UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, DC 20549

FORM 10-Q

|(Mark One)                                                                                   |                                                                                         
|-------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------
|ý                                                                                            | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|For the quarterly period ended April 3, 2005                                                
|OR                                                                                          
|o                                                                                            | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|For the transition period
from                             to           
                  .

Commission file Number: 0-26126

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 ý    No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).
Yes ý    No o

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 May 2, 2005
|--------------------------------------- |  | --------------------------
|Common Stock, $0.01 par value per share |  | 34,778,342                



---





INDEX

SEROLOGICALS CORPORATION AND SUBSIDIARIES

|PART I.                                                                                       |                                                                                                             |   
|--------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------- | --
|Item 1. Condensed Consolidated Financial Statements                                           |                                                                                                             | 3 
|                                                                                              | Unaudited Consolidated Balance SheetsApril 3, 2005 and January 2, 2005                                     |   
|                                                                                              | Unaudited Consolidated Statements of IncomeFor the three months ended April 3, 2005 and March 28, 2004     |   
|                                                                                              | Unaudited Consolidated Statements of Cash FlowsFor the three months ended April 3, 2005 and March 28, 2004 |   
|                                                                                              | Unaudited Notes to Condensed Consolidated Financial Statements                                              |   
|Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations |                                                                                                             | 16
|Item 3. Quantitative and Qualitative Disclosures about Market Risk                            |                                                                                                             | 22
|Item 4. Controls and Procedures                                                               |                                                                                                             | 22
|PART II.                                                                                      |                                                                                                             |   
|Item 1. Legal Proceedings                                                                     |                                                                                                             | 23
|Item 6. Exhibits                                                                              |                                                                                                             | 23
|SIGNATURES                                                                                    |                                                                                                             | 24

2

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PART I.

Item 1. Financial Statements

SEROLOGICALS CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited and in thousands)

|                                       |                                                 | April 3, 2005                 |                                            | January 2, 2005 |        
|-------------------------------------- | ----------------------------------------------- | ----------------------------- | ------------------------------------------ | --------------- | -------
|ASSETS                                 |                                                 |                               |                                            |                 |        
|CURRENT ASSETS:                        |                                                 |                               |                                            |                 |        
|                                       | Cash and cash equivalents                       |                               | $                                          | 19,579          |        
|                                       | Short-term investments                          |                               |                                            | 34,130          |        
|                                       | Trade accounts receivable, net                  |                               |                                            | 34,236          |        
|                                       | Inventories                                     |                               |                                            | 54,250          |        
|                                       | Other current assets                            |                               |                                            | 16,479          |        
|                                       |                                                 |                               |                                            |                 |        
|                                       |                                                 |                               | Total current assets                       |                 |        
|PROPERTY AND EQUIPMENT, NET            |                                                 |                               | 97,542                                     |                 |        
|GOODWILL                               |                                                 |                               | 243,795                                    |                 |        
|INTANGIBLE ASSETS, NET                 |                                                 |                               | 124,481                                    |                 |        
|OTHER ASSETS                           |                                                 |                               | 5,971                                      |                 |        
|                                       |                                                 |                               |                                            |                 |        
|                                       |                                                 |                               | Total assets                               |                 | $      
|                                       |                                                 |                               |                                            |                 |        
|LIABILITIES AND STOCKHOLDERS' EQUITY   |                                                 |                               |                                            |                 |        
|CURRENT LIABILITIES:                   |                                                 |                               |                                            |                 |        
|                                       | Accounts payable                                |                               | $                                          | 9,343           |        
|                                       | Accrued liabilities                             |                               |                                            | 22,903          |        
|                                       | Current maturities on capital lease obligations |                               |                                            | 2,835           |        
|                                       |                                                 |                               |                                            |                 |        
|                                       |                                                 | Total current liabilities     |                                            |                 | 35,081 
|CONVERTIBLE SUBORDINATED DEBENTURES    |                                                 |                               | 128,679                                    |                 |        
|LONG TERM DEBT LESS CURRENT MATURITIES |                                                 |                               | 1,024                                      |                 |        
|DEFERRED INCOME TAXES                  |                                                 |                               | 41,311                                     |                 |        
|OTHER LIABILITIES                      |                                                 |                               | 2,396                                      |                 |        
|                                       |                                                 |                               |                                            |                 |        
|                                       |                                                 | Total liabilities             |                                            |                 | 208,491
|                                       |                                                 |                               |                                            |                 |        
|COMMITMENTS AND CONTINGENCIES          |                                                 |                               |                                            |                 |        
|STOCKHOLDERS' EQUITY:                  |                                                 |                               |                                            |                 |        
|                                       | Preferred stock                                 |                               |                                            |                |        
|                                       | Common stock                                    |                               |                                            | 380             |        
|                                       | Additional paid-in capital                      |                               |                                            | 338,933         |        
|                                       | Retained earnings                               |                               |                                            | 93,272          |        
|                                       | Accumulated other comprehensive income          |                               |                                            | 10,325          |        
|                                       | Less:                                           |                               |                                            |                 |        
|                                       |                                                 | Common stock held in treasury |                                            |                 | (20,347
|                                       |                                                 | Deferred compensation         |                                            |                 | (591   
|                                       |                                                 |                               |                                            |                 |        
|                                       |                                                 |                               | Total stockholders' equity                 |                 |        
|                                       |                                                 |                               |                                            |                 |        
|                                       |                                                 |                               | Total liabilities and stockholders' equity |                 | $      
|                                       |                                                 |                               |                                            |                 |        

