SEROLOGICALS CORP, 424B3, 1996-05-30

SEROLOGICALS CORP
424B3, 1996-05-30
BIOLOGICAL PRODUCTS, (NO DIAGNOSTIC SUBSTANCES)

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<PAGE>
PROSPECTUS
2,100,000 SHARES

[LOGO]

COMMON STOCK
---------

Of the 2,100,000 shares of Common Stock offered hereby, 900,000 are being
sold by Serologicals Corporation (the "Company") and 1,200,000 shares are being
sold by the Selling Stockholders named under "Principal and Selling
Stockholders." The Company will not receive any proceeds from the sale of shares
by the Selling Stockholders.

The Common Stock of the Company is traded on The Nasdaq Stock Market's
National Market under the symbol "SERO." On May 29, 1996, the last sale price of
the Common Stock as reported by Nasdaq was $25 3/4 per share.

SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
-------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS (1) COMPANY (2) STOCKHOLDERS (2)
<S> <C> <C> <C> <C>
Per Share $26.00 $1.43 $24.57 $24.57
Total (3) $54,600,000 $3,003,000 $22,113,000 $29,484,000
</TABLE>

(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses of the offering payable by the Company estimated
at $320,000.

(3) The Company and certain of the Selling Stockholders have granted the
Underwriters a 30-day option to purchase up to 315,000 additional shares of
Common Stock on the same terms as set forth above to cover over-allotments,
if any. If the Underwriters exercise such option in full, the total Price
to Public, Underwriting Discounts and Commissions, Proceeds to Company and
Proceeds to Selling Stockholders will be $62,790,000, $3,453,450,
$25,798,500 and $33,538,050, respectively. See "Underwriting."

--------------

The shares of Common Stock are being offered by the several Underwriters
named herein, subject to prior sale, when, as and if accepted by them and
subject to certain conditions. It is expected that certificates for the shares
of Common Stock offered hereby will be available for delivery on or about June
4, 1996 at the offices of Smith Barney Inc., 333 West 34th Street, New York, New
York 10001.

--------------

SMITH BARNEY INC.
LEHMAN BROTHERS

VOLPE, WELTY & COMPANY

May 29, 1996
<PAGE>
Maps of Serologicals Corporation international headquarters, clinical
laboratories and donor center locations in the United States and monoclonal
production and process facilities and monoclonal development facility in the
United Kingdom.

IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK OF
THE COMPANY ON THE NASDAQ STOCK MARKET IN ACCORDANCE WITH RULE 10B-6A UNDER THE
SECURITIES EXCHANGE ACT OF 1934. SEE "UNDERWRITING."

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ STOCK MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

2
<PAGE>
PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION (INCLUDING THE FINANCIAL STATEMENTS AND THE NOTES THERETO) APPEARING
ELSEWHERE IN THIS PROSPECTUS.

THE COMPANY

The Company is a leading worldwide provider of specialty human
antibody-based products and services to major healthcare companies. The
Company's services, including donor recruitment, donor management and clinical
testing services, enable the Company to provide value-added products that are
used as the active ingredients in therapeutic products for the treatment and
management of Rh incompatibility in newborns, rabies and hepatitis and in
diagnostic products such as blood typing reagents and diagnostic test kits. In
addition, the Company collects and produces antibodies for the manufacture of
intravenous immune globulin ("IVIG"), a product containing a broad spectrum of
antibodies for use in the treatment of a wide variety of medical indications.
The Company conducts its operations through a national network of 39 donor
centers and through laboratories located in the United States and the United
Kingdom. Many of the Company's donor centers are strategically located on or
near medical campuses, enhancing the Company's ability to source specialty
antibodies from medical community referrals.

The Company competes primarily in the specialty antibody segment of the
plasma-based products and services industry, which encompasses a number of
markets, with products ranging from source plasma (the clear liquid portion of
the blood characterized by non-specific concentrations of antibodies) to
specialty antibodies found in source plasma and other specialty biologic
components. Antibodies, also known as immune globulins, are soluble components
contained in plasma which are produced by the immune system to fight specific
diseases. The specialty antibody segment of the industry is characterized by a
growing demand for therapeutic antibodies as an alternative to other more
expensive and, for many applications, less effective treatments, as well as
constraints on the supply of antibodies due to more rigorous donor screening
procedures required by regulatory authorities and manufacturers of antibody
products. Specialty antibodies range from those used to treat tetanus and
cytomegalovirus ("CMV"), which the Company believes generally sell for
approximately $85 to $90 per liter, to high end products such as anti-D (an
antibody used to treat Rh incompatibility in newborns), anti-hepatitis and blood
typing reagents, which the Company believes generally sell for approximately
$350 to $700 per liter. By comparison, the average industry gross price of
source plasma is approximately $75 to $80 per liter. The Company's pricing for
its specialty antibodies averaged approximately $413 per liter in 1995, an
increase of approximately 10% over the prior year.

The Company's strategy is to enhance its leadership position in the
specialty antibody segment of the industry and to take advantage of emerging
opportunities relating to the provision of other specialty biologic products and
services. The key elements of this strategy include (i) expanding its core
business by increasing its donor base and broadening the range of antibodies it
sources and the specialty services it provides; (ii) pursuing selective
acquisitions to capitalize on consolidation opportunities in its industry; (iii)
expanding customer relationships by providing additional services, allowing the
Company to become more deeply involved in its customers' product development,
regulatory compliance and quality assurance programs; (iv) seeking to increase
the quality of antibodies and production efficiencies; and (v) utilizing its
existing donor center network and expertise in biologic product development,
manufacturing techniques and regulatory compliance to take advantage of emerging
opportunities in the area of healthcare services.

The Company has captured what it believes are major shares in its key
specialty markets, based on 1994 industry data, which the Company believes is
the most recent information available on worldwide markets. The Company has
established long standing customer relationships with major healthcare companies
such as Bayer Corporation (formerly Miles, Inc.), Centeon (Behringwerke/Armour),
Ortho Diagnostics Systems (Johnson & Johnson) and Abbott Laboratories, Inc. The
Company's net sales increased at a compounded annual growth rate of 39%, from
$14.2 million in 1991 to $52.1 million in 1995. During the same period, the
Company's net income before extraordinary items has increased from $327,000 in
1991 to $4.5 million in 1995. The Company has increased the number of donor
centers it operates from six at the end of 1991 to 39 as of March 31, 1996.

3
<PAGE>
THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by:
The Company................................... 900,000 shares (1)
The Selling Stockholders...................... 1,200,000 shares (2)
Common Stock to be outstanding after the
offering....................................... 9,386,302 shares (1) (3)
Use of proceeds................................. Repayment of indebtedness, working capital
and other general corporate purposes.
Nasdaq National Market symbol................... SERO
</TABLE>

- --------------
(1) Does not include up to 150,000 shares of Common Stock that may be sold by
the Company pursuant to the Underwriters' over-allotment option. See
"Underwriting."

(2) Does not include up to 165,000 shares of Common Stock that may be sold by
certain Selling Stockholders pursuant to the Underwriters' over-allotment
option. See "Underwriting."

(3) Based upon the number of shares of Common Stock outstanding as of March 31,
1996. Includes 65,000 shares being sold by Selling Stockholders issuable
upon exercise of outstanding options held by them, but does not include an
aggregate of 1,566,101 shares of Common Stock issuable upon exercise of
outstanding options and warrants and conversion of an outstanding
convertible subordinated promissory note. See "Capitalization" and Notes 5
and 6 of Notes to Consolidated Financial Statements of the Company.
--------------

PROSPECTIVE INVESTORS ARE CAUTIONED THAT THE STATEMENTS IN THIS PROSPECTUS
THAT ARE NOT DESCRIPTIONS OF HISTORICAL FACTS MAY BE FORWARD-LOOKING STATEMENTS,
INCLUDING, BUT NOT LIMITED TO, STATEMENTS CONTAINED IN "MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS." SUCH STATEMENTS
REFLECT MANAGEMENT'S CURRENT VIEWS, ARE BASED ON MANY ASSUMPTIONS AND ARE
SUBJECT TO RISKS AND UNCERTAINTIES. ACTUAL RESULTS COULD DIFFER MATERIALLY FROM
THOSE CURRENTLY ANTICIPATED DUE TO A NUMBER OF FACTORS, INCLUDING THOSE
IDENTIFIED UNDER "RISK FACTORS."
--------------

UNLESS THE CONTEXT OTHERWISE REQUIRES, REFERENCES IN THIS PROSPECTUS TO THE
"COMPANY" SUBSEQUENT TO THE COMPANY'S REORGANIZATION IN NOVEMBER 1994 REFER TO
SEROLOGICALS CORPORATION AND ITS SUBSIDIARIES. REFERENCES TO THE "COMPANY" PRIOR
TO THE COMPANY'S REORGANIZATION IN NOVEMBER 1994 REFER TO SEROLOGICALS, INC., A
GEORGIA CORPORATION ("SEROLOGICALS"), AND ITS SUBSIDIARIES. THE COMPANY'S
PRINCIPAL EXECUTIVE OFFICES ARE LOCATED AT 780 PARK NORTH BOULEVARD, SUITE 110,
CLARKSTON, GEORGIA 30021 AND ITS TELEPHONE NUMBER IS (404) 296-5595.

