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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-Q

|           |  |                                                                                         
|---------- |  | ----------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                         
|[X]        |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 
|           |  |                                                                                         
|           |  | For the quarterly period ended June 30, 2002                                            
|           |  |                                                                                         
|OR        
|           |  |                                                                                         
|[   ]      |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
|           |  |                                                                                         
|           |  | For the transition period from

to                                                      

Commission File Number: 0-26126

SEROLOGICALS CORPORATION
(Exact Name of Registrant as Specified in its Charter)

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

(678) 728-2000
(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 outstanding of each of the issuers classes of
common stock, as of the latest practicable date:

|                                       |  |                              
|-------------------------------------- |  | -----------------------------
|Class                                  |  | Outstanding at August 9, 2002
|                                       |  |                              
|Common Stock, $.01 par value per share |  | 24,385,655                   





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TABLE OF CONTENTS



|                                                                                              |                                            |  |  |  |  |  |  | 
|--------------------------------------------------------------------------------------------- | ------------------------------------------ |  |  |  |  |  |  | 
|PART I.                                                                                      
|                                                                                              | Item 1. Financial Statements              
|                                                                                              | CONSOLIDATED BALANCE SHEETS               
|                                                                                              | CONSOLIDATED STATEMENTS OF INCOME         
|                                                                                              | CONSOLIDATED STATEMENTS OF CASH FLOWS     
|                                                                                              | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|Item 3. Quantitative and Qualitative Disclosures about Market Risk                           
|PART II.                                                                                     
|Item 1. Legal Proceedings                                                                    
|Item 4. Submission of Matters to a Vote of Security Holders                                  
|Item 5. Other Information                                                                    
|Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURES                                                                                   
|Employment Agreement - James Kramer, PhD.                                                    
|Section 906 Certification of the CEO                                                         
|Section 906 Certification of the CFO                                                         



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##### Table of Contents



INDEX

SEROLOGICALS CORPORATION AND SUBSIDIARIES

|           |  |                                                                                       |  |                                                      |                                                                   |  |   |   | 
|---------- |  | ------------------------------------------------------------------------------------- |  | ---------------------------------------------------- | ----------------------------------------------------------------- |  | - | - | 
|PART
I.    |  |                                                                                       |  |                                                      |                                                                   |  |  
|           |  |                                                                                      
|Item 1.    |  | Financial Statements                                                                  |  |                                                      |                                                                   | 
|           |  |                                                                                      
|           |  |                                                                                       |  | Consolidated Balance Sheets -                        |                                                                   |  |   |  
|           |  |                                                                                       |  |                                                      | June 30, 2002 (Unaudited) and December 30, 2001                   |  |   | 3 | 
|           |  |                                                                                      
|           |  |                                                                                       |  | Unaudited Consolidated Statements of Income -        |                                                                   |  |   |  
|           |  |                                                                                       |  |                                                      | For the three and six months ended June 30, 2002 and July 1, 2001 |  |   | 4 | 
|           |  |                                                                                      
|           |  |                                                                                       |  | Unaudited Consolidated Statements of Cash Flows -    |                                                                   |  |   |  
|           |  |                                                                                       |  |                                                      | For the six months ended June 30, 2002 and July 1, 2001           |  |   | 5 | 
|           |  |                                                                                      
|           |  |                                                                                       |  | Notes to Unaudited Consolidated Financial Statements |                                                                   |  | 6 |  
|           |  |                                                                                      
|Item 2.    |  | Managements Discussion and Analysis of Financial
Condition and Results of Operations |  |                                                      | 13                                                                | 
|           |  |                                                                                      
|Item 3.    |  | Quantitative and Qualitative Disclosures about Market Risk                            |  |                                                      | 23                                                                | 
|           |  |                                                                                      
|PART II.   | 
|           |  |                                                                                      
|Item 1.    |  | Legal Proceedings                                                                     |  |                                                      | 24                                                                | 
|           |  |                                                                                      
|Item 4.    |  | Submission of Matters to a Vote of Security Holders                                   |  |                                                      | 24                                                                | 
|           |  |                                                                                      
|Item 5.    |  | Other
Information                                                                     |  |                                                      | 24                                                                | 
|           |  |                                                                                      
|Item 6.    |  | Exhibits and Reports on Form 8-K                                                      |  |                                                      | 25                                                                | 
|           |  |                                                                                      
|SIGNATURES |  |                                                                                       |  |                                                      | 26                                                                | 





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##### Table of Contents






PART I.




Item 1.     Financial Statements




SEROLOGICALS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)

|                                                                      |                                                                    |  |                            |                                            |   |             |         |              |   |         |         | 
|--------------------------------------------------------------------- | ------------------------------------------------------------------ |  | -------------------------- | ------------------------------------------ | - | ----------- | ------- | ------------ | - | ------- | ------- | 
|                                                                      |                                                                    |  |                            |                                            |   | June 30,    |         |              |   |        
|                                                                      |                                                                    |  |                            |                                            |   | 2002        |         | December 30,
|                                                                      |                                                                    |  |                            |                                            |   | (Unaudited) |         | 2001        
|                                                                      |                                                                    |  |                            | ASSETS                                     |   |             |         |              |   |         |         | 
|CURRENT ASSETS:                                                       |                                                                    |  |                            |                                            |   |             |         |             
|                                                                      | Cash and cash equivalents                                          |  | $                          | 4,630                                      |   |             | $       | 10,780       |  
|                                                                      | Trade accounts receivable, net                                     |  |                            | 27,662                                     |   |             |         | 24,652       |  
|                                                                      | Inventories                                                        |  |                            | 31,868                                     |   |             |         | 31,595       |  
|                                                                      | Income tax receivable                                              |  |                            | 2,358                                      |   |             |         | 4,201        |  
|                                                                      | Other current assets                                               |  |                            | 7,320                                      |   |             |         | 4,144        |  
|                                                                      |                                                                    |  |                            |                                            |   |             |         |             
|                                                                      |                                                                    |  | Total current assets       |                                            |   | 73,838      |         |              |   | 75,372  |        
|                                                                      |                                                                    |  |                            |                                            |   |             |         |             
|PROPERTY AND EQUIPMENT, net                                           |                                                                    |  | 52,886                     |                                            |   |             | 48,869  |             
|                                                                      |                                                                    |  |                            |                                            |   |             |         |             
|OTHER ASSETS:                                                         |                                                                    |  |                            |                                            |   |             |         |             
|                                                                      | Goodwill                                                           |  |                            | 38,616                                     |   |             |         | 35,360       |  
|                                                                      | Patents and proprietary know-how, net                              |  |                            | 11,087                                     |   |             |         | 11,471       |  
|                                                                      | Other, net                                                         |  |                            | 4,395                                      |   |             |         | 4,266        |  
|                                                                      |                                                                    |  |                            |                                            |   |             |         |             
|                                                                      |                                                                    |  | Total other assets         |                                            |   | 54,098      |         |              |   | 51,097  |        
|                                                                      |                                                                    |  |                            |                                            |   |             |         |             
|                                                                      |                                                                    |  |                            | Total assets                               |   | $           | 180,822 |              |   | $       | 175,338 | 
|                                                                      |                                                                    |  |                            |                                            |   |             |         |             
|                                                                      |                                                                    |  |                            | LIABILITIES AND STOCKHOLDERS EQUITY       |   |             |         |              |   |         |         | 
|CURRENT LIABILITIES:                                                  |                                                                    |  |                            |                                            |   |             |         |             
|                                                                      | Current maturities of long-term debt and capital lease obligations |  | $                          | 495                                        |   |             | $       | 3,125        |  
|                                                                      | Accounts payable                                                   |  |                            | 5,613                                      |   |             |         | 5,955        |  
|                                                                      | Accrued liabilities                                                |  |                            | 8,389                                      |   |             |         | 10,711       |  
|                                                                      | Deferred revenue                                                   |  |                            | 1,611                                      |   |             |         | 425          |  
|                                                                      |                                                                    |  |                            |                                            |   |             |         |             
|                                                                      |                                                                    |  | Total current liabilities  |                                            |   | 16,108      |         |              |   | 20,216  |        
|                                                                      |                                                                    |  |                            |                                            |   |             |         |             
|LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, less current maturities |                                                                    |  | 34                         |                                            |   |             | 1,451   |             
|DEFERRED INCOME TAXES                                                 |                                                                    |  | 1,612                      |                                            |   |             | 858     |             
|                                                                      |                                                                    |  |                            |                                            |   |             |         |             
|OTHER LIABILITIES                                                     |                                                                    |  | 427                        |                                            |   |             | 338     |             
|                                                                      |                                                                    |  |                            |                                            |   |             |         |             
|STOCKHOLDERS EQUITY:                                                 |                                                                    |  |                            |                                            |   |             |         |             
|                                                                      | Common stock                                                       |  |                            | 277                                        |   |             |         | 275          |  
|                                                                      | Additional paid-in capital                                         |  |                            | 117,462                                    |   |             |         | 114,489      |  
|                                                                      | Retained earnings                                                  |  |                            | 64,752                                     |   |             |         | 58,262       |  
|                                                                      | Accumulated other comprehensive income (loss)                      |  |                            | 497                                        |   |             |         | (551         | )
|                                                                      | Less: common stock held in treasury                                |  |                            | (20,347                                    | ) |             |         | (20,000      | )
|                                                                      |                                                                    |  |                            |                                            |   |             |         |             
|                                                                      |                                                                    |  | Total stockholders equity |                                            |   | 162,641     |         |              |   | 152,475 |        
|                                                                      |                                                                    |  |                            |                                            |   |             |         |             
|                                                                      |                                                                    |  |                            | Total liabilities and stockholders equity |   | $           | 180,822 |              |   | $       | 175,338 | 
|                                                                      |                                                                    |  |                            |                                            |   |             |         |             