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

3

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SEROLOGICALS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited and in thousands, except share and per share amounts)

|                                                     |                                     | Quarter Ended |       
|---------------------------------------------------- | ----------------------------------- | ------------- | ------
|
|NET REVENUES                                         |                                     | $             | 56,635
|COST OF REVENUES                                     |                                     |               | 25,796
|                                                     |                                     |               |       
|                                                     | Gross profit                        |               |       
|                                                     |                                     |               |       
|OPERATING EXPENSES:                                  |                                     |               |       
|                                                     | Selling, general and administrative |               |       
|                                                     | Research and development            |               |       
|                                                     | Amortization of intangibles         |               |       
|                                                     |                                     |               |       
|OPERATING INCOME                                     |                                     |               | 4,298 
|                                                     | Other expenses (income), net        |               |       
|                                                     | Interest expense                    |               |       
|                                                     | Interest (income)                   |               |       
|                                                     |                                     |               |       
|INCOME FROM OPERATIONS                               |                                     |               | 2,682 
|PROVISION FOR INCOME TAXES                           |                                     |               | 778   
|                                                     |                                     |               |       
|NET INCOME                                           |                                     | $             | 1,904 
|                                                     |                                     |               |       
|NET INCOME PER SHARE:                                |                                     |               |       
|                                                     | Basic                               |               | $     
|                                                     |                                     |               |       
|                                                     | Diluted                             |               | $     
|                                                     |                                     |               |       
|WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING: |                                     |               |       
|                                                     | Basic                               |               |       
|                                                     |                                     |               |       
|                                                     | Diluted                             |               |       
|                                                     |                                     |               |       

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

4

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SEROLOGICALS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited and in thousands)

|                                                              |                                                                                                   | Quarter Ended                              |                                          
|------------------------------------------------------------- | ------------------------------------------------------------------------------------------------- | ------------------------------------------ | -----------------------------------------
|
|OPERATING ACTIVITIES:                                         |                                                                                                   |                                            |                                          
|                                                              | Net income                                                                                        |                                            | $                                        
|                                                              |                                                                                                   |                                            |                                          
|                                                              | Adjustments to reconcile net income from operations to net cash provided by operating activities: |                                            |                                          
|                                                              |                                                                                                   | Depreciation and amortization              |                                          
|                                                              |                                                                                                   | Tax benefit from exercise of stock options |                                          
|                                                              |                                                                                                   | Deferred and other compensation            |                                          
|                                                              |                                                                                                   | Deferred income tax provision              |                                          
|                                                              |                                                                                                   | Other, net                                 |                                          
|                                                              | Changes in operating assets and liabilities, net of acquisition of business:                      |                                            |                                          
|                                                              |                                                                                                   | Trade accounts receivable, net             |                                          
|                                                              |                                                                                                   | Inventories                                |                                          
|                                                              |                                                                                                   | Other current assets                       |                                          
|                                                              |                                                                                                   | Accounts payable                           |                                          
|                                                              |                                                                                                   | Accrued liabilities                        |                                          
|                                                              |                                                                                                   | Other, net                                 |                                          
|                                                              |                                                                                                   |                                            |                                          
|                                                              |                                                                                                   | Total adjustments                          |                                          
|                                                              |                                                                                                   |                                            |                                          
|                                                              |                                                                                                   |                                            | Net cash provided by operating activities
|                                                              |                                                                                                   |                                            |                                          
|INVESTING ACTIVITIES:                                         |                                                                                                   |                                            |                                          
|                                                              | Purchases of short-term investments                                                               |                                            |                                          
|                                                              | Proceeds from sale of short-term investments                                                      |                                            |                                          
|                                                              | Purchases of property and equipment                                                               |                                            |                                          
|                                                              | Disposition of businesses                                                                         |                                            |                                          
|                                                              | Purchase of business, net of cash acquired                                                        |                                            |                                          
|                                                              | Other, net                                                                                        |                                            |                                          
|                                                              |                                                                                                   |                                            |                                          
|                                                              |                                                                                                   |                                            | Net cash used in investing activities    
|                                                              |                                                                                                   |                                            |                                          
|FINANCING ACTIVITIES:                                         |                                                                                                   |                                            |                                          
|                                                              | Payments on capital lease obligations                                                             |                                            |                                          
|                                                              | Proceeds from issuance of stock under stock plans                                                 |                                            |                                          
|                                                              |                                                                                                   |                                            |                                          
|                                                              |                                                                                                   |                                            | Net cash provided by financing activities
|                                                              |                                                                                                   |                                            |                                          
|Net cash (provided) used by discontinued operations:          |                                                                                                   |                                            |                                          
|                                                              | Operating activities                                                                              |                                            |                                          
|                                                              | Investing activities                                                                              |                                            |                                          
|                                                              |                                                                                                   |                                            |                                          
|                                                              |                                                                                                   |                                            |                                         
|                                                              |                                                                                                   |                                            |                                          
|Effects of exchange rate changes on cash and cash equivalents |                                                                                                   |                                            | (46                                      
|                                                              |                                                                                                   |                                            |                                          
|Net decrease in cash and cash equivalents                     |                                                                                                   |                                            | (13,445                                  
|Cash and cash equivalents, beginning of period                |                                                                                                   |                                            | 33,024                                   
|                                                              |                                                                                                   |                                            |                                          
|Cash and cash equivalents, end of period                      |                                                                                                   | $                                          | 19,579                                   
|                                                              |                                                                                                   |                                            |                                          
|SUPPLEMENTAL DISCLOSURE:                                      |                                                                                                   |                                            |                                          
|Cash paid during the period for:                              |                                                                                                   |                                            |                                          
|                                                              | Interest paid, net of amounts capitalized                                                         |                                            | $                                        
|                                                              | Income taxes paid                                                                                 |                                            |                                          
|Non-cash investing and financing activities:                  |                                                                                                   |                                            |                                          
|                                                              | Acquisition earnout payable                                                                       |                                            |                                          

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

5

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SEROLOGICALS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
April 3, 2005
(UNAUDITED)

1.     ORGANIZATION AND BASIS OF PRESENTATION



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



The accompanying unaudited condensed 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 of the Securities Exchange Act of 1934. 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. The accompanying unaudited condensed consolidated financial statements reflect all
adjustments, which are of a normal recurring nature, considered necessary 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 January 2, 2005 and the notes thereto included in the Company's Annual Report on Form 10-K for the year ended January 2, 2005.



Inventories are stated at the lower of cost or market, cost being determined on a first-in, first-out basis. Market for inventories is
replacement cost for raw materials or net realizable value for all other categories.

