##### 



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 September 28, 2003                                       
|           |  |                                                                                         
|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
(State or other jurisdiction of
incorporation or organization) |  | 58-2142225
(I.R.S. Employer
Identification Number)

|                                                           |  |                 
|---------------------------------------------------------- |  | ----------------
|5655 Spalding Drive                                        |  |                 
|Norcross, Georgia
(Address of principal
executive offices) |  | 30092
(Zip Code)

(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 by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). 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 November 4, 2003
|                                       |  |                                
|Common Stock, $.01 par value per share |  |                                 | 24,660,040 | 





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##### 



INDEX

SEROLOGICALS CORPORATION AND SUBSIDIARIES

|                                                                                              |                                                                                                                                    |  |    |   | 
|--------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------- |  | -- | - | 
|PART I.                                                                                       |                                                                                                                                    |  |    |  
|Item 1. Financial Statements                                                                  |                                                                                                                                    |  |    |  
|                                                                                              | Unaudited Consolidated Balance Sheets -
September 28, 2003 and December 29, 2002                                                   |  |    | 3 | 
|                                                                                              | Unaudited Consolidated Statements of Income (Loss) -
For the three and nine months ended September 28, 2003 and September 29, 2002 |  |    | 4 | 
|                                                                                              | Unaudited Consolidated Statements of Cash Flows -
For the nine months ended September 28, 2003 and September 29, 2002              |  |    | 5 | 
|                                                                                              | Unaudited Notes to Consolidated Financial Statements                                                                               |  |    | 6 | 
|Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations |                                                                                                                                    |  | 17 |  
|Item 3. Quantitative and Qualitative Disclosures about Market Risk                            |                                                                                                                                    |  | 25 |  
|Item 4. Controls and Procedures                                                               |                                                                                                                                    |  | 26 |  
|PART II.                                                                                      |                                                                                                                                    |  |    |  
|Item 1. Legal Proceedings                                                                     |                                                                                                                                    |  | 26 |  
|Item 6. Exhibits and Reports on Form 8-K                                                      |                                                                                                                                    |  | 26 |  
|SIGNATURES                                                                                    |                                                                                                                                    |  | 28 |  





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##### 



PART I.

Item 1. Financial Statements

SEROLOGICALS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited and in thousands)

|                                                            |                                                 |                            |                                            |         |         |               |        |              |         |         |  | 
|----------------------------------------------------------- | ----------------------------------------------- | -------------------------- | ------------------------------------------ | ------- | ------- | ------------- | ------ | ------------ | ------- | ------- |  | 
|                                                            |                                                 |                            |                                            |         |         | September 28, |        | December 29,
|                                                            |                                                 |                            |                                            |         |         | 2003          |        | 2002        
|                                                            |                                                 |                            |                                            |         |         |               |        |             
|ASSETS                                                     
|CURRENT ASSETS:                                             |                                                 |                            |                                            |         |         |               |        |             
|                                                            | Cash and cash equivalents                       |                            | $                                          | 41,879  |         |               | $      | 15,242       |        
|                                                            | Trade accounts receivable, net                  |                            |                                            | 27,223  |         |               |        | 22,090       |        
|                                                            | Inventories                                     |                            |                                            | 35,168  |         |               |        | 19,535       |        
|                                                            | Other current assets                            |                            |                                            | 12,004  |         |               |        | 5,546        |        
|                                                            |                                                 |                            |                                            |         |         |               |        |              |        
|                                                            |                                                 | Total current assets       |                                            |         | 116,274 |               |        |              | 62,413  |        
|                                                            |                                                 |                            |                                            |         |         |               |        |              |        
|PROPERTY AND EQUIPMENT, net                                 |                                                 |                            | 65,352                                     |         |         |               | 48,725 |             
|                                                            |                                                 |                            |                                            |         |         |               |        |              |        
|DISCONTINUED OPERATIONS (Note 3)                            |                                                 |                            | 15,218                                     |         |         |               | 35,126 |             
|                                                            |                                                 |                            |                                            |         |         |               |        |              |        
|OTHER ASSETS:                                               |                                                 |                            |                                            |         |         |               |        |             
|                                                            | Goodwill                                        |                            |                                            | 93,330  |         |               |        | 30,812       |        
|                                                            | Intangible assets, net                          |                            |                                            | 50,549  |         |               |        | 13,765       |        
|                                                            | Other                                           |                            |                                            | 649     |         |               |        | 324          |        
|                                                            |                                                 |                            |                                            |         |         |               |        |              |        
|                                                            |                                                 | Total other assets         |                                            |         | 144,528 |               |        |              | 44,901  |        
|                                                            |                                                 |                            |                                            |         |         |               |        |              |        
|                                                            |                                                 |                            | Total assets                               |         | $       | 341,372       |        |              | $       | 191,165 | 
|                                                            |                                                 |                            |                                            |         |         |               |        |              |        
|LIABILITIES AND STOCKHOLDERS EQUITY                       
|CURRENT LIABILITIES:                                        |                                                 |                            |                                            |         |         |               |        |             
|                                                            | Current maturities of capital lease obligations |                            | $                                          | 7       |         |               | $      | 385          |        
|                                                            | Accounts payable                                |                            |                                            | 4,813   |         |               |        | 4,983        |        
|                                                            | Accrued liabilities                             |                            |                                            | 16,692  |         |               |        | 9,361        |        
|                                                            |                                                 |                            |                                            |         |         |               |        |              |        
|                                                            |                                                 | Total current liabilities  |                                            |         | 21,512  |               |        |              | 14,729  |        
|                                                            |                                                 |                            |                                            |         |         |               |        |              |        
|CONVERTIBLE DEBENTURES (Note 5)                             |                                                 |                            | 130,000                                    |         |         |               |       |             
|                                                            |                                                 |                            |                                            |         |         |               |        |              |        
|CAPITAL LEASE OBLIGATIONS, less current maturities (Note 6) |                                                 |                            | 32                                         |         |         |               | 39     |             
|                                                            |                                                 |                            |                                            |         |         |               |        |              |        
|DEFERRED INCOME TAXES                                       |                                                 |                            | 17,184                                     |         |         |               | 4,062  |             
|                                                            |                                                 |                            |                                            |         |         |               |        |              |        
|OTHER LIABILITIES                                           |                                                 |                            | 54                                         |         |         |               | 95     |             
|                                                            |                                                 |                            |                                            |         |         |               |        |              |        
|DISCONTINUED OPERATIONS (Note 3)                            |                                                 |                            | 1,955                                      |         |         |               | 1,870  |             
|                                                            |                                                 |                            |                                            |         |         |               |        |              |        
|STOCKHOLDERS EQUITY:                                       |                                                 |                            |                                            |         |         |               |        |             
|                                                            | Preferred stock                                 |                            |                                            |        |         |               |        |             |        
|                                                            | Common stock                                    |                            |                                            | 279     |         |               |        | 277          |        
|                                                            | Additional paid-in capital                      |                            |                                            | 119,169 |         |               |        | 118,116      |        
|                                                            | Retained earnings                               |                            |                                            | 68,831  |         |               |        | 72,211       |        
|                                                            | Accumulated other comprehensive income          |                            |                                            | 2,703   |         |               |        | 113          |        
|                                                            | Less: Common stock held in treasury             |                            |                                            | (20,347 | )       |               |        | (20,347      | )      
|                                                            |                                                 |                            |                                            |         |         |               |        |              |        
|                                                            |                                                 | Total stockholders equity |                                            |         | 170,635 |               |        |              | 170,370 |        
|                                                            |                                                 |                            |                                            |         |         |               |        |              |        
|                                                            |                                                 |                            | Total liabilities and stockholders equity |         | $       | 341,372       |        |              | $       | 191,165 | 
|                                                            |                                                 |                            |                                            |         |         |               |        |              |        

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

3



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##### 



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

|                                      |                                                                          |                                       |         |        |                    |            |                   |        |               |            |               |        |       |            |        |        |      |            | 
|------------------------------------- | ------------------------------------------------------------------------ | ------------------------------------- | ------- | ------ | ------------------ | ---------- | ----------------- | ------ | ------------- | ---------- | ------------- | ------ | ----- | ---------- | ------ | ------ | ---- | ---------- | 
|                                      |                                                                          |                                       |         |        | Three Months Ended |            | Nine Months Ended
|                                      |                                                                          |                                       |         |        |                    |            |                  
|                                      |                                                                          |                                       |         |        | September 28,      |            | September 29,     |        | September 28, |            | September 29,
|                                      |                                                                          |                                       |         |        | 2003               |            | 2002              |        | 2003          |            | 2002         
|                                      |                                                                          |                                       |         |        |                    |            |                   |        |               |            |              
|Net sales                             |                                                                          | $                                     | 42,010  |        |                    | $          | 23,726            |        |               | $          | 100,555       |        |       | $          | 71,611 |       
|Costs and expenses:                   |                                                                          |                                       |         |        |                    |            |                   |        |               |            |               |        |       |            |        |       
|                                      | Cost of sales                                                            |                                       |         | 18,714 |                    |            |                   | 11,093 |               |            |               | 45,342 |       |            |        | 33,464 |     
|                                      | Selling, general and
administrative
expenses                             |                                       |         | 12,826 |                    |            |                   | 7,588  |               |            |               | 31,116 |       |            |        | 25,542 |     
|                                      | Research and development                                                 |                                       |         | 1,628  |                    |            |                   | 1,555  |               |            |               | 4,298  |       |            |        | 3,931  |     
|                                      | Amortization of intangibles                                              |                                       |         | 630    |                    |            |                   | 223    |               |            |               | 1,551  |       |            |        | 660    |     
|                                      | Special charges (Note 4)                                                 |                                       |         | 504    |                    |            |                   |       |               |            |               | 2,778  |       |            |        |       |     
|                                      |                                                                          |                                       |         |        |                    |            |                   |        |               |            |               |        |       |            |        |       
|Operating income                      |                                                                          |                                       | 7,708   |        |                    |            | 3,267             |        |               |            | 15,470        |        |       |            | 8,014  |       
|                                      | Other expense, net                                                       |                                       |         | 61     |                    |            |                   | 36     |               |            |               | 248    |       |            |        | 91     |     
|                                      | Write-off of deferred financing
costs (Note 4)                           |                                       |         | 4,112  |                    |            |                   |       |               |            |               | 4,492  |       |            |        |       |     
|                                      | Interest expense (income), net                                           |                                       |         | 1,399  |                    |            |                   | 34     |               |            |               | 2,953  |       |            |        | (424   | )   
|                                      |                                                                          |                                       |         |        |                    |            |                   |        |               |            |               |        |       |            |        |       
|Income from continuing operations     |                                                                          |                                       | 2,136   |        |                    |            | 3,197             |        |               |            | 7,777         |        |       |            | 8,347  |       
|Provision for income taxes            |                                                                          |                                       | 742     |        |                    |            | 1,119             |        |               |            | 2,725         |        |       |            | 2,921  |       
|                                      |                                                                          |                                       |         |        |                    |            |                   |        |               |            |               |        |       |            |        |       
|Net income from continuing
operations |                                                                          |                                       | 1,394   |        |                    |            | 2,078             |        |               |            | 5,052         |        |       |            | 5,426  |       
|                                      | Income (loss) from discontinued
operations, net of income taxes
(Note 3) |                                       |         | (7,930 | )                  |            |                   | 1,203  |               |            |               | (8,435 | )     |            |        | 4,345  |     
|                                      |                                                                          |                                       |         |        |                    |            |                   |        |               |            |               |        |       |            |        |       
|Net income (loss)                     |                                                                          | $                                     | (6,536  | )      |                    | $          | 3,281             |        |               | $          | (3,383        | )      |       | $          | 9,771  |       
|                                      |                                                                          |                                       |         |        |                    |            |                   |        |               |            |               |        |       |            |        |       
|Basic earnings (loss) per share:      |                                                                          |                                       |         |        |                    |            |                   |        |               |            |               |        |       |            |        |       
|                                      |                                                                          | Net income from continuing
operations |         | $      | 0.06               |            |                   | $      | 0.09          |            |               | $      | 0.21  |            |        | $      | 0.22 |           
|                                      |                                                                          | Discontinued operations               |         |        | (0.32              | )          |                   |        | 0.05          |            |               |        | (0.34 | )          |        |        | 0.18 |           
|                                      |                                                                          |                                       |         |        |                    |            |                   |        |               |            |               |        |       |            |        |       
|                                      |                                                                          | Net income (loss)                     |         | $      | (0.26              | )          |                   | $      | 0.14          |            |               | $      | (0.13 | )          |        | $      | 0.40 |           
|                                      |                                                                          |                                       |         |        |                    |            |                   |        |               |            |               |        |       |            |        |       
|Diluted earnings (loss) per share:    |                                                                          |                                       |         |        |                    |            |                   |        |               |            |               |        |       |            |        |       
|                                      |                                                                          | Net income from continuing
operations |         | $      | 0.06               |            |                   | $      | 0.08          |            |               | $      | 0.20  |            |        | $      | 0.22 |           
|                                      |                                                                          | Discontinued operations               |         |        | (0.32              | )          |                   |        | 0.05          |            |               |        | (0.34 | )          |        |        | 0.17 |           
|                                      |                                                                          |                                       |         |        |                    |            |                   |        |               |            |               |        |       |            |        |       
|                                      |                                                                          | Net income (loss)                     |         | $      | (0.26              | )          |                   | $      | 0.13          |            |               | $      | (0.14 | )          |        | $      | 0.39 |           
|                                      |                                                                          |                                       |         |        |                    |            |                   |        |               |            |               |        |       |            |        |       
|Weighted average shares:              |                                                                          |                                       |         |        |                    |            |                   |        |               |            |               |        |       |            |        |       
|                                      |                                                                          |                                       | Basic   |        |                    | 24,567,487 |                   |        |               | 24,385,579 |               |        |       | 24,502,089 |        |        |      | 24,330,530 | 
|                                      |                                                                          |                                       |         |        |                    |            |                   |        |               |            |               |        |       |            |        |       
|                                      |                                                                          |                                       | Diluted |        |                    | 25,059,584 |                   |        |               | 24,840,035 |               |        |       | 24,873,651 |        |        |      | 24,859,193 | 
|                                      |                                                                          |                                       |         |        |                    |            |                   |        |               |            |               |        |       |            |        |       

