,000
)Corporate bonds


39,000


(52,000
)

(13,000
)Total

$
55,000

$
(296,000
)
$
(241,000
)


March 31, 2001

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Net
Unrealized
LossesMunicipal 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
)


The
amortized cost and estimated fair value of the securities (excluding the preferred stocks) at December 31, 2001, by contractual maturity, are shown below:

Amortized
Cost

Fair
Market
ValueDue in one year or less

$


$
Due after one year through five years


1,954,000


2,004,000Due after five years through ten years


211,000


214,000Due after ten years


6,957,000


6,663,000Total

$
9,122,000

$
8,881,000


The
Company had investments in three unconsolidated companies, recorded on the equity method of accounting, of $3,167,000 as of March 31, 2001. Due to recent
difficult economic conditions affecting

8

---

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
its total investment in two of these companies, Compliance1, Inc. and Econometrics, Inc., is currently without value. Accordingly, the Company has recorded an impairment charge of
$3,129,000 in the second quarter of fiscal year 2002 which includes the balance of the investment in these companies and are all related accounts.

The
Company continues to carry its investment in MedicareFacts, LLC recorded on the equity method. The Company's equity in the net loss of this unconsolidated company was $1,000 for the
third quarter of fiscal year 2002. MedicareFacts, LLC designs and develops reimbursement guides which provide a single source for all coding and coverage information needed to file accurate Medicare
claims, thus ensuring optimal reimbursement and compliance with government regulations. These products are used principally by hospitals and clinical laboratories. The Company's investment is in the
form of a two-year
10% series B unsecured convertible note in the aggregate principal amount of $400,000 that matures in October 2002, and which converts, at the Company's option, into 18.6% of the
outstanding common stock of MedicareFacts, LLC as of December 31, 2001.

The
Company has an investment in Renaissance Pharmaceuticals, Inc. which is recorded at historical cost under the cost method. Renaissance Pharmaceuticals, Inc. is a
development stage drug delivery company. The Company has a direct investment of $650,000 in Renaissance Pharmaceuticals, Inc. for 2.5% of the outstanding common stock as of December 31,
2001. During the quarter ending December 31, 2000, the Company recorded an impairment charge of $380,000 against its investment in Renaissance Pharmaceuticals, Inc. due to a revised
valuation by the management of Renaissance Pharmaceuticals, Inc. in connection with Renaissance Pharmaceuticals, Inc.'s $5.2 million convertible preferred stock offering.
Management of Renaissance Pharmaceuticals, Inc. has informed the Company that it is actively pursuing investors for their preferred stock offering.

Item 2. 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, 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. Reference is made to this report as well as the Company's most recent Annual Report on Form 10-K and other reports filed with the Securities and Exchange Commission
for other factors that could affect the forward-looking statements. 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.

9

---



Results of Operations

Net Sales and Operating Income (Loss).

The following table sets forth, for the periods indicated, the net sales and operating income (loss) for each segment of the business of the Company and its
subsidiaries:

|                         |                                      | Three months ended
December 31, |   | Nine months ended
December 31, |          
|------------------------ | ------------------------------------ | ------------------------------- | - | ------------------------------ | ---------
|
|NET SALES:               |                                      |                                 |   |                                |          
|                         | Waste Management Services Segment    |                                 | $ | 4,724,000                      |          
|                         | Consumer Healthcare Products Segment |                                 |   | 324,000                        |          
|                         |                                      |                                 |   |                                |          
|                         |                                      | Company Totals                  |   | $                              | 5,048,000
|                         |                                      |                                 |   |                                |          
|OPERATING INCOME (LOSS): |                                      |                                 |   |                                |          
|                         | Waste Management Services Segment    |                                 | $ | 400,000                        |          
|                         | Consumer Healthcare Products Segment |                                 |   | 127,000                        |          
|                         | Corporate                            |                                 |   | (144,000                       | )        
|                         |                                      |                                 |   |                                |          
|                         |                                      | Company Totals                  |   | $                              | 383,000  
|                         |                                      |                                 |   |                                |          