Inventories
at April 3, 2005 and January 2, 2005 consisted of the following (in thousands):

April 3, 2005

January 2, 2005Raw materials

$
11,737

$
10,950Work in process


14,295


12,995Finished goods


28,218


25,901$
54,250

$
49,846


6

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In October 2003, the Company entered into interest rate swap agreements relating to $70 million principal amount of its 4.75% Convertible Senior
Subordinated Debentures due August 15, 2033 (the "Debentures"). The objective of the swaps is to convert the 4.75% fixed interest rate on this portion of the Debentures to a variable interest
rate based on the 6-month LIBOR at the end of each interest period plus a spread of 66 basis points. The gain or loss from changes in the fair value of the swaps is expected to offset the
gain or loss from the changes in the fair value of the cash flows from the interest payments on 54% of the Debentures throughout the expected life of the Debentures. At April 3, 2005 and
January 2, 2005, the fair market value of the interest rate swaps was a liability of $1.3 million and an asset of $0.4 million, respectively. The fair value of the interest rate
swaps was included in "Other long term liabilities" and "Other assets" at April 3, 2005 and January 2, 2005, respectively, in the accompanying Consolidated Balance Sheets. The Company
analyzed ineffectiveness on the swaps as of April 3, 2005 and determined that ineffectiveness was immaterial. The interest rate swaps were designated and qualified as a fair value hedge in
accordance with Statement of Financial Accounting Standards No. 133, "Accounting for Derivatives and Hedging Activities" and related interpretations and amendments. Accordingly, the portion of
the Debentures hedged reflect the fair value of the changes related to the swap. The Company has presented the carrying value of the Debentures as follows (in thousands):

April 3, 2005

January 2, 2005Face value of Debentures

$
130,000

$
130,000Fair market value of swaps


(1,321
)

395Carrying value of Debentures

$
128,679

$
130,395




Basic earnings per share are calculated by dividing net income by the weighted average number of common shares outstanding during the period. The calculation of
diluted earnings per share is similar to basic earnings per share, except that net income is adjusted by the after-tax interest expense on the Debentures when they are dilutive and the
weighted average number of shares includes the dilutive effect of stock options, stock awards, and the Debentures. The Debentures were anti-dilutive for the three months ended
April 3, 2005 and, accordingly, were excluded from the calculation of diluted earnings per share. They were, however, dilutive and included in diluted earnings per share for the three months
ended March 28, 2004.

7

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

|                                                               |                                                                              | Quarter Ended
|-------------------------------------------------------------- | ---------------------------------------------------------------------------- | -------------
|
|Numerator:                                                     |                                                                              |              
|                                                               | Net income                                                                   |              
|                                                               | Add back interest expense on convertible debentures, net of income taxes     |              
|                                                               |                                                                              |              
|                                                               | Numerator for diluted earnings per share attributable to common stockholders |              
|                                                               |                                                                              |              
|Denominator:                                                   |                                                                              |              
|Basic earnings per shareweighted average shares outstanding   |                                                                              |              
|                                                               | Effect of dilutive securities:                                               |              
|                                                               | Stock options                                                                |              
|                                                               | Convertible debentures                                                       |              
|                                                               | Common stock awards                                                          |              
|                                                               |                                                                              |              
|Diluted earnings per shareweighted average shares outstanding |                                                                              |              
|                                                               |                                                                              |              
|Basic earnings per share                                       |                                                                              | $            
|                                                               |                                                                              |              
|Diluted earnings per share                                     |                                                                              | $            
|                                                               |                                                                              |              

The
following shares issuable under stock option agreements and the Debentures were excluded from the calculation of diluted earnings per share for the periods indicated because either
the option price exceded the average market price for the Company's stock or the conversion of the Debentures would have been antidilutive:

Quarter EndedApril 3, 2005

March 28, 2004(in thousands)Stock options

40

600Convertible debentures

8,790




Stock-Based Compensation Plan

The Company accounts for stock-based employee compensation plans 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, other than amortization of restricted stock, was reflected in net
income, as all options granted under these plans had an exercise price equal to the market value of the underlying common stock on the date of grant. The following table illustrates the effect on net
income and earnings per share if the Company had

8

---



applied
the fair value recognition provisions of SFAS No. 123, "Accounting for Stock-Based Compensation," to stock-based employee compensation (in thousands, except per share amounts):

|                                                                                                                                            |                     | Quarter Ended |      
|------------------------------------------------------------------------------------------------------------------------------------------- | ------------------- | ------------- | -----
|
|Net income as reported                                                                                                                      |                     | $             | 1,904
|Deduct: Total stock-based employee compensation expense determined under fair value-based method for all awards, net of related tax effects |                     |               | (872 
|                                                                                                                                            |                     |               |      
|Pro forma net income                                                                                                                        |                     | $             | 1,032
|                                                                                                                                            |                     |               |      
|Earnings per share:                                                                                                                         |                     |               |      
|                                                                                                                                            | Basicas reported   |               | $    
|                                                                                                                                            |                     |               |      
|                                                                                                                                            | Basicpro forma     |               | $    
|                                                                                                                                            |                     |               |      
|                                                                                                                                            | Dilutedas reported |               | $    
|                                                                                                                                            |                     |               |      
|                                                                                                                                            | Dilutedpro forma   |               | $    
|                                                                                                                                            |                     |               |      

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. There were no changes in these assumptions from those disclosed in our Annual Report on Form 10-K
for the fiscal year ended January 2, 2005.



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

|                            |                                          | Quarter Ended
|--------------------------- | ---------------------------------------- | -------------
|
|Net income, as reported     |                                          | $            
|Other comprehensive income: |                                          |              
|                            | Foreign currency translation adjustments |              
|                            |                                          |              
|Comprehensive income        |                                          | $            
|                            |                                          |              

As
previously disclosed in the Company's Annual Report on Form 10-K for the year ended January 2, 2005, the Company determined that foreign currency translation
adjustments were incorrectly presented net of tax for periods prior to the year ended January 2, 2005. As a result, the Company restated the previously reported foreign currency translation
adjustments from $0.25 million to $0.38 million for the three months ended March 28, 2004.

9

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2.     ACQUISITIONS



On February 22, 2005 the Company completed the acquisition of Specialty Media, a division of Cell & Molecular Technologies, Inc., wholly
owned by Sentigen Holding Corporation (NASDAQ: SGHL). Specialty Media, based in Phillipsburg, New Jersey, develops and supplies a variety of specialty stem cell culture media formulations and
supplements, cells and research reagent tools to the life sciences industry. Serologicals acquired all of the assets of Specialty Media for $6.5 million in cash and assumption of certain
liabilities. The Specialty Media acquisition provides a number of important strategic additions for our Research segment, most significantly, its products extend Chemicon's stem cell product
portfolio.