4
<PAGE>
SUMMARY CONSOLIDATED AND PRO FORMA FINANCIAL AND OPERATING INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA AND AVERAGE PRICE PER LITER)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1993 1994
------- -------
THREE MONTHS ENDED
------------------------------------
1995 MARCH 31, 1996
---------------------- APRIL 2, ------------------------
ACTUAL PRO FORMA (1) 1995 ACTUAL PRO FORMA (1)
------- ------------- --------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales.......................... $22,938 $30,100 $52,124 $56,872 $11,968 $14,779 $15,795
Gross profit....................... 8,451 13,304 20,599 21,173 4,667 6,114 6,238
Income available to common
stockholders before extraordinary
loss and cumulative effect of
accounting change................. 899 3,353 4,421 5,127 607 1,628 1,567
Net income available for common
stockholders...................... 1,200 3,250 2,598 5,127 607 1,628 1,567
Income available to common
stockholders before extraordinary
loss and cumulative effect of
accounting change per common
share:
Primary.......................... $ 0.14 $ 0.54 $ 0.58 $ 0.58 $ 0.10 $ 0.18 $ 0.17
Fully diluted (2)................ 0.14 0.54 0.58 0.58 0.10 0.18 0.17
Net income available to common
stockholders per common share:
Primary.......................... $ 0.19 $ 0.52 $ 0.34 $ 0.58 $ 0.10 $ 0.18 $ 0.17
Fully diluted (2)................ 0.19 0.52 0.34 0.58 0.10 0.18 0.17
Weighted average common and common
equivalent shares outstanding:
Primary.......................... 6,187 6,250 7,646 8,797 6,253 8,971 8,971
Fully diluted (2)................ 6,482 6,250 7,646 8,797 6,253 8,971 8,971
OPERATING DATA:
Number of specialty liters
shipped........................... 61.3 77.6 86.3 86.3 21.1 24.0 24.0
Average specialty antibody price
per liter......................... $ 351 $ 375 $ 413 $ 413 $ 410 $ 423 $ 423
</TABLE>

<TABLE>
<CAPTION>
AS OF MARCH 31, 1996
------------------------
ACTUAL AS ADJUSTED (3)
------- ---------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital.................... $ 5,629 $21,158
Total assets....................... 57,606 71,776
Long-term debt and capital lease
obligations, less current
maturities........................ 10,559 3,557
Stockholders' equity............... 38,242 60,773
</TABLE>

- ----------------
(1) Gives effect to the sale of the 2,400,000 shares of Common Stock issued June
14, 1995 and the application of the net proceeds therefrom (the "IPO") and
to the Southeastern Acquisition (as defined herein) as if such transactions
had occurred on January 1, 1995. See "Pro Forma Financial Information."

(2) The effect of the convertible securities and the accretion of common stock
put warrants on net income per common share for the years ended December 31,
1994 and 1995, the three month periods ended April 2, 1995 and March 31,
1996, and on pro forma net income per share for the year ended December 31,
1995 and the three months ended March 31, 1996 was antidilutive.

(3) Gives effect to the sale of the 900,000 shares of Common Stock offered by
the Company hereby, $223,600 received from the exercise of options to
purchase Common Stock being sold in this offering and $514,368 in related
tax benefit, and the application of the net proceeds therefrom as described
under "Use of Proceeds."
--------------

UNLESS OTHERWISE INDICATED, INFORMATION IN THIS PROSPECTUS ASSUMES NO
EXERCISE OF THE UNDERWRITERS' OPTION TO PURCHASE FROM THE COMPANY AND CERTAIN
SELLING STOCKHOLDERS UP TO 315,000 ADDITIONAL SHARES OF COMMON STOCK TO COVER
OVER-ALLOTMENTS, IF ANY. SEE "UNDERWRITING."

5
<PAGE>
RISK FACTORS

In addition to the other information in this Prospectus, the following risk
factors should be considered carefully in evaluating the Company and its
business before purchasing the shares of Common Stock offered hereby.

DEPENDENCE ON AND RELATIONSHIP WITH CUSTOMERS

The industry in which the Company competes is characterized by sales to a
relatively few major healthcare companies. The Company's top ten customers
accounted for 76%, 75% and 82% of the Company's net sales in 1993, 1994 and
1995, respectively. One of the Company's customers, Bayer Corporation ("Bayer")
accounted for 26%, 35% and 50% of the Company's net sales in 1993, 1994 and
1995, respectively. Bayer purchases substantially all of the Company's
antibodies for IVIG, a product line the Company acquired in December 1994 as a
result of the acquisition of the Acadiana Group (the "Seramune Acquisition"). In
1993 Wolf Brandenburger, A.G., accounted for 15% of the Company's net sales and
during 1995 another customer, Behringwerke, A.G. accounted for 13% of the
Company's net sales. To date, most of the Company's sales have been made to
major healthcare companies that have been customers for many years; however, the
majority of such sales have been made pursuant to annual purchase orders.
Moreover, the Company believes there is a trend for these customers to use fewer
suppliers. The Company's therapeutic products are sold to four major and several
smaller biological product manufacturers. Loss of any major customer or a
material reduction in a major customer's purchases could have a material adverse
effect upon the Company.

The Company has two long-term supply contracts with Bayer related to
antibodies for IVIG. There can be no assurance that such contracts will not be
terminated or that Bayer will not reduce its supply requirements pursuant to the
provisions therefor in such agreements. The Company also has a long-term supply
contract with Abbott Laboratories, Inc. ("Abbott"). These long-term contracts
generally provide for annual pricing negotiations. Most of the Company's other
sales are made pursuant to annual purchase orders. Under the purchase orders and
the long-term contracts referred to above, once established, the pricing remains
fixed for the year. As a result, the Company may be adversely affected if its
costs of collecting and selling its products rise during a given year because
the Company may not be able to pass on the increased costs until the next annual
pricing. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources" and "Business --
Marketing and Customers."

STRINGENT REGULATION

The Company's collection, storage, labeling and distribution activities are
subject to strict regulation and licensing by the U.S. Food and Drug
Administration (the "FDA"). In addition, the Company's facilities in the United
States and abroad are subject to periodic inspection by the FDA. Failure to
correct any deficiencies or to otherwise comply with applicable laws or
regulations could subject the Company to enforcement action, including product
seizures, recalls, center or facility closure, license revocations and civil and
criminal penalties, any one or more of which could have a material adverse
effect on the Company's business. Changes in existing federal, state or foreign
laws or regulations could also have an adverse effect on the Company's business.
The industry continually evaluates its practices and procedures regarding new
information or public concerns over diseases which may be transmitted from
donors through their blood or blood components. Based upon such evaluation, a
certain portion of the population may be prohibited from donating in the future,
or certain new testing and screening procedures may be required to be performed
with respect to certain donors. In certain circumstances, the loss of donors, or
the cost of additional testing procedures, could have an adverse effect on the
Company's operating results.

One of the Company's strategies is to expand the collection of specialty
antibodies at certain of the Company's recently acquired non-specialty donor
centers at which only antibodies for IVIG are currently being collected. Before
new donor centers are opened or new specialty antibodies are collected at an
existing center, the centers, products, procedures and personnel must meet
certain regulatory standards to obtain necessary licenses and approvals. In
addition, the production and marketing of the Company's antibody products and
its ongoing product development activities related to such products are subject
to extensive regulation by the FDA. The approval process for new products
typically takes several years and involves

6
<PAGE>
considerable cost. There can be no assurance that even after such time and
expenditures, any approvals or licenses sought by the Company will be granted or
that FDA review will not involve delays adversely affecting the marketing and
sale of the Company's products. Further, the Company is required to obtain from
each donor an informed consent regarding the donation procedure. Failure of the
Company to obtain an adequate consent could have a material adverse effect on
the Company.

Laws and regulations with similar substantive and enforcement provisions are
also in effect in many states and foreign countries where the Company does
business. Any change in existing federal, state or foreign laws or regulations,
or in the interpretation or enforcement thereof, or the promulgation of any
additional laws or regulations could have an adverse effect on the Company's
business. See "Business -- Government and Industry Regulation."

FOREIGN RESTRICTIONS ON IMPORTATION OF BLOOD DERIVATIVES

Sales outside the United States in 1993, 1994 and 1995 represented
approximately 29%, 30% and 31%, respectively, of the Company's net sales for
those years. Foreign sales primarily are to European customers. Export sales
from the United States were $3.7 million, $5.3 million and $11.6 million during
1993, 1994 and 1995, respectively. Concern over blood safety has led to
movements in a number of European and other countries to restrict the
importation of blood and blood derivatives, including antibodies, collected
outside the countries' borders or, in the case of certain European countries,
outside Europe. To date, these efforts have not led to any meaningful
restriction on the importation of blood and blood derivatives and have not
adversely affected the Company. Such restrictions, however, continue to be
debated and there can be no assurance that such restrictions will not be imposed
in the future. If imposed, such restrictions could have a material adverse
effect on the demand for the Company's products.

FLUCTUATIONS IN ANTIBODY SUPPLY AND DEMAND

As a result of factors affecting both the demand for and supply of
antibodies, worldwide demand for many types of antibodies has exceeded supply
since 1991. Future demand for antibodies could, however, be adversely affected
by a number of factors, including technological developments resulting in more
efficacious or cost-effective products or more efficient methods of sourcing
antibodies, healthcare reform, including changes in third-party reimbursement,
and changes in domestic or foreign regulation. There can be no assurance that
the demand for antibodies the Company provides will remain strong in the future.
In addition, if new and/or more effective vaccines designed to eliminate certain
diseases that are currently treated with antibodies are successfully introduced,
demand for antibodies may also be adversely affected.

The supply of antibodies has been constrained in recent years, due in large
part to more rigorous screening procedures required by regulatory authorities
and manufacturers of antibody-based products to detect the presence of HIV,
hepatitis viruses and other disease-causing organisms. These safety procedures
have disqualified a portion of the potential donor population. Supply has also
decreased as the potential donor population with certain specialty antibodies
has aged and been lost to attrition. These and other factors could adversely
affect the Company's ability to source antibodies in the future. Future
fluctuations in the demand for or supply of antibodies could adversely affect
the Company. See " -- Stringent Regulation," "-- Foreign Restrictions on
Importation of Blood Derivatives," " -- Uncertainty Related to Healthcare
Reform; No Assurance of Adequate Reimbursement," "-- Competition; Rapid
Technological Change" and "Business -- Industry Overview."