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

4



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##### 



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

|                                                     |                                                                                          |                                |                                                     |         |                   |          |               |        |        |        |  
|---------------------------------------------------- | ---------------------------------------------------------------------------------------- | ------------------------------ | --------------------------------------------------- | ------- | ----------------- | -------- | ------------- | ------ | ------ | ------ | -
|                                                     |                                                                                          |                                |                                                     |         | Nine Months Ended
|                                                     |                                                                                          |                                |                                                     |         |                  
|                                                     |                                                                                          |                                |                                                     |         | September 28,     |          | September 29,
|                                                     |                                                                                          |                                |                                                     |         | 2003              |          | 2002         
|                                                     |                                                                                          |                                |                                                     |         |                   |          |              
|Operating activities:                                |                                                                                          |                                |                                                     |         |                   |          |               |       
|                                                     | Net income (loss)                                                                        |                                | $                                                   | (3,383  | )                 |          | $             | 9,771  |       
|                                                     | Income (loss) from discontinued operations                                               |                                |                                                     | (8,435  | )                 |          |               | 4,345  |       
|                                                     |                                                                                          |                                |                                                     |         |                   |          |               |        |       
|                                                     | Net
income from continuing operations                                                    |                                |                                                     | 5,052   |                   |          |               | 5,426  |       
|                                                     | Adjustments to reconcile net income (loss) to net cash provided
by operating activities: |                                |                                                     |         |                   |          |               |        |       
|                                                     | Depreciation and amortization                                                            |                                |                                                     | 6,351   |                   |          |               | 3,855  |       
|                                                     | Tax benefit from exercise of stock options                                               |                                |                                                     | 190     |                   |          |               | 758    |       
|                                                     | Non-cash special charges and write-off of deferred financing costs                       |                                |                                                     | 6,402   |                   |          |               |       |       
|                                                     | Deferred income tax provision                                                            |                                |                                                     | 1,109   |                   |          |               | 691    |       
|                                                     | Deferred and other compensation                                                          |                                |                                                     | 62      |                   |          |               | 179    |       
|                                                     | Changes in operating assets and liabilities, net of effect of
business combination:      |                                |                                                     |         |                   |          |               |        |       
|                                                     |                                                                                          | Trade accounts receivable, net |                                                     |         | (202              | )        |               |        | (5,070 | )     
|                                                     |                                                                                          | Inventories                    |                                                     |         | (9,404            | )        |               |        | 455    |       
|                                                     |                                                                                          | Other current assets           |                                                     |         | (4,475            | )        |               |        | 2,410  |       
|                                                     |                                                                                          | Accounts payable               |                                                     |         | (1,551            | )        |               |        | (464   | )     
|                                                     |                                                                                          | Accrued liabilities            |                                                     |         | 1,270             |          |               |        | (1,572 | )     
|                                                     |                                                                                          | Other, net                     |                                                     |         | (363              | )        |               |        | 219    |       
|                                                     |                                                                                          |                                |                                                     |         |                   |          |               |        |       
|                                                     |                                                                                          | Total adjustments              |                                                     |         | (611              | )        |               |        | 1,461  |       
|                                                     |                                                                                          |                                |                                                     |         |                   |          |               |        |       
|                                                     |                                                                                          |                                | Net cash provided by operating activities           |         |                   | 4,441    |               |        |        | 6,887  |  
|                                                     |                                                                                          |                                |                                                     |         |                   |          |               |        |       
|Investing activities:                                |                                                                                          |                                |                                                     |         |                   |          |               |       
|                                                     | Purchases of property and equipment                                                      |                                |                                                     | (12,262 | )                 |          |               | (8,881 | )     
|                                                     | Purchase of business, net of cash received                                               |                                |                                                     | (97,097 | )                 |          |               |       |       
|                                                     | Other                                                                                    |                                |                                                     |        |                   |          |               | (263   | )     
|                                                     |                                                                                          |                                |                                                     |         |                   |          |               |        |       
|                                                     |                                                                                          |                                | Net cash used in investing activities               |         |                   | (109,359 | )             |        |        | (9,144 | )
|                                                     |                                                                                          |                                |                                                     |         |                   |          |               |        |       
|Financing activities:                                |                                                                                          |                                |                                                     |         |                   |          |               |       
|                                                     | Proceeds from convertible debentures                                                     |                                |                                                     | 130,000 |                   |          |               |       |       
|                                                     | Proceeds from term loan                                                                  |                                |                                                     | 82,500  |                   |          |               |       |       
|                                                     | Repayment of term loan                                                                   |                                |                                                     | (82,500 | )                 |          |               |       |       
|                                                     | Payments on long-term debt and capital leases                                            |                                |                                                     | (385    | )                 |          |               | (4,142 | )     
|                                                     | Proceeds from stock plans                                                                |                                |                                                     | 803     |                   |          |               | 2,459  |       
|                                                     | Payment of debt issuance costs                                                           |                                |                                                     | (8,706  | )                 |          |               |       |       
|                                                     | Other                                                                                    |                                |                                                     |        |                   |          |               | (347   | )     
|                                                     |                                                                                          |                                |                                                     |         |                   |          |               |        |       
|                                                     |                                                                                          |                                | Net cash provided by (used in) financing activities |         |                   | 121,712  |               |        |        | (2,030 | )
|                                                     |                                                                                          |                                |                                                     |         |                   |          |               |        |       
|Net cash provided by discontinued operations         |                                                                                          |                                | 9,843                                               |         |                   |          | 3,293         |       
|Net increase (decrease) in cash and cash equivalents |                                                                                          |                                | 26,637                                              |         |                   |          | (994          | )     
|Cash and cash equivalents, beginning of period       |                                                                                          |                                | 15,242                                              |         |                   |          | 12,119        |       
|                                                     |                                                                                          |                                |                                                     |         |                   |          |               |        |       
|Cash and cash equivalents, end of period             |                                                                                          | $                              | 41,879                                              |         |                   | $        | 11,125        |       
|                                                     |                                                                                          |                                |                                                     |         |                   |          |               |        |       
|Supplemental Disclosures:                            |                                                                                          |                                |                                                     |         |                   |          |               |       
|Interest paid, net of amounts capitalized            |                                                                                          | $                              | 2,735                                               |         |                   | $        |              |       
|Income taxes paid                                    |                                                                                          | $                              | 2,287                                               |         |                   | $        | 3,003         |       
|Non-Cash Investing and Financing Activities:         |                                                                                          |                                |                                                     |         |                   |          |               |       
|Stock acquired by employees in lieu of cash bonus    |                                                                                          | $                              | 138                                                 |         |                   | $        | 212           |       

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

5



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##### 



SEROLOGICALS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 28, 2003
(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 sciences companies throughout the world.

The Company conducts manufacturing, distribution and research and
development for its research products segment from facilities in California,
Australia and the United Kingdom. The Company conducts manufacturing for its
cell culture and diagnostic products segments at facilities located in North
America and the United Kingdom. The Companys protein fractionation facilities
are 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 biotechnology-based products. The
Company operates a monoclonal antibody manufacturing facility in Scotland that
is engaged in the development and manufacturing of monoclonal antibody products
for use in diagnostic products such as blood typing reagents and 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 production of substrates used in
diagnostic assays.

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. 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 29, 2002 and the
notes thereto included in the Companys Annual Report on Form 10-K for the year
ended December 29, 2002, as amended by the Companys Current Report on Form 8-K
filed on August 8, 2003.

Financial statements for all periods presented have been reclassified to
separately report results of discontinued operations from results of continuing
operations (Note 3). Disclosures included herein pertain to the Companys
continuing operations unless otherwise noted.

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

6



---



##### 



Inventories

Inventories are stated at the lower of cost or market, cost being
determined on a first-in, first-out basis. Market for work-in-process and
finished goods inventories is net realizable value and for raw materials is
replacement cost. The components of inventories are stated as follows (in
thousands):

|                |       |   |               |        |              |   |        |        | 
|--------------- | ----- | - | ------------- | ------ | ------------ | - | ------ | ------ | 
|                |       |   | September 28, |        | December 29,
|                |       |   | 2003          |        | 2002        
|                |       |   |               |        |             
|Raw materials   |       | $ | 9,130         |        |              | $ | 4,167  |       
|Work-in-process |       |   | 9,878         |        |              |   | 4,132  |       
|Finished goods  |       |   | 16,160        |        |              |   | 11,236 |       
|                |       |   |               |        |              |   |        |       
|                | Total |   | $             | 35,168 |              |   | $      | 19,535 | 
|                |       |   |               |        |              |   |        |       

Earnings (loss) Per Share

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

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

|                                                                      |                                       |                                       |                   |                                                                         |       |                    |        |                   |      |               |        |               |       |        |        |       |      |       |        | 
|--------------------------------------------------------------------- | ------------------------------------- | ------------------------------------- | ----------------- | ----------------------------------------------------------------------- | ----- | ------------------ | ------ | ----------------- | ---- | ------------- | ------ | ------------- | ----- | ------ | ------ | ----- | ---- | ----- | ------ | 
|                                                                      |                                       |                                       |                   |                                                                         |       | Three Months Ended |        | Nine Months Ended
|                                                                      |                                       |                                       |                   |                                                                         |       |                    |        |                  
|                                                                      |                                       |                                       |                   |                                                                         |       | September 28,      |        | September 29,     |      | September 28, |        | September 29,
|                                                                      |                                       |                                       |                   |                                                                         |       | 2003               |        | 2002              |      | 2003          |        | 2002         
|                                                                      |                                       |                                       |                   |                                                                         |       |                    |        |                   |      |               |        |              
|Numerator:                                                            |                                       |                                       |                   |                                                                         |       |                    |        |                   |      |               |        |               |       |        |        |      
|                                                                      | Net
income from continuing operations |                                       | $                 | 1,394                                                                   |       |                    | $      | 2,078             |      |               | $      | 5,052         |       |        | $      | 5,426 |     
|                                                                      | Discontinued operations               |                                       |                   | (7,930                                                                  | )     |                    |        | 1,203             |      |               |        | (8,435        | )     |        |        | 4,345 |     
|                                                                      |                                       |                                       |                   |                                                                         |       |                    |        |                   |      |               |        |               |       |        |        |       |     
|                                                                      |                                       |                                       | Net income (loss) |                                                                         | $     | (6,536             | )      |                   | $    | 3,281         |        |               | $     | (3,383 | )      |       | $    | 9,771 |       
|                                                                      |                                       |                                       |                   |                                                                         |       |                    |        |                   |      |               |        |               |       |        |        |       |     
|Denominator:                                                          |                                       |                                       |                   |                                                                         |       |                    |        |                   |      |               |        |               |       |        |        |      
|Basic earnings (loss) per share -
weighted average shares outstanding |                                       |                                       | 24,567            |                                                                         |       |                    | 24,386 |                   |      |               | 24,502 |               |       |        | 24,331 |      
|Effect of dilutive securities:                                        |                                       |                                       |                   |                                                                         |       |                    |        |                   |      |               |        |               |       |        |        |      
|                                                                      |                                       |                                       |                   | Stock options                                                           |       |                    | 470    |                   |      |               | 439    |               |       |        | 353    |       |      |       | 515    | 
|                                                                      |                                       |                                       |                   | Common stock awards                                                     |       |                    | 23     |                   |      |               | 15     |               |       |        | 19     |       |      |       | 13     | 
|                                                                      |                                       |                                       |                   |                                                                         |       |                    |        |                   |      |               |        |               |       |        |        |       |     
|                                                                      |                                       |                                       |                   | Diluted
earnings (loss) per share  weighted average shares outstanding |       |                    | 25,060 |                   |      |               | 24,840 |               |       |        | 24,874 |       |      |       | 24,859 | 
|                                                                      |                                       |                                       |                   |                                                                         |       |                    |        |                   |      |               |        |               |       |        |        |       |     
|Basic earnings (loss) per share:                                      |                                       |                                       |                   |                                                                         |       |                    |        |                   |      |               |        |               |       |        |        |      
|                                                                      |                                       | Net
income from continuing operations |                   | $                                                                       | 0.06  |                    |        | $                 | 0.09 |               |        | $             | 0.21  |        |        | $     | 0.22 |      
|                                                                      |                                       | Discontinued operations               |                   |                                                                         | (0.32 | )                  |        |                   | 0.05 |               |        |               | (0.34 | )      |        |       | 0.18 |      
|                                                                      |                                       |                                       |                   |                                                                         |       |                    |        |                   |      |               |        |               |       |        |        |       |     
|                                                                      |                                       |                                       |                   | Net income (loss)                                                       |       | $                  | (0.26  | )                 |      | $             | 0.14   |               |       | $      | (0.13  | )     |      | $     | 0.40   | 
|                                                                      |                                       |                                       |                   |                                                                         |       |                    |        |                   |      |               |        |               |       |        |        |       |     
|Diluted earnings (loss) per share:                                    |                                       |                                       |                   |                                                                         |       |                    |        |                   |      |               |        |               |       |        |        |      
|                                                                      |                                       | Net
income from continuing operations |                   | $                                                                       | 0.06  |                    |        | $                 | 0.08 |               |        | $             | 0.20  |        |        | $     | 0.22 |      
|                                                                      |                                       | Discontinued operations               |                   |                                                                         | (0.32 | )                  |        |                   | 0.05 |               |        |               | (0.34 | )      |        |       | 0.17 |      
|                                                                      |                                       |                                       |                   |                                                                         |       |                    |        |                   |      |               |        |               |       |        |        |       |     
|                                                                      |                                       |                                       |                   | Net income (loss)                                                       |       | $                  | (0.26  | )                 |      | $             | 0.13   |               |       | $      | (0.14  | )     |      | $     | 0.39   | 
|                                                                      |                                       |                                       |                   |                                                                         |       |                    |        |                   |      |               |        |               |       |        |        |       |     