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

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SEROLOGICALS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share and per share data)
(Unaudited)

|                             |                                              |         |        |                    |            |                  |        |          |            |         |        |        |            |   |        |        |            | 
|---------------------------- | -------------------------------------------- | ------- | ------ | ------------------ | ---------- | ---------------- | ------ | -------- | ---------- | ------- | ------ | ------ | ---------- | - | ------ | ------ | ---------- | 
|                             |                                              |         |        | Three Months Ended |            | Six Months Ended
|                             |                                              |         |        |                    |            |                 
|                             |                                              |         |        | June 30,           |            | July 1,          |        | June 30, |            | July 1,
|                             |                                              |         |        | 2002               |            | 2001             |        | 2002     |            | 2001   
|                             |                                              |         |        |                    |            |                  |        |          |            |        
|Net sales                    |                                              | $       | 37,292 |                    |            | $                | 27,181 |          |            | $       | 68,763 |        |            | $ | 53,639 |       
|Costs and expenses:          |                                              |         |        |                    |            |                  |        |          |            |         |        |        |            |   |        |       
|                             | Cost of sales                                |         |        | 18,672             |            |                  |        | 13,744   |            |         |        | 34,660 |            |   |        | 27,530 |           
|                             | Selling, general and administrative
expenses |         |        | 10,163             |            |                  |        | 5,419    |            |         |        | 20,381 |            |   |        | 10,785 |           
|                             | Research and development                     |         |        | 1,380              |            |                  |        | 353      |            |         |        | 2,376  |            |   |        | 683    |           
|                             | Special charges, net                         |         |        | 1,309              |            |                  |        | 163      |            |         |        | 1,309  |            |   |        | 163    |           
|                             |                                              |         |        |                    |            |                  |        |          |            |         |        |        |            |   |        |       
|Operating income             |                                              |         | 5,768  |                    |            |                  | 7,502  |          |            |         | 10,037 |        |            |   | 14,478 |       
|                             | Other expense, net                           |         |        | 332                |            |                  |        | 312      |            |         |        | 511    |            |   |        | 583    |           
|                             | Interest income, net                         |         |        | (382               | )          |                  |        | (349     | )          |         |        | (458   | )          |   |        | (712   | )         
|                             |                                              |         |        |                    |            |                  |        |          |            |         |        |        |            |   |        |       
|Income before income taxes   |                                              |         | 5,818  |                    |            |                  | 7,539  |          |            |         | 9,984  |        |            |   | 14,607 |       
|Provision for income taxes   |                                              |         | 2,036  |                    |            |                  | 2,714  |          |            |         | 3,494  |        |            |   | 5,400  |       
|                             |                                              |         |        |                    |            |                  |        |          |            |         |        |        |            |   |        |       
|Net income                   |                                              | $       | 3,782  |                    |            | $                | 4,825  |          |            | $       | 6,490  |        |            | $ | 9,207  |       
|                             |                                              |         |        |                    |            |                  |        |          |            |         |        |        |            |   |        |       
|Net income per common share: |                                              |         |        |                    |            |                  |        |          |            |         |        |        |            |   |        |       
|                             |                                              | Basic   |        | $                  | 0.16       |                  |        | $        | 0.20       |         |        | $      | 0.27       |   |        | $      | 0.39       | 
|                             |                                              |         |        |                    |            |                  |        |          |            |         |        |        |            |   |        |       
|                             |                                              | Diluted |        | $                  | 0.15       |                  |        | $        | 0.20       |         |        | $      | 0.26       |   |        | $      | 0.38       | 
|                             |                                              |         |        |                    |            |                  |        |          |            |         |        |        |            |   |        |       
|Weighted average shares:     |                                              |         |        |                    |            |                  |        |          |            |         |        |        |            |   |        |       
|                             |                                              | Basic   |        |                    | 24,339,675 |                  |        |          | 23,682,859 |         |        |        | 24,303,005 |   |        |        | 23,458,212 | 
|                             |                                              |         |        |                    |            |                  |        |          |            |         |        |        |            |   |        |       
|                             |                                              | Diluted |        |                    | 24,921,293 |                  |        |          | 24,428,283 |         |        |        | 24,872,093 |   |        |        | 24,162,441 | 
|                             |                                              |         |        |                    |            |                  |        |          |            |         |        |        |            |   |        |       

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

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SEROLOGICALS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

|                                                     |                                                                                   |   |                                |                                                     |   |                  |        |         |   |        |        |  
|---------------------------------------------------- | --------------------------------------------------------------------------------- | - | ------------------------------ | --------------------------------------------------- | - | ---------------- | ------ | ------- | - | ------ | ------ | -
|                                                     |                                                                                   |   |                                |                                                     |   | Six Months Ended
|                                                     |                                                                                   |   |                                |                                                     |   |                 
|                                                     |                                                                                   |   |                                |                                                     |   | June 30,         |        | July 1,
|                                                     |                                                                                   |   |                                |                                                     |   | 2002             |        | 2001   
|                                                     |                                                                                   |   |                                |                                                     |   |                  |        |        
|Operating activities:                                |                                                                                   |   |                                |                                                     |   |                  |        |        
|                                                     | Net income                                                                        |   | $                              | 6,490                                               |   |                  | $      | 9,207   |  
|                                                     | Adjustments to reconcile net income to net cash provided
by operating activities: |  
|                                                     | Depreciation and amortization                                                     |   |                                | 3,328                                               |   |                  |        | 2,916   |  
|                                                     | Loss on disposal of assets                                                        |   |                                |                                                    |   |                  |        | 39      |  
|                                                     | Loss
on impairment of long-lived assets                                           |   |                                | 532                                                 |   |                  |        |        |  
|                                                     | Tax benefit from exercise of stock options                                        |   |                                | 746                                                 |   |                  |        | 2,761   |  
|                                                     | Non-cash special credit                                                           |   |                                |                                                    |   |                  |        | (762    | )
|                                                     | Deferred and other compensation                                                   |   |                                | 117                                                 |   |                  |        |        |  
|                                                     | Changes in operating assets and liabilities:                                      |   |                                |                                                     |   |                  |        |         |  
|                                                     |                                                                                   |   | Trade accounts receivable, net |                                                     |   | (3,010           | )      |         |   | (4,363 | )     
|                                                     |                                                                                   |   | Inventories                    |                                                     |   | (2,811           | )      |         |   | 436    |       
|                                                     |                                                                                   |   | Income tax receivable          |                                                     |   | 1,843            |        |         |   | (725   | )     
|                                                     |                                                                                   |   | Other assets                   |                                                     |   | (3,175           | )      |         |   | 2,029  |       
|                                                     |                                                                                   |   | Accounts payable               |                                                     |   | (342             | )      |         |   | (1,294 | )     
|                                                     |                                                                                   |   | Accrued liabilities            |                                                     |   | (3,152           | )      |         |   | (1,069 | )     
|                                                     |                                                                                   |   | Deferred revenue               |                                                     |   | 1,187            |        |         |   | 310    |       
|                                                     |                                                                                   |   | Other, net                     |                                                     |   | 873              |        |         |   | (239   | )     
|                                                     |                                                                                   |   |                                |                                                     |   |                  |        |        
|                                                     |                                                                                   |   | Total adjustments              |                                                     |   | (3,864           | )      |         |   | 39     |       
|                                                     |                                                                                   |   |                                |                                                     |   |                  |        |        
|                                                     |                                                                                   |   |                                | Net cash provided by operating activities           |   |                  | 2,626  |         |   |        | 9,246  |  
|                                                     |                                                                                   |   |                                |                                                     |   |                  |        |        
|Investing activities:                                |                                                                                   |   |                                |                                                     |   |                  |        |        
|                                                     | Purchases of property and equipment                                               |   |                                | (6,406                                              | ) |                  |        | (2,611  | )
|                                                     | Other                                                                             |   |                                | (189                                                | ) |                  |        |        |  
|                                                     |                                                                                   |   |                                |                                                     |   |                  |        |        
|                                                     |                                                                                   |   |                                | Net cash used in investing activities               |   |                  | (6,595 | )       |   |        | (2,611 | )
|                                                     |                                                                                   |   |                                |                                                     |   |                  |        |        
|Financing activities:                                |                                                                                   |   |                                |                                                     |   |                  |        |        
|                                                     | Payments on long-term debt and capital leases                                     |   |                                | (3,935                                              | ) |                  |        | (9      | )
|                                                     | Proceeds from stock plans                                                         |   |                                | 2,101                                               |   |                  |        | 9,948   |  
|                                                     | Purchase of common stock                                                          |   |                                | (347                                                | ) |                  |        |        |  
|                                                     |                                                                                   |   |                                |                                                     |   |                  |        |        
|                                                     |                                                                                   |   |                                | Net cash (used in) provided by financing activities |   |                  | (2,181 | )       |   |        | 9,939  |  
|                                                     |                                                                                   |   |                                |                                                     |   |                  |        |        
|Net (decrease) increase in cash and cash equivalents |                                                                                   |   | (6,150                         | )                                                   |   |                  | 16,574 |        
|Cash and cash equivalents, beginning of period       |                                                                                   |   | 10,780                         |                                                     |   |                  | 22,492 |        
|                                                     |                                                                                   |   |                                |                                                     |   |                  |        |        
|Cash and cash equivalents, end of period             |                                                                                   | $ | 4,630                          |                                                     |   | $                | 39,066 |        
|                                                     |                                                                                   |   |                                |                                                     |   |                  |        |        
|Supplemental Disclosures:                            |                                                                                   |   |                                |                                                     |   |                  |        |        
|Interest paid, net of amounts capitalized            |                                                                                   | $ |                               |                                                     |   | $                | 135    |        
|Income taxes paid                                    |                                                                                   | $ | 2,777                          |                                                     |   | $                | 4,136  |        
|Non-Cash Investing and Financing Activities:         |                                                                                   |   |                                |                                                     |   |                  |        |        
|Contingent consideration payable                     |                                                                                   | $ | 327                            |                                                     |   | $                |       |        
|Stock acquired by employees in lieu of cash bonus    |                                                                                   | $ | 212                            |                                                     |   | $                |       |        

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

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SEROLOGICALS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2002
(UNAUDITED)

1. ORGANIZATION AND BASIS OF PRESENTATION

Organization

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

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

On December 13, 2001, the Company acquired Intergen Company L.P.
(Intergen), a privately held Delaware limited partnership. The purchase
price was approximately $45 million, less approximately $1.7 million
representing estimated costs necessary to complete the expansion of Intergens
manufacturing facility in Toronto, Canada. Additionally, the former partners
of Intergen may earn certain additional cash consideration based on the
financial performance of Intergen over a defined period of time. The purchase
price and the Toronto completion costs were funded with cash on hand. The
results of operations of Intergen are included in the accompanying financial
statements from the date of acquisition.