RELIANCE ON FEW PRODUCTS

Two of the Company's products (antibodies for IVIG and anti-D) accounted for
approximately 61% of the Company's net sales in 1995. Loss of either major
product line or a material reduction in worldwide demand for these products
could have a material adverse effect upon the Company.

ACQUISITION STRATEGY AND RELATED CAPITAL REQUIREMENTS

To take advantage of consolidation opportunities in the industry and expand
its product and service portfolio, the Company's strategy includes growth
through acquisitions. The Company is subject to various risks associated with an
acquisition growth strategy, including the risk that the Company will be unable
to identify and recruit suitable acquisition candidates in the future or to
integrate and manage them or that any

7
<PAGE>
acquisition will ultimately be profitable. In addition, increasing competition
may increase purchase prices for acquisitions to levels that exceed the
Company's financial resources or that reduce the economic return to the Company.
The Company's expansion strategy may also require significant capital resources,
and the Company expects to use cash and securities, including Common Stock, as
the principal consideration for future acquisitions. Capital is needed not only
for acquisitions, but also for the effective integration, operation and
expansion of such businesses. In the event that the Common Stock does not
maintain a sufficient valuation or potential acquisition candidates are
unwilling to accept Common Stock as consideration, the Company will be required
to use cash resources or use other securities as consideration. Although the
Company's bank credit facility provides up to $15 million specifically for
acquisition financing, the Company may need to raise capital through the
issuance of other long-term or short-term indebtedness or the issuance of its
securities in private or public transactions, which could result in dilution of
existing equity positions, increased interest and amortization expense or
decreased income to fund future expansion. There can be no assurance that
acceptable financing for future acquisitions or for the integration and
expansion of existing business can be obtained.

UNCERTAINTY RELATED TO HEALTHCARE REFORM; NO ASSURANCE OF ADEQUATE REIMBURSEMENT

Political, economic and regulatory influences are subjecting the healthcare
industry in the United States to fundamental change. Although Congress has
failed to pass comprehensive health care reform legislation thus far, the
Company anticipates that Congress and state legislatures will continue to review
and assess alternative healthcare delivery and payment systems and may in the
future propose and adopt legislation effecting fundamental changes in the
healthcare delivery system. Legislative debate is expected to continue in the
future, and the Company cannot predict what impact the adoption of any federal
or state health care reform measures or future private sector reform may have on
its industry or business.

In both domestic and foreign markets, sales by the Company's customers of
products that incorporate the Company's products may depend in part on the
availability of reimbursement from third-party payors such as government health
administration authorities, private health insurers and other organizations.
Third party payors are increasingly challenging the price and cost effectiveness
of medical products and services. There can be no assurance that pricing
pressures which may be experienced by the Company's customers will not adversely
affect the Company because of a determination that these products are not cost
effective or because of inadequate third party reimbursement levels to such
customers. See "Business -- Government and Industry Regulation" and "Business --
Third Party Reimbursement."

COMPETITION; RAPID TECHNOLOGICAL CHANGE

The Company is engaged in the business of providing antibodies, which is a
competitive and rapidly changing industry. Competition for customers is intense
and depends principally on the ability to provide products of the quality and in
the quantity required by customers. The Company competes for antibody donors
with customers of the Company who may obtain antibody products for their own
use, other independent commercial plasma collection companies and non-profit
organizations, such as the American Red Cross and community blood banks. Many of
these competitors have access to greater financial, marketing and other
resources than the Company. Certain of the Company's specialty antibody products
are derived from donors with rare antibody characteristics, resulting in
increased competition for such donors. If the Company is unable to maintain and
expand its donor base, its business and future prospects may be adversely
affected. Additionally, several companies are attempting to develop and market
products to diagnose and treat diseases based upon technology which would lessen
or eliminate the need for certain antibodies. There can be no assurance that
competition will not adversely affect the Company. See "Business -- Operations"
and "Business -- Competition."

DEPENDENCE ON KEY PERSONNEL

The success of the Company's operations is dependent upon the experience and
ability of its senior management, Harold J. Tenoso, Ph.D., Terry Dobson, Charles
P. Harrison, Timm M. Hurst, Gary A. Kress,

8
<PAGE>
Russell H. Plumb, and James F. Sowinski. Dr. Tenoso, Mr. Plumb and Mr. Harrison
are parties to employment agreements with the Company. The Company does not
maintain any key-man insurance on its senior management. The loss of any of such
persons could have an adverse effect on the Company's business. See
"Management."

RISK OF PROFESSIONAL, PRODUCT AND HAZARDOUS WASTE LIABILITY; AVAILABILITY OF
INSURANCE

To increase the concentration of antibodies it provides, the Company
immunizes qualified donors using either commercially available vaccines or a
proprietary vaccine developed from the red blood cells selected from certified
cell donors. Although the Company believes that it takes the precautions
required by applicable regulations to minimize the risks of adverse reaction to
a vaccine or the risk of infectious disease transmission via such cells, these
risks cannot be entirely eliminated. Despite the precautions taken, in the event
of adverse reactions in donors, the Company could be held liable for any damages
that result, and such liability could adversely affect the Company. See
"Business -- Product Liability and Insurance."

In addition, the Company's operations involve the controlled use of
bio-hazardous materials and chemicals. Although the Company believes that its
safety procedures for handling and disposing of such materials comply with the
standards prescribed by state and federal regulations, the risk of accidental
contamination or injury from these materials cannot be completely eliminated. In
the event of such an accident, the Company could be held liable for any damages
that result, and any such liability could exceed the resources of the Company.
The Company may incur substantial costs to maintain compliance with
environmental regulations as the Company further develops its manufacturing
capacity. See "Business -- Government and Industry Regulation."

The Company's operations also expose it to liability risks that are inherent
in the testing, manufacturing and marketing of antibody-based products. The
Company currently maintains professional, product liability and errors and
omissions insurance. There can be no assurance that the coverage limits of such
insurance would be adequate to protect the Company against any potential claims,
including claims based upon the transmission of infectious disease, or
otherwise. In addition, there can be no assurance that the Company will be able
to obtain or maintain professional or product liability insurance in the future
on acceptable terms or with adequate coverage against potential liabilities. See
"Business -- Product Liability and Insurance."

DEPENDENCE UPON SINGLE SOURCE SUPPLIERS

The Company purchases certain supplies for its operations from single source
suppliers. The disruption of existing supply relationships could impair the
Company's ability to process, manufacture and test products or cause the Company
to incur costs associated with the development of alternative sources. In
addition, in some instances FDA approval would be required to replace or
substitute a supplier or component used by the Company. Any such disruption
could result in delays in obtaining antibodies or making product shipments,
which could have a material adverse effect on the Company's financial condition
and results of operations.

RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS

The Company generates significant sales from operations outside the United
States and is subject to risks generally associated with international
operations. The Company's United Kingdom operations, which accounted for
approximately 21% and 18% of the Company's net sales in 1994 and 1995,
respectively, generate net sales and incur expenses in foreign currencies.
Accordingly, the Company's financial results from international operations may
be affected by fluctuations in currency exchange rates. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
Notes 2 and 13 of Notes to Consolidated Financial Statements of the Company.

CONTROL BY EXISTING STOCKHOLDERS

Upon consummation of this offering, Samuel A. Penninger, Jr., Chairman of
the Board of Directors, certain other employees and BancBoston Ventures, Inc.
will collectively have voting control over approximately 28% of the outstanding
shares of Common Stock. Accordingly, these stockholders, should they choose to
act in concert, may be in a position to control the Company, elect all of the
Company's directors,

9
<PAGE>
increase the authorized capital stock, dissolve, merge or sell the assets of the
Company, generally direct the affairs of the Company and prevent a change in
control of the Company. See "Principal and Selling Stockholders."

CERTAIN ANTI-TAKEOVER PROVISIONS

Certain provisions of the Company's Amended and Restated Certificate of
Incorporation and Amended and Restated By-Laws could have the effect of
discouraging a third party from pursuing a non-negotiated takeover of the
Company and preventing certain changes in control. These provisions include a
staggered board, advance notice to the Board of Directors of stockholder
proposals and stockholder nominees, limitations on the ability of stockholders
to remove directors, call stockholders meetings and act by written consent, the
requirement that vacancies in the Board of Directors may be filled only by a
majority of the remaining directors and the ability of the Board to issue,
without further stockholder approval, preferred stock with rights and privileges
that could be senior to the Common Stock. The Company also is subject to Section
203 of the Delaware General Corporation Law which, subject to certain
exceptions, prohibits a Delaware corporation from engaging in any of a broad
range of business combinations with any "interested stockholder" for a period of
three years following the date that such stockholder became an interested
stockholder. These provisions could discourage a third party from pursuing a
takeover of the Company at a price considered attractive by many stockholders,
since such provisions could have the effect of preventing or delaying a
potential acquirer from achieving control of the Company and its Board of
Directors. See "Description of Capital Stock -- Preferred Stock" and
"Description of Capital Stock -- Certain Provisions of the Company's Certificate
of Incorporation and By-Laws."

VOLATILITY OF STOCK PRICE

There has been significant volatility in the market price of securities of
healthcare companies and emerging companies generally, and the Company in
particular, that often has been unrelated to the operating performance of such
companies. The Company believes that factors such as legislative, regulatory and
technological developments, failure to meet securities analysts' performance
expectations and quarterly variations in financial results could cause the
market price of the Common Stock to fluctuate substantially.

SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS

Upon consummation of this offering, the Company will have 9,386,302 shares
of Common Stock outstanding. The 2,100,000 shares of Common Stock sold in this
offering (2,415,000 if the over-allotment option is exercised), the 2,400,000
shares sold by the Company in the IPO and 1,925,265 other shares (other than
shares held or purchased by "affiliates" of the Company) are freely tradable
without restriction or further registration under the Securities Act. The
2,961,037 remaining shares of Common Stock are "restricted securities," as that
term is defined under Rule 144 promulgated under the Securities Act, and may
only be sold pursuant to a registration statement under the Securities Act or an
applicable exemption from the registration requirements of the Securities Act,
including Rule 144 thereunder.

In addition, 1,500,000 shares of Common Stock are authorized for issuance
under the Company's Amended and Restated 1994 Omnibus Incentive Plan (the
"Omnibus Plan"). Of these shares, 664,860 shares are issuable upon the exercise
of outstanding stock options granted by the Company, of which options to
purchase 218,363 shares are currently exercisable (exclusive of an aggregate of
15,000 shares to be sold by certain Selling Stockholders in this offering upon
the exercise of outstanding options) . Further, 360,000 shares of Common Stock
are authorized for issuance under the Company's 1995 Non-Employee Directors'
Stock Option Plan (the "Director Plan"), of which 64,000 shares are issuable
upon the exercise of outstanding stock options granted by the Company. In
addition, 250,000 shares of Common Stock are authorized for issuance under the
Company's 1996 Employee Stock Purchase Plan (the "Purchase Plan"), none of which
is issued or outstanding. Finally, options held by an officer to purchase
439,492 shares of Common Stock are also outstanding (exclusive of 50,000 shares
to be sold by such officer in this offering upon the exercise of outstanding
options). The Company has filed registration statements on Form S-8 with the
Securities and Exchange Commission (the "Commission") registering the shares of
Common Stock that are issuable under these plans and the option to the officer.
There are also outstanding the Convertible Note (as hereinafter defined) which
is convertible into 250,000 shares of Common Stock and a warrant to purchase
147,749 shares

10
<PAGE>
of Common Stock (the "State Street Warrant"). The holder of this warrant has
registration rights with respect to these shares. Certain beneficial holders of
Common Stock have additional registration rights. The exercise of these
registration rights could adversely affect the market price of the Common Stock
and could impair the Company's future ability to raise capital through an
offering of its equity securities.

The Company, the Selling Stockholders, the Company's directors and officers
and certain other stockholders, beneficially owning in the aggregate 3,506,511
shares of Common Stock, have agreed not to offer, sell, contract to sell or
otherwise dispose of any shares of Common Stock or any securities convertible
into or exercisable or exchangeable for Common Stock, without the prior written
consent of Smith Barney Inc., for a period of 90 days after the date of this
Prospectus. No predictions can be made as to the effect, if any, that market
sales of shares of existing stockholders or the availability for future sale of
such shares or shares in this offering will have on the market price of shares
of Common Stock prevailing from time to time. The prevailing market price of the
Common Stock after the offering could be adversely affected by future sales of
substantial amounts of Common Stock by existing stockholders. See "Principal and
Selling Stockholders," "Shares Eligible for Future Sale" and "Underwriting."

11
<PAGE>
USE OF PROCEEDS

The net proceeds to the Company from the sale of the 900,000 shares of
Common Stock offered by the Company hereby will be approximately $22.0 million
(approximately $25.9 million if the Underwriters' over-allotment option is
exercised in full), including $223,600 in proceeds to be received by the Company
from the exercise of options to purchase shares of Common Stock being sold by
Selling Stockholders in this offering ($395,600 if the Underwriters'
over-allotment option is exercised in full). Of these net proceeds, the Company
expects to use (i) approximately $6.8 million to repay the amount outstanding
under the Company's Amended and Restated Credit Agreement (the "Credit
Agreement" or the "Revolving Credit Facility") dated as of July 20, 1995 with
NationsBank, N.A. (South) ("NationsBank"), which currently bears interest at
LIBOR plus 1.5% (6.9% as of March 31, 1996) per annum and matures in July 1998,
(ii) approximately $951,000 to repay in full two outstanding notes payable of
$802,000 and $149,000 which bear interest at effective rates of approximately
10% and 16% per annum and mature in February 1997 and March 1999, respectively,
and (iii) $211,000 to repay in full a note payable, which bears interest at 8.5%
per annum and matures in March 1999, which was incurred in connection with the
acquisition of the assets of a donor center in May 1995. The remaining net
proceeds will be used for working capital and general corporate purposes,
including acquisitions and capital expenditures to expand the Company's
monoclonal antibody manufacturing capacity in the United Kingdom. There are
currently no definitive agreements or letters of intent related to any potential
acquisition. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Overview," "-- Liquidity and Capital Resources" and
Note 6 of Notes to Consolidated Financial Statements of the Company. Pending
such uses, the net proceeds will be invested in short-term, interest-bearing
instruments.

The Company will not receive any of the net proceeds from the sale of Common
Stock offered by the Selling Stockholders, except for the proceeds received from
the exercise of options to purchase 65,000 shares of Common Stock.

PRICE RANGE OF COMMON STOCK

The Common Stock was initially offered to the public on June 14, 1995 at a
price of $11.50 per share and is quoted on The Nasdaq National Market. The
following table sets forth the range of high and low sale prices for the Common
Stock for the periods indicated as reported on The Nasdaq National Market.

<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
1995
Second fiscal quarter
(from June 15)........ $11 3/4 $10 5/8
Third fiscal quarter... 18 1/4 10 5/8
Fourth fiscal
quarter............... 17 3/4 14 3/4

1996
First fiscal quarter... 27 1/2 15
Second fiscal quarter
(through May 29)...... 31 23 1/4
</TABLE>

On May 29, 1996, the last sale price of the Common Stock was $25 3/4 per
share, as reported on The Nasdaq National Market. At March 31, 1996, there were
69 stockholders of record of the Common Stock.

DIVIDEND POLICY

The Company has not paid any dividends on its Common Stock to date. The
payment of dividends, if any, in the future is within the discretion of the
Board of Directors and will depend on the Company's earnings, its capital
requirements and financial condition. It is the present intention of the Board
of Directors to retain all earnings, if any, for use in the Company's business
operations and, accordingly, the Board of Directors does not expect to declare
or pay any dividends in the foreseeable future. In addition, under the Credit
Agreement there are limitations on the Company's ability to pay dividends.

12
<PAGE>
CAPITALIZATION

The following table sets forth the consolidated capitalization of the
Company at March 31, 1996 and as adjusted to give effect to the exercise of
options for 65,000 shares of Common Stock being sold by Selling Stockholders in
this offering, the sale of the 900,000 shares of Common Stock offered by the
Company hereby and the application of the net proceeds therefrom as described
under "Use of Proceeds."

<TABLE>
<CAPTION>
MARCH 31, 1996
----------------------
ACTUAL AS ADJUSTED
--------- -----------
(IN THOUSANDS, EXCEPT
SHARE DATA)
<S> <C> <C>
Current maturities of long term debt and capital lease obligations..................... $ 987 $ 143
--------- -----------
--------- -----------
Long term debt and capital lease obligations, less current maturities.................. $ 10,559 $ 3,557
--------- -----------
Stockholders' equity:
Preferred Stock, $.01 par value; 1,000,000 shares authorized; no shares issued or
outstanding......................................................................... -- --
Common Stock, $.01 par value; 30,000,000 shares authorized; 8,421,302 shares issued
and outstanding, actual; and 9,386,302 shares issued and outstanding, as adjusted
(1)................................................................................. 84 94
Additional paid-in capital (2)......................................................... 29,402 51,923
Retained earnings(3)................................................................... 8,760 8,760
Cumulative translation adjustment...................................................... (4) (4)
--------- -----------
Total stockholders' equity........................................................... 38,242 60,773
--------- -----------
Total capitalization............................................................... $ 48,801 $ 64,330
--------- -----------
--------- -----------
</TABLE>

- --------------
(1) Does not include (i) 664,860 shares of Common Stock issuable upon the
exercise of options outstanding at March 31, 1996 under the Omnibus Plan
(exclusive of an aggregate of 15,000 shares of Common Stock to be sold by
certain Selling Stockholders in this offering upon the exercise of
outstanding stock options), (ii) 147,749 shares of Common Stock issuable
upon the exercise of the State Street Warrant, (iii) 439,492 shares of
Common Stock issuable upon the exercise of options held by an officer
(exclusive of an aggregate of 50,000 shares of Common Stock to be sold by
such officer in this offering upon the exercise of outstanding stock
options), and (iv) 250,000 shares issuable upon conversion of the 9%
convertible subordinated note due December 1997 in the principal amount of
$3,500,000 (the "Convertible Note"). See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources," "Management -- 1994 Omnibus Incentive Plan," "Management
-- Employment Agreements" and Note 5 of Notes to Consolidated Financial
Statements of the Company.

(2) Includes $514,368 related to the income tax benefits associated with the
exercise of non-qualified stock options held by certain Selling Stockholders
who will sell the underlying shares pursuant to this offering. Also includes
$222,950 to be received by the Company upon the exercise of such stock
options.

(3) Does not include approximately $41,000 of extraordinary loss (net of income
taxes) on the early retirement of indebtedness with the proceeds of this
offering.