7



---



##### 



The following shares issuable under stock option agreements were excluded
from the calculation of dilutive earnings (loss) 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 not have been dilutive (in
thousands):

|                   |       |                   |  |               |       |               |  |  |       |  |  |  |     | 
|------------------ | ----- | ----------------- |  | ------------- | ----- | ------------- |  |  | ----- |  |  |  | --- | 
|Three Months Ended |       | Nine Months Ended
|                   |       |                  
|September 28,      |       | September 29,     |  | September 28, |       | September 29,
|2003               |       | 2002              |  | 2003          |       | 2002         
|                   |       |                   |  |               |       |              
|                   | 1,019 |                   |  |               | 1,204 |               |  |  | 1,126 |  |  |  | 666 | 
|                   |       |                   |  |               |       |               |  |  |       |  |  |  |     | 

The Company also excluded from the calculation of dilutive earnings (loss)
per share approximately 8.8 million shares issuable upon conversion of the
$130.0 million principal amount of the Companys 4.75% Convertible Senior
Subordinated Debentures due August 15, 2033 (Debentures) (Note 5). These
shares were excluded from the calculation of dilutive earnings per share as the
conversion requirements were not met during the third quarter of 2003 and thus
their effect would not have been dilutive.

Stock-Based Compensation Plan

At September 28, 2003, the Company has one stock-based employee
compensation plan. The Company accounts for this plan under the recognition
and measurement principles of Accounting Principles Board (APB) Opinion No.
25, Accounting for Stock Issued to Employees, and related interpretations. No
stock-based employee compensation cost is reflected in net income (loss), as
all options granted under this plan had an exercise price equal to the market
value of the underlying common stock on the date of grant. The following table
illustrates the effect on net income (loss) and earnings (loss) per share if
the Company had applied the fair value recognition provisions of Statement of
Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based
Compensation, to stock-based employee compensation (in thousands, except per
share amounts):

|                                                                                                                                            |                     |   |                    |       |                   |   |               |      |               |   |        |       |   |   |       |      | 
|------------------------------------------------------------------------------------------------------------------------------------------- | ------------------- | - | ------------------ | ----- | ----------------- | - | ------------- | ---- | ------------- | - | ------ | ----- | - | - | ----- | ---- | 
|                                                                                                                                            |                     |   | Three Months Ended |       | Nine Months Ended
|                                                                                                                                            |                     |   |                    |       |                  
|                                                                                                                                            |                     |   | September 28,      |       | September 29,     |   | September 28, |      | September 29,
|                                                                                                                                            |                     |   | 2003               |       | 2002              |   | 2003          |      | 2002         
|                                                                                                                                            |                     |   |                    |       |                   |   |               |      |              
|Net income (loss), as reported                                                                                                              |                     | $ | (6,536             | )     |                   | $ | 3,281         |      |               | $ | (3,383 | )     |   | $ | 9,771 |     
|Deduct: Total stock-based
employee compensation expense
determined under fair value
based method for all awards,
net of related tax effects |                     |   | 620                |       |                   |   | 280           |      |               |   | 1,862  |       |   |   | 839   |     
|                                                                                                                                            |                     |   |                    |       |                   |   |               |      |               |   |        |       |   |   |       |     
|Pro forma net income (loss)                                                                                                                 |                     | $ | (7,156             | )     |                   | $ | 3,001         |      |               | $ | (5,245 | )     |   | $ | 8,932 |     
|                                                                                                                                            |                     |   |                    |       |                   |   |               |      |               |   |        |       |   |   |       |     
|Earnings (loss) per share:                                                                                                                  |                     |   |                    |       |                   |   |               |      |               |   |        |       |   |   |       |     
|                                                                                                                                            | Basic-as reported   |   | $                  | (0.26 | )                 |   | $             | 0.14 |               |   | $      | (0.13 | ) |   | $     | 0.40 | 
|                                                                                                                                            | Basic-pro forma     |   |                    | (0.29 | )                 |   |               | 0.12 |               |   |        | (0.21 | ) |   |       | 0.37 | 
|                                                                                                                                            | Diluted-as reported |   | $                  | (0.26 | )                 |   | $             | 0.13 |               |   | $      | (0.14 | ) |   | $     | 0.39 | 
|                                                                                                                                            | Diluted-pro forma   |   |                    | (0.29 | )                 |   |               | 0.12 |               |   |        | (0.22 | ) |   |       | 0.37 | 

Under SFAS No. 123, the fair value of stock-based awards is calculated
through the use of option-pricing models, even though such models were
developed to estimate the fair value of freely tradable, fully transferable
options without vesting restrictions, which differ significantly from the
Companys stock option grants. These models also require subjective
assumptions, including future stock price volatility and expected lives of each
option grant.

8



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##### 



Comprehensive Income (Loss)

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

|                                        |  |                    |        |                   |  |               |               |      |  |   |        |   |  |   |        | 
|--------------------------------------- |  | ------------------ | ------ | ----------------- |  | ------------- | ------------- | ---- |  | - | ------ | - |  | - | ------ | 
|                                        |  | Three Months Ended |        | Nine Months Ended
|                                        |  |                    |        |                  
|                                        |  | September 28,      |        | September 29,     |  | September 28, | September 29,
|                                        |  | 2003               |        | 2002              |  | 2003          |               | 2002
|                                        |  |                    |        |                   |  |               |               |     
|Net income (loss), as reported          |  | $                  | (6,536 | )                 |  | $             | 3,281         |      |  | $ | (3,383 | ) |  | $ | 9,771  | 
|Foreign currency translation adjustment |  |                    | (93    | )                 |  |               | (646          | )    |  |   | 2,590  |   |  |   | 402    | 
|                                        |  |                    |        |                   |  |               |               |      |  |   |        |   |  |   |        | 
|Comprehensive income (loss)             |  | $                  | (6,629 | )                 |  | $             | 2,635         |      |  | $ | (793   | ) |  | $ | 10,173 | 
|                                        |  |                    |        |                   |  |               |               |      |  |   |        |   |  |   |        | 



For the three months and nine months ended September 28, 2003 and
September 29, 2002 there was no other comprehensive income (loss), net of tax
for the discontinued operations.

Recent Accounting Pronouncements

In January 2003, the Financial Accounting Standards Board (FASB) issued
FASB Interpretation No. 46, (FIN 46), Consolidation of Variable Interest
Entities, an Interpretation of Accounting Research Bulletin No. 51. FIN 46
requires certain variable interest entities to be consolidated by the primary
beneficiary of the entity if the equity investors in the entity do not have the
characteristics of a controlling financial interest or do not have sufficient
equity at risk for the entity to finance its activities without additional
subordinated financial support from other parties. FIN 46 is effective
immediately for all new variable interest entities created or acquired after
January 31, 2003. For variable interest entities created or acquired prior to
February 1, 2003, the provisions of FIN 46 must be applied for the first
interim or annual period ending after December 15, 2003. The adoption of this
standard did not have an impact on the Companys financial statements.

In April 2003, the FASB issued SFAS No. 149, Amendment to Statement 133
on Derivative Instruments and Hedging Activities. SFAS No. 149 amends and
clarifies accounting for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities under SFAS
No. 133. SFAS No. 149 is applied prospectively and is effective for contracts
entered into or modified after June 30, 2003, except for SFAS No. 133
implementation issues that have been effective for fiscal quarters that began
prior to June 15, 2003 and certain provisions relating to forward purchases and
sales on securities that do not yet exist. The adoption of this standard did
not have an impact on the Companys financial statements.

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity.
SFAS 150 clarifies the accounting for certain financial instruments with
characteristics of both liabilities and equity and requires that those
instruments be classified as liabilities in statements of financial position.
Previously, many of those financial instruments were classified as equity. The
adoption of this standard did not have an impact on the Companys financial
statements.



|2. |  | ACQUISITION
|-- |  | -----------

Acquisition of Chemicon

Effective April 1, 2003, Serologicals completed the acquisition of 100% of
the common stock of Chemicon International, Inc. (Chemicon), a
privately-owned company based in Temecula, California. Chemicon has
manufacturing, distribution and research and development operations in
California, Australia and the United Kingdom. Chemicon provides a broad range
of specialty reagents, kits, antibodies and molecular biology tools to
biotechnology, pharmaceutical and academic research customers working in the
areas of neuroscience, infectious disease, drug discovery, cancer research,
stem cell research and proteomics. Chemicon is also a leading supplier of
monoclonal antibodies, conjugates, antibody blends and kits for use in the
diagnostic laboratory. The acquisition of Chemicon greatly expands the
Companys range of products and customers within the research market. The
purchase price of $95 million in cash was funded with the proceeds from an
$82.5

9



---



##### 



million five-year term loan and cash on hand. The results of operations
of Chemicon are included in the Companys financial statements beginning April
1, 2003.

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

|                              |  |   |         | 
|----------------------------- |  | - | ------- | 
|Cash paid at closing          |  | $ | 95,000  | 
|Direct costs of acquisition   |  |   | 2,392   | 
|Current liabilities assumed   |  |   | 7,444   | 
|Long-term liabilities assumed |  |   | 12,012  | 
|                              |  |   |         | 
|                              |  | $ | 116,848 | 
|                              |  |   |         | 

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

|                                      |  |   |         | 
|------------------------------------- |  | - | ------- | 
|Cash and cash equivalents             |  | $ | 295     | 
|Accounts receivable, net of allowance |  |   | 4,932   | 
|Inventory                             |  |   | 7,234   | 
|Other current assets                  |  |   | 1,983   | 
|Property and equipment                |  |   | 5,556   | 
|Developed products                    |  |   | 24,000  | 
|Trademarks and trade names            |  |   | 9,000   | 
|Other
intangible assets               |  |   | 1,330   | 
|Goodwill                              |  |   | 62,518  | 
|                                      |  |   |         | 
|                                      |  | $ | 116,848 | 
|                                      |  |   |         | 

The Company preliminarily allocated the purchase price to the fair value
of identifiable long-lived assets and intangibles based on an independent third
party appraisal. Management expects
to finalize the allocation by the end of the fourth quarter of 2003. None of
the goodwill related to the acquisition of Chemicon is expected to be
deductible for tax purposes. Chemicon is included in the research products
segment. The following table sets forth the weighted average lives for the
intangible assets acquired:

|                  |                            |                       |  |  |            | 
|----------------- | -------------------------- | --------------------- |  |  | ---------- | 
|Asset Description |                            | Weighted Average Life
|                  |                            |                      
|                  | Developed products         |                       |  |  | 18.6 years | 
|                  | Trademarks and trade names |                       |  |  | Indefinite | 
|                  | Other
intangible assets    |                       |  |  | 6.5 years  | 
|                  | Goodwill                   |                       |  |  | Indefinite | 

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

In conjunction with the business combination, the Company is evaluating
the consolidation of certain components of Chemicons operations. Any costs
incurred related to a restructuring resulting from this effort will be included
in the purchase price of Chemicon in accordance with Emerging Issues Task Force
(EITF) 95-3,
Recognition of Liabilities in Connection with a Purchase Business
Combination. These costs may

10



---



##### 



include termination benefits, relocation costs, asset impairments and
lease commitments. The Company expects to complete its evaluation by the end
of fiscal year 2003.