Basis of Presentation

The accompanying unaudited consolidated financial statements include the
accounts of Serologicals and its subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation. The
accompanying statements have been prepared in accordance with accounting
principles generally accepted in the United States for interim financial
information and the instructions to Form 10-Q. Accordingly, they do not
include all of the information and footnotes required by accounting principles
generally accepted in the United States for complete financial statements. In
the opinion of management, the accompanying unaudited consolidated financial
statements reflect all adjustments, which are of a normal recurring nature, to
present fairly Serologicals financial position, results of operations and cash
flows at the dates and for the periods presented.

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Interim results of operations are not necessarily indicative of results to be expected for the
full year. The interim financial statements should be read in conjunction with the audited
consolidated financial statements as of December 30, 2001 and the notes thereto
included in the Companys Annual Report on Form 10-K for the year ended
December 30, 2001.

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

Earnings Per Share

Basic earnings per share are calculated by dividing net income by the
weighted average number of common shares outstanding during the period. The
calculation of diluted earnings per share is similar to basic earnings per
share, except the weighted average number of shares includes the dilutive
effect of stock options, warrants and similar instruments.

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

|                            |                                                                                     |                            |   |                    |      |                  |   |          |      |         |   |        |      |  |   |        |      | 
|--------------------------- | ----------------------------------------------------------------------------------- | -------------------------- | - | ------------------ | ---- | ---------------- | - | -------- | ---- | ------- | - | ------ | ---- |  | - | ------ | ---- | 
|                            |                                                                                     |                            |   | Three Months Ended |      | Six Months Ended
|                            |                                                                                     |                            |   |                    |      |                 
|                            |                                                                                     |                            |   | June 30,           |      | July 1,          |   | June 30, |      | July 1,
|                            |                                                                                     |                            |   | 2002               |      | 2001             |   | 2002     |      | 2001   
|                            |                                                                                     |                            |   |                    |      |                  |   |          |      |        
|Basic earnings per share:   |                                                                                     |                            |   |                    |      |                  |   |          |      |         |   |        |      |  |   |       
|                            | Net income                                                                          |                            | $ | 3,782              |      |                  | $ | 4,825    |      |         | $ | 6,490  |      |  | $ | 9,207  |     
|                            | Weighted average shares of common stock outstanding                                 |                            |   | 24,340             |      |                  |   | 23,683   |      |         |   | 24,303 |      |  |   | 23,458 |     
|                            |                                                                                     |                            |   |                    |      |                  |   |          |      |         |   |        |      |  |   |       
|                            |                                                                                     | Net income per share       |   | $                  | 0.16 |                  |   | $        | 0.20 |         |   | $      | 0.27 |  |   | $      | 0.39 | 
|                            |                                                                                     |                            |   |                    |      |                  |   |          |      |         |   |        |      |  |   |       
|Diluted earnings per share: |                                                                                     |                            |   |                    |      |                  |   |          |      |         |   |        |      |  |   |       
|                            | Net income                                                                          |                            | $ | 3,782              |      |                  | $ | 4,825    |      |         | $ | 6,490  |      |  | $ | 9,207  |     
|                            | Weighted average shares of common stock outstanding                                 |                            |   | 24,340             |      |                  |   | 23,683   |      |         |   | 24,303 |      |  |   | 23,458 |     
|                            | Effect of dilutive securities:                                                      |                            |   |                    |      |                  |   |          |      |         |   |        |      |  |   |        |     
|                            |                                                                                     | Stock options and warrants |   |                    | 567  |                  |   |          | 734  |         |   |        | 556  |  |   |        | 694  | 
|                            |                                                                                     | Common stock awards        |   |                    | 14   |                  |   |          | 11   |         |   |        | 13   |  |   |        | 10   | 
|                            |                                                                                     |                            |   |                    |      |                  |   |          |      |         |   |        |      |  |   |       
|                            | Weighted average shares of common stock outstanding,
including dilutive instruments |                            |   | 24,921             |      |                  |   | 24,428   |      |         |   | 24,872 |      |  |   | 24,162 |     
|                            |                                                                                     |                            |   |                    |      |                  |   |          |      |         |   |        |      |  |   |       
|                            |                                                                                     | Net income per share       |   | $                  | 0.15 |                  |   | $        | 0.20 |         |   | $      | 0.26 |  |   | $      | 0.38 | 
|                            |                                                                                     |                            |   |                    |      |                  |   |          |      |         |   |        |      |  |   |       

The following shares issuable under stock option agreements were excluded
from the calculation of dilutive earnings per share for the periods indicated
as the option price exceeded the average market price for the Companys stock
and thus their effect would have been anti-dilutive (in thousands):

|                   |     |                  |  |          |  |         |  |     |  |  |  |     | 
|------------------ | --- | ---------------- |  | -------- |  | ------- |  | --- |  |  |  | --- | 
|Three Months Ended |     | Six Months Ended
|                   |     |                 
|June 30,           |     | July 1,          |  | June 30, |  | July 1,
|2002               |     | 2001             |  | 2002     |  | 2001   
|                   |     |                  |  |          |  |        
|                   | 571 |                  |  | 288      |  |         |  | 472 |  |  |  | 358 | 
|                   |     |                  |  |          |  |         |  |     |  |  |  |    

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Comprehensive Income

The following table sets forth the calculation of comprehensive income for
the periods indicated below
(in thousands):

|                                               |                                          |   |                    |       |                  |   |          |     |         |   |       |       |  |   |       |      |  
|---------------------------------------------- | ---------------------------------------- | - | ------------------ | ----- | ---------------- | - | -------- | --- | ------- | - | ----- | ----- |  | - | ----- | ---- | -
|                                               |                                          |   | Three Months Ended |       | Six Months Ended
|                                               |                                          |   |                    |       |                 
|                                               |                                          |   | June 30,           |       | July 1,          |   | June 30, |     | July 1,
|                                               |                                          |   | 2002               |       | 2001             |   | 2002     |     | 2001   
|                                               |                                          |   |                    |       |                  |   |          |     |        
|Net income, as reported                        |                                          | $ | 3,782              |       |                  | $ | 4,825    |     |         | $ | 6,490 |       |  | $ | 9,207 |     
|Other comprehensive income (loss), net of tax: |                                          |   |                    |       |                  |   |          |     |         |   |       |       |  |   |       |     
|                                               | Foreign currency translation adjustments |   |                    | 1,252 |                  |   |          | 139 |         |   |       | 1,048 |  |   |       | (570 | )
|                                               |                                          |   |                    |       |                  |   |          |     |         |   |       |       |  |   |       |     
|Comprehensive income                           |                                          | $ | 5,034              |       |                  | $ | 4,964    |     |         | $ | 7,538 |       |  | $ | 8,637 |     
|                                               |                                          |   |                    |       |                  |   |          |     |         |   |       |       |  |   |       |     

Recent Accounting Pronouncements

On December 31, 2001, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 142. SFAS No. 142 supersedes APB Opinion No.
17, Intangible Assets. This Standard prescribes the accounting practices for
acquired goodwill and other intangible assets. Under this Standard, goodwill
and indefinite-lived intangibles are no longer amortized to earnings, but
instead are reviewed periodically (at least annually) for impairment. In
accordance with the requirements of SFAS No. 142, goodwill and identifiable,
indefinite-lived assets related to the Intergen acquisition are not being
amortized. Effective December 31, 2001, all goodwill and other intangible
assets with indefinite lives existing prior to July 1, 2001 are not being
amortized. Had the non-amortization provisions for goodwill as prescribed by
SFAS No. 142 been in effect in 2001, net income would have increased by
approximately $225,000, or $0.01 per diluted share for the three months ended
July 1, 2001, and approximately $450,000, or $0.02 per diluted share for the
six months ended July 1, 2001.

During the second quarter of 2002, in conjunction with the adoption of
SFAS No. 142, the Company engaged a third party to perform an independent
valuation of the fair value of the Companys reporting units to determine
whether any impairments existed as of December 31, 2001. Based on this
appraisal, the Company concluded that no impairments existed as of that date,
and accordingly, there was no transitional goodwill impairment charge.

In June 2001, the FASB issued SFAS No. 143, Accounting for Asset
Retirement Obligations. This Standard addresses financial accounting and
reporting for asset retirement costs of long-lived assets resulting from legal
obligations associated with acquisition, construction or development
transactions. The Company plans to adopt this Standard in the first quarter of
2003. The adoption of this Standard is not expected to have a material impact
on the Companys financial position or results of operations.