13
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA

The following selected historical financial data have been derived from the
Consolidated Financial Statements of the Company. The Consolidated Financial
Statements of the Company and Notes thereto as of December 31, 1994 and 1995 and
for each of the years in the three-year period ended December 31, 1995, together
with the report thereon of Arthur Andersen LLP, independent public accountants,
are included elsewhere in this Prospectus. The selected historical financial
data for the three-month periods ended April 2, 1995 and March 31, 1996 have
been derived from the Company's unaudited consolidated financial statements and
include, in the opinion of management, all normal recurring adjustments
necessary to present fairly the data for such periods. The operating results for
the three-month periods are not necessarily indicative of the results that may
be expected for a full year. The selected historical financial data below should
be read in conjunction with the Consolidated Financial Statements of the Company
and Notes thereto, "Pro Forma Financial Information" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, ----------------------
----------------------------------------------------- APRIL 2, MARCH 31,
1991 1992 1993 1994 1995 1995 1996
--------- --------- --------- --------- --------- --------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales..................................... $ 14,211 $ 17,883 $ 22,938 $ 30,100 $ 52,124 $ 11,968 $ 14,779
Costs and expenses:
Cost of sales............................... 9,570 12,797 14,487 16,796 31,525 7,302 8,665
Selling, general and administrative
expenses................................... 2,921 3,391 4,076 6,290 8,217 1,845 2,293
Product development expenses................ 465 610 728 829 1,973 601 589
Corporate relocation expenses............... -- -- 1,500 -- -- -- --
Other expense (income), net................. 63 (322) 142 12 1,328 332 426
Interest expense............................ 600 548 426 407 2,116 909 163
--------- --------- --------- --------- --------- --------- -----------
Income before income taxes, extraordinary loss
and cumulative effect of accounting change... 592 859 1,579 5,766 6,965 979 2,643
Provision for income taxes.................... 265 331 680 2,227 2,499 347 1,015
--------- --------- --------- --------- --------- --------- -----------
Income before extraordinary loss and
cumulative effect of accounting change....... 327 528 899 3,539 4,466 632 1,628
Extraordinary loss on early retirement of
debt, net of income taxes.................... -- -- -- (103) (1,823) -- --
Cumulative effect of change in accounting for
income taxes................................. -- -- 301 -- -- -- --
--------- --------- --------- --------- --------- --------- -----------
Net income.................................... 327 528 1,200 3,436 2,643 632 1,628
Accretion of common stock put warrants........ -- -- -- 186 45 25 --
--------- --------- --------- --------- --------- --------- -----------
Net income available for common
stockholders................................. $ 327 $ 528 $ 1,200 $ 3,250 $ 2,598 $ 607 $ 1,628
--------- --------- --------- --------- --------- --------- -----------
--------- --------- --------- --------- --------- --------- -----------
Net income per common share-primary:
Income before extraordinary loss and
cumulative effect of accounting change..... $ 0.05 $ 0.09 $ 0.14 $ 0.54 $ 0.58 $ 0.10 $ 0.18
Extraordinary loss.......................... -- -- -- (0.02) (0.24) -- --
Cumulative effect of accounting change...... -- -- 0.05 -- -- -- --
--------- --------- --------- --------- --------- --------- -----------
Net income.................................. $ 0.05 $ 0.09 $ 0.19 $ 0.52 $ 0.34 $ 0.10 $ 0.18
--------- --------- --------- --------- --------- --------- -----------
--------- --------- --------- --------- --------- --------- -----------
Net income (loss) per common share-fully
diluted:
Income before extraordinary loss and
cumulative effect of accounting change..... $ 0.05 $ 0.08 $ 0.14 $ 0.54 $ 0.58 $ 0.10 $ 0.18
Extraordinary loss.......................... -- -- -- (0.02) (0.24) -- --
Cumulative effect of accounting change...... -- -- 0.05 -- -- -- --
--------- --------- --------- --------- --------- --------- -----------
Net income.................................. $ 0.05 $ 0.08 $ 0.19 $ 0.52 $ 0.34 $ 0.10 $ 0.18
--------- --------- --------- --------- --------- --------- -----------
--------- --------- --------- --------- --------- --------- -----------
Weighted average common and common equivalent
shares outstanding:
Primary..................................... 6,160 6,090 6,187 6,250 7,646 6,253 8,971
--------- --------- --------- --------- --------- --------- -----------
--------- --------- --------- --------- --------- --------- -----------
Fully diluted............................... 6,454 6,385 6,482 6,250 7,646 6,253 8,971
--------- --------- --------- --------- --------- --------- -----------
--------- --------- --------- --------- --------- --------- -----------

AS OF
AS OF DECEMBER 31, ----------------------
----------------------------------------------------- APRIL 2, MARCH 31,
1991 1992 1993 1994 1995 1995 1996
--------- --------- --------- --------- --------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital............................... $ 2,472 $ 3,916 $ 3,157 $ 6,060 $ 6,174 $ 2,337 $ 5,629
Total assets.................................. 10,818 10,899 12,811 50,135 50,324 46,906 57,606
Long term debt and capital lease obligations,
less current maturities...................... 4,302 3,983 3,076 32,708 6,751 27,886 10,559
Stockholders' equity.......................... 2,385 2,330 3,534 6,842 36,593 7,504 38,242
</TABLE>

14
<PAGE>
PRO FORMA FINANCIAL INFORMATION

The following pro forma financial information for the year ended December
31, 1995 is based on the audited historical Consolidated Financial Statements of
the Company and the audited historical Combined Financial Statements of
Southeastern Biologics, Inc., Plasma Management, Inc. and Concho Biologics, Inc.
(the "Southeastern Group") included elsewhere in this Prospectus, adjusted to
give effect to the Southeastern Acquisition and the IPO (collectively, the
"Transactions"), as if they had occurred on January 1, 1995. The pro forma
adjustments are based upon available information and certain assumptions that
the Company believes are reasonable. The pro forma financial information for the
year ended December 31, 1995 does not purport to represent what the Company's
results of operations would actually have been had the Transactions in fact
occurred on January 1, 1995, or to project the Company's results of operations
for any future period. The pro forma financial information for the three months
ended March 31, 1996 is based upon the unaudited financial data of the Company
and the Southeastern Group and gives effect to the results of operations as if
the Transactions had occurred on January 1, 1996 and the net proceeds were used
to repay long-term debt as described in "Use of Proceeds."

For purposes of presenting pro forma results, no changes in revenues or
expenses have been made to reflect the results of any modification to operations
that might have been made had the Transactions been consummated on the assumed
effective date of the Transactions. The pro forma expenses include the recurring
costs which are directly attributable to the Transactions, such as interest
expense and the related tax effects thereof, and amortization of intangible
assets. The pro forma financial information should be read in conjunction with
the historical Consolidated Financial Statements of the Company and Notes
thereto and the historical Combined Financial Statements of the Southeastern
Group and Notes thereto included elsewhere in this Prospectus, "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Use of Proceeds."

15
<PAGE>
PRO FORMA CONSOLIDATED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
ADJUSTMENTS
FOR THE
COMPANY ADJUSTMENTS SOUTHEASTERN SOUTHEASTERN COMPANY
HISTORICAL FOR THE IPO GROUP (G) ACQUISITION PRO FORMA
----------- -------------- -------------- -------------- ---------
<S> <C> <C> <C> <C> <C>
Net sales.......................... $ 52,124 $ -- $ 4,748 $ -- $ 56,872
Costs and expenses:
Cost of sales.................... 31,525 -- 4,174 -- 35,699
Selling, general and
administrative expenses......... 8,217 (347)(a) 674 -- 8,544
Product development expenses..... 1,973 -- -- -- 1,973
Other expense (income), net...... 1,328 -- (57) 154(h) 1,425
Interest expense................. 2,116 (1,349)(b) 92 323(i) 1,182
----------- ------- ------ ------- ---------
Income (loss) before income taxes
and extraordinary loss............ 6,965 1,696 (135) (477) 8,049
Provision (benefit) for income
taxes............................. 2,499 644(c) (40) (181)(c) 2,922
----------- ------- ------ ------- ---------
Income (loss) before extraordinary
loss.............................. 4,466 1,052 (95) (296) 5,127
Extraordinary loss on early
retirement of debt, net of income
taxes............................. (1,823) 1,823(d) -- -- --
----------- ------- ------ ------- ---------
Net income (loss).................. 2,643 2,875 (95) (296) 5,127
Accretion of common stock put
warrants.......................... 45 (45)(e) -- -- --
----------- ------- ------ ------- ---------
Net income (loss) available for
common stockholders............... $ 2,598 $ 2,920 $ (95) $ (296) $ 5,127
----------- ------- ------ ------- ---------
----------- ------- ------ ------- ---------
Net income (loss) per common share
-- primary:
Income before extraordinary
loss............................ $ 0.58 $ 0.58
Extraordinary loss............... (0.24) --
----------- ---------
Net income......................... $ 0.34 $ 0.58
----------- ---------
----------- ---------
Weighted average common and common
equivalent shares outstanding:
Primary.......................... 7,646 1,151(f) 8,797
----------- ------- ---------
----------- ------- ---------
</TABLE>

16
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE PERIOD ENDED DECEMBER 31, 1995
(IN THOUSANDS)

(a) To reflect the reversal of compensation expense related to the accelerated
vesting of an option to an officer.

(b) To reflect the decrease in interest expense with respect to the following:

<TABLE>
<S> <C>
- - Borrowings repaid in connection with the IPO under a term credit facility
in the aggregate principal amount of $16.7 million at an interest rate of
LIBOR plus 3.25% (a weighted average interest rate of 9.21%).............. $ 713
- - Borrowings repaid in connection with the IPO under subordinated debt in
the (face) principal amount of $7.5 million at a stated interest rate of
10.9%, plus amortization of the original issue discount................... 577
- - Reduction in debt issuance cost amortization on a term credit facility and
subordinated debt......................................................... 59
---------
$ 1,349
---------
---------
</TABLE>

(d) To reflect the reversal in the extraordinary loss of $1.8 million (net of
income taxes) resulting from the early retirement of subordinated debt and
borrowings under a term credit facility in connection with the IPO.

(e) Reduction in accretion of common stock put warrants terminated in connection
with the IPO.

(f) To adjust weighted average shares to reflect the sale of the 2,400,000
shares of Common Stock in connection with the IPO as if the transaction had
occurred on January 1, 1995.