The following table summarizes the results of Serologicals on a pro forma
basis for the three and nine months ended September 28, 2003 and September 29,
2002 as if the acquisition of Chemicon had occurred at the beginning of the
period. The pro forma results exclude certain expenses totaling approximately
$0.4 million that were recorded by Chemicon as a result of the acquisition.
These costs primarily include professional and other fees paid as a direct
result of the transaction. These results do not purport to represent what the
results of operations for Serologicals would have actually been or to be
indicative of the future results of operations of Serologicals (in thousands,
except per share amounts).

|                             |  |                    |        |                   |  |               |        |               |  |   |         |   |  |   |         | 
|---------------------------- |  | ------------------ | ------ | ----------------- |  | ------------- | ------ | ------------- |  | - | ------- | - |  | - | ------- | 
|                             |  | Three Months Ended |        | Nine Months Ended
|                             |  |                    |        |                  
|                             |  | September 28,      |        | September 29,     |  | September 28, |        | September 29,
|                             |  | 2003               |        | 2002              |  | 2003          |        | 2002         
|                             |  |                    |        |                   |  |               |        |              
|Revenue                      |  | $                  | 42,010 |                   |  | $             | 34,170 |               |  | $ | 111,705 |   |  | $ | 101,849 | 
|Net income                   |  |                    | (6,536 | )                 |  |               | 3,285  |               |  |   | (3,563  | ) |  |   | 9,032   | 
|Net income per common share: |  |                    |        |                   |  |               |        |               |  |   |         |   |  |   |         | 
|Basic                        |  | $                  | (0.26  | )                 |  | $             | 0.13   |               |  | $ | (0.15   | ) |  | $ | 0.37    | 
|Diluted                      |  |                    | (0.26  | )                 |  |               | 0.13   |               |  |   | (0.14   | ) |  |   | 0.36    | 



|3. |  | DISCONTINUED OPERATIONS
|-- |  | -----------------------

On July 10, 2003, the Company announced its intention to exit the
Therapeutic Plasma business. As a result, during the third quarter, the
Therapeutic Plasma business was classified as held for sale as it met the
criteria prescribed by SFAS No. 144 Impairment of Long-Lived Assets and
Discontinued Operations (SFAS No. 144). In October 2003, the Company entered
into a non-binding letter of intent to sell its Therapeutic Plasma business,
consisting of the Companys ten plasma collection centers and its central
testing laboratory. The Company expects that the buyer will retain the majority
of the employees of this business. The Company
expects to enter into a definitive agreement for the sale of the business by
the end of 2003. The specific terms of the agreement and the identity of the
buyer will not be disclosed until a definitive agreement is signed. Based on
the current indication of value for this transaction, the Company recorded an
impairment loss of $11.0 million during the third quarter with respect to the
Therapeutic Plasma business, which is included as a component of the income
(loss) from discontinued operations in the accompanying Consolidated Statement
of Income (Loss).

11



---



##### 



Assets and liabilities of discontinued operations were as follows (in
thousands):

|             |                                      |                                          |        |               |        |              |        |        |        | 
|------------ | ------------------------------------ | ---------------------------------------- | ------ | ------------- | ------ | ------------ | ------ | ------ | ------ | 
|             |                                      |                                          |        | September 28, |        | December 29,
|             |                                      |                                          |        | 2003          |        | 2002        
|             |                                      |                                          |        |               |        |             
|Assets:      |                                      |                                          |        |               |        |              |        |       
|             | Cash overdraft                       |                                          | $      | (124          | )      |              | $      | (2,392 | )     
|             | Trade accounts receivable            |                                          |        | 6,327         |        |              |        | 13,778 |       
|             | Inventories                          |                                          |        | 5,995         |        |              |        | 6,770  |       
|             | Other current assets                 |                                          |        | 722           |        |              |        | 1,146  |       
|             |                                      |                                          |        |               |        |              |        |       
|             |                                      | Current assets                           |        |               | 12,920 |              |        |        | 19,302 | 
|             |                                      |                                          |        |               |        |              |        |       
|             | Property and equipment, net          |                                          |        | 2,298         |        |              |        | 6,736  |       
|             | Goodwill and other intangible assets |                                          |        |              |        |              |        | 8,861  |       
|             | Other noncurrent assets              |                                          |        |              |        |              |        | 227    |       
|             |                                      |                                          |        |               |        |              |        |       
|             |                                      | Noncurrent assets                        |        |               | 2,298  |              |        |        | 15,824 | 
|             |                                      |                                          |        |               |        |              |        |       
|             |                                      | $                                        | 15,218 |               |        | $            | 35,126 |       
|             |                                      |                                          |        |               |        |              |        |       
|Liabilities: |                                      |                                          |        |               |        |              |        |       
|             |                                      | Accounts payable and accrued liabilities |        | $             | 1,603  |              |        | $      | 1,518  | 
|             |                                      | Noncurrent liabilities                   |        |               | 352    |              |        |        | 352    | 
|             |                                      |                                          |        |               |        |              |        |       
|             |                                      | $                                        | 1,955  |               |        | $            | 1,870  |       
|             |                                      |                                          |        |               |        |              |        |       

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

|                                                       |  |                    |        |                   |  |               |       |               |  |   |        |   |  |   |        |  
|------------------------------------------------------ |  | ------------------ | ------ | ----------------- |  | ------------- | ----- | ------------- |  | - | ------ | - |  | - | ------ | -
|                                                       |  | Three Months Ended |        | Nine Months Ended
|                                                       |  |                    |        |                  
|                                                       |  | September 28,      |        | September 29,     |  | September 28, |       | September 29,
|                                                       |  | 2003               |        | 2002              |  | 2003          |       | 2002         
|                                                       |  |                    |        |                   |  |               |       |              
|Net sales                                              |  | $                  | 5,767  |                   |  | $             | 7,712 |               |  | $ | 21,314 |   |  | $ | 28,589 |  
|Impairment                                             |  |                    | 11,016 |                   |  |               |      |               |  |   | 11,016 |   |  |   |       |  
|Income tax benefit (provision)                         |  |                    | 4,270  |                   |  |               | (648  | )             |  |   | 4,542  |   |  |   | (2,340 | )
|Income (loss) from
discontinued operations, net
of tax |  |                    | (7,930 | )                 |  |               | 1,203 |               |  |   | (8,435 | ) |  |   | 4,345  |  

As part of the Therapeutic sale, the Company also expects to sell certain
product groups within the human-sourced disease state polyclonal antibody
business, as defined in the letter of intent. Human-sourced disease state
polyclonal antibodies sales and gross margin are included in the Diagnostic
segment. The Company has not treated this business as discontinued operations
as it does not fulfill the requirements to be considered a discontinued
operation in accordance with SFAS No. 144. The following table sets forth net
sales and gross profit of the human-sourced disease state polyclonal antibody
product groups that the Company expects to sell (in thousands):

|             |  |                    |     |                   |  |               |       |               |  |   |       |  |  |   |       | 
|------------ |  | ------------------ | --- | ----------------- |  | ------------- | ----- | ------------- |  | - | ----- |  |  | - | ----- | 
|             |  | Three Months Ended |     | Nine Months Ended
|             |  |                    |     |                  
|             |  | September 28,      |     | September 29,     |  | September 28, |       | September 29,
|             |  | 2003               |     | 2002              |  | 2003          |       | 2002         
|             |  |                    |     |                   |  |               |       |              
|Net sales    |  | $                  | 803 |                   |  | $             | 1,175 |               |  | $ | 2,256 |  |  | $ | 3,842 | 
|Gross profit |  |                    | 545 |                   |  |               | 730   |               |  |   | 1,616 |  |  |   | 2,302 | 



|4. |  | SPECIAL CHARGES AND WRITE-OFF OF DEFERRED FINANCING COSTS
|-- |  | ---------------------------------------------------------

At closing of the Debentures (Note 5) and new revolving credit facility
(Note 6), the Company paid off the balances in full and terminated its previous
term loan and old revolving credit facility. During the third quarter of 2003,
the Company recorded a charge of approximately $4.1 million related to the
write-off of deferred financing costs associated with the terminated
facilities.

12



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##### 



Additionally during the third quarter of 2003, the Company recorded a
special charge of $0.3 million related to the remaining costs associated with
the relocation of its Gaithersburg, Maryland facility to Chemicon, as described
below, and $0.2 million related primarily to severance associated with the
completion of the corporate restructuring program initiated during the second
quarter of 2003.

During the second quarter of 2003, the Company approved a plan to transfer
the responsibility for manufacturing and distribution of research products from
Gaithersburg, Maryland to its Chemicon division. This transfer is expected to
provide a more competitive focus for the manufacturing, sales and distribution
of these products. In addition, during the quarter, the Company continued to
review its infrastructure to ensure the staffing is optimal to focus on the
primary growth areas related to the Companys strategic plan. As a result of
these efforts, including its ongoing product rationalization initiatives, the
Company reduced its workforce at various locations including the Gaithersburg
facility, the Kankakee facility, the Milford facility and the corporate office.
As a result of these restructurings, the Company recorded $1.2 million in
special charges in the accompanying Consolidated Statement of Income (Loss).
The components of the special charge included approximately $0.4 million for
employee severance and $0.8 million related to the impairment of certain
long-lived assets at Gaithersburg, Maryland. Employee termination costs are
expected to be paid by the end of 2004.

During the second quarter of 2003, the Company also incurred $0.9 million
resulting from the Bovine Spongiform Encephalopathy (BSE) or mad-cow
disease scare in Canada. This charge included costs associated with writing
off certain inventory that had been sourced from Canadian raw materials and the
cost of shutting down and cleaning a section of the Toronto manufacturing
facility to prepare for the switchover to U.S.-sourced raw materials. Prior to
the announcement that a single cow had tested positive for BSE, the Company
procured certain bovine raw materials from Canadian sources. As a result of
this issue, and after discussions with customers, the Company began sourcing
all bovine raw materials used in the Toronto facility from the United States.
The Toronto plant was partially shutdown for approximately one month during the
quarter for cleaning and sanitization. Additionally, certain inventory that
was manufactured in Canada and scheduled to be shipped to international
customers was delayed by foreign governments. The United States Department of
Agriculture ban on Canadian imports of bovine materials prevented the transfer
of products from Toronto to our distribution facility in Massachusetts for part
of the quarter.

During the first quarter of 2003, subsequent to notifying the lender of
our intent to terminate our then existing credit facility, the Company recorded
a charge of approximately $0.4 million related to the write-off of deferred
financing costs.

Additionally during the first quarter of 2003, the Company recorded a
special charge of $0.1 million related to a loss associated with an equipment
failure at the Toronto facility and other termination costs.

All charges except for deferred financing fees are included in Special
Charges in the accompanying Consolidated Statement of Income (Loss). Deferred
financing fees are included in Write-Off of Deferred Financing Costs in the
accompanying Consolidated Statement of Income (Loss).