The
results of Specialty Media were not material to the results of operations for the three months ended April 3, 2005, accordingly, no pro forma disclosure is presented.

The
components of the purchase price were (in thousands):

Cash paid

$
6,500Direct costs


84Mortgage debt assumed


245Other liabilities assumed


340$
7,169


The
Company has not completed its valuation of the fair market value of the underlying assets acquired; however at April 3, 2005 the preliminary summary allocation of assets
acquired was as follows (in thousands):

Current assets

$
630Property and equipment


509Intangibles, principally goodwill


6,030$
7,169




During the first quarter of 2005, the Company completed its evaluation of the purchase price allocation of Upstate Group, Inc., which it acquired in
October 2004, based on the estimated fair values of the assets and liabilities assumed as of the date of purchase. The components of the purchase price are as follows (in thousands):

Preliminary
Purchase
Price

Adjustments

Final
Purchase
PriceStock issued and cash paid to shareholders

$
203,325

$


$
203,325Direct costs of acquisition


3,998





3,998Liabilities assumed


34,781


3,299


38,080Total consideration and acquisition costs

$
242,104

$
3,299

$
245,403


During
the first quarter of 2005, the Company completed its analysis of the fair market value at the date of acquisition of the finished goods inventory and certain intangible assets
resulting in a net increase in these assets and a corresponding net decrease in goodwill of $6.7 million. We also completed our analysis of deferred income taxes arising from the Upstate
acquisition, resulting in

10

---



additional
long-term deferred income tax liabilities and a corresponding increase in goodwill of $3.3 million. The final allocation of purchase price to the underlying assets is as
follows (in thousands):

|                                              |  | Preliminary
Allocation |         | Adjustments |   | Final
Allocation |   | Intangible
Weighted
Average
Useful Life
|--------------------------------------------- |  | ---------------------- | ------- | ----------- | - | ---------------- | - | ---------------------------------------
|Cash and cash equivalents                     |  | $                      | 1,238   |             | $ |                 |   | $                                      
|Accounts receivable, net                      |  |                        | 6,403   |             |   |                 |   |                                        
|Inventory                                     |  |                        | 9,420   |             |   | 2,361            |   |                                        
|Other current assets                          |  |                        | 1,907   |             |   |                 |   |                                        
|Property and equipment                        |  |                        | 9,515   |             |   |                 |   |                                        
|Developed products                            |  |                        | 53,200  |             |   | (1,200           | ) |                                        
|Trademarks and trade name                     |  |                        | 9,800   |             |   |                 |   |                                        
|Other intangible assets                       |  |                        | 12,200  |             |   | 5,500            |   |                                        
|Purchased in-process research and development |  |                        | 3,263   |             |   |                 |   |                                        
|Goodwill                                      |  |                        | 135,158 |             |   | (3,362           | ) |                                        
|                                              |  |                        |         |             |   |                  |   |                                        
|                                              |  | $                      | 242,104 |             | $ | 3,299            |   | $                                      
|                                              |  |                        |         |             |   |                  |   |                                        

3.     DISCONTINUED OPERATIONS

The Company completed its divestiture of its former therapeutic plasma business on January 15, 2004, effective December 28, 2003. The Company sold
the therapeutic plasma business to Life Therapeutics ("Life") (formerly Gradipore Limited), a company based in Sydney, Australia. Under the provisions of Statement of Financial Accounting Standards
No. 144, "Impairment of Long-Lived Assets and Discontinued Operations" ("SFAS 144"), this business was classified as a discontinued operation. The results of operations for
this business were classified as discontinued operations in all periods presented prior to 2005. There are no results from or assets related to discontinued operations included in the 2005 financial
statements.

Part
of the sale proceeds consisted of two secured promissory notes, which were recorded at their estimated net realizable value of $7.9 million. In December 2004, the
Company renegotiated the terms of the two promissory notes, combining them into one secured promissory note ("new note") with a stated face value of $7.8 million. The new note receivable bears
interest at the applicable federal long-term tax exempt rate and is payable in variable quarterly installments through December 2007. The note is secured by the underlying assets of
the business acquired and is guaranteed by Life. In connection with the renegotiation of the notes, Life relinquished its right to assert indemnity claims against the Company. The Company recorded an
imputed interest charge on this new note in December 2004 because the stated interest rate on the new note was considered below market.

Following
is a summary of the new note receivable at April 3, 2005 and January 2, 2005 (in thousands):

April 3, 2005

January 2, 2005Note receivable at face value

$
7,300

$
7,800Less imputed interest


(551
)

(551
)Net present value of note


6,749


7,249Less current portion


(1,449
)

(1,948
)Long term portion

$
5,300

$
5,301


11

---



The
current and long term portions of the new note are included in other current assets and other assets, respectively, in the April 3, 2005 and January 2, 2005
consolidated balance sheets. In January 2005, Life made its first quarterly principal payment of $0.5 million on the new note.

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

4.     STOCKHOLDERS' EQUITY AND STOCK COMPENSATION PLAN



On May 11, 2005, the Company's shareholders approved an amendment to Article Four of our Amended and Restated Certificate of Incorporation that increased
the number of authorized shares of Common Stock from 50,000,000 shares to 115,000,000 shares.

An
increase in the number of authorized shares of Common Stock was necessary to permit us to reserve the number of shares being authorized for inclusion in the 2005 Incentive Plan (see
description below). The availability of the additional authorized shares of Common Stock will permit us to meet advantageous market conditions for the sale of additional Common Stock or securities
that are convertible into shares of Common Stock, future acquisitions of the properties or securities of other companies, issuances of stock pursuant to employee benefit plans and our employee stock
purchase plan, as well as stock dividends, stock splits and other general corporate purposes.



Periodically the Company has awarded restricted common stock and restricted stock units to eligible key employees under our equity-based incentive plan. These
awards have restriction periods tied primarily to employment and service. The awards are recorded at market value on the date of the grant as unearned compensation and compensation expense is
recognized over the restriction period on a straight-line basis, net of forfeitures. In the first quarter of 2005, the Company issued shares under this program to certain key employees.
These shares were recorded at their fair market value on date of issue, or approximately $0.3 million. These restricted shares cliff vest over three to five years from date of issuance. The
Company recorded these shares as outstanding with an offsetting entry to Deferred Compensation, a component of stockholders' equity. The value of these shares is being charged to compensation expense
ratably over the vesting period.