In July 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities. This Standard supersedes
guidance provided by EITF Issue No. 94-3, Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity (including
Certain Costs Incurred in a Restructuring). SFAS No. 146 requires that costs
associated with exit or disposal activities be recognized when they are
incurred rather than at the date of a commitment to an exit or disposal plan.
This Standard is effective for all exit or disposal activities initiated after
December 31, 2002. The adoption of this Standard is not expected to have a
material impact on the Companys financial position or results of operations.

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2. ACQUISITION AND SPECIAL CHARGES

Acquisition of Intergen

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

The total purchase price was approximately $45 million, less costs
remaining to complete the expansion of Intergens manufacturing facility in
Toronto, which were estimated to be approximately $1.7 million as of the
acquisition date. Additionally, the Company entered into an earnout agreement
with Intergens partners. The earnout agreement required the Company to pay
additional consideration to Intergens partners based on a defined formula if
Intergen sales exceeded $8 million during the first quarter of 2002. This
provision resulted in an additional payment of approximately $327,000 that was
recorded as an adjustment to goodwill on the consolidated balance sheet. This
payment was made in July 2002. Also, a second component of the earnout
agreement requires the Company to pay additional consideration based on a
formula related to sales of certain Intergen technologies over a five year
period ending December 31, 2006. Any payments made under the earnout agreement
will be treated as additional consideration and accounted for as additional
goodwill. No payments were earned under this component of the earnout
agreement during the first six months of 2002.

During the first six months of 2002, the Company recorded several
additional purchase price adjustments to goodwill. These adjustments included
additional severance costs related to the acquisition, an adjustment to the
preliminary opening inventory valuation for slow moving inventory, a discount
related to early payment of a supplier note payable, and an accrual for certain
license agreements.

The following table summarizes the results of Serologicals on a pro forma
basis for the three and six months ended July 1, 2001 as if the acquisition of
Intergen had occurred on January 1, 2001. These results do not purport to
represent what the results of operations for Serologicals would actually have
been or to be indicative of the future results of operations of Serologicals
(in thousands, except per share amounts).

|                             |         |   |              |      |            |   |        |      | 
|---------------------------- | ------- | - | ------------ | ---- | ---------- | - | ------ | ---- | 
|                             |         |   | Three Months |      | Six Months
|                             |         |   |              |      |           
|Revenues                     |         | $ | 33,688       |      |            | $ | 66,694 |     
|Net income                   |         | $ | 4,131        |      |            | $ | 8,060  |     
|Net income per common share: |         |   |              |      |            |   |        |     
|                             | Basic   |   | $            | 0.17 |            |   | $      | 0.34 | 
|                             | Diluted |   | $            | 0.17 |            |   | $      | 0.33 | 

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Special Charges

During the second quarter of 2002, the Company completed an extensive
review of its plasma operations. As a result of this review, the Company
permanently closed four of its seventeen donor centers, resulting in a charge
of $1.3 million. The components of the charge included approximately $179,000
related to severance payments, approximately $492,000 related to lease
obligations and approximately $532,000 related to the write-off of certain
long-lived assets associated with the closed centers. The remaining balance
consisted of other miscellaneous costs related to the closures.

The following table summarizes the accrual for termination benefits and
other costs for the six months ended June 30, 2002 (in thousands):

|                           |  |          |     |            |  |              |     |       |  |         |      |          |  |   |     |  |  |   |     | 
|-------------------------- |  | -------- | --- | ---------- |  | ------------ | --- | ----- |  | ------- | ---- | -------- |  | - | --- |  |  | - | --- | 
|                           |  |          |     |            |  | Additions to |     |       |  |         |      |          |  |   |     |  |  |  
|                           |  |          |     |            |  | reserve      |     |       |  |         |      |          |  |   |     |  |  |  
|                           |  | Balance, |     | charged to |  | Cash         |     |       |  |         |      | Balance,
|Description                |  | 12/30/01 |     | expense    |  | payments     |     | Other |  | 6/30/02
|                           |  |          |     |            |  |              |     |       |  |        
|Employee
termination costs |  | $        | 544 |            |  | $            | 179 |       |  | $       | (400 | )        |  | $ | 180 |  |  | $ | 503 | 
|Relocation costs           |  | $        | 100 |            |  |              |    |       |  |         |     |          |  |   |    |  |  | $ | 100 | 

The remaining accrual of $603,000 is included in Accrued liabilities in
the Consolidated Balance Sheets. As of June 30, 2002, the Company had
continuing obligations under severance arrangements with 39 former employees.
All of these amounts are expected to be paid in 2002.

3. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS

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

|                                                                                |  |          |     |              |  |   |       | 
|------------------------------------------------------------------------------- |  | -------- | --- | ------------ |  | - | ----- | 
|                                                                                |  | June 30, |     | December 30,
|                                                                                |  | 2002     |     | 2001        
|                                                                                |  |          |     |             
|Revolving credit facility                                                       |  | $        |    |              |  | $ |      | 
|Note payable; interest at 7% payable at maturity; maturing on
March 1, 2003     |  |          |    |              |  |   | 3,752 | 
|Capital lease obligations at varying interest rates and terms, maturing
in 2003 |  |          | 529 |              |  |   | 824   | 
|                                                                                |  |          |     |              |  |   |       | 
|                                                                                |  | $        | 529 |              |  | $ | 4,576 | 
|Less: current maturities                                                        |  |          | 495 |              |  |   | 3,125 | 
|                                                                                |  |          |     |              |  |   |       | 
|                                                                                |  | $        | 34  |              |  | $ | 1,451 | 
|                                                                                |  |          |     |              |  |   |       | 

During the second quarter of 2002, the Company prepaid a note
payable to a supplier which it assumed as part of the Intergen acquisition.
The Company negotiated a discount on the principal balance of approximately
$112,000 to prepay the note prior to maturity. This discount was recorded as
an adjustment to goodwill arising from the Intergen acquisition.

On April 25, 2002, the Company amended its revolving credit facility (the
Revolver) that was scheduled to expire in September 2002. The amount
available under the facility has been reduced from $75 million to $65 million.
The Revolver expires on April 25, 2005. Amounts outstanding under the Revolver
bear interest at either a floating rate or a Eurodollar interest rate plus a
margin that fluctuates based on the Companys leverage ratio. The margin on
the Eurodollar rate ranges from 1.25% to 1.75%, and the margin on the floating
rate option ranges from 0% to 0.25%. The Company is required to pay a fee
ranging from .3% to .5% on the unused portion of the Revolver, depending on the
Companys leverage ratio and amounts borrowed under the Revolver. The Revolver
contains certain financial covenants that require the maintenance of minimum
levels of

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cash flow coverage, minimum cash flows from domestic operations, debt to
net worth, debt service coverage, and limitations on capital expenditures.

The Company capitalizes interest on borrowings during the active
construction period of major capital projects. During the three and six months
ended June 30, 2002, the Company capitalized approximately $181,000 and
$346,000, respectively, in connection with various projects.

4. SEGMENT INFORMATION

Statement of Financial Accounting Standards No. 131, Disclosure about
Segments of an Enterprise and Related Information (SFAS No. 131), requires
the reporting of information about operating segments in annual financial
statements and requires selected information in interim financial reports.
Beginning in 2002, for management purposes the operations of the Companys
subsidiaries are organized into three primary operating segments:
Biotechnology and Molecular Biology Products (Biotech), Diagnostic Products
and Life Science Reagents (Diagnostics) and Therapeutic Products
(Therapeutics). These segments are based primarily on the differing nature of
the ultimate end use of the Companys products, the differing production,
manufacturing and other value-added processes performed by the Company with
respect to the products and, to a lesser extent, the differing customer bases
to which each reportable segment sells its products. Prior to 2002, the
Company reported only two operating segments, Therapeutics and Diagnostics.
As a result of the Intergen acquisition, as well as the increased significance
on the Companys operations of its EX-CYTE® product, the Company has developed
a significant portfolio of products used in applications within the
biotechnology and biopharmaceutical fields. The activities of the new Biotech
segment primarily include the manufacture and sale of tissue culture media
components, as well as certain research products and technologies used in life
sciences research and in high throughput drug screening. The following table
sets forth sales and operating income information with respect to the Companys
segments (in thousands):