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

|                      |  |                    |     |                   |  |               |   |               |  |   |       |  |  |   |   | 
|--------------------- |  | ------------------ | --- | ----------------- |  | ------------- | - | ------------- |  | - | ----- |  |  | - | - | 
|                      |  | Three Months Ended |     | Nine Months Ended
|                      |  |                    |     |                  
|                      |  | September 28,      |     | September 29,     |  | September 28, |   | September 29,
|                      |  | 2003               |     | 2002              |  | 2003          |   | 2002         
|                      |  |                    |     |                   |  |               |   |              
|Research products     |  | $                  | 264 |                   |  | $             |  |               |  | $ | 1,163 |  |  | $ |  | 
|Cell culture products |  |                    | 32  |                   |  |               |  |               |  |   | 1,218 |  |  |   |  | 
|Diagnostic products   |  |                    | 10  |                   |  |               |  |               |  |   | 127   |  |  |   |  | 
|Corporate             |  |                    | 198 |                   |  |               |  |               |  |   | 270   |  |  |   |  | 
|                      |  |                    |     |                   |  |               |   |               |  |   |       |  |  |   |   | 
|                      |  | $                  | 504 |                   |  | $             |  |               |  | $ | 2,778 |  |  | $ |  | 
|                      |  |                    |     |                   |  |               |   |               |  |   |       |  |  |   |   | 

13



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The following table summarizes the activity in the accrual for termination
benefits and other costs for the nine months ended September 28, 2003 (in
thousands):

|                           |  |          |       |          |  |              |       |            |  |          |        |   |  |   |        |   |  |   |     | 
|-------------------------- |  | -------- | ----- | -------- |  | ------------ | ----- | ---------- |  | -------- | ------ | - |  | - | ------ | - |  | - | --- | 
|                           |  | Balance, |       |          |  | Cash         |       | Noncash    |  | Balance,
|Description                |  | 12/29/02 |       | Expenses |  | Expenditures |       | Write-offs |  | 9/28/03 
|                           |  |          |       |          |  |              |       |            |  |         
|Employee termination costs |  | $        | 942   |          |  | $            | 647   |            |  | $        | (1,315 | ) |  | $ |       |   |  | $ | 274 | 
|Lease termination costs    |  |          | 70    |          |  |              | 120   |            |  |          | (39    | ) |  |   |       |   |  |   | 151 | 
|Asset impairment           |  |          |      |          |  |              | 1,719 |            |  |          |       |   |  |   | (1,719 | ) |  |   |    | 
|Other                      |  |          |      |          |  |              | 292   |            |  |          | (101   | ) |  |   | (191   | ) |  |   |    | 
|                           |  |          |       |          |  |              |       |            |  |          |        |   |  |   |        |   |  |   |     | 
|                           |  | $        | 1,012 |          |  | $            | 2,778 |            |  | $        | (1,455 | ) |  | $ | (1,910 | ) |  | $ | 425 | 
|                           |  |          |       |          |  |              |       |            |  |          |        |   |  |   |        |   |  |   |     | 

The remaining accrual of $0.4 million is included in Accrued Liabilities
in the Consolidated Balance Sheets. All of these amounts are expected to be
paid over the remainder of 2003 and 2004.



|5. |  | CONVERTIBLE SENIOR SUBORDINATED DEBENTURES
|-- |  | ------------------------------------------

On August 20, 2003, the Company issued $130.0 million principal amount of
4.75% Convertible Senior Subordinated Debentures due August 15, 2033 to certain
institutional investors. After expenses, the Company received net proceeds of
$126.1 million. Interest on the Debentures is payable semi-annually on
February 15th and August 15th. The Debentures are convertible into shares of
Serologicals common stock at an initial rate of 67.6133 shares of common stock
per $1,000 principal amount of the Debentures (or approximately 8.8 million
shares of common stock at a conversion price of $14.79 per share of common
stock), subject to the satisfaction of certain conditions, such as obtaining a
average stock price of $17.75 over 20 trading days over a period of 30 consecutive trading days ending on the last trading day of the preceding fiscal
quarter or a fundamental change in the business. The Debentures may be
redeemed, in whole or in part, at the Companys option on or after August 22,
2008 at 100% of the principal amount. In addition, the holders of the
Debentures may require the Company to repurchase all or a portion of the
Debentures for 100% of the principal amount, plus accrued interest, on August
15, 2008, August 15, 2010, August 15, 2013, August 15, 2018, August 15, 2023,
August 15, 2028, or at any time prior to their maturity following a fundamental
change in the business, as defined in the agreement. The Debentures are
unsecured obligations of the Company and are subordinated to all of the
Companys senior debt, including any debt incurred under the new revolver
credit facility (Note 6).



|6. |  | LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
|-- |  | --------------------------------------------

Long-term debt and capital lease obligations at September 28, 2003 and
December 29, 2002 consisted of the following (in thousands):

|                                                                                |  |               |    |              |  |   |     | 
|------------------------------------------------------------------------------- |  | ------------- | -- | ------------ |  | - | --- | 
|                                                                                |  | September
28, |    | December 29,
|                                                                                |  | 2003          |    | 2002        
|                                                                                |  |               |    |             
|Revolving credit facility                                                       |  |               |   |              |  |   |    | 
|Capital lease obligations at
varying interest rates and terms,
maturing
in 2004 |  |               | 39 |              |  |   | 424 | 
|                                                                                |  |               |    |              |  |   |     | 
|                                                                                |  |               | 39 |              |  |   | 424 | 
|Less: current maturities                                                        |  |               | 7  |              |  |   | 385 | 
|                                                                                |  |               |    |              |  |   |     | 
|                                                                                |  | $             | 32 |              |  | $ | 39  | 
|                                                                                |  |               |    |              |  |   |     | 

On August 29, 2003, the Company entered into a new $30.0 million
three-year revolving credit facility (Revolver). The new Revolver bears
interest at a floating rate of interest determined by reference to a base rate
or to Eurodollar interest rates, plus a margin. The margin on the Eurodollar
interest rate ranges from 2.00% to 2.75% and the margin on the base rate ranges
from 1.00% to 1.75% based on the Companys leverage ratio. The Company is
required to pay a commitment fee of .5% per annum on undrawn balances. The
Revolver is secured by substantially all of the assets of the Company. The
Revolver contains certain financial covenants that require the maintenance of a
minimum fixed charge coverage ratio and earnings before interest, taxes,

14



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##### 



depreciation and amortization and also provides for a maximum leverage
ratio and limitations on capital expenditures. Furthermore, under the terms of
the Revolver, there are restrictions on the Companys ability to make
acquisitions, repurchase common stock and to pay dividends. As of September
28, 2003, there were no amounts outstanding under the Revolver.

The Company capitalizes interest on borrowings during the active
construction period of major capital projects. During the three and nine
months ended September 28, 2003 the Company capitalized approximately $0.1
million and 0.3 million, respectively, in connection primarily with the
construction of the new EX-CYTE® plant in Lawrence, Kansas. During the three
months and nine months ended September 29, 2002, the Company capitalized
approximately $0.1 million and $0.4 million, respectively, in connection with
various projects.



|7. |  | SEGMENT INFORMATION
|-- |  | -------------------

SFAS No. 131, Disclosure about Segments of an Enterprise and Related
Information, requires the reporting of information about operating segments in
annual financial statements and requires selected information in interim
financial reports. Beginning in 2003, for management purposes the operations
of the Companys subsidiaries are organized into three primary operating
segments: Research Products (Research), Cell Culture Products (Cell
Culture) and Diagnostic Products (Diagnostics). These segments are based
primarily on the differing production, manufacturing and other value-added
processes performed by the Company with respect to the products and, to a
lesser extent, the differing end use and customer bases to which each
reportable segment sells its products. During 2002, the Company
reported three operating segments, Biotechnology and Molecular Biology Products,
Therapeutic Products and Diagnostic Products. All amounts in this Quarterly
Report reflect the restatement of the prior year segments so that they are
consistent with the current year presentation.

15



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##### 



The activities of the Research segment primarily include manufacturing and
sales of reagents, cell-based assays, antibodies and molecular biology
products. Key products within the Research segment are ESGRO®, Arthrogen-CIA®
and Amplifuor®. The Cell Culture segment products consist of cell culture
media and supplements for drug development, biomanufacturing and life science
research. The Companys most significant product within this segment is
EX-CYTE®. Other key products within the Cell Culture segment include bovine
serum albumin (BSA), recombinant insulin and other products used principally
in mammalian cell culture. The key products within the Diagnostic segment are
monoclonal antibodies used in blood typing reagents and diagnostic antibodies
and certain human-sourced polyclonal antibodies.

|                                                                                  |  |                                       |        |                    |        |                   |        |               |        |               |         |   |        |   |        |   |        |  
|--------------------------------------------------------------------------------- |  | ------------------------------------- | ------ | ------------------ | ------ | ----------------- | ------ | ------------- | ------ | ------------- | ------- | - | ------ | - | ------ | - | ------ | -
|                                                                                  |  |                                       |        | Three Months Ended |        | Nine Months Ended
|                                                                                  |  |                                       |        |                    |        |                  
|                                                                                  |  |                                       |        | September 28,      |        | September 29,     |        | September 28, |        | September 29,
|                                                                                  |  |                                       |        | 2003               |        | 2002              |        | 2003          |        | 2002         
|                                                                                  |  |                                       |        |                    |        |                   |        |               |        |              
|Net sales:                                                                        |  |                                       |        |                    |        |                   |        |               |        |               |         |   |        |   |        |  
|                                                                                  |  | Research products                     |        | $                  | 14,213 |                   |        | $             | 763    |               |         | $ | 28,377 |   |        | $ | 2,811  |  
|                                                                                  |  | Cell culture products                 |        |                    | 20,646 |                   |        |               | 16,579 |               |         |   | 49,911 |   |        |   | 49,434 |  
|                                                                                  |  | Diagnostic products                   |        |                    | 7,151  |                   |        |               | 6,384  |               |         |   | 22,267 |   |        |   | 19,366 |  
|                                                                                  |  |                                       |        |                    |        |                   |        |               |        |               |         |   |        |   |        |  
|                                                                                  |  | $                                     | 42,010 |                    |        | $                 | 23,726 |               |        | $             | 100,555 |   |        | $ | 71,611 |  
|                                                                                  |  |                                       |        |                    |        |                   |        |               |        |               |         |   |        |   |        |  
|Gross profit :                                                                    |  |                                       |        |                    |        |                   |        |               |        |               |         |   |        |   |        |  
|                                                                                  |  | Research products                     |        | $                  | 9,016  |                   |        | $             | 200    |               |         | $ | 17,480 |   |        | $ | 1,013  |  
|                                                                                  |  | Cell culture products                 |        |                    | 10,395 |                   |        |               | 9,439  |               |         |   | 25,543 |   |        |   | 27,563 |  
|                                                                                  |  | Diagnostic products                   |        |                    | 3,885  |                   |        |               | 2,994  |               |         |   | 12,190 |   |        |   | 9,571  |  
|                                                                                  |  |                                       |        |                    |        |                   |        |               |        |               |         |   |        |   |        |  
|                                                                                  |  |                                       | 23,296 |                    |        |                   | 12,633 |               |        |               | 55,213  |   |        |   | 38,147 |  
|Reconciling items:                                                                |  |                                       |        |                    |        |                   |        |               |        |               |         |   |        |   |        |  
|                                                                                  |  | Selling, general and administrative   |        |                    | 12,826 |                   |        |               | 7,588  |               |         |   | 31,116 |   |        |   | 25,542 |  
|                                                                                  |  | Research and development              |        |                    | 1,628  |                   |        |               | 1,555  |               |         |   | 4,298  |   |        |   | 3,931  |  
|                                                                                  |  | Amortization of intangibles           |        |                    | 630    |                   |        |               | 223    |               |         |   | 1,551  |   |        |   | 660    |  
|                                                                                  |  | Special charges                       |        |                    | 504    |                   |        |               |       |               |         |   | 2,778  |   |        |   |       |  
|                                                                                  |  | Other expense, net                    |        |                    | 61     |                   |        |               | 36     |               |         |   | 248    |   |        |   | 91     |  
|                                                                                  |  | Write-off of deferred financing costs |        |                    | 4,112  |                   |        |               |       |               |         |   | 4,492  |   |        |   |       |  
|                                                                                  |  | Interest expense (income), net        |        |                    | 1,399  |                   |        |               | 34     |               |         |   | 2,953  |   |        |   | (424   | )
|                                                                                  |  |                                       |        |                    |        |                   |        |               |        |               |         |   |        |   |        |  
|Income from continuing operations
before income taxes and discontinued
operations |  | $                                     | 2,136  |                    |        | $                 | 3,197  |               |        | $             | 7,777   |   |        | $ | 8,347  |  
|                                                                                  |  |                                       |        |                    |        |                   |        |               |        |               |         |   |        |   |        |  



|8. |  | SUBSEQUENT EVENTS
|-- |  | -----------------

On October 17, 2003, the Company entered into an interest rate swap on
$70.0 million principal amount of its Debentures. The objective of the swap is
to convert the 4.75% fixed interest rate on a portion of the Debentures to a
variable interest rate based on the 6-month London Interbank Offered Rate
(LIBOR) at the end of each interest period plus a spread of 66 basis points
on the $70 million of the Debentures. The gain or loss
from changes in the fair value of the swap is expected to offset the gain or
loss from the changes in the fair value of the cash flows from the Debentures
throughout the expected life of the Debentures.

16



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##### 



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. Statements that are not historical facts, including statements about
our beliefs and expectations, are forward-looking statements. Forward-looking
statements may be identified by the use of words such as may, will,
expect, anticipate, intend, estimate, plan, believe, or continue
and other words of similar meaning or future or conditional verbs such as
will, should, would, and could. Forward-looking statements include
discussions of our expected business outlook, future operations, financial
performance, pending acquisitions, financial strategies, future working capital
needs and projected industry trends, as well as our strategies for growth,
product development, regulatory approvals and compliance, market position and
expenditures.