On May 11, 2005, our shareholders approved the Serologicals Corporation 2005 Incentive Plan (the "2005 Incentive Plan"); under which 10,000,000 shares of
our Common Stock are reserved for issuance. The 2005 Incentive Plan provides specific limitations on the size of grants in any year that any one participant in the 2005 Incentive Plan may be granted
in any calendar year. Pursuant to the 2005 Incentive Plan, the Committee is authorized to issue awards consisting of stock options, deferred stock units, performance share units, restricted stock,
restricted stock units, stock appreciation rights ("SARs") and other stock-based awards and cash payments. The purposes of the 2005 Incentive Plan are to encourage ownership of our Common Stock by key
persons whose long-term employment and service is considered essential to our continued progress and to provide cash awards to such persons based on the increase in the value of our Common
Stock. Such awards are intended to align participants' and shareowners' interests.

12

---



The
2005 Incentive Plan replaced and superseded the Prior Plan. The Prior Plan automatically terminated as of the date our shareowners approved the 2005 Incentive Plan, except that such
termination does not affect any grants or awards outstanding under the Prior Plan. Shares previously reserved for issuance under the Serologicals Corporation Stock Incentive Plan, which was approved
by our shareowners on May 8, 2001 (the "Prior Plan"), that remain available for grants under the Prior Plan and any shares subject to awards under the Prior Plan that subsequently are
forfeited, cancelled or expire unexercised also will be available under the 2005 Incentive Plan.

5.     SEGMENT INFORMATION

SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information" defines operating segments to be those components of a business for
which separate financial information is available that is regularly evaluated by management in making operating decisions and in assessing performance. SFAS No. 131 further requires that the
segment information presented be consistent with the basis and manner in which management internally disaggregates financial information for the purposes of assisting in making internal operating
decisions.

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

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

Our
Bioprocessing segment sells a variety of cell culture products, including highly purified proteins and tissue culture media components. These products are used primarily by
biopharmaceutical and biotechnology companies as nutrient additives in cell culture media. Our most significant product within the Cell Culture segment is EX-CYTE®, a patented
serum-free solution of cholesterol, lipoproteins and fatty acids. EX-CYTE® is used, in combination with other cell culture supplements, to reduce or replace animal
serum in cell culture processes. We also provide a range of serum-based products in this segment, including BSA, under the brand name "Probumin", for which we are the world's leading
supplier.. We also sell recombinant human insulin, under the brand name of "Incelligent", for use as a media supplement. In addition, we provide contract research services in the areas of
cell-line development, process development, protein expression, in vivo research and molecular biology optimization and media formulation. We market our all of cell culture products and
services under our Celliance brand name. This segment also manufactures and sells monoclonal antibodies that are used in products such as blood typing reagents and in controls for
diagnostic tests for certain infectious diseases. We believe these products comprise the world's most comprehensive range of commercially available human monoclonal antibodies for blood grouping.
These products are also marketed under our Celliance brand name.

13

---



In
2004, our business was organized in three business segments: Research, Cell Culture and Diagnostics. These segments were based primarily on the differing production, manufacturing and
other value-added processes that we performed with respect to our products and, to a lesser extent, the differing nature of the ultimate end use of our products. All amounts in this Quarterly Report
on Form 10-Q reflect the restatement of the 2004 segments so that they are consistent with the current year presentation.

The
Company's segment net revenues and gross profit for the three months ended April 3, 2005 and March 28, 2004 were as follows (in thousands):

Quarter EndedApril 3, 2005

March 28, 2004Net revenues:Research

$
32,161

$
15,171Bioprocessing


24,474


21,333Total

$
56,635

$
36,504Gross Profit:Research

$
20,301

$
9,307Bioprocessing


10,538


10,163Total

$
30,839

$
19,470


Prior
to 2005, the Company did not determine operating income and income before income taxes or segregate assets by segment because a significant portion of selling, general and
administrative expenses, research and development expenses and assets were shared and not allocated to operating units. Beginning in 2005, with the decision to switch from a company organized
primarily by functional organizational units to a company with distinct operating units in two business segments and a separate corporate group, we are able to provide additional segment information
for 2005 as follows (in thousands); however, comparable information for 2004 is not meaningful and as a result not presented:

|                                             |  | Quarter ended April 3, 2005
|-------------------------------------------- |  | ---------------------------
|
|Gross profit                                 |  | $                          
|Selling, general and administrative expenses |  |                            
|Research and development                     |  |                            
|Amortization                                 |  |                            
|                                             |  |                            
|Operating income (loss)                      |  |                            
|Other expense (income), net                  |  |                            
|                                             |  |                            
|Income (loss) before income tax              |  | $                          
|                                             |  |                            
|Assets at April 3, 2005                      |  | $                          
|                                             |  |                            

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 about Serologicals Corporation and its subsidiaries (collectively, "Serologicals" or the "Company," "we," "our" or "us") that are subject to risks and
uncertainties. Statements that are not historical facts, including statements about our beliefs and expectations, are forward-looking statements. Forward-looking statements may be identified by the
use of words such as "may," "will," "expect," "anticipate," "intend," "estimate," "plan," "believe," or "continue" and other words of similar meaning or future or conditional verbs such as "should,"
"would" and "could." Forward-looking statements include discussions of our expected business outlook, future operations, financial

14

---



performance, pending acquisitions, financial strategies, future working capital needs and projected industry trends, as well as our strategies for growth, product development, regulatory approvals and
compliance, market position and expenditures.

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

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



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

15

---





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

Overview

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

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

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

Our
Bioprocessing segment sells a variety of cell culture products, including highly purified proteins and tissue culture media components. These products are used primarily by
biopharmaceutical and biotechnology companies as nutrient additives in cell culture media. Our most significant product within the Bioprocessing segment is EX-CYTE®, a patented
serum-free solution of cholesterol, lipoproteins and fatty acids. EX-CYTE® is used, in combination with other cell culture supplements, to reduce or replace animal
serum in cell culture processes. We also provide a range of serum-based products in this segment, including BSA, under the brand name "Probumin", for which we are the world's leading
supplier. We also sell recombinant human insulin, under the brand name of "Incelligent", for use as a media supplement. In addition, we provide contract research services in the areas of
cell-line development, process development, protein expression, in vivo research and molecular biology optimization and media formulation. We market all of our cell culture products and
services under our Celliance brand name. This segment also manufactures and sells monoclonal antibodies that are used in products such as blood typing reagents and in controls for
diagnostic tests for certain infectious diseases. We believe these products comprise the world's most comprehensive range of commercially available human monoclonal antibodies for blood grouping.
These products are also marketed under our Celliance brand name.