The
Company's net sales increased 7% to $5,048,000 for the third quarter of fiscal 2002 from $4,708,000 for the third quarter of fiscal 2001. The Company's operating income decreased 10%
to $383,000 for the third quarter of fiscal 2002 from $426,000 for the third quarter of fiscal 2001. The Company's cost of goods sold of the Waste Management Services Segment is primarily made up of
direct labor and related costs and benefits to collect and process waste, vehicle and equipment maintenance, repair and depreciation, waste disposal costs and interest on capital leases used to
finance vehicle acquisitions. The cost of goods sold for the Consumer Healthcare Products Segment is made up of the cost of materials for products distributed and the related shipping expenses. The
Company's cost of goods sold on a consolidated basis for the quarter ended December 31, 2001, and December 31, 2000, was 67% and 63%, respectively, of net sales. Selling, general and
administrative expenses decreased to 24% of net sales for the third quarter of fiscal 2002 from 28% for the third quarter of fiscal 2001 on a consolidated basis. Selling, general and administrative
expenses in both of the Company's business segments is made up of:



The
Company's net sales increased 9% to $15,214,000 for the nine months ended December 31, 2001, from $13,945,000 for the nine months ended December 31, 2000. The Company's
operating income decreased 3% to $1,400,000 for the first nine months of fiscal 2002 from $1,450,000 for the first nine months of fiscal 2001. Cost of goods sold increased to 65% of net sales for the
nine months ended December 31, 2001 from 62% of net sales for the nine months ended December 31, 2000. Selling,
general and administrative expenses decreased to 25% of net sales for the nine months ended December 31, 2001 from 27% of net sales for the nine months ended December 31, 2000. The
primary reasons for these changes are discussed below.

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

10

---

Waste Management Services Segment

Net sales in the Company's Waste Management Services Segment, which operates through Bio Waste Systems, Inc. and Medical Waste Systems, Inc.
(collectively, "Bio Systems"), increased 9% to $4,724,000 for the third quarter of fiscal 2002 from $4,346,000 for the third quarter of fiscal 2001. Bio Systems' net sales increased 9% to $13,989,000
for the nine months ended December 31, 2001, from $12,815,000 during the same period in fiscal 2001. The sales growth is primarily due to securing new hospital contracts for Bio Systems' core
business of providing "sharps" (including sharp-edged medical waste such as scalpels, syringes, and needles) disposal services which utilize cost effective reusable containers. Bio Systems added nine
new hospital contracts in the third quarter of fiscal 2002, and added a total of 13 new hospital contracts in the first nine months of fiscal 2002. In fiscal 2001, Bio Systems expanded its disposal
services to include certain laboratory waste and surgical fluid waste. Net sales for laboratory and surgical fluid waste increased $37,000 to $246,000 in the third quarter of fiscal 2002. Net sales
for laboratory and surgical fluid waste increased $141,000 to $700,000 for the nine months ended December 31, 2001. Bio Systems intends to continue to actively pursue the laboratory and
surgical fluid waste disposal market, although the market is relatively small compared to Bio Systems' core business of sharps disposal. Bio Systems has also expanded its disposal services at
hospitals and healthcare related facilities to include other regulated medical waste ("redbag services"). For the third quarter of fiscal 2002, net sales in the redbag services segment increased
$172,000 to $351,000. For the nine months ended December 31, 2001, net sales in the redbag segment increased $400,000 to $922,000.