|                                  |                                |   |                    |        |                  |   |          |        |         |   |       |         |   |   |        |        |  
|--------------------------------- | ------------------------------ | - | ------------------ | ------ | ---------------- | - | -------- | ------ | ------- | - | ----- | ------- | - | - | ------ | ------ | -
|                                  |                                |   | Three
Months Ended |        | Six Months Ended
|                                  |                                |   |                    |        |                 
|                                  |                                |   | June 30,           |        | July 1,          |   | June 30, |        | July 1,
|                                  |                                |   | 2002               |        | 2001             |   | 2002     |        | 2001   
|                                  |                                |   |                    |        |                  |   |          |        |        
|Net sales-unaffiliated customers: |                                |   |                    |        |                  |   |          |        |         |   |       |         |   |   |        |       
|                                  | Biotechnology Products         |   | $                  | 14,707 |                  |   | $        | 5,967  |         |   | $     | 26,793  |   |   | $      | 8,334  |  
|                                  | Diagnostic Products            |   |                    | 10,277 |                  |   |          | 8,379  |         |   |       | 21,127  |   |   |        | 17,771 |  
|                                  | Therapeutic Products           |   |                    | 12,308 |                  |   |          | 12,835 |         |   |       | 20,843  |   |   |        | 27,534 |  
|                                  |                                |   |                    |        |                  |   |          |        |         |   |       |         |   |   |        |       
|                                  | Total                          |   | $                  | 37,292 |                  |   | $        | 27,181 |         |   | $     | 68,763  |   |   | $      | 53,639 |  
|                                  |                                |   |                    |        |                  |   |          |        |         |   |       |         |   |   |        |       
|Segment operating income:         |                                |   |                    |        |                  |   |          |        |         |   |       |         |   |   |        |       
|                                  | Biotechnology Products         |   | $                  | 6,356  |                  |   | $        | 3,107  |         |   | $     | 10,763  |   |   | $      | 4,351  |  
|                                  | Diagnostic Products            |   |                    | 3,171  |                  |   |          | 2,985  |         |   |       | 6,840   |   |   |        | 6,153  |  
|                                  | Therapeutic Products           |   |                    | 3,061  |                  |   |          | 3,723  |         |   |       | 5,019   |   |   |        | 8,487  |  
|                                  | Corporate/Other                |   |                    | (5,511 | )                |   |          | (2,150 | )       |   |       | (11,276 | ) |   |        | (4,350 | )
|                                  |                                |   |                    |        |                  |   |          |        |         |   |       |         |   |   |        |       
|                                  | Total                          |   | $                  | 7,077  |                  |   | $        | 7,665  |         |   | $     | 11,346  |   |   | $      | 14,641 |  
|                                  |                                |   |                    |        |                  |   |          |        |         |   |       |         |   |   |        |       
|Reconciling items:                |                                |   |                    |        |                  |   |          |        |         |   |       |         |   |   |        |       
|                                  | Interest (income) expense, net |   | $                  | (382   | )                |   | $        | (349   | )       |   | $     | (458    | ) |   | $      | (712   | )
|                                  | Other expense, net             |   |                    | 332    |                  |   |          | 312    |         |   |       | 511     |   |   |        | 583    |  
|                                  | Special charges, net           |   |                    | 1,309  |                  |   |          | 163    |         |   |       | 1,309   |   |   |        | 163    |  
|                                  |                                |   |                    |        |                  |   |          |        |         |   |       |         |   |   |        |       
|Income before income taxes        |                                | $ | 5,818              |        |                  | $ | 7,539    |        |         | $ | 9,984 |         |   | $ | 14,607 |       
|                                  |                                |   |                    |        |                  |   |          |        |         |   |       |         |   |   |        |       

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Segment operating income is defined as earnings before income taxes,
interest, amortization, and foreign currency gains and losses and special
charges. Corporate and other includes general corporate expenses other than
those directly attributable to an operating segment. The Company had no
material intersegment sales during 2002 or 2001.

5. COMMITMENTS AND CONTINGENCIES

Litigation

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

During 2000, twelve complaints were filed against the Company and certain
of its current and former executive officers and directors which allege
violations of the Securities Exchange Act of 1934, including Sections 10(b) and
20(a) thereof and Rule 10b-5 promulgated thereunder. During the third quarter
of 2000, the complaints were consolidated and a lead plaintiff was named. A
consolidated complaint was filed on October 10, 2000 which also seeks the
courts certification of the litigation as class action on behalf of all
purchasers of the Companys stock between April 27, 1999 and April 10, 2000. On
November 30, 2000, the Company and the other defendants filed a motion to
dismiss the consolidated complaint. On January 17, 2001, the plaintiff filed an
opposition to the motion to dismiss. On April 20, 2001, a hearing was held on
the motion to dismiss. On September 5, 2001, the Court granted the motion to
dismiss the complaint in its entirety with prejudice and ruled that the
plaintiffs would not be allowed to amend the complaint. On September 19, 2001,
the plaintiffs filed a motion to amend the judgment and/or for relief arguing
that they should have been allowed to amend the complaint. The Company
responded by filing a brief supporting the Courts dismissal of the complaint.
On January 17, 2002, the Court reconsidered its decision and granted plaintiffs
leave to file an amended complaint. The plaintiffs filed a second amended
consolidated complaint on February 12, 2002. The Company does not consider the
claims of the second amended consolidated complaint to be substantively
different than those of the initial consolidated complaint and, consequently,
filed a motion to dismiss the second amended consolidated complaint on March
11, 2002. Although management considers all of the claims in the second amended
consolidated complaint to be without merit and intends to defend the lawsuit
vigorously if the Companys motion to dismiss is denied, management is unable
at this time to predict the final outcome of these claims.

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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations

Forward Looking Statements

This Quarterly Report on Form 10-Q contains certain forward looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995, which generally can be identified by the use of forward looking
terminology such as may, will, expect, anticipate, intend,
estimate, plan, believe, or continue or the negative thereof or other
variations thereon or similar terminology. These forward-looking statements
include, without limitation, statements regarding sales expectations for
certain of the Companys products, particularly, anti-D; the Companys ability
to meet customer demand for its products; the level of capital expenditures
during 2002; the possible need to construct a second EX-CYTE® plant; the
ability to reduce the backlog from the Scotland manufacturing facility; the
successful installation of new fermenters during the third and fourth quarters
at the Scotland manufacturing facility; the ability to absorb production from
the recently closed donor centers into the remaining 13 donor centers and to
increase the efficiency of the operations of the remaining donor centers;
increased investment in research and development; the sufficiency of capital
and liquidity to fund operations, capital expenditures, and acquisitions; and
the impact on the Companys financial position and results of operations from
the adoption of recently promulgated accounting standards. These
forward-looking statements are subject to certain risks, uncertainties and
other factors, including the Companys ability to attract and retain qualified
donors; the Companys ability to comply with various regulatory, customer and
other standards; the impact of competition; changes in government and industry
mandated regulations or customer specifications; changes in the markets or
customers demand for the Companys products and services; the existence of
opportunities in the marketplace to leverage the Companys strengths and
relationships; the ability of the Company to commercialize successfully the
Intergen products and technologies; and the ability of the Company to identify
new product opportunities that it can successfully commercialize. Any one or
more of these risks, uncertainties or factors could cause actual results to
differ materially from the Companys expectations. Additional information on
factors that could potentially affect the Company or its financial results may
be found in Part I of the Companys Annual Report on Form 10-K for the year
ended December 30, 2001.

Overview

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

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

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specialize in the collection of specialty human
antibodies. Prior to May 17, 2002, the Company operated 17 donor centers
for the collection of specialty human antibodies. As a result of an ongoing
project the Company has been conducting since 2001 to evaluate all of the
operational aspects of its donor center related operations, the Company
announced its plans to cease collections from its centers located in
Pittsburgh, Pennsylvania, Asheville, North Carolina, Atlanta, Georgia (one of
two centers in Atlanta), and Tuscaloosa, Alabama. The Company recorded charges
totaling $1.3 million related to the closure of these centers during the second
quarter of 2002. The Company expects to absorb the production capacity from
the closed donor centers through its remaining 13 centers, while reducing fixed
costs related to plasma operations.

On December 13, 2001, the Company acquired Intergen Company L.P.
(Intergen), a privately held Delaware limited partnership. The purchase
price was approximately $45 million, less approximately $1.7 million
representing estimated costs to complete the expansion of Intergens
manufacturing facility in Toronto, Canada. Additionally, the former partners
of Intergen may earn certain additional cash consideration based on the
financial performance of Intergen over a period of time. During the first
quarter of 2002, the former Intergen partners earned additional consideration
totaling approximately $327,000, based on the performance of the Company in
accordance with an earnout agreement. The purchase price and the Toronto
completion costs were funded with cash on hand. Also during the first quarter
of 2002, the Company permanently closed the former Intergen corporate
headquarters in Purchase, New York upon completing the transfer of all of the
essential functions performed at that location to the Companys corporate
office.

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

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

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Results of Operations

The following discussion and analysis of Serologicals financial condition
and results of operations should be read in conjunction with the Consolidated
Financial Statements and Notes thereto.

The following table sets forth certain operating data of Serologicals as a
percentage of net sales for the periods indicated below.

|                                             |  |                    |       |                  |  |          |       |         |  |  |       |   |  |  |       |  
|-------------------------------------------- |  | ------------------ | ----- | ---------------- |  | -------- | ----- | ------- |  |  | ----- | - |  |  | ----- | -
|                                             |  | Three
Months Ended |       | Six Months Ended
|                                             |  |                    |       |                 
|                                             |  | June 30,           |       | July 1,          |  | June 30, |       | July 1,
|                                             |  | 2002               |       | 2001             |  | 2002     |       | 2001   
|                                             |  |                    |       |                  |  |          |       |        
|Net sales                                    |  |                    | 100.0 | %                |  |          | 100.0 | %       |  |  | 100.0 | % |  |  | 100.0 | %
|Gross profit                                 |  |                    | 49.9  | %                |  |          | 49.4  | %       |  |  | 49.6  | % |  |  | 48.7  | %
|Selling, general and administrative
expenses |  |                    | 27.2  | %                |  |          | 19.9  | %       |  |  | 29.6  | % |  |  | 20.1  | %
|Research and development                     |  |                    | 3.7   | %                |  |          | 1.3   | %       |  |  | 3.5   | % |  |  | 1.3   | %
|Net income                                   |  |                    | 10.1  | %                |  |          | 17.8  | %       |  |  | 9.4   | % |  |  | 17.2  | %

Quarters Ended June 30, 2002 and July 1, 2001

NET SALES

Consolidated

Consolidated net sales increased approximately $10.1 million, or 37%, from
$27.2 million in the second quarter of 2001 to $37.3 million in the same period
in 2002. The increase was primarily due to the sales contribution from
Intergen and increased sales of EX-CYTE®.

Biotech Products

Net sales of biotechnology products increased $8.7 million, or 146%, from
$6.0 million in the second quarter of 2001 to $14.7 million in the same period
in 2002. Sales of EX-CYTE® increased $3.3 million, or 55%, from $6.0 million
in the second quarter of 2001 to $9.2 million in the same period in 2002. The
growth in the EX-CYTE® product is due to continued advancement in the
commercialization of the Companys customers end-products by moving to later
stage clinical trials and FDA drug approval. The remainder of the increase was
due to the sales contribution from Intergen, including sales of human
recombinant insulin and other media supplements, BSA, specialty reagents and
various other products.