In
2004, our business was organized in three business segments: Research, Cell Culture and Diagnostics. These segments were 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. All amounts in this Quarterly Report on
Form 10-Q reflect the restatement of the 2004 segments so that they are consistent with the current year presentation.

16

---



Critical Accounting Policies

There have been no material changes to our critical accounting policies from those discussed under the caption "Critical Accounting Policies" in "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended January 2, 2005.

Results of Operations

Overview

The following discussion and analysis of Serologicals' financial condition and results of operations should be read in conjunction with the unaudited Condensed
Consolidated Financial Statements and Notes thereto included in this Quarterly Report on Form 10-Q.

The
following table sets forth certain consolidated operating data as a percentage of net revenues for the periods indicated below:

Quarter EndedApril 3, 2005

March 28, 2004Net revenues

100.0
%
100.0
%Gross profit

54.5
%
53.3
%Selling, general and administrative expenses

35.8
%
32.0
%Research and development expenses

7.9
%
5.4
%Amortization of intangibles

3.1
%
1.8
%Operating income

7.6
%
14.1
%Net income

3.4
%
8.2
%


The
following tables set forth a breakdown of revenue and gross profit contributed by segment for the three months ended April 3, 2005 and March 28, 2004 (dollars in
thousands):

Quarter EndedApril 3, 2005

March 28, 2004Actual

% Total

Actual

% TotalRevenue:Research

$
32,161

57
%
$
15,171

42
%Bioprocessing


24,474

43
%

21,333

58
%$
56,635

100
%
$
36,504

100
%


Quarter EndedApril 3, 2005

March 28, 2004Actual

Gross Margin %

Actual

Gross Margin %Gross Profit:Research

$
20,301

63
%
$
9,307

61
%Bioprocessing


10,538

43
%

10,163

48
%$
30,839

54
%
$
19,470

53
%


17

---





Consolidated.Consolidated net revenues increased 55.1%, to $56.6 million, in the first quarter ended April 3,
2005, compared to $36.5 million in the same period last year primarily from the inclusion of Upstate in 2005 and overall increased sales unit volumes in certain key products as discussed below.
Consolidated gross profits increased from $19.5 million in the first quarter of 2004 to $30.8 million in the first quarter of 2005, primarily due to the inclusion of Upstate in the first
quarter of 2005. Gross margins increased slightly to 54.5% in the first quarter of 2005 compared to 53.3% in the prior year quarter, due to inclusion of Upstate in 2005, but were partially offset by
lower margins arising from the
Bioprocessing product mix. Additionally, first quarter 2005 gross profits included a one time charge of approximately $0.6 million primarily resulting from adjustments to inventory arising from
the acquisition of Upstate.

Research.Net revenue in the first quarter of 2005 increased approximately $16.9 million, or 111%, over the prior year
quarter. In addition to the increased revenue recorded as the result of the Upstate acquisition, Chemicon achieved revenue growth of 5.9% which was driven by contributions in the areas of
neuroscience, molecular biology, bulk reagents and custom services. Upstate revenue, while not included in our first quarter 2004 operating results, grew 20% compared to the first quarter of 2004.
Upstate growth was driven primarily by increases in revenue from kinase profiling services. Research revenues increased 16% in Asia, 14% in Europe and 11% in North America compared to the prior year
quarter. Revenues from these three geographic regions represented approximately 91% and 89% of research product revenues for the first quarter of 2005 and 2004, respectively. Gross margins for the
first quarter 2005 improved by 1.8 percentage points over the prior year quarter to 63.1% primarily due to the contribution by Upstate at 65% in 2005. Changes in foreign currency exchange rates
were immaterial to foreign-currency denominated Research segment revenues in the first quarter of 2005 and 2004. Gross margins in the Research segment were unaffected by currency rates in the first
quarter of 2005 compared to a 1% reduction in margins in the first quarter of 2004. Recognized losses on foreign exchange transactions were immaterial in the first quarter of 2005 and 2004.

Bioprocessing.The following table sets forth a breakdown of net revenue for the key products in the Bioprocessing segment
(in thousands):

Quarter EndedApril 3, 2005

March 28, 2004EX-CYTE®

$
2,752

$
3,604Probumin BSA


4,396


4,166Incelligent


6,771


5,155Monoclonal antibodies


6,502


5,389Other bioprocessing products


4,053


3,019$
24,474

$
21,333


Bioprocessing
revenue increased by 15%, or $3.2 million, to $24.5 million over the first quarter of 2004. EX-CYTE® sales in the current quarter
decreased by 24.5% compared to the first quarter of 2004 due to timing of customer delivery requirements. Sales of Celliance's proprietary bovine serum albumin (Probumin BSA) in the first
quarter of 2005 increased 1.2% over the first quarter of 2004. Sales of recombinant human insulin (Incelligent) increased by 31.3% compared to the first quarter of 2004 primarily due to
customer delivery requirements. Sales of monoclonal antibodies increased 20.5% in the first quarter of 2005 over the first quarter of 2004. The quarterly revenue growth in Bioprocessing came from
North America, where revenue increased 16% over 2004, and Europe, where revenue increased 15% over 2004. Sales to the rest of the world were flat compared with the first quarter of 2004. Revenues in
2005 reflect modest price increases over the prior year quarter.

18

---



Bioprocessing
gross margins during the first three months of 2004 included a charge of approximately $0.5 million or 2% of Bioprocessing revenue, related to a production halt at
our Toronto facility early in the first quarter of 2004 due to a "mad-cow" disease scare in Washington state. The production halt resulted from our inability to transport raw materials
from our U.S. supplier to our facility in Toronto. As a result, much of our Toronto plant was idle for approximately one month in 2004 until all of the importation clearances from the Canadian
government were obtained. The plant became fully operational and has been running near capacity since it reopened in early 2004.