(g) Reflects the combined results of operations of six donor centers operated by
the Southeastern Group acquired by the Company on March 6, 1996 in the
Southeastern Acquisition for the period from January 1, 1995 to December 31,
1995. The Southeastern Acquisition was accounted for using the purchase
method of accounting. The total purchase price for the Southeastern
Acquisition has been allocated to the tangible and identifiable intangible
assets based upon the Company's preliminary estimates of their fair value
with the excess of cost over net assets acquired allocated to goodwill.

(h) To reflect the increase in amortization expense related to the intangible
assets acquired in the Southeastern Acquisition:

<TABLE>
<S> <C>
Goodwill.................................................... $ 120
FDA Licenses................................................ 24
Noncompete agreements....................................... 10
---------
$ 154
---------
---------
</TABLE>

(i) To reflect the increase in interest expense with respect to the following:

<TABLE>
<S> <C>
- - Borrowings incurred in connection with the Southeastern Acquisition under
the Revolving Credit Facility in the aggregate principal amount of $4.7
million at an interest rate of LIBOR plus 1.5% (6.9% at March 31, 1996).... $ 323
---------
---------
</TABLE>

17
<PAGE>
PRO FORMA CONSOLIDATED STATEMENT OF INCOME FOR THE THREE MONTHS ENDED MARCH 31,
1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
ADJUSTMENTS
FOR THE
COMPANY SOUTHEASTERN SOUTHEASTERN COMPANY
HISTORICAL GROUP(A) ACQUISITION PRO FORMA
----------- ------------- ------------- -----------
<S> <C> <C> <C> <C>
Net sales........................................................ $ 14,779 $ 1,016 $ -- $ 15,795
Costs and expenses:
Cost of sales.................................................. 8,665 892 -- 9,557
Selling, general and administrative expenses................... 2,293 104 -- 2,397
Product development expenses................................... 589 -- -- 589
Other expense (income), net.................................... 426 2 38(b) 466
Interest expense............................................... 163 19 58(c) 240
----------- ------ ----- -----------
Income (loss) before income taxes................................ 2,643 (1) (96) 2,546
Provision (benefit) for income taxes............................. 1,015 -- (36)(d) 979
----------- ------ ----- -----------
Net income (loss)................................................ $ 1,628 $ (1) $ (60) $ 1,567
----------- ------ ----- -----------
----------- ------ ----- -----------
Net income per common share:
Primary........................................................ $ 0.18 $ 0.17
----------- -----------
----------- -----------
Weighted average common and common equivalent shares outstanding:
Primary........................................................ 8,971 8,971
----------- -----------
----------- -----------
</TABLE>

- --------------

(a) Reflects the combined results of operations of six donors centers operated
by the Southeastern Group acquired by the Company on March 6, 1996 in the
Southeastern Acquisition for the period from January 1, 1996 to March 6,
1996. The Southeastern Acquisition was accounted for using the purchase
method of accounting. The total purchase price for the Southeastern
Acquisition has been allocated to the tangible and identifiable intangible
assets based upon the Company's preliminary estimates of their fair value
with the excess of cost over net assets acquired allocated to goodwill.

(b) To reflect the increase in amortization expense related to the intangible
assets acquired in the Southeastern Acquisition:

<TABLE>
<S> <C>
Goodwill..................................................... $ 30
FDA Licenses................................................. 6
Noncompete agreements........................................ 2
---------
$ 38
---------
---------
</TABLE>

(d) To record the income tax effect of the pro forma adjustments based on the
Company's statutory tax rate.

18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

The Company is a leading worldwide provider of specialty human
antibody-based products and services to major healthcare companies. Until
November 1994, the business of the Company was conducted through Serologicals
and its wholly owned subsidiary, Bioscot, Ltd. ("Bioscot"). In November 1994,
the Board of Directors approved a corporate reorganization whereby Serologicals
Holdings, Inc., a Delaware corporation, was formed to become the parent company
of Serologicals and Seramune, Inc. ("Seramune") and their respective
subsidiaries. Seramune was formed to consummate the Seramune Acquisition, which
occurred on December 23, 1994. In May 1995, Serologicals Holdings, Inc. changed
its name to Serologicals Corporation.

As of March 31, 1996, Serologicals operated 13 donor centers that specialize
in the collection of specialty antibodies. Bioscot operated two FDA-licensed
monoclonal antibody manufacturing facilities in Scotland. Seramune operated 26
donor centers that collect antibodies for IVIG. The acquisition of Seramune
represented the Company's entry into the IVIG antibody market.

In June 1995, the Company completed the IPO and issued 2.4 million shares of
Common Stock at a price of $11.50 per share. The net proceeds to the Company of
$24.6 million, plus cash on hand of approximately $400,000, were used to retire
$7.5 million of subordinated debt and approximately $17.5 million of borrowings
under a term credit facility incurred primarily for the Seramune Acquisition. An
extraordinary charge of $1.8 million (net of income taxes) was recorded in
relation to the early extinguishment of this debt and associated debt issuance
costs. Additionally, the Company recognized a non-recurring, non-cash charge of
$346,500 for compensation expense ($215,000 net of income taxes) related to the
acceleration of vesting of an officer's stock options.

In July 1995, the Company amended its Credit Agreement with its bank and
obtained a $20.0 million Revolving Credit Facility to finance future
acquisitions, product development and new business opportunities.

RECENT ACQUISITIONS

On October 2, 1995, the Company acquired all of the capital stock of
Allegheny Biologicals, Inc. ("ABI"). ABI operates two specialty donor centers,
in Jacksonville, Florida and Pittsburgh, Pennsylvania. The Company paid
approximately $2.5 million in cash and also agreed to pay additional contingent
consideration of up to $500,000 in the future based upon ABI achieving certain
performance measures. On February 14, 1996, the Company purchased a specialty
donor center located in Washington, D.C. and certain other assets located in
Jacksonville, Florida from Am-Rho Laboratories, Inc. (the "Am-Rho Acquisition").
The purchase price consisted of $1.1 million in cash at closing, the assumption
of certain liabilities and forgiveness of a $500,000 note receivable from Am-Rho
Inc., the parent of Am-Rho Laboratories, Inc. On March 6, 1996, the Company
acquired all of the capital stock of Southeastern Biologics, Inc. and Plasma
Management, Inc. and the assets of Concho Biologics, Inc. (the "Southeastern
Acquisition"). The purchase price consisted of $3.6 million in cash, the
assumption of $1.1 million of indebtedness and additional contingent
consideration to be paid based on the performance of the acquired business over
the 12 months subsequent to the closing. All of these acquisitions were
accounted for using the purchase method.

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<PAGE>
RESULTS OF OPERATIONS

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

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, -------------------------
------------------------------------- APRIL 2, MARCH 31,
1993 1994 1995 1995 1996
----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Net sales.................................................. 100.0% 100.0% 100.0% 100.0% 100.0%
Gross profit............................................... 36.8 44.2 39.5 39.0 41.4
Selling, general and administrative expenses............... 17.8 20.9 15.8 15.4 15.5
Product development........................................ 3.1 2.8 3.8 5.0 4.0
Income before extraordinary loss........................... 3.9 11.8 8.6 5.3 11.0
Net income available for common stockholders............... 5.2 10.8 5.0 5.1 11.0
</TABLE>

THREE MONTHS ENDED APRIL 2, 1995 AND MARCH 31, 1996

Net sales increased 23.5%, or $2.8 million, from $12.0 million in 1995 to
$14.8 million in 1996. The increase in net sales was due primarily to increased
shipments of anti-D and IVIG antibodies and, to a lesser extent, price
increases. Net sales of the Company's therapeutic products increased 38.9%,
while net sales of its diagnostic products decreased 10.4% from the comparable
period in the prior year. The decrease in net sales of diagnostics products was
due primarily to reduced shipments of clinical diagnostic antibodies resulting
from temporary inventory shortages of certain antibodies.

Gross profit increased 31.0%, or $1.4 million, from $4.7 million in 1995 to
$6.1 million in 1996. The increase in gross profit is due largely to increased
net sales of anti-D and IVIG antibodies. The increase in gross profit as a
percentage of net sales reflects the increase in net sales of anti-D and
anti-HBs, which typically generate higher gross margins than those generated on
non-specialty antibody-based products. Gross profit as a percentage of net sales
from the Company's specialty products increased from 44.6% in 1995 to 51.4% in
1996 as a result of both price increases and lower per unit production costs.

Selling, general and administrative expenses increased 24.2%, or $447,000,
from $1.8 million in 1995 to $2.3 million in 1996. The increase resulted
primarily from incremental administrative expenses associated with being a
public company, the hiring of an additional vice president in February 1996,
general corporate expenses associated with the Company's relocation of its
Seramune subsidiary to Colorado and incremental expenses related to the Am-Rho
Acquisition and the acquisition of ABI.

Product development expenses decreased approximately 2.0% from $601,000 in
1995 to $589,000 in 1996. The Company anticipates that product development
expenses, as a percentage of sales, will increase slightly in 1996 over 1995
levels due to increased expenditures related to the development of monoclonal
anti-D therapeutic antibodies.

Other expense (income), net increased 28.3%, or $94,000, from $332,000 in
1995 to $426,000 in 1996 due primarily to amortization of intangible assets as a
result of the acquisition of ABI in October 1995 and the Am-Rho Acquisition and
the Southeastern Acquisition in February 1996 and March 1996, respectively.

Interest expense decreased 82.1%, or $746,000, from $909,000 in 1995 to
$163,000 in 1996, primarily as a result of the retirement of approximately $25.0
million in debt in June 1995 with proceeds from the IPO.