Forward-looking statements are only predictions and are not guarantees of
performance. Forward-looking statements are based on current expectations of
future events and are based on our current views and assumptions regarding
future events and operating performance. These assumptions could prove
inaccurate, or unknown risks or uncertainties could materialize, which could
cause our actual results to differ materially from our expectations or
predictions. Many of these factors are beyond our ability to control or
predict.

Factors that could cause our actual results to differ materially include:



| |  |  | our ability to implement our growth strategy;                                                                                                                                                                                   
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | our ability to manage our growth and expansion;                                                                                                                                                                                 
|
| |  |  | our ability to raise capital;                                                                                                                                                                                                   
|
| |  |  | our ability to find acceptable acquisitions in the future and to integrate and manage them;                                                                                                                                     
|
| |  |  | our ability to complete the disposition of our Therapeutics business;                                                                                                                                                           
|
| |  |  | our ability to compete effectively within our industry;                                                                                                                                                                         
|
| |  |  | our dependence on the success of the customers of our EX-CYTE®
product in developing and marketing existing and new drugs using the
product;                                                                                    
|
| |  |  | our ability to complete construction and validation of the new
EX-CYTE® manufacturing facility during 2004;                                                                                                                     
|
| |  |  | our ability to attract and retain qualified scientific and production personnel;                                                                                                                                                
|
| |  |  | our ability to comply with regulatory, customer and industry regulations and guidelines;                                                                                                                                        
|
| |  |  | our ability to identify new commercial product opportunities;                                                                                                                                                                   
|
| |  |  | our ability to protect our intellectual property;                                                                                                                                                                               
|
| |  |  | the effect on our results of operations of the loss of any
significant customers or reduced orders from significant customers,
including reductions or delays in research and development budgets
and in government funding; and
|
| |  |  | adoption of or changes in, domestic and foreign laws and
regulations that could affect our ability to maintain existing
licenses and approvals.                                                                                 

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

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

Overview

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. Our
products are essential for the research, development and manufacturing of
biologically based life science products. Our products and technologies are
used in a wide variety of applications within the areas of oncology,

17



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##### 



hematology, immunology, cardiology and infectious diseases, as well as in
the study of molecular biology. Our customers include many of the leading life
sciences companies throughout the world.

Our operations are organized into three operating segments: Research
Products, Cell Culture Products and Diagnostic Products. These segments are
based primarily on the differing production, manufacturing and other
value-added processes that we perform with respect to the products and to a
lesser extent, the differing nature of the ultimate end use of our products.
During 2002, the Company reported three operating segments, Biotechnology
and Molecular Biology Products, Therapeutic Products and Diagnostic Products.
All amounts in this Quarterly Report reflect the restatement of the prior year
segments so that they are consistent with the current year presentation.

We conduct the operations of our research segment through Chemicon, which
we acquired in April 2003. Chemicon provides a broad range of specialty
reagents, kits, antibodies and molecular biology tools to biotechnology,
pharmaceutical and academic research customers working in the areas of
neuroscience, infectious disease, drug discovery, cancer research, stem cell
research and proteomics. Chemicon is also a leading supplier of monoclonal
antibodies, conjugates, antibodies blends and kits for use in diagnostic
laboratories. Chemicon, headquartered in Temecula, California, has
manufacturing and distribution operations in California, Australia and the
United Kingdom.

We manufacture our cell culture and diagnostic products in facilities
located in North America and the United Kingdom. We operate protein
fractionation facilities located in Kankakee, Illinois and Toronto, Ontario and
have a third facility under construction in Lawrence, Kansas. These facilities
provide a variety of highly purified proteins used in diagnostic reagents and
cell culture media components for use in the development and manufacturing of
biotechnology products. Additionally, these facilities produce a line of
highly purified animal proteins known as tissue culture media components that
are used primarily by biopharmaceutical and biotechnology companies as nutrient
additives in cell culture media. We manufacture monoclonal antibodies in our
Scotland facility which is used in diagnostic products such as blood typing
reagents and in controls for diagnostic tests for certain infectious diseases.
We operate a facility in Milford, Massachusetts that includes a central
distribution facility as well as operations related to production of substrates
used in diagnostic assays.

Discontinued Operations

On July 10, 2003, the Company announced its intention to exit the
Therapeutic business. As a result, during the third quarter, the Therapeutic
Plasma business was classified as held for sale as it met the criteria
prescribed by Statement of Financial Accounting Standard No. 144 Impairment of
Long-Lived Assets and Discontinued Operations (SFAS No. 144). On October 1,
2003, the Company signed a letter of intent to sell its national network of 10
donor centers that specialize in the collection of hyper-immune human blood
antibodies, and the central testing laboratory. Financial statements for all
years presented have been reclassified to separately report results of
discontinued operations from results of continuing operations. Disclosures
included herein pertain to the Companys continuing operations unless otherwise
noted.

As part of the Therapeutic sale, the Company also expects to sell certain
product groups within the human-sourced disease state polyclonal antibody
business, as defined in the letter of intent. Human-sourced disease state
polyclonal antibodies sales and gross margin are included in the Diagnostic
segment. The Company has not treated this business as discontinued operations
as it does not fulfill the requirements to be considered a discontinued
operation in accordance with SFAS No. 144. The following table sets forth net
sales and gross profit of the human-sourced disease state polyclonal antibody
product groups that the Company expects to sell (in thousands):

|             |  |                    |     |                   |  |               |       |               |  |   |       |  |  |   |       | 
|------------ |  | ------------------ | --- | ----------------- |  | ------------- | ----- | ------------- |  | - | ----- |  |  | - | ----- | 
|             |  | Three Months Ended |     | Nine Months Ended
|             |  |                    |     |                  
|             |  | September 28,      |     | September 29,     |  | September 28, |       | September 29,
|             |  | 2003               |     | 2002              |  | 2003          |       | 2002         
|             |  |                    |     |                   |  |               |       |              
|Net sales    |  | $                  | 803 |                   |  | $             | 1,175 |               |  | $ | 2,256 |  |  | $ | 3,842 | 
|Gross profit |  |                    | 545 |                   |  |               | 730   |               |  |   | 1,616 |  |  |   | 2,302 | 

18



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See
Note 3 - DISCONTINUED OPERATIONS in Item 1 Financial Statements for
further discussion of discontinued operations.

Critical Accounting Policies

There have been no material changes regarding Serologicals critical
accounting policies from the critical accounting polices discussed under the
caption Critical Accounting Policies in Item 2 Managements Discussion and
Analysis of Financial Conditions and Results of Operations in our Quarterly
Report on Form 10-Q for the quarterly period ended June 29, 2003.

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 |       | Nine Months Ended
|                                             |  |                    |       |                  
|                                             |  | September 28,      |       | September 29,     |  | September 28, |       | September 29,
|                                             |  | 2003               |       | 2002              |  | 2003          |       | 2002         
|                                             |  |                    |       |                   |  |               |       |              
|Net sales                                    |  |                    | 100.0 | %                 |  |               | 100.0 | %             |  |  | 100.0 | % |  |  | 100.0 | %
|Gross profit                                 |  |                    | 55.5  | %                 |  |               | 53.2  | %             |  |  | 54.9  | % |  |  | 53.3  | %
|Selling, general and administrative
expenses |  |                    | 30.5  | %                 |  |               | 32.0  | %             |  |  | 30.9  | % |  |  | 35.7  | %
|Research and development                     |  |                    | 3.9   | %                 |  |               | 6.6   | %             |  |  | 4.3   | % |  |  | 5.5   | %
|Amortization of intangibles                  |  |                    | 1.5   | %                 |  |               | 0.9   | %             |  |  | 1.5   | % |  |  | 0.9   | %
|Special charges                              |  |                    | 1.2   | %                 |  |               |      |               |  |  | 2.8   | % |  |  |      |  
|Operating income                             |  |                    | 18.3  | %                 |  |               | 13.8  | %             |  |  | 15.4  | % |  |  | 11.2  | %

The following table sets forth a breakdown of revenue and gross profit
contributions by segment for the quarters ended September 28, 2003 and
September 29, 2002:

| |                       |   |                    |        |                    |  |        |    |         |   |        |        |  |  |     |    |  
| | --------------------- | - | ------------------ | ------ | ------------------ |  | ------ | -- | ------- | - | ------ | ------ |  |  | --- | -- | -
| |                       |   | September 28, 2003 |        | September 29, 2002
| |                       |   |                    |        |                   
| |                       |   | Actual             |        | % Total            |  | Actual |    | % Total
| |                       |   |                    |        |                    |  |        |   
| | Net sales:            |   |                    |        |                    |  |        |    |         |   |        |        |  |  |     |    |  
| | Research products     |   | $                  | 14,213 |                    |  |        | 34 | %       |   | $      | 763    |  |  |     | 3  | %
| | Cell culture products |   |                    | 20,646 |                    |  |        | 49 | %       |   |        | 16,579 |  |  |     | 70 | %
| | Diagnostic products   |   |                    | 7,151  |                    |  |        | 17 | %       |   |        | 6,384  |  |  |     | 27 | %
| |                       |   |                    |        |                    |  |        |    |         |   |        |        |  |  |     |   
| |                       | $ | 42,010             |        |                    |  | 100    | %  |         | $ | 23,726 |        |  |  | 100 | % 
| |                       |   |                    |        |                    |  |        |    |         |   |        |        |  |  |     |   



|              |                       |        |        |        |  |        |    |      |   |   |        |       |  |  |    |    |  
|------------- | --------------------- | ------ | ------ | ------ |  | ------ | -- | ---- | - | - | ------ | ----- |  |  | -- | -- | -
|              |                       | Actual |        | GM %   |  | Actual |    | GM %
|              |                       |        |        |        |  |        |    |     
|Gross profit: |                       |        |        |        |  |        |    |      |   |   |        |       |  |  |    |   
|              | Research products     |        | $      | 9,016  |  |        |    | 63   | % |   | $      | 200   |  |  |    | 26 | %
|              | Cell culture products |        |        | 10,395 |  |        |    | 50   | % |   |        | 9,439 |  |  |    | 57 | %
|              | Diagnostic products   |        |        | 3,885  |  |        |    | 54   | % |   |        | 2,994 |  |  |    | 47 | %
|              |                       |        |        |        |  |        |    |      |   |   |        |       |  |  |    |   
|              |                       | $      | 23,296 |        |  |        | 55 | %    |   | $ | 12,633 |       |  |  | 53 | % 
|              |                       |        |        |        |  |        |    |      |   |   |        |       |  |  |    |   

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The following table sets forth a breakdown of revenue and gross profit
contributions by segment for the nine months ended September 28, 2003 and
September 29, 2002:

|           |                       |   |                    |        |                    |  |        |    |         |   |        |        |  |  |     |    |  
|---------- | --------------------- | - | ------------------ | ------ | ------------------ |  | ------ | -- | ------- | - | ------ | ------ |  |  | --- | -- | -
|           |                       |   | September 28, 2003 |        | September 29, 2002
|           |                       |   |                    |        |                   
|           |                       |   | Actual             |        | % Total            |  | Actual |    | % Total
|           |                       |   |                    |        |                    |  |        |   
|Net sales: |                       |   |                    |        |                    |  |        |    |         |   |        |        |  |  |     |   
|           | Research products     |   | $                  | 28,377 |                    |  |        | 28 | %       |   | $      | 2,811  |  |  |     | 4  | %
|           | Cell culture products |   |                    | 49,911 |                    |  |        | 50 | %       |   |        | 49,434 |  |  |     | 69 | %
|           | Diagnostic products   |   |                    | 22,267 |                    |  |        | 22 | %       |   |        | 19,366 |  |  |     | 27 | %
|           |                       |   |                    |        |                    |  |        |    |         |   |        |        |  |  |     |   
|           |                       | $ | 100,555            |        |                    |  | 100    | %  |         | $ | 71,611 |        |  |  | 100 | % 
|           |                       |   |                    |        |                    |  |        |    |         |   |        |        |  |  |     |   

|              |                       |   |        |        |      |  |        |    |      |   |        |        |  |  |    |    |  
|------------- | --------------------- | - | ------ | ------ | ---- |  | ------ | -- | ---- | - | ------ | ------ |  |  | -- | -- | -
|              |                       |   | Actual |        | GM % |  | Actual |    | GM %
|              |                       |   |        |        |      |  |        |   
|Gross profit: |                       |   |        |        |      |  |        |    |      |   |        |        |  |  |    |   
|              | Research products     |   | $      | 17,480 |      |  |        | 62 | %    |   | $      | 1,013  |  |  |    | 36 | %
|              | Cell culture products |   |        | 25,543 |      |  |        | 51 | %    |   |        | 27,563 |  |  |    | 56 | %
|              | Diagnostic products   |   |        | 12,190 |      |  |        | 55 | %    |   |        | 9,571  |  |  |    | 49 | %
|              |                       |   |        |        |      |  |        |    |      |   |        |        |  |  |    |    |  
|              |                       | $ | 55,213 |        |      |  | 55     | %  |      | $ | 38,147 |        |  |  | 53 | % 
|              |                       |   |        |        |      |  |        |    |      |   |        |        |  |  |    |   

NET SALES

Consolidated

Consolidated net sales increased approximately $18.3 million, or 77%, from
$23.7 million in the third quarter of 2002 to $42.0 million in the third
quarter of 2003. Consolidated net sales increased approximately $29.0 million,
or 41%, from $71.6 million during the first nine months of 2002 to $100.6
million during the same period of 2003. The increase during the third quarter
of 2003 and the first nine months of 2003 was primarily due to the sales
contribution from Chemicon and growth in sales of monoclonal antibodies. The
increase in the third quarter was also due to year over year growth in Cell
Culture sales, primarily sales of insulin and other media supplements.
Included in net sales for the three months and nine months ended September 28,
2003 is $12.4 million and $24.3 million, respectively, contributed by Chemicon.