Changes
in foreign currency exchange rates were neutral to foreign-denominated Bioprocessing segment revenues in the first quarter of 2005 and 2004. Gross margins in the Bioprocessing
segment were reduced by 1% due to currency rates in the first quarter of 2005 compared to a reduction of 2% in the first quarter of 2004. Recognized losses on foreign exchange transactions were
immaterial in the first quarter of 2005 and 2004.



Consolidated selling, general and administrative ("SG&A") expenses were $20.3 million, or 35.8%, of revenues for the first quarter of 2005, compared to
$11.7 million, or 32%, of revenues in the first
quarter of 2004. SG&A during the first quarter of 2005 increased by $8.6 million compared to the same period in the prior year primarily due to the inclusion of Upstate in 2005. Additionally,
SG&A in the first quarter of 2005 included approximately $1 million in costs incurred for the continued integration of Upstate. The majority of these integration costs were incurred in cross
training our sales force to sell all product offerings and integration of various Research selling, customer service and marketing efforts. Excluding Upstate and the related integration costs, SG&A in
2005 would have been 31.9% of revenue, which is comparable with the first quarter of 2004. We have maintained a continued focus on eliminating excess costs throughout the organization; however, we
continue to experience growing public company costs and have incurred increased incentive compensation expense on a quarter over quarter basis.



Consolidated research and development expense increased to $4.5 million or 7.9% of revenues during the first quarter of 2005 as compared to
$2 million or 5.4% of revenues during the same quarter in 2004. Research and development expenses increased in the first quarter of 2005 by $2.5 million primarily due to the inclusion of
Upstate.

Our
Research segment introduced 384 new products during the first quarter of 2005, including new Chemicon assays and reagents focused in the areas of neuroscience and stem cell research
and a range of new Upstate kinases and multiplex Beadlyte® assays. Upstate continues to expand its industry position by providing over 220 kinases in their selectivity panel with an
aggressive plan to substantially increase its kinase panel by the end of 2005. Recently, Upstate announced the launch of a new immunoprecipitation (IP) product called Catch and
Release®,which is a faster, simpler and more reproducible method of completing traditional IP. Upstate also introduced Pathway Profiler, a new service which measures
cell-based signaling cascades (cell communication pathways) and provides drug development companies with a unique insight into their therapy and its efficacy within a cell.

During
2005, we continued to advance various projects in the Bioprocessing segment related to the characterization and performance of EX-CYTE® and development of
new cell culture supplements. This segment recently introduced Hybri-CYTE, a serum-free cell culture supplement designed for use with hybridoma cell lines.
Hybri-CYTE is the first in a new line of supplements that are designed specifically to eliminate the use of fetal bovine serum while incorporating a number of Celliance's
proprietary cell culture products including EX-CYTE®, Probumin BSA and Incelligent animal-free insulin. A patent has been filed for
Hybri-CYTE. The new product has been introduced in both Europe and North America and more than 20 product samples are currently being provided to customers. Additional product
extensions are expected to launch later this year.

19

---





Amortization of intangibles increased from $0.7 million during the first three months of 2004 to $1.8 million for the same period in 2005 due to the
acquisition of Upstate effective October 1, 2004.



Other expenses (income), net in 2005 consists primarily of gains and losses from foreign currency transactions. Recognized losses on foreign exchange transactions
were $0.1 million during the three months ended April 3, 2005, compared to $0.2 million during the same period during 2004. In 2004 other expenses (income), net included
$0.4 million in income from providing certain administrative transition services to the buyer of the therapeutic plasma business. We did not have any additional income from transition services
after the second quarter of 2004.



Interest expense increased during the first quarter of 2005 to $1.8 million compared to $1.1 million in the same quarter of 2004 due to increases in
the variable interest rates under our interest rate swap agreements. The swaps convert the 4.75% fixed rate on $70 million of our Debentures to a variable interest rate based on
6-month LIBOR at the end of each interest period plus a spread of 66 basis points. Also in the first quarter of 2005, we capitalized a negligible amount of interest on construction in
process (CIP) compared to $0.2 million in the same quarter of 2004. The decrease in capitalized interest in 2005 was due to lower balances in CIP during the comparable quarters due primarily to
the completion of the construction phase of our new bioprocessing plant in Lawrence, Kansas.



Interest income increased during the first quarter of 2005 compared to the same period in 2004 due to higher interest rates on higher balances in cash, cash
equivalents and short term investments. Our average balances for these categories during the first three months of 2005 were $64.7 million compared to $60.5 million during the first
three months of 2004.



Our consolidated effective tax rate for the first quarter of 2005 was 29%, compared with 33% in the first quarter of 2004. We expect our rate for the full 2005
fiscal year to be 29% compared to 31% for the full year in 2004. The lower expected rate is a result of the generation of more of our income in lower tax jurisdictions, utilization of acquired net
operating loss carry forwards, as well as the benefit of expected higher tax credits and use of tax credit carry forwards.

Liquidity and Capital Resources

The following table sets forth certain indicators of financial condition and liquidity as of April 3, 2005 and January 2, 2005 (dollars in
thousands):

April 3, 2005

January 2, 2005Cash, cash equivalents and marketable securities

$
53,709

$
62,054Working capital

$
123,593

$
122,443Long term debt and convertible subordinated debentures

$
132,538

$
135,008Stockholders equity

$
421,972

$
416,531Total debt to equity


31.4
%

32.4
%


20

---



We
have three principal sources of near-term liquidity: (1) existing cash, cash equivalents and marketable securities; (2) cash generated by operations; and
(3) available borrowing capacity under our new five-year revolving credit facility ("Revolver"), which provides for a maximum borrowing capacity of $45 million. As of
April 3, 2005, we had $45 million available under the Revolver. We believe that our liquidity and capital resources are sufficient to meet our working capital, capital expenditure and
other anticipated normal operating cash requirements over the next twelve months.