YEARS ENDED DECEMBER 31, 1994 AND 1995

Net sales increased 73.2%, or $22.0 million, from $30.1 million in 1994 to
$52.1 million in 1995. The increase relates primarily to net sales of $16.2
million resulting from the Seramune Acquisition, increased shipments of anti-D
and monoclonal antibodies and, to a lesser extent, price increases. Net sales of
the Company's therapeutic and diagnostic product lines increased 118.9% and
19.8%, respectively, from the prior year.

Gross profit increased 54.8%, or $7.3 million, from $13.3 million in 1994 to
$20.6 million in 1995. The increase was due largely to $3.1 million of
additional gross profit associated with Seramune's net sales of

20
<PAGE>
IVIG antibodies and increased net sales of anti-D antibodies and diagnostic
monoclonal antibodies, which are the Company's higher margin products. The
decrease in gross profit as a percentage of net sales reflects the additional
net sales of IVIG antibodies, which generally generate gross margins lower than
those associated with specialty antibody-based products. Gross profit from the
Company's specialty antibodies increased from 44.2% in 1994 to 48.8% in 1995.

Selling, general and administrative expenses increased 30.6%, or $1.9
million, from $6.3 million in 1994 to $8.2 million in 1995. Of this increase,
$635,000 was due to administrative expenses related to the new Seramune
subsidiary, $757,000 was to support additional growth and the costs of being a
public entity and $141,000 was related to upgrading the Company's information
systems. The remainder was primarily attributed to a non-recurring, non-cash
charge to compensation expense of $346,500 related to the accelerated vesting of
an officer's stock options in connection with the IPO. Selling, general and
administrative expenses decreased as a percentage of net sales in 1995 from
1994.

Product development expenses increased 137.9%, or $1.1 million, from
$830,000 in 1994 to $2.0 million in 1995. Of this increase, $513,000 was the
result of a collaboration between the Company and the Scottish National Blood
Transfusion Service ("SNBTS") to develop monoclonal anti-D therapeutic products.
Additionally, the Company initiated several other development projects in late
1994 and 1995 designed to enhance existing products, which resulted in increased
product development expenses in 1995. The Company anticipates that product
development expenses, as a percentage of sales, will increase slightly in 1996
resulting from continued development of monoclonal anti-D therapeutic antibodies
and the expansion into specialty biologic products and services.

Other expense (income), net increased $1.3 million from $12,000 in 1994 to
$1.3 million in 1995 due primarily to amortization of intangible assets as a
result of the acquisitions of Seramune and ABI.

Interest expense increased $1.7 million from $407,000 in 1994 to $2.1
million in 1995, primarily from indebtedness incurred in connection with the
Seramune Acquisition.

The effective tax rate as reflected in the provision for taxes decreased
from 38.6% in 1994 to 35.9% in 1995. This decrease is due primarily to a
significant increase in Bioscot's pre-tax earnings which are taxed at a lower
rate than earnings in the United States.

Extraordinary loss (net of income taxes) increased $1.7 million from
$103,000 in 1994 to $1.8 million in 1995 due to the early extinguishment of debt
in the second quarter from the proceeds of the IPO. Approximately $1.4 million
of this amount relates to the acceleration of the original issue discount
associated with the repayment of subordinated debt. The remainder relates to the
write-off of the debt issuance costs associated with the repayment of debt from
IPO proceeds.

YEARS ENDED DECEMBER 31, 1993 AND 1994

Net sales increased 31.2%, or $7.2 million, from $22.9 million in 1993 to
$30.1 million in 1994 primarily as a result of increased net sales of the
Company's anti-D antibodies and to a lesser extent net sales of certain other
therapeutic and diagnostic specialty antibodies. These increases resulted both
from increased product volume and price increases. Net sales of the Company's
therapeutic and diagnostic product lines increased 49.9% and 18.6%,
respectively, from 1993 to 1994.

Gross profit increased 56.4%, or $4.8 million, from $8.5 million in 1993 to
$13.3 million in 1994. The increase in gross profit reflects increased net
sales, a greater proportion of certain higher margin therapeutic and diagnostic
antibodies and increased production efficiencies from the Company's existing
operating facilities.

Selling, general and administrative expenses increased 54.3%, or $2.2
million, from $4.1 million in 1993 to $6.3 million in 1994. The increase was due
primarily to additional selling and marketing expenses associated with a higher
sales volume, additional professional and legal expenses associated with the
corporate reorganization and increased expenses related to information systems,
bonus and incentive compensation and regulatory compliance.

21
<PAGE>
Product development expenses increased 14.0%, or $102,000, from $728,000 in
1993 to $830,000 in 1994. This increase was attributed to the development of
diagnostic monoclonal antibodies and enhancements to existing products. As a
percentage of sales, product development expenses decreased slightly from 3.2%
in 1993 to 2.8% in 1994.

The Company adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes," effective January 1, 1993. Accordingly, income of
$301,000 related to the cumulative effect of this accounting change was recorded
in 1993. The effective tax rate as reflected in the provision for taxes in 1993
and 1994 were 43.1% and 38.6%, respectively.

LIQUIDITY AND CAPITAL RESOURCES

As of March 31, 1996, the Company had cash on hand and working capital of
$1.6 million and $5.6 million, respectively.

Net cash flow provided by (used in) operations for the quarter ended April
2, 1995, was ($5,000) as compared to $355,000 for the quarter ended March 31,
1996. The increase in cash flow from operations resulted mainly from an increase
in net income of $1.0 million due to improved profitability and lower interest
expense offset by an increase in the Company's receivables and a decrease in
deferred revenues. Net cash flow provided by operations for 1993, 1994 and 1995
was $1.7 million, $4.8 million and $7.4 million, respectively. The increase in
cash flow provided by operations in 1994 was the result of improved operating
margins and improved management of accounts receivable, inventory and accounts
payable, offset in part by payment of previously accrued corporate relocation
expenses. Cash flow from operations increased in 1995 due primarily to increased
profitability, improved inventory and accounts payable management and the
additional cash flow provided by the Seramune operations acquired in late 1994.

Net cash flow used in investing activities for the quarter ended April 2,
1995, was $674,000 as compared to $5.1 million for the quarter ended March 31,
1996. The increase in investing activities related primarily to the Am-Rho
Acquisition and the Southeastern Acquisition. Net cash flow used in investing
activities for 1993, 1994 and 1995 was $670,000, $32.0 million and $4.6 million,
respectively. The significant change in investing activities in 1994 related
predominantly to the Seramune Acquisition and the corporate relocation to
Atlanta. Investing activities in 1995 included the acquisition of three
non-specialty antibody donor centers and the acquisition of ABI for total
consideration of approximately $3.0 million, the opening of two new
non-specialty antibody donor center locations, and other capital expenditures in
the normal course of business.

Net cash flow provided by (used in) financing activities, including the
effects of changes in foreign currency rates, for the quarter ended April 2,
1995 was ($4.8 million) as compared to $3.4 million for the quarter ended March
31, 1996. The increase in net cash flow provided by financing activities in the
1996 period related primarily to the repayment in January 1995 of a $25.5
million promissory note related to the Seramune Acquisition with proceeds of a
$21.0 million term credit facility as compared with the incurrence of
approximately $4.7 million of debt to finance the Southeastern Acquisition in
1996. Net cash flow provided by (used in) financing activities, including the
effects of changes in foreign exchange rates, for 1993, 1994 and 1995 was ($1.3
million), $33.2 million and ($6.8 million), respectively. The net cash flow
provided in 1994 was primarily the result of the senior and subordinated debt
borrowed in connection with the Seramune Acquisition. The net cash used in
financing activities in 1995 relates primarily to (i) the repayment of the $25.5
million short term promissory note due to the sellers in the Seramune
Acquisition with the proceeds of the $21.0 million term credit facility and $4.5
million cash on hand, (ii) scheduled principal payments of $1.4 million related
to the term credit facility and (iii) cash provided by the IPO proceeds of $24.6
million.

On June 20, 1995, the net proceeds from the Company's IPO and $400,000 of
cash on hand were used to repay subordinated debt of $7.5 million and a term
credit facility of $17.5 million. An extraordinary loss of $1.8 million (net of
income taxes) was recorded which related to the early extinguishment of this
debt. At March 31, 1996, total long-term debt, including current maturities, was
$10.6 million.

Capital expenditures relate primarily to the Company's facilities, related
equipment and the acquisition or development of additional specialty and
non-specialty antibody donor centers. During the quarters ended

22
<PAGE>
April 2, 1995, and March 31, 1996, capital expenditures were $403,000 and
$459,000, respectively. The increase in capital expenditures in 1996 was due
primarily to the renovation of the two ABI donor centers. For the years ended
1993, 1994 and 1995, capital expenditures were $760,000, $2.1 million and $1.5
million, respectively. The increase in capital expenditures in 1994 was due to
expenditures of approximately $800,000 associated with the relocation of the
Company's headquarters to Atlanta, $689,000 related to the enhancement of
monoclonal production capacity and other expenditures in the ordinary course of
business. Capital expenditures in 1995 related primarily to expenditures of
$583,000 by Seramune to relocate, add and update a number of its non-specialty
donor centers; expenditures of $478,000 to expand the Company's monoclonal
production capacity; and other expenditures in the normal course of business.

During 1996, the Company anticipates a significant increase in capital
expenditures. The major factors affecting this increase include (i) the
relocation and expansion of the Company's monoclonal production facilities in
Scotland; (ii) the re-engineering and upgrading of the Company's information
systems to support its planned growth; and (iii) the development, relocation and
upgrading of specialty and non-specialty donor centers to increase production
capabilities and efficiencies.

In early 1996, the Company received a grant from a governmental authority in
Scotland to defray a portion of the expenses associated with the relocation and
expansion of its monoclonal production facilities. The grant of up to
approximately L580,000 is payable to the Company in three installments over
approximately three years and the timing and amount of the payments are subject
to (i) the level of capital expenditures made and (ii) the creation of
additional jobs at Bioscot.