Diagnostic Products

Net sales of Diagnostic Products increased approximately $1.9 million, or
23%, from $8.4 million in the second quarter of 2001 to $10.3 million in the
same period in 2002. This increase was primarily due to increased sales of BSA
and sales growth from other products acquired through the Intergen acquisition.
BSA sales increased from $2.0 million in the second quarter of 2001 to $2.8
million in the same period in 2002. Sales of monoclonal antibodies and related
products declined from $4.0 million to $3.3 million, due primarily to
production capacity issues. These issues are being addressed with the addition
of three new fermenters that are expected to be in production during the third
and fourth quarter of this year and will expand the production capacity at the
plant in Scotland. As of the end of the second quarter of 2002, there was an
order backlog of approximately $750,000 at this plant. The Company expects to
reduce the backlog during the second half of the year. The remainder of the
sales increase was essentially due to Intergen product sales.

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Therapeutic Products

Net sales of Therapeutic Products decreased approximately $0.5 million, or
4%, from $12.8 million in the second quarter of 2001 to $12.3 million during
the same period in 2002. Sales of anti-D declined $2.2 million, or 43%,
compared with the prior year. The Company expects anti-D sales to be
significantly lower for the full year 2002 compared with 2001, due to the
uneven ordering patterns of its customers for this product. Sales of
anti-hepatitis antibodies increased $3.0 million, or 73% over the prior year.
The growth in demand for anti-hepatitis is largely being driven by the
increasing life span for liver transplant patients, as well as other new
treatment protocols for liver patients. Sales of anti-rabies declined 10% from
the prior year quarter, primarily as a result of timing of customer orders and
delivery requirements. In addition, the Company recorded sales in the second
quarter of 2002 related to its contract with a biopharmaceutical manufacturer
to provide the customer with vaccinia immune globulin plasma, which will be
used in the development of a treatment for adverse reactions caused by
administration of a smallpox vaccine. Revenues related to this product totaled
approximately $170,000 during the quarter.

GROSS PROFIT

Consolidated

Consolidated gross profit increased approximately $5.2 million, or 39%,
from $13.4 million in the second quarter of 2001 to $18.6 million during the
same period in 2002. This increase was primarily due to increased sales.
Furthermore, the Companys EX-CYTE® product, which has a higher margin than the
Companys other products, represented a higher percentage of total sales in the
second quarter of 2002 compared with the same period in 2001. Gross margin
increased from 49% in the second quarter of 2001 to 50% in the current period.

Biotech Products

Gross profit from Biotech Products increased $4.3 million, or 101%, from
$4.2 million in the second quarter of 2001 to $8.5 million during the same
period in 2002. This increase was primarily due to the increased sales of
EX-CYTE® and the addition of the former Intergen products to the Biotech sales
mix. Gross margins on Biotech Products decreased from 71% in the second
quarter of 2001 to 58% in the second quarter of 2002. This decrease was due to
the mix of sales. In the second quarter of 2001, all sales in this segment
represented sales of EX-CYTE®, while in the same period in 2002 approximately
63% of the Biotech sales were sales of EX-CYTE®. The Intergen products
included in this segment are generally lower margin products than EX-CYTE®.

Diagnostic Products

Gross profit from Diagnostic Products increased $1.0 million, or 24%, from
$4.1 million in the second quarter of 2001 to $5.1 million in the second
quarter of 2002. The majority of the increase was attributable to increased
sales due to the Intergen acquisition. Gross margins on Diagnostic Products
were 49% in both the current and prior year quarters.

Therapeutic Products

Gross profit from Therapeutic Products decreased approximately $100,000,
or 2%, from $5.1 million in the second quarter of 2001 to $5.0 million in the
second quarter of 2002. Gross margins were positively impacted by significant
increases in anti-hepatitis antibody sales, for which the Company achieved
higher gross margins during the second quarter of 2002 than the prior year
quarter. The increase in gross margin for the product resulted from
contractual arrangements with a customer that provide for premium pricing
adjustments for delivery of product that exceeds antibody concentration
requirements as defined within the contract. This offset the decreased sales
of the anti-D product, which historically has been the highest margin product
in this segment. Gross margins on Therapeutic Products increased from 40% in
the second quarter of 2001 to 41%

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during the same
period in 2002, as margin improvements in the Companys anti-hepatitis product
offset the sales decline of the relatively high margin anti-D product.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Consolidated selling, general and
administrative expenses (SG&A) increased approximately $4.7 million, or
88%, in the second quarter of 2002, from $5.4 million in the second quarter of 2001
to $10.2 million in the current year. As a percentage of revenues, SG&A
was 27% during the current year quarter compared with 20% in the prior year quarter,
and 33% in the first quarter of 2002. Approximately $600,000 of this increase was
due to external costs related to the integration of Intergen. Other significant
items contributing to the increase compared with the prior year quarter included
approximately $345,000 in professional fees incurred as part of a project to evaluate
all aspects of the Therapeutic Products business operations, approximately $1.3
million related to the expansion of the Companys sales and marketing organization,
approximately $300,000 of increased costs due to the timing of hiring certain executives
during the second half of 2001, and an increase of approximately $377,000 related to
higher commercial insurance costs.

RESEARCH AND DEVELOPMENT

Research and development expenses increased approximately $1.0 million, or
291%, from $353,000 in the second quarter of 2001 to approximately $1.4 million
in the current year. As a percentage of sales, spending in this area increased
from 1.3% in the second quarter of 2001 to 3.7 % during the same period in
2002. This increase is primarily due to the expansion of the Companys
research and development activities, including those acquired as a result of
the Intergen acquisition. The Company expects full-year 2002 research and
development expenditures to represent approximately 3.5% of sales, and that the
investment in this area will increase over the next several years.

SPECIAL CHARGES

During the second quarter of 2002, the Company recorded a charge totaling
approximately $1.3 million related to the closure of four of its donor centers.
The decision to close the centers resulted from an extensive evaluation of
the operations of the Therapeutics Products business segment. The charge
consisted of severance payments, costs associated with lease obligations at the
four centers, write-offs of certain assets, including leasehold improvements
and equipment, and intangible assets related to the centers, such as
FDA licenses and non-compete agreements. The Company expects the closure of
these centers will result in increased efficiency without affecting production
capacity for the plasma collection operations.

During the second quarter of 2001, the Company reversed approximately
$762,000 of previously accrued expenses related to the cancellation of a
software development contract. During the second quarter of 2001, the Company
received a favorable ruling in its arbitration case with the third party vendor
in which the arbitrator ruled that the Company has no further obligations to
the vendor.

Additionally, during the second quarter of 2001, the Company wrote off
approximately $925,000 of external due diligence costs related to the
evaluation of the potential acquisition of Intergen. At the time of the
write-off, the Company did not consider the acquisition probable of being
completed.

INTEREST INCOME, NET

Net interest income increased approximately $33,000, or 10% compared with
the prior year quarter. During the second quarter of 2002, the Company
recorded interest income of approximately $370,000 related to interest due on
outstanding tax refunds from prior years. The Company recorded the interest
income upon receiving formal notification from the federal and state taxing
authorities that those previously open years were now closed and the refunds
would be released. The Company received these tax refunds in July 2002.
Excluding the impact of this item, net interest income declined as a result of
using cash on hand to complete the acquisition of Intergen, including the
completion of the Toronto plant.

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Six Months Ended June 30, 2002 and July 1, 2001

NET SALES

Consolidated

Consolidated net sales increased approximately $15.1 million, or 28%, from
$53.6 million in the first six months of 2001 to $68.8 million during the same
period in 2002. The increase was primarily attributable to the sales growth
related to the Intergen acquisition and increased sales of EX-CYTE®.

Biotech Products

Net sales of Biotech Products increased $18.5 million, or 222%, from $8.3
million in the first six months of 2001 to $26.8 million in the first half of
2002. Sales of EX-CYTE® increased $6.8 million, or 82%, from $8.3 million in
the first six months of 2001 to $15.2 million during the same period in 2002.
The growth in the EX-CYTE® product is due to continued advancement in the
commercialization of the Companys customers end-products by moving to later
stage clinical trials and FDA drug approval. The remainder of the increase was
due to the sales contribution from Intergen, including sales of human
recombinant insulin and other media supplements, BSA, specialty reagents and
various other products.

Diagnostic Products

Net sales of Diagnostic Products increased approximately $3.4 million, or
19%, from $17.8 million in the first six months of 2001 to $21.1 million during
the same period in 2002. This increase was primarily due to increased sales of
BSA and sales growth from other products acquired through the Intergen
acquisition. BSA sales increased from $4.5 million in the first six months of
2001 to $6.0 million during the same period in 2002. Sales of monoclonal
antibodies and related products declined from $8.5 million to $7.2 million, due
primarily to production capacity issues. These issues are being addressed with
the addition of three new fermenters that are expected to be in production
during the third and fourth quarter of this year and will expand the production
capacity at the plant in Scotland. As of the end of the second quarter of
2002, there was an order backlog of approximately $750,000 at this plant. The
Company expects to reduce this backlog during the second half of the year.
The remainder of the sales increase was essentially due to Intergen product
sales.