Net
cash provided by operating activities was $0.3 million and $12.5 million during the first three months of 2005 and 2004, respectively. Changes in operating assets and
liabilities used $1.6 million in cash in the first three months of 2005, compared to cash generated of $9.5 million in the first three months of 2004. Accounts receivable declined
$13.1 million and $13.6 million during the first quarter of 2005 and 2004, respectively, because the first quarter of each year had lower sales than the fourth quarter of the preceding
year. Inventories increased $2.3 million in the 2005 period compared to an increase of $3.6 million in the 2004 period as we produce product for anticipated higher sales in later
quarters of each year. Accounts payable and accrued liabilities declined $17.3 million and $4.4 million during the first three months of 2005 and 2004, respectively, due to payments of
incentive compensation, interest on the Debentures, accrued royalties and income taxes during both years. The remaining changes in cash provided by operating activities are due to $1.1 million
lower net income from operations, increased depreciation and amortization and tax benefit from exercise of stock options. Depreciation and amortization increased in the first three months of 2005
compared to the same period in 2004 due to the acquisition of Upstate effective October 1, 2004.

Net
cash used in investing activities during the first three months of 2005 was $14.8 million, compared with $16.7 million during the first three months of 2004. Capital
expenditures during the first three months of 2005 were $2.9 million, consisting primarily of manufacturing facility improvements throughout the company and capitalization of certain costs
associated with the implementation of the new enterprise resource planning ("ERP") system at Chemicon. In 2004, our capital expenditures consisted primarily of the construction of the new Lawrence
facility. We anticipate capital expenditures for the remainder of the year to total approximately $15 million to $17 million. The most significant capital expenditures anticipated for
the remainder of 2005 are the continued implementation of our ERP system at Chemicon, which is expected to be completed in summer 2005, implementation of our ERP system at Upstate, scheduled to begin
later in 2005, final validation of our new Lawrence, Kansas facility and continued improvements at manufacturing sites throughout the company. During the first three months of 2005, net cash used in
investing activities included $6.8 million related primarily to the
acquisition of Specialty Media. During the first three months of 2004, we received the initial cash payment of $3.5 million from the sale of the therapeutic plasma business. Net investments in
short term securities, principally auction-rate securities, increased $5.1 million during the first three months of 2005 and $14.6 million for the comparable period in 2004.
This results from the increase in available cash on hand and investing in higher yielding marketable securities.

Net
cash provided by financing activities in the first three months of 2005 was $1.2 million, compared with $1.3 million in the first three months of 2004. Financing
activities in the first three months of 2005 consisted of proceeds from the exercise of stock options and payments on capital leases. Financing activities in the first three months of 2004 consisted
of proceeds from the exercise of stock options.

As
of May 2, 2005, we had approximately $56.7 million in cash, cash equivalents and short-term investments.

There
have been no material changes regarding our contractual obligations from the information provided in our Annual Report on Form 10-K for the fiscal year ended
January 2, 2005. 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.

21

---



Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes regarding our market risk position from the information provided in our Annual Report on Form 10-K for the
fiscal year ended January 2, 2005. 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.

Item 4. 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. There were no significant changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially
affected, or are reasonably likely to materially affect, our internal control over financial reporting.

22

---





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

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

|3.1.1 |  | Amended and Restated Certificate of Incorporation (Exhibit 3.1 to the Company's Annual Report on Form 10-K for the year ended December 29, 2002 is hereby incorporated by reference).                                                                                                                                                                                                                     
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.2.1 |  | Amended and Restated By-laws (Exhibit 3.4 to the Company's Registration Statement on Form S-1 (File No. 33-91176), effective June 14, 1995, is hereby incorporated by reference).                                                                                                                                                                                                                         
|3.1.2 |  | Certificate of Amendment of Amended and Restated Certificate of Incorporation.*                                                                                                                                                                                                                                                                                                                           
|4.1.1 |  | 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).                                                                                                                                                                                                                    
|4.1.2 |  | Specimen Form of Rights Certificate (Exhibit 2.1 to the Company's Registration Statement on Form 8-A filed August 10, 1999, is hereby incorporated by reference).                                                                                                                                                                                                                                         
|4.1.3 |  | Form of Rights Agreement, dated as of August 2, 1999, between the Company and State Street Bank & Trust Company, N.A. (Exhibit 2.2 to the Company's Registration Statement on Form 8-A filed August 10,
1999, is hereby incorporated by reference).                                                                                                                                                       
|4.1.4 |  | Form of Certificate of Designation of Preferences and Rights of Series B Preferred Stock (Exhibit 2.3 to the Company's Registration Statement on Form 8-A filed August 10, 1999, is incorporate by
reference).                                                                                                                                                                                            
|4.1.5 |  | Summary of Rights Plan (Exhibit 2.4 to the Company's Registration Statement on Form 8-A filed August 10, 1999, is hereby incorporated by reference).                                                                                                                                                                                                                                                      
|4.2.1 |  | Indenture, dated as of August 20, 2003, between Serologicals Corporation and The Bank of New York, as Trustee, for the 4.75% Convertible Senior Subordinated Debentures due 2033, including the form of 4.75% Convertible
Senior Subordinated Debenture due 2033 (Exhibit 4.1 to the Company's Current Report on Form 8-K, dated August 21, 2003, is hereby incorporated by reference).                   
|4.2.2 |  | Registration Rights Agreement, dated August 20, 2003, by and among Serologicals Corporation and Banc of America Securities LLC, J.P. Morgan Securities Inc. and UBS Securities LLC, as initial purchasers of the Company's
4.75% Convertible Senior Subordinated Debentures due 2003 (Exhibit 4.2 to the Company's Current Report on Form 8-K, dated August 21, 2003 is hereby incorporated by reference).
|10.1  |  | Serologicals Corporation 2005 Incentive Plan (Exhibit 99.1 to the Company's Current Report on Form 8-K, dated May 17, 2005, is hereby incorporated by reference).                                                                                                                                                                                                                                         
|10.2  |  | Serologicals Corporation Non-Employee Director Compensation Arrangements (Exhibit 99.2 to the Company's Current Report on Form 8-K, dated May 17, 2005, is hereby incorporated by reference).                                                                                                                                                                                                             
|31.1  |  | Certification of the Chief Executive Officer Pursuant to Rule 13a-14 (a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*                                                                                                                                                                                                                                                          
|31.2  |  | Certification of the Chief Financial Officer Pursuant to Rule 13a-14 (a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*                                                                                                                                                                                                                                                          
|32.1  |  | Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002.*                                                                                                                                                                                                                                                       
|32.2  |  | Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002.*                                                                                                                                                                                                                                                       

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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: May 18, 2005 |  | BY:                                  

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