Bio
Systems' cost of goods sold for the third quarter of fiscal 2002 was 69% of its net sales as compared to 64% for the third quarter of fiscal 2001, and for the nine months ending
December 31, 2001 was 68% compared to 64% during the same period last year. The increases were primarily due to increases in outsourced waste disposal expenses, which increased $156,000 to
$427,000 for the third quarter of fiscal 2002 and increased $470,000 to $1,187,000 during the nine months ended December 31, 2001. The increase in outsourced waste disposal expenses are due to
several factors. First, Bio Systems' sharps disposal capacity at its Farmingdale facility is currently restricted under its solid waste processing permit. Further, non-sharps waste
collected in Bio Systems' laboratory, surgical fluid and redbag waste services cannot currently be disposed at Bio Systems' facility. Bio Systems has applied to the appropriate agencies for additional
permitted sharps disposal capacity and, although expects to receive approval during the first quarter of fiscal 2003. Selling, general and administrative expenses for the third quarter of fiscal 2002
decreased to 20% of net sales from 22% of net sales in the same period last
year. For the nine months ended December 31, 2001, selling, general and administrative expenses decreased to 20% of net sales as compared to 22% during the same period last year.

For
the third quarter of fiscal 2002, operating income decreased 21% to $404,000 from $514,000 for the same period last year. For the nine months ending December 31, 2001,
operating income decreased 4% to $1,522,000 from $1,583,000 for the same period last year. These results reflect higher costs related to outsourcing of waste disposal and sharps container hardware
installation.

Consumer Healthcare Products Segment

Net sales for the Consumer Healthcare Products Segment, which operates through Scherer Laboratories, Inc. ("Scherer Labs"), decreased 10% to $324,000 for
the third quarter of fiscal 2002 from $362,000 during the same period in fiscal 2001. Scherer Labs' net sales increased 8% to $1,225,000 for the nine months ended December 31, 2001 from
$1,130,000 for the nine months ended December 31, 2000. Increased sales are mostly the result of increased volume with existing customers.

As
a result of the decreased cost of goods sold, Scherer Labs' operating income increased 30% to $127,000 for the third quarter of fiscal 2002 from $98,000 for the third quarter of
fiscal 2001 and

11

---

increased 27% to $486,000 for the nine months ended December 31, 2001 from $383,000 for the nine months ended December 31, 2000.

Corporate

The Company's operating expenses in the Corporate Segment decreased to $56,000 for the quarter ended December 31, 2001 from $186,000 for the quarter ended
December 31, 2000. For the nine months ended December 31, 2001, operating expenses in the Corporate Segment increased to $608,000 from $516,000 for the same period in fiscal 2001.
Certain administrative, accounting, management oversight and payroll services are performed by the Company's corporate office. The Corporate operating expenses primarily include the salaries and wages
of the personnel who perform these functions (including the Company's executive officers), rent expense, and professional accounting and legal fees. For the quarter ended December 31, 2001, the
corporate office operating expense decrease is primarily due to a reduction of rent expense and the discontinuance of amortization of the Econometrics, Inc. amortization cost. The increase of
corporate operating expenses for the nine months ended December 31, 2001, is primarily due to financial consulting and other professional fees and severance compensation that resulted from the
closing of Scherer Labs' Texas office.

Other Income.

The Company's interest income for the third quarter of fiscal 2002 is primarily from its investments in government and corporate fixed income bonds. Of the
$166,000 recorded, $10,000 represents interest accrued on MedicareFacts, LLC notes. In the third quarter of fiscal 2001, the $241,000 of interest income included $82,000 accrued on the debt
instruments of its unconsolidated companies accounted for on the equity method. (See Note 4 of Notes to Condensed Consolidated Financial Statements included elsewhere herein.) In the third
quarter of fiscal 2002 the Company recognized equity in net losses of unconsolidated companies of $1,000 as compared to $106,000 for the third quarter of fiscal 2001. The Company also recognized a
$380,000 impairment charge in the quarter ended December 31, 2000, relating to a write down of an investment recorded under the cost method of accounting.