Therapeutic Products

Net sales of Therapeutic Products decreased approximately $6.7 million, or
24%, from $27.5 million in the first six months of 2001 to $20.8 million during
the same period in 2002. Sales of anti-D declined $8.9 million, or 67%
compared with the prior year. The Company expects anti-D sales to be
significantly lower for the full year 2002 compared with full year 2001, due to
the uneven ordering patterns of its customers for this product. Sales of
anti-hepatitis antibodies increased $4.8 million, or 59% over the prior year.
The growth in demand for anti-hepatitis is largely being driven by the
increasing life span for liver transplant patients, as well as other new
treatment protocols for liver patients. Sales of anti-rabies declined $1.5
million, or 32% from the prior year, primarily as a result of timing of
customer orders and delivery requirements. In addition, the Company recorded
sales in the first half of 2002 related to its contract with a
biopharmaceutical manufacturer to provide the customer with vaccinia immune
globulin plasma, which will be used in the development of a treatment of
adverse reactions caused by administration of a smallpox vaccine. Revenues
related to this product totaled approximately $170,000 for the six months.

GROSS PROFIT

Consolidated

Consolidated gross profit increased approximately $8.0 million, or 31%,
from $26.1 million in the first six months of 2001 to $34.1 million during the
same period in 2002. This increase was primarily due to the

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higher sales.
Furthermore, the Companys EX-CYTE® product, which has a higher margin than the
Companys other products, represented a higher percentage of total sales in the
first six months of 2002 compared with the same period in 2001. Gross margin
increased from 49% in 2001 to 50% in the current year.

Biotech Products

Gross profit from Biotech Products increased approximately $8.6 million,
or 143%, from $6.0 million in the first six months of 2001 to $14.6 million
during the same period in 2002. This increase was primarily due to the
increased sales of EX-CYTE® and the addition of the former Intergen products to
the Biotech sales mix. Gross margins on biotech products decreased from 72%
during the first six months in 2001 to 55% during the same period in 2002.
This decrease was due to the mix of sales. During the first six months of
2001, all sales in this segment represented sales of EX-CYTE®, while in such
period in 2002 approximately 57% of the Biotech sales were sales of EX-CYTE®.
The Intergen products included in this segment are generally lower margin
products than EX-CYTE®.

Diagnostic Products

Gross profit from Diagnostic Products increased approximately $1.8
million, or 21%, from $8.9 million in the first six months of 2001 to $10.7
million during the same period in 2002. The majority of the increase was
attributable to increased sales due to the Intergen acquisition. Gross margins
on Diagnostic Products were 51% in the first six months of 2002 compared with
50% during the same period in 2001.

Therapeutic Products

Gross profit from Therapeutic Products decreased approximately $2.5
million, or 22%, from $11.2 million in the first six months of 2001 to $8.7
million during the same period in 2002. The decrease in gross margins is
primarily due to the significantly lower sales of anti-D during the first six
months of 2002, which is a relatively higher margin specialty antibody product.
Gross margins were positively impacted by significant increases in
anti-hepatitis antibody sales, for which the Company has achieved higher gross
margins during the first half of 2002. The increase in gross margins for the
product resulted from contractual arrangements with a customer that provide for
premium pricing adjustments for delivery of product that exceeds antibody
concentration requirements as defined within the contract. Gross margins on
Therapeutic Products increased from 41% during the first six months of 2001 to
42% during the same period in 2002, as margin improvements in the Companys
anti-hepatitis product offset the sales decline of the relatively high margin
anti-D product.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

SG&A increased approximately $9.6 million, or 89%, from $10.8 million in
the first six months of 2001 to $20.4 million during the same period in 2002.
As a percentage of revenues, SG&A expenses were 30% for the first half of 2002
compared with 20% in the prior year. Approximately $1.6 million of this
increase was due to external costs related to the integration of Intergen.
Other significant items contributing to the increase compared with prior year
included approximately $800,000 in professional fees incurred as part of a project to evaluate all
aspects of the Therapeutic Products business operations,
approximately $900,000 related to operating
the former Intergen corporate office during the first quarter of
2002, approximately $2.6 million related to the expansion of
the Companys sales and marketing organization, approximately
$490,000 of increased costs due to the timing of hiring certain executives
during the second half of 2001 and an increase of approximately $600,000 related
to higher commercial insurance costs.

RESEARCH AND DEVELOPMENT

Research and development expenses increased approximately $1.7 million, or
248%, from $683,000 in the first half of 2001 to approximately $2.4 million in
the first half of the current year. As a percentage of sales,
spending in this area increased from 1.3% in the first six months of 2001 to
3.5% during the same period in 2002. This increase is primarily due to the
expansion of the Companys research and development activities, including those
acquired as a result of the Intergen acquisition. The Company expects
full-year 2002 research

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and development expenditures to represent approximately
3.5% of sales, and that the investment in this area will increase over the next
several years.

SPECIAL CHARGES

During the first six months of 2002, the Company recorded a charge
totaling approximately $1.3 million related to the closure of four of its donor
centers. The decision to close the centers resulted from an extensive
evaluation of the operations of the Therapeutics Products business segment.
The charge consisted of severance payments, costs associated with lease
obligations at the four centers, write-offs of certain assets, including
leasehold improvements and equipment, and intangible assets related to
the centers, such as FDA licenses and non-compete agreements. The Company
expects that the closure of these centers will result in increased efficiency
without affecting production capacity for the plasma collection operations.

During 2001, the Company reversed approximately $762,000 of previously
accrued expenses related to the cancellation of a software development
contract. During the second quarter of 2001, the Company received a favorable
ruling in its arbitration case related to these costs in which the arbitrator
ruled that the Company had no further obligation to the vendor.

Additionally, during the second quarter of 2001, the Company wrote off
approximately $925,000 of external due diligence costs related to the
evaluation of the potential acquisition of Intergen. At the time of the
write-off, the Company did not consider the acquisition probable of being
completed.

INTEREST INCOME, NET

Net interest income decreased approximately $254,000, or 36%, from net
interest income of approximately $712,000 during the first six months of 2001
to net interest income of approximately $458,000 during the same period in
2002. During the first six months of 2002, the Company recorded interest
income of approximately $370,000 related to interest due on outstanding tax
refunds from prior years. The Company recorded the interest income upon
receiving formal notification from the federal and state taxing authorities
that those previously open years were now closed and the refunds would be
released. The Company received these tax refunds in July 2002. Excluding the
impact of this item, net interest income decreased as a result of using cash on
hand to complete the acquisition of Intergen, including the completion of the
Toronto plant.

Liquidity and Capital Resources

The following table sets forth certain indicators of financial condition
and liquidity as of June 30, 2002 and December 30, 2001 (in thousands, except
for percentages):

|                                                   |  |          |         |              |  |   |         |  
|-------------------------------------------------- |  | -------- | ------- | ------------ |  | - | ------- | -
|                                                   |  | June
30, |         | December
30,
|                                                   |  | 2002     |         | 2001        
|                                                   |  |          |         |             
|Cash and cash equivalents                          |  | $        | 4,630   |              |  | $ | 10,780  |  
|                                                   |  |          |         |              |  |   |         |  
|Working capital                                    |  |          | 57,730  |              |  |   | 55,156  |  
|                                                   |  |          |         |              |  |   |         |  
|Total long-term debt and capital lease obligations |  |          | 529     |              |  |   | 4,576   |  
|                                                   |  |          |         |              |  |   |         |  
|Stockholders equity                               |  |          | 162,641 |              |  |   | 152,475 |  
|                                                   |  |          |         |              |  |   |         |  
|Total debt to equity ratio                         |  |          | 0.3     | %            |  |   | 3.0     | %

Serologicals has three principal sources of near-term liquidity: (i)
existing cash and cash equivalents; (ii) cash generated by operations, and
(iii) available borrowing capacity under the Revolver, which provides for
maximum borrowings of $65 million. Management believes the Companys liquidity
and capital resources are sufficient to meet its working capital, capital
expenditure and other anticipated cash requirements over the next twelve months
and will be available for use in potential acquisitions.

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Net cash provided by operating activities in the first six months of 2002
was $2.6 million as compared to net cash provided of $9.2 million in the same
period in the previous year, a net decrease of $6.6 million. Significant items
contributing to the decrease were an increased investment in working capital,
decreased net income of $2.7 million, and a decrease in the tax benefits
associated with the exercise of stock options. The increased investment in
working capital was primarily due to an increase in other assets compared with
the prior year, largely due to significant increases in the cost of insurance
which is primarily paid in advance, offset by the fact that the first six
months of 2001 included proceeds from settlement of an insurance claim. Other
working capital changes included a decrease in accounts receivable compared
with the prior year, a decrease in income tax receivable, increases in
inventory (due largely to the decreased therapeutic product sales), an increase
in accounts payable, and an increase in deferred revenue. The Companys
overall working capital requirements have increased as a result of the Intergen
acquisition.

Net cash used in investing activities in the first six months of 2002 was
$6.6 million, compared with $2.6 million in the first six months of 2001.
Significant capital expenditures for the first six months of 2002 consisted
primarily of the following items: i) completion of the build out of the
expanded monoclonal manufacturing facility in Scotland; ii) completion of the
Companys expanded protein fractionation facility in Toronto; and iii) costs
associated with the implementation of an ERP system. The Company anticipates
capital expenditures for the remainder of the year to total approximately $7
million to $9 million. The most significant expenditure anticipated for the
remainder of 2002 is the ERP system implementation. Additionally, the Company
is continuing to plan for the potential construction of a second EX-CYTE®
plant. If the Company decides to construct the plant, the Company will likely
incur additional capital expenditures during the second half of this year.
Over the next 12-15 months, this project would result in an estimated capital
investment of $20-25 million.