Research Products

Net sales of Research products increased $13.4 million from $0.8 million
in the third quarter of 2002 to $14.2 million in the third quarter of 2003.
Net sales of Research products increased $25.6 million from $2.8 million in the
first nine months of 2003 to $28.4 million in the same period of 2002.
Research products net sales increased primarily due to the acquisition of
Chemicon. Chemicon contributed $12.4 million and $24.3 million to Research
products net sales for the three months and nine months ended September 28,
2003, respectively. During the third quarter of 2003, the operations of the
Companys previous research products operations in Gaithersburg, Maryland were
combined and integrated into Chemicon. Additionally, net sales from Chemicon
increased 19% during the third quarter of 2003 compared to the third quarter of
2002.

Cell Culture Products

Net sales of Cell Culture products increased $4.0 million, or 24%, from
$16.6 million in the third quarter of 2002 to $20.6 million in the third
quarter of 2003. Net sales of Cell Culture products remained essentially
unchanged at $49.4 million and $49.9 million during the first nine months of
2002 and 2003, respectively. Sales of EX-CYTE® were $8.6 million and $19.6
million during the third quarter and the first nine months of 2003,
respectively, compared to $8.3 million and $23.5 million during the same period
in 2002, respectively. The decrease in sales of EX-CYTE® for the first nine
months of 2003 is due to one of the Companys major customers deferring its
shipments until the second half of 2003. Sales of bovine serum albumin (BSA)
were constant during the quarter compared to third quarter of 2002 at $3.8
million and $3.9 million, respectively. Sales of BSA increased during the
first nine months of 2003 compared to the prior year from $10.9 million in
first nine months of 2002 to $12.0 million in the first nine months of 2003 due
to completion of the Cohn BSA expansion at the Toronto facility in January
2003. BSA sales were impacted in the third quarter due to the partial shut
down of our Toronto plant during June 2003 following the discovery of a

20



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single cow infected with BSE in Canada. The closure of this plant reduced the
amount of saleable product during the quarter due to the manufacturing cycle
time required for certain products. Sales of insulin and other media
supplements increased $3.1 million during the third quarter from $1.9 million
in the third quarter of 2002 to $5.0 million in the same period of 2003.
Sales of insulin and other media supplements also increased during the first
nine months of 2003 to $10.4 million from $7.1 million in the same period of
2002.

Diagnostic Products

Net sales of Diagnostic products increased approximately $0.8 million, or
12%, from $6.4 million in the third quarter of 2002 to $7.2 million in the
third quarter of 2003. Net sales of Diagnostic products also increased
approximately $2.9 million, or 15%, from $19.4 million in the first nine months
of 2002 to $22.3 million in the first nine months of 2003. This increase is
primarily due to higher sales of monoclonal antibodies and related products
which increased from $3.5 million and $10.7 million in the third quarter and
first nine months of 2002, respectively, to $5.1 million and $16.5 million in
the third quarter and first nine months of 2003, respectively. This increase
in monoclonal antibodies and related products was partially offset by decreased
sales of human-sourced disease state polyclonal antibodies, detection products
and other diagnostic products. Human-sourced disease state polyclonal antibody
sales have been negatively impacted by the Health Insurance Portability and
Accountability Act (HIPPA), which has adversely affected access to qualified
donors.

GROSS PROFIT

Consolidated

Consolidated gross profit increased approximately $10.7 million, from
$12.6 million in the third quarter of 2002 to $23.3 million during the third
quarter of 2003. For the nine months ended September 28, 2003 and September
29, 2002 consolidated gross profit increased $17.1 million from $38.1 million
to $55.2 million, respectively. This increase was primarily due to increased
sales. Gross margin increased from 53% in the third quarter and the first
nine months of 2002 to 55% in the third quarter and the first nine months of
2003. This increase primarily relates to the acquisition of Chemicon and
stronger margins on monoclonal antibodies and related products as a result of
manufacturing efficiencies gained from increased production at our facility in
Scotland and the significant increase in sales of monoclonal antibodies.

Research Products

Gross profit from Research products increased $8.8 million, from $0.2
million in the third quarter of 2002 to $9.0 million in the third quarter of
2003. For the nine months ended September 28, 2003 and September 29, 2002,
Research products gross profit increased $16.5 million from $1.0 million to
$17.5 million, respectively. Gross margin increased from 26% and 36% in the
third quarter and the first nine months of 2002, respectively, to 63% and 62%
in the third quarter and the first nine months of 2003, respectively.
Increases in gross profit and gross margin are due to the acquisition of
Chemicon, effective April 1, 2003. Gross profit for the second quarter and the
first nine months of 2003 was negatively impacted by a $0.2 million and $0.4
million, respectively, charge to cost of sales as a result of inventory
adjustments to Chemicons opening inventory required under purchase accounting
rules.

Cell Culture Products

Gross profit from Cell Culture products increased $1.0 million, from $9.4
million in the third quarter of 2002 to $10.4 million during the third quarter
of 2003. For the nine months ended September 28, 2003 and September 29, 2002,
Cell Culture products gross profit decreased from $27.6 million to $25.5
million, respectively. Gross margin decreased from 57% and 56% in the third
quarter and the first nine months of 2002, respectively, to 50% and 51% in the
third quarter and the first nine months of 2003, respectively. Gross margins
were lower in the third quarter and the first nine months of 2003 primarily due
to product mix, as EX-CYTE®, which is a higher margin product, represented a
significantly lower percentage of total Cell Culture product sales

21



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than in the third quarter and the first nine months of 2002. Additionally, the
margins declined due to manufacturing cost variances arising from excess
capacity at certain of our manufacturing facilities.

Diagnostic Products

Gross profit from Diagnostic products increased $0.9 million, or 30%, from
$3.0 million in the third quarter of 2002 to $3.9 million in the third quarter
of 2003. For the nine months ended September 28, 2003 and September 29, 2002,
Diagnostic products gross profit increased from $9.6 million to $12.2 million,
respectively. Gross margin increased from 47% and 49% in the third quarter and
the first nine months of 2002, respectively, to 54% and 55% in the third
quarter and the first nine months of 2003, respectively. Gross margins
increased primarily due to efficiencies gained from increased production at our
Scotland facility, increased sales prices of monoclonal antibodies and the
significant increase in the monoclonal antibody and related product sales,
which are relatively higher margin products.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Consolidated selling, general and administrative expenses (SG&A)
increased approximately $5.2 million, or 68% from $7.6 million in the third
quarter of 2002 to $12.8 million in the third quarter of 2003. For the nine
months ended September 28, 2003 and September 29, 2002, SG&A increased $5.6
million, or 22%, from $25.5 million to $31.1 million, respectively. As a
percentage of revenues, SG&A was 31% during the third quarter and first nine
months of 2003 compared with 32% and 36% in the second quarter and first nine
months of 2002, respectively. Included in SG&A for the three months and nine
months ended September 28, 2003, is $5.9 million and $10.7 million,
respectively, contributed by Chemicon. The increase attributable to Chemicon
was partially offset as the Company continued to emphasize cost controls over
SG&A at all locations including its corporate office.

RESEARCH AND DEVELOPMENT

Research and development expenses remained flat at $1.6 million for the
third quarter of 2003 as compared to 2002. For the nine months ended September
28, 2003 and September 29, 2002, research and development increased from $3.9
million to $4.3 million, respectively. This increase is primarily due to the
expansion of the Companys research and development activities, including those
acquired as a result of the Chemicon acquisition. During the third quarter of
2003, Chemicon introduced 223 new products, bringing the total for the year to
516 new products. The Company also continued to advance various projects in
the Cell Culture area related to the characterization of EX-CYTE® and other
cell culture supplements.

AMORTIZATION OF INTANGIBLES

Amortization of intangibles increased from $0.2 million and $0.7 million
in the third quarter and first nine months of 2002, respectively, to $0.6
million and $1.6 million in the third quarter and first nine months of 2003,
respectively, due to the acquisition of Chemicon during the second quarter of
2003.

22



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SPECIAL CHARGES AND WRITE-OFF OF DEFERRED FINANCING COSTS

During the three months and nine months ended September 28, 2003, the
Company incurred $0.5 million and $2.8 million, respectively, in special
charges and $4.1 million and $4.5 million, respectively, in write-off of
deferred financing costs. All charges except for deferred financing fees are
included in Special Charges in the accompanying Consolidated Statement of
Income (Loss). Deferred financing fees are included in Write-Off of Deferred
Financing Costs in the accompanying Consolidated Statement of Income (Loss).
See Note 4  SPECIAL CHARGES AND WRITE-OFF OF DEFERRED FINANCING COSTS in
Item 1 Financial Statements for additional discussion of special charges. The
following chart summarizes the special charges and write-off of deferred
financing costs incurred during these periods (in thousands):

|                        |                       |   |               |       |                   |   |               |   |               |   |       |       |  |   |   |   | 
|----------------------- | --------------------- | - | ------------- | ----- | ----------------- | - | ------------- | - | ------------- | - | ----- | ----- |  | - | - | - | 
|                        |                       |   | Quarter Ended |       | Nine Months Ended
|                        |                       |   |               |       |                  
|                        |                       |   | September 28, |       | September 29,     |   | September 28, |   | September 29,
|                        |                       |   | 2003          |       | 2002              |   | 2003          |   | 2002         
|                        |                       |   |               |       |                   |   |               |   |              
|Deferred financing fees |                       | $ | 4,112         |       |                   | $ |              |   |               | $ | 4,492 |       |  | $ |  |  
|Gaithersburg closure    |                       |   | 264           |       |                   |   |              |   |               |   | 1,044 |       |  |   |  |  
|Toronto BSE shutdown    |                       |   | 32            |       |                   |   |              |   |               |   | 966   |       |  |   |  |  
|Restructuring costs     |                       |   | 198           |       |                   |   |              |   |               |   | 514   |       |  |   |  |  
|Other                   |                       |   | 10            |       |                   |   |              |   |               |   | 254   |       |  |   |  |  
|                        |                       |   |               |       |                   |   |               |   |               |   |       |       |  |   |   |   | 
|                        | Total special charges |   | $             | 4,616 |                   |   | $             |  |               |   | $     | 7,270 |  |   | $ |  | 
|                        |                       |   |               |       |                   |   |               |   |               |   |       |       |  |   |   |   | 

INTEREST EXPENSE (INCOME), NET

Interest expense (income), net decreased from interest expense of less
than $0.1 million and interest income of $(0.4) million in the third quarter
and first nine months of 2002, respectively, to interest expense of $1.4
million and $3.0 million in the third quarter and first nine months of 2003,
respectively. The increase in interest expense was due to borrowings used to
finance the Chemicon acquisition and subsequent refinancing arising from the
issuance of the Debentures.

INCOME (LOSS) FROM DISCONTINUED OPERATIONS, NET OF INCOME TAXES

Income (loss) from operations of discontinued operations, net of income
taxes decreased from earnings of $1.2 million and $4.3 million during the third
quarter and first nine months of 2002, respectively, to a loss of $(7.9)
million and $(8.4) million during the same periods in 2003, respectively.
Based on the current indication of value for the Therapeutic business, the
Company recorded an impairment loss of $11.0 million during the third quarter
with respect to the Therapeutic Plasma business, which is included as a
component of the income (loss) from discontinued operations, net
of income taxes in the accompanying Consolidated Statement of Income (Loss).
The remaining decline is primarily due to the continued weakness in sales and
gross margins of the Therapeutic Plasma business.