Liquidity and Capital Resources

The Company's cash and cash equivalents totaled $5,448,000 at December 31, 2001, an increase of $1,050,000 from $4,398,000 at March 31, 2001. Since
March 31, 2001, the Company has made additional investments of $112,000 in Econometrics, Inc. in an attempt to keep that company viable. (See Note 4 of Notes to Condensed
Consolidated Financial Statements included elsewhere herein). Also, since March 31, 2001, the Company invested $1,027,000 in additional marketable securities. The Company's working capital
increased $777,000 at December 31, 2001, from $7,096,000 at March 31, 2001. This increase was primarily for the reasons described below.

Cash Flow from Operating Activities.

The Company's cash provided by operating activities from continuing operations totaled $3,245,000 for the first nine months of fiscal 2002, as compared to
$2,891,000 for the first nine months of fiscal 2001. The increase is primarily due to increased sales of $1,269,000 at Bio Systems and Scherer Labs for the nine months ended December 31, 2001,
a corresponding decrease in accounts receivable and collateralizing workers compensation requirements with letters of credit instead of using cash.

Cash Flows from Investing and Financing Activities.

The Company's investing activities used cash of $2,139,000 for the nine months ended December 31, 2001, as compared to a use of cash of $221,000 for the
nine months ended December 31,

12

---

2000. During the nine months ended December 31, 2001, the Company increased its net investment in marketable securities by $1,027,000 and the Company made an additional cash investment of
$112,000 in Econometrics, Inc. (see comments above). For the nine months ended December 31, 2001, the
Company acquired new vehicles, factory machinery and equipment, office equipment and containers amounting to $870,000, versus $1,185,000 for the nine months ended December 31, 2000.

Cash
used for financing activities was $56,000 for the nine months ended December 31, 2001, resulting from the Company paying off certain capital leases. For the nine months ended
December 31, 2000, cash flow from financing activities was $295,000 caused by capital lease financing of new vehicles.

Management
of the Company believes that its current cash on hand and its current and future cash flow is sufficient to maintain its 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 acquisition opportunities and internal expansion.

Effects of Accounting Standards

In June 2001, the Financial Accounting Standards Board (FASB) issued Statement No. 141, "Business Combinations," which established new accounting
and reporting standards for business combinations and supersedes Accounting Principles Board (APB) Opinion No. 16. All business combinations initiated after June 30, 2001, must now be
accounted for using the purchase method of accounting.

Also
in June 2001, the FASB issued Statement No. 142, "Goodwill and Other Intangible Assets," which establishes new accounting and reporting standards for acquired goodwill
and other intangible assets and supersedes APB Opinion No. 17. It addresses how intangible assets that are acquired individually or with a group of other assets (but not those acquired in a
business combination) should be accounted for upon acquisition and on an ongoing basis. Goodwill and intangible assets that have indefinite useful lives will not be amortized but rather will be tested
at least annually for impairment. Intangible assets that have finite useful lives will continue to be amortized over their useful lives, which are no longer limited to 40 years. The Company
must adopt the provisions of Statement No.142 on April 1, 2002. The Company recorded amortization expense related to goodwill of $83,000 for the nine months ended December 31, 2001, and
is expected to record $107,000 of goodwill amortization expense for the year ending March 31, 2002. The Company has not yet quantified the impact of adopting Statement No. 142 on its
consolidated financial statements; however, the impact is not expected to be material upon adoption on April 1, 2002.

PART II. OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K

(a)    Exhibits



(b)    Reports
on Form 8-K.



13

---



SIGNATURES

Pursuant to the requirements 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.

|                        |  | SCHERER HEALTHCARE, INC.
(Registrant)                                                          
|----------------------- |  | -----------------------------------------------------------------------------------------------
|Date: February 14, 2002 |  | /s/ROBERT P. SCHERER, JR.Robert P. Scherer, Jr. Chairman, Chief Executive Officer and
President
|Date: February 14, 2002 |  | /s/DONALD P. ZIMADonald P. Zima Vice President and Chief Financial Officer                     

14

---

QuickLinks