Net cash used in financing activities in the first six months of 2002 was
$2.2 million, compared with net cash provided of $9.9 million during the same
period in 2001. Financing activities in the first six months of 2002 consisted
of the prepayment of a $3.5 million note payable to a supplier which was
assumed as part of the Intergen acquisition. The Company negotiated a discount
on the principal balance of approximately $112,000 to prepay the note in
advance of its maturity. This discount was recorded as an adjustment to
goodwill arising from the Intergen acquisition. Additional financing
activities included payment of certain capital lease obligations and the
repurchase of 20,000 shares of common stock in a private transaction with a
Director of the Company, offset by proceeds from the exercise of stock options
and the purchase of stock through other Company stock ownership plans.

As of June 30, 2002, the Company had outstanding debt of approximately
$529,000, consisting of certain capital lease obligations which mature on
various dates through 2003.

In April 2002, the Company closed on its amended Revolver that was
scheduled to expire in September 2002. The amount available under the facility
has been reduced from $75 million to $65 million. The Revolver expires on
April 25, 2005. Amounts outstanding under the Revolver bear interest at either
a floating rate or a Eurodollar interest rate plus a margin that fluctuates
based on the Companys leverage ratio. The margin on the Eurodollar rate
ranges from 1.25% to 1.75%, and the margin on the floating rate option ranges
from 0% to 0.25%. There were no borrowings outstanding under the Revolver as
of June 30, 2002.

The Company has no off-balance sheet financing arrangements and has not
created any special purpose entities. Additionally, the Company does not engage
in any trading activities within its business and has no transactions with
related parties.

Critical Accounting Policies

The consolidated financial statements are presented on the basis of
accounting principles that are generally accepted in the United States of
America, which require management to make estimates that affect the amount of
revenues, expenses, assets and liabilities reported. Five critical accounting
matters that are both very important to the portrayal of our financial
condition and results and required managements most difficult,

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subjective, or
complex judgments, are discussed below. The accounting for these matters in the
accompanying financial statements was based on current facts and circumstances
which, in managements judgment, hold potential for change which could affect
managements future estimates. Therefore, future financial results could differ
materially from current financial results based on managements current
estimates.

Revenue recognition

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

Accounts receivable

The Company performs ongoing credit evaluations of its customers and
adjusts credit limits based upon payment history and the customers current
credit worthiness, as determined by review of current credit information. The
Company monitors collections and payments from its customers and maintains a
provision for estimated credit losses based upon historical experience and any
specific customer collection issues that have been identified.

Inventory

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

Valuation of goodwill and other intangible assets

The Company periodically evaluates its goodwill and intangibles for
potential impairment whenever events or changes occur that indicate the
carrying value may no longer be recoverable. Evaluations are based on estimated
undiscounted future cash flows from the use and eventual disposition of the
underlying assets. In the first quarter of 2002, the Company adopted SFAS No.
142, Goodwill and Other Intangible Assets (SFAS No. 142). The Company
completed its initial impairment review during the second quarter of 2002 and
will perform an annual review thereafter. Based on the initial evaluation, the
Company determined that no impairments existed as of December 31, 2001.

Deferred income taxes

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

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

Recent Accounting Pronouncements

On December 31, 2001, the Company adopted SFAS No. 142. SFAS No. 142
supersedes APB Opinion No. 17, Intangible Assets. This Standard prescribes
the accounting practices for acquired goodwill and other intangible assets.
Under this Standard, goodwill and indefinite-lived intangibles are no longer
amortized to earnings, but instead are reviewed periodically (at least
annually) for impairment. In accordance with the requirements of SFAS No. 142,
goodwill and identifiable, indefinite-lived assets related to the Intergen
acquisition are not being amortized. Effective December 31, 2001, all goodwill
and other intangible assets with indefinite lives existing prior to July 1,
2001 are not being amortized. Had the non-amortization provisions for goodwill
as prescribed by SFAS No. 142 been in effect in 2001, net income would have
increased by approximately $225,000, or $0.01 per diluted share for the three
months ended July 1, 2001, and approximately $450,000, or $0.02 per diluted
share for the six months ended July 1, 2001.

During the second quarter of 2002, in conjunction with the adoption of
SFAS No. 142, the Company engaged a third party to perform an independent
valuation of the fair value of the Companys reporting units to determine
whether any impairments existed as of December 31, 2001. Based on this
appraisal, the Company concluded that no impairments existed as of that date.

In June 2001, the FASB issued SFAS No. 143, Accounting for Asset
Retirement Obligations. This Standard addresses financial accounting and
reporting for asset retirement costs of long-lived assets resulting from legal
obligations associated with acquisition, construction or development
transactions. The Company plans to adopt this Standard in the first quarter of
2003. The adoption of this Standard is not expected to have a material impact
on the Companys financial position or results of operations.

In July 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities. This Standard supersedes
guidance provided by EITF Issue No. 94-3, Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity (including
Certain Costs Incurred in a Restructuring). SFAS No. 146 requires that costs
associated with exit or disposal activities be recognized when they are
incurred rather than at the date of a commitment to an exit or disposal plan.
This Standard is effective for all exit or disposal activities initiated after
December 31, 2002. The adoption of this Standard is not expected to have a
material impact on the Companys financial position or results of operations.




Item 3. Quantitative and Qualitative Disclosures about Market Risk

There have been no material changes regarding Serologicals market risk
position from the information provided in our Annual Report on Form 10-K for
the fiscal year ended December 30, 2001. The quantitative and qualitative
disclosures about market risk are discussed under the caption Market Risk in
Item 7-Managements Discussion and Analysis of Financial Condition and Results
of Operations, contained in the Form 10-K.

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PART II.




Item 1. Legal Proceedings

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

During 2000, twelve complaints were filed against the Company and certain
of its current and former executive officers and directors which allege
violations of the Securities Exchange Act of 1934, including Sections 10(b) and
20(a) thereof and Rule 10b-5 promulgated thereunder. During the third quarter
of 2000, the complaints were consolidated and a lead plaintiff was named. A
consolidated complaint was filed on October 10, 2000 which also seeks the
courts certification of the litigation as class action on behalf of all
purchasers of the Companys stock between April 27, 1999 and April 10, 2000. On
November 30, 2000, the Company and the other defendants filed a motion to
dismiss the consolidated complaint. On January 17, 2001, the plaintiff filed an
opposition to the motion to dismiss. On April 20, 2001, a hearing was held on
the motion to dismiss. On September 5, 2001, the Court granted the motion to
dismiss the complaint in its entirety with prejudice and ruled that the
plaintiffs would not be allowed to amend the complaint. On September 19, 2001,
the plaintiffs filed a motion to amend the judgment and/or for relief arguing
that they should have been allowed to amend the complaint. The Company
responded by filing a brief supporting the Courts dismissal of the complaint.
On January 17, 2002, the Court reconsidered its decision and granted plaintiffs
leave to file an amended complaint. The plaintiffs filed a second amended
consolidated complaint on February 12, 2002. The Company does not consider the
claims of the second amended consolidated complaint to be substantially
different than those of the initial consolidated complaint and, consequently,
filed a motion to dismiss the second amended consolidated complaint on March
11, 2002. Although management considers all of the claims in the second
amended consolidated complaint to be without merit and intends to defend the
lawsuit vigorously if the Companys motion to dismiss is denied, management is
unable at this time to predict the final outcome of these claims.




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

The Company held its 2002 Annual Meeting of Stockholders on May 7, 2002.

At the Annual Meeting, Gerard M. Moufflet and Lawerence E. Tilton, were
re-elected directors. The number of shares of Common Stock voted in the
election of Mr. Moufflet was 21,602,963 FOR and 216,371 withheld. The number
of shares of common stock voted in the election of Mr. Tilton was 21,715,153
FOR and 104,181 withheld. In addition, the following other directors continued
as such after the meeting: David A. Dodd, Ralph E. Christoffersen, Ph.D., Wade
Fetzer, III, Desmond H. OConnell, Jr., Samuel A. Penninger, Jr., and George M.
Shaw, M.D., Ph.D.




Item 5. Other Information

Mr. Samuel A.
Penninger, Jr., resigned from the Company's Board of Directors
subsequent to the Annual Meeting for personal reasons.

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Item 6. Exhibits and Reports on Form 8-K



| |                                                                         
| | ------------------------------------------------------------------------
| | a.    Exhibits (numbered in accordance with Item 601 of Regulation
S-K):



| | 10.1 |  | Employment Agreement between
the Company and James J. Kramer, Ph.D.                                                                                   
| | ---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 99.1 |  | Certification of the Chief Executive Officer
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
|
| | 99.2 |  | Certification of the Chief Financial Officer
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.



| |                           
| | --------------------------
| | b.    Reports on Form 8-K:



| | 1) |  | On May 28, 2002, the Company filed a Current Report
on Form 8-K, in which it reported under Item 5  Other Events,
the completion of the major initiatives from its ACE (Achieving
Collective Excellence) Project which included the consolidation
of Plasma Operations.                                                                                                                                                                           
| | -- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 2) |  | On June 14, 2002, the Company filed a Current
Report on Form 8-K, in which it reported under Item 4  Changes
in Registrants Certifying Accountant, that the Companys Board
of Directors adopted a resolution to dismiss the Companys
independent public accountants, Arthur Andersen LLP, and engage
Deloitte & Touche LLP as the Companys independent public
accountant for the fiscal year ending December 29, 2002
effective June 12, 2002.

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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.

|                      |  |     |  |                                       
|--------------------- |  | --- |  | --------------------------------------
|                      |  |     |  | SEROLOGICALS CORPORATION              
|                      |  |     |  |                                       
|                      |  |     |  | (Registrant)                          
|                      |  |     |  |                                       
|                      |  |     |  |                                       
|Date: August 14, 2002 |  | By: |  | /s/ Harold W. Ingalls                 
|                      |  |     |  |                                       
|                      |  |     |  | Harold W. Ingalls                     
|                      |  |     |  | Vice President/Chief Financial Officer

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