Financial Condition and Liquidity and Capital Resources

The following table sets forth certain indicators of financial condition
and liquidity as of September 28, 2003 and December 29, 2002 (in thousands,
except for percentages):

|                                                   |  |               |         |              |  |   |         |  
|-------------------------------------------------- |  | ------------- | ------- | ------------ |  | - | ------- | -
|                                                   |  | September 29, |         | December 29,
|                                                   |  | 2003          |         | 2002        
|                                                   |  |               |         |             
|Cash and cash equivalents                          |  | $             | 41,879  |              |  | $ | 15,242  |  
|Working capital                                    |  |               | 94,762  |              |  |   | 47,684  |  
|Total long-term debt and capital lease obligations |  |               | 130,039 |              |  |   | 424     |  
|Stockholders equity                               |  |               | 170,635 |              |  |   | 170,370 |  
|Total debt to equity ratio                         |  |               | 76.2    | %            |  |   | 0.2     | %

23



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Serologicals has three principal sources of near-term liquidity: (1)
existing cash and cash equivalents; (2) cash generated by operations, and (3)
available borrowing capacity under the revolving credit facility (Revolver),
which provides for a maximum borrowing capacity of $30.0 million. As of
November 1, 2003, the Company had $30.0 million available under the Revolver.
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.

Net cash provided by operating activities in the first nine months of 2003
was $4.4 million as compared to net cash provided of $6.9 million in the first
nine months of 2002. Changes in operating assets and liabilities used were
$14.7 million and $4.0 million during the first nine months of 2003 and 2002,
respectively. Cash used during the first nine months of 2003 was driven
primarily by a $9.4 million and $4.5 million increase in inventory and other
current assets, respectively. The growth in inventory was primarily due to
restoring inventory levels at our Scotland facility after the backlog of orders
that occurred during the third quarter of 2002, a large purchase of insulin at
the end of the third quarter and delays in shipments of EX-CYTE® to one of
the Companys major customers. Other current assets increased primarily due to
income tax receivable associated with the Companys net loss. Cash used in the
first nine months of 2002 was driven primarily by increase in accounts
receivables. The incremental increase in cash used by changes in operating
assets and liabilities was offset partially by incremental increases in
adjustments such as depreciation and amortization and non-cash special charges
and write-off of deferred financing costs. Depreciation and amortization
increased due to the acquisition of Chemicon on April 1, 2003. Non-cash
special charges and write-off of deferred financing costs relate primarily to
the write off $4.5 million in deferred financing costs during the year, $0.8
million related to asset impairment associated with the relocation of research
products produced at our Gaithersburg, Maryland facility to Chemicon and $1.0
million related to asset impairments associated with the Toronto BSE shutdown.
See Note 4  SPECIAL CHARGES AND WRITE-OFF OF DEFERRED FINANCING COSTS in
Item 1 Financial Statements for additional discussion of special charges.

Net cash used in investing activities in the first nine months of 2003 was
$109.4 million, compared with $9.1 million in the first nine months of 2002.
Investing activities during the first nine months of 2003 included the
acquisition of Chemicon for $97.1 million, net of cash received and capital
expenditures of $12.3 million. Investing activities during the first nine
months of 2002 include capital expenditures of $8.9 million. Capital
expenditures for the first nine months of 2003 consisted primarily of
construction of the Companys new
EX-CYTE® manufacturing facility in Lawrence, Kansas and completion of
the Companys Enterprise Resource Planning system implementation project. The
Company anticipates capital expenditures for the remainder of the year to total
approximately $8 million to $13 million. The most significant expenditure
anticipated for the remainder of 2003 is the continued construction of the
Companys new EX-CYTE® manufacturing facility.

Net cash provided by financing activities in the first nine months of 2003
was $121.7 million, compared with $2.0 million of net cash used during the same
period in 2002. Financing activities in the first nine months of 2003
primarily consisted of proceeds from the issuance of $130.0 million principal
amount of 4.75% Convertible Senior Subordinated Debentures (Debentures) due
August 15, 2033 to certain institutional investors and payment of debt issuance
costs of $8.7 million. See Note 5  CONVERTIBLE SUBORDINATED DEBENTURES
in Item 1 Financial Statements for discussion of the Debentures. During the
nine months ended September 28, 2003 the Company also received proceeds of
$82.5 million from a term loan entered into during the second quarter of 2003
and subsequently repaid the outstanding balance of the term loan upon issuing
the Debentures during the third quarter of 2003. Financing activities in the
first nine months of 2002 primarily consisted of payment of long-term debt and
capital leases of $4.1 million and proceeds from stock options of $2.5 million.

On October 17, 2003, the Company entered into an interest rate swap on
$70.0 million principal amount of its Debentures. The objective of the swap is
to convert the 4.75% fixed interest rate on a portion of the Debentures to a
variable interest rate based on the 6-month London Interbank Offered Rate
(LIBOR) at the end of each interest period plus a spread of 66 basis points
on the $70 million of the Debentures. The gain or loss
from changes in the fair value of the swap is expected to offset the gain or
loss

24



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from the changes in the fair value of the cash flows from the Debentures
throughout the expected life of the Debentures.

On August 29, 2003, the Company entered into a new $30.0 million
three-year Revolver. See Note 6  LONG-TERM DEBT AND CAPITAL LEASE
OBLIGATIONS in Item 1 Financial Statements for discussion of new Revolver.

Other than as discussed above, there have been no material changes
regarding Serologicals contractual obligations from the information provided
in our Annual Report on Form 10-K for the fiscal year ended December 29, 2002,
as amended by Form 8-K filed on August 8, 2003. The contractual obligations
are discussed under the caption Liquidity and Capital Resources in Item
7-Managements Discussion and Analysis of Financial Condition and Results of
Operations, contained in the Form 10-K.

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

Recent Accounting Pronouncements

See Recent Accounting Pronouncements under caption Recent Accounting
Pronouncements in Note 1- ORGANIZATION AND BASIS OF PRESENTATION in Item 1
Financial Statements for discussion of new Revolver.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

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

There have been no material changes other than discussed above regarding
Serologicals market risk position from the information provided in our Annual
Report on Form 10-K for the fiscal year ended December 29, 2002, as amended by
Form 8-K filed on August 8, 2003. 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.

25



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Item 4. Controls and Procedures

a. Evaluation of disclosure controls and procedures.

As of the end of the period covered by this report, we carried out an
evaluation, under the supervision and with the participation of our principal
executive officer and principal financial officer, of the effectiveness of the
design and operation of our disclosure controls and procedures. Based on this
evaluation, our principal executive officer and principal financial officer
concluded that our disclosure controls and procedures are effective in timely
alerting them to material information required to be included in our periodic
reports filed with the Securities and Exchange Commission. In addition, we
reviewed our internal controls, and there have been no significant changes in
our internal controls or in other factors during the period covered by this
report that materially affected, or are reasonable likely to materially affect,
our internal controls over financial reporting.

b. Changes in internal controls.

There were no significant changes in our internal controls over financial
reporting that occurred during our last fiscal quarter that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.

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.

Item 6. Exhibits and Reports on Form 8-K



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

| |  |  |     |  |  |                                                                                                                                                                                                                                                                         
| |  |  | --- |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |  | 3.1 |  |  | Amended and Restated Certificate of Incorporation
(Exhibit 3.1 to the Companys Annual Report on Form 10-K for
the period ending December 29, 2002 is hereby incorporated by
reference.)                                                                                
| |  |  |     |  |  |                                                                                                                                                                                                                                                                         
| |  |  | 3.2 |  |  | Amended and Restated By-laws (Exhibit 3.4 to the
Companys Registration Statement on Form S-1 (File No.
33-91176), effective June 14, 1995, is hereby incorporated by
reference).                                                                                       
| |  |  |     |  |  |                                                                                                                                                                                                                                                                         
| |  |  | 4.1 |  |  | Specimen Common Stock Certificate (Exhibit 4.1 to
the Companys Registration Statement on Form S-1 (File No.
33-91176), effective June 14, 1995, is hereby incorporated by
reference).                                                                                  
| |  |  |     |  |  |                                                                                                                                                                                                                                                                         
| |  |  | 4.2 |  |  | Specimen Form of Rights Certificate (Exhibit 2.1 of
the Companys Registration Statement on Form 8-A (File
No.000-26126) filed August 10, 1999, is hereby incorporated by
reference).                                                                                   
| |  |  |     |  |  |                                                                                                                                                                                                                                                                         
| |  |  | 4.3 |  |  | Form of Rights Agreement, dated as of August 2,
1999, between the Company and State Street Bank & Trust
Company, N.A. (Exhibit 2.2 of the Companys Registration
Statement on Form 8-A (File No. 000-26126) filed August 10,
1999, is hereby incorporated by reference).
| |  |  |     |  |  |                                                                                                                                                                                                                                                                         
| |  |  | 4.4 |  |  | Form of Certificate of Designation, Preferences and
Rights of Series B Preferred Stock (Exhibit 2.3 of the
Companys Registration Statement on Form 8-A (File No.
000-26126) filed August 10, 1999, is hereby incorporated by
reference).                               
| |  |  |     |  |  |                                                                                                                                                                                                                                                                         
| |  |  | 4.5 |  |  | Summary of Rights Plan (Exhibit 2.4 of the
Companys Registration Statement on Form 8-A (File No.
000-26126) filed August 10, 1999).                                                                                                                                    

26



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##### 



| |  |  |      |  |  |                                                                                                                                                                                                                                                                                    
| |  |  | ---- |  |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |  | 10.1 |  |  | Credit Agreement, dated as of August 29, 2003,
among Serologicals Corporation as the Borrower, the
Subsidiaries of the Borrower Identified Herein as the
Guarantors, Bank of America, N.A., as Administrative Agent and
L/C Issuer, and JP Morgan Chase Bank, as Syndication Agent.
| |  |  |      |  |  |                                                                                                                                                                                                                                                                                    
| |  |  | 31.1 |  |  | Certification Pursuant to Rule 13a-14(a), as
Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.                                                                                                                                                                    
| |  |  |      |  |  |                                                                                                                                                                                                                                                                                    
| |  |  | 31.2 |  |  | Certification Pursuant to Rule 13a-14(a), as
Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.                                                                                                                                                                    
| |  |  |      |  |  |                                                                                                                                                                                                                                                                                    
| |  |  | 32.1 |  |  | Certification of the Chief Executive Officer
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of Sarbanes-Oxley Act of 2002.                                                                                                                                 
| |  |  |      |  |  |                                                                                                                                                                                                                                                                                    
| |  |  | 32.2 |  |  | Certification of the Chief Financial Officer
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of Sarbanes-Oxley Act of 2002.                                                                                                                                 



| | b. |  | Reports on Form 8-K filed during the quarter ended September

28, 2003:
| | -- |  | -----------------------------------------------------------------------

| |  |  |   |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  |  | - | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |  | 1 | ) |  | Form 8-K filing announcing the completion of its
previously announced offering of $130 million aggregate
principal amount of 4.75% Convertible Senior Subordinated
Debentures due 2033 filed on August 21, 2003.                                                                                                                                                                                                                                           
| |  |  |   |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  |  | 2 | ) |  | Form 8-K filing announcing its agreement to sell
$110 million of aggregate principal amount of its 4.75%
Convertible Senior Subordinated Debentures due 2033 in a
private placement pursuant to Rule 144A under the Securities
Act of 1933 filed on August 15, 2003.                                                                                                                                                                                       
| |  |  |   |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  |  | 3 | ) |  | Form 8-K filing announcing its intention to raise
$100 million through an offering of convertible senior
subordinated debentures due 2033 in a private placement
pursuant to Rule 144A under the Securities Act of 1933 filed on
August 14, 2003.                                                                                                                                                                                                          
| |  |  |   |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  |  | 4 | ) |  | Form 8-K/A filing amending the pro forma financial
statements for the Chemicon acquisition filed on August 8,
2003.                                                                                                                                                                                                                                                                                                                                        
| |  |  |   |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  |  | 5 | ) |  | Form 8-K filing amending Item 7  Managements
Discussion and Analysis of Financial Condition and Results of
Operations, as previously filed in its Annual Report on Form
10-K for its fiscal year ended December 29, 2002 and Item 6
 Selected Financial Data, as previously filed in its Annual
Report on Form 10-K for its fiscal year ended December 29, 2002
to reclassify certain items to conform to the 2003 presentation
filed on August 8, 2003.
| |  |  |   |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  |  | 6 | ) |  | Form 8-K furnishing the Companys second quarter
2003 earnings release filed on July 25, 2003.                                                                                                                                                                                                                                                                                                                                                             
| |  |  |   |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  |  | 7 | ) |  | Form 8-K furnishing the Companys announcement that
its Board of Directors has approved a plan to exit the
therapeutic plasma business filed on July 11, 2003.                                                                                                                                                                                                                                                                                             

27



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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: November 10, 2003 |  | By: /s/ Harold W. Ingalls 
|                        |  |                           
|                        |  | Harold W. Ingalls         
|                        |  | Vice President Finance and
|                        |  | Chief Financial Officer   

28