On July 20, 1995, the Company entered into the Revolving Credit Facility
with NationsBank providing for maximum borrowings of $20.0 million. The
Revolving Credit Facility has a three-year term with a variable interest rate
and provides for a maximum of $15.0 million for future acquisitions. The Company
anticipates using the proceeds from the Revolving Credit Facility to fund
capital expenditures, acquisitions and any increased working capital needs. The
amount outstanding under the Revolving Credit Facility was $2.1 million at
December 31, 1995 and $6.8 million at March 31, 1996.

The Company believes that existing cash balances, cash generated from
operations, net proceeds from this offering and the borrowing capacity available
under the Revolving Credit Facility are sufficient to fund operations and
anticipated capital expenditures for at least the next 12 months and may be used
to fund the Company's acquisition strategy.

The Company is in the second year of a five-year supply contract with Bayer
for the sale of antibodies for IVIG. The contract provides for successive
one-year renewals, unless notice is given by either party, and commitments from
Bayer to purchase specified amounts on an escalating basis over the five-year
term. Revenues under this contract represented 31.1% of the Company's revenues
in 1995. Early termination of the contract could adversely affect the Company's
ability to meet its financial obligations in the short term. In addition, as
part of the Southeastern Acquisition, the Company acquired a second supply
contract with Bayer for the sale of antibodies for IVIG, with terms
substantially similar to those contained in the Company's existing contract with
Bayer except as it relates to volume levels. See "Business -- Marketing and
Customers."

On January 21, 1996, the Company entered into an amended agreement with the
holders of the Convertible Note issued in the principal amount of $3.5 million
in connection with the Seramune Acquisition. Under the terms of the amendment,
the earliest call date of the note was changed from January 21, 1996 to January
21, 1997, the interest rate decreased to 9% from 12% and the conversion price
increased to $14.00 from $10.93 per share of Common Stock. The amended agreement
decreases the number of shares issuable at conversion from approximately 320,500
shares to 250,000 shares.

The Company financed the $1.1 million cash paid at closing of the Am-Rho
Acquisition with cash on hand. On March 6, 1996, the Company borrowed
approximately $3.6 million under the Revolving Credit Facility to pay the amount
payable at the closing of the Southeastern Acquisition. The assumed debt of
approximately $1.1 million associated with the Southeastern Acquisition was
repaid with proceeds from the Revolving Credit Facility during March 1996.

23
<PAGE>
FOREIGN OPERATIONS

The Company's foreign operations are primarily conducted through Bioscot.
During the first quarters of 1995 and 1996, foreign operations accounted for
18.6% and 15.1% of net sales and 19.0% and 14.6% of income from operations,
respectively. In 1993, 1994 and 1995, foreign operations accounted for 17.6%,
20.6% and 17.8% of net sales and 33.7%, 22.8% and 22.6% of income from
operations, respectively. The increase in net sales associated with foreign
operations in 1994 was the result of increased shipments of monoclonal
antibodies. Export sales from the United States were $3.7 million, $5.3 million
and $11.6 million during 1993, 1994 and 1995, respectively. See Note 13 of Notes
to Consolidated Financial Statements of the Company.

The functional currency of Bioscot is the British pound sterling.
Fluctuations in foreign exchange rates can impact operating results, including
total revenues and expenses, when translations of the subsidiary financial
statements are made in accordance with SFAS No. 52, "Foreign Currency
Translation." It has not been the Company's practice to hedge its assets and
liabilities in the United Kingdom or its intercompany transactions due to the
inherent risks associated with foreign currency hedging transactions and the
timing of payment between the Company and Bioscot. In 1993, 1994 and 1995, the
Company recorded foreign currency transaction gains of $37,000, $72,000 and
$29,000, respectively.

OUTLOOK

The Company's strategy is to enhance its position in the specialty antibody
segment of the industry and to take advantage of emerging opportunities relating
to the provision of other biologic products and services. The key elements of
this strategy include (i) expanding its core business by increasing its donor
base and broadening the range of antibodies it sources and the services it
provides; (ii) pursuing selective acquisitions to capitalize on opportunities in
a consolidating industry; (iii) expanding customer relationships by providing
additional services, allowing the Company to become more deeply involved in its
customers' product development, regulatory compliance and quality assurance
programs; (iv) seeking to increase the quality of antibodies and production
efficiencies; and (v) utilizing its existing donor center network and expertise
in biologic product development, manufacturing techniques and regulatory
compliance to capitalize on emerging opportunities in specialty biologic based
products and services. However, there can be no assurance that the Company will
be successful in achieving any or all of the elements of its strategy.

External growth is a significant component of the Company's strategic plan.
The Company's strategy includes acquisitions of selected specialty and
non-specialty donor centers, as well as businesses that provide services and
products that are complementary to its existing business. The Company believes
that these acquisitions will enable it to leverage its core competencies and its
general and administrative infrastructure, thereby creating economies of scale.
However, there can be no assurance that the Company will be able to complete
suitable acquisitions in the future.

The Company intends to capitalize on its existing monoclonal technology to
take advantage of the increasing preference of its customers for more consistent
and uniform antibody yields achievable through monoclonal manufacturing
techniques. To achieve this goal, the Company is committing capital resources to
expand its monoclonal antibody production facilities in Scotland. This expansion
will enable the Company to implement more efficient manufacturing techniques, as
well as provide additional production capacity for diagnostic monoclonal
products and the development of therapeutic monoclonal products. The Company is
developing therapeutic monoclonal products using the approach that led to the
Company's ability to commercialize monoclonal products for diagnostic purposes.
However, there can be no assurance that the Company will be successful in the
development of such products.

24
<PAGE>
donating in the future, or certain new testing and screening procedures may be
required to be performed with respect to certain donors. In certain
circumstances, the loss of donors, or the cost of additional testing procedures,
could have an adverse effect on the Company's operating results.

RECENT ACCOUNTING PRONOUNCEMENTS

In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 121 ("SFAS 121") "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of", which becomes effective for fiscal years beginning after December 15, 1995.
SFAS 121 establishes standards for determining when impairment losses on
long-lived assets have occurred and how impairment losses should be measured.
The Company adopted SFAS 121 effective January 1, 1996. The financial statement
impact of adopting SFAS 121 was not material.

In October 1995, the FASB issued Statement of Financial Accounting Standards
No. 123 ("SFAS 123") "Accounting for Stock-Based Compensation," which becomes
effective for fiscal years beginning after December 15, 1995. SFAS 123
establishes new financial accounting and reporting standards for stock-based
compensation plans. However, entities are allowed to elect whether to measure
compensation expense for stock-based compensation under SFAS 123 or APB No. 25,
"Accounting for Stock Issued to Employees." The Company has elected to remain
with the accounting under APB No. 25 and will make the required pro forma
disclosures of net income and earnings per share as if the provisions of SFAS
123 had been applied in its December 31, 1996 financial statements. The
potential impact of adopting this standard on the Company's pro forma
disclosures of net income and earnings per share has not been quantified at this
time.

25
<PAGE>
BUSINESS

GENERAL

The Company is a leading worldwide provider of specialty human
antibody-based products and services to major healthcare companies. The
Company's services, including donor recruitment, donor management and clinical
testing services, enable the Company to provide value-added products that are
used as the active ingredients in therapeutic products for the treatment and
management of Rh incompatibility in newborns, rabies and hepatitis and in
diagnostic products such as blood typing reagents and diagnostic test kits. In
addition, the Company collects and produces antibodies for the manufacture of
intravenous immune globulin, a product containing a broad spectrum of antibodies
for use in the treatment of a wide variety of medical indications. The Company
conducts its operations through a national network of 39 donor centers and
through laboratories located in the United States and the United Kingdom. Many
of the Company's donor centers are strategically located at or near medical
campuses, enhancing the Company's ability to source specialty antibodies from
medical community referrals.

INDUSTRY OVERVIEW

The human blood products and services industry encompasses a number of
markets, with products ranging from whole blood, which is used for direct
transfusions, to blood components, such as source plasma, specialty antibodies
found in source plasma, and other specialty biologic components. Source plasma
(the clear liquid portion of the blood characterized by non-specific
concentrations of antibodies) is used to manufacture many products that treat a
variety of medical indications. Antibodies are soluble components contained in
plasma which are produced by the immune system to fight specific diseases.

The largest segment of the industry is comprised of non-profit
organizations, such as the American Red Cross and community blood banks, which
supply whole blood and other transfusible products to hospitals. The commercial
segment of the market is focused primarily on supplying source plasma, specialty
antibodies and specialty biologic components to healthcare companies for use as
the active ingredients in therapeutic and diagnostic products. According to The
Marketing Research Bureau Inc., an independent market research company, the
worldwide market for finished products made from plasma-based products has grown
from $1.5 billion in 1984 to approximately $4.6 billion in 1994 and is expected
to approximate $6.4 billion by the year 2000.

The specialty segment of the industry includes products consisting of
specialty antibodies and cells. Specialty antibodies are typically used to
manufacture products for treating persons exposed to or at risk of contracting a
specific disease and to make diagnostic products used to screen patients for
prior exposure to a specific disease or to determine blood type. Specialty
antibodies range from those used to treat tetanus and cytomegalovirus, which the
Company believes generally sell for approximately $85 to $90 per liter, to high-
end products such as anti-D, an antibody used to treat Rh incompatibility in
newborns, anti-hepatitis and antibodies for blood typing reagents, which the
Company believes generally sell for approximately $350 to $700 per liter. By
comparison, the average industry gross price of source plasma is approximately
$75 to $80 per liter. The Company's pricing for its specialty antibodies
averaged $413 per liter in 1995, an increase of approximately 10% over the prior
year.

The Company believes that there are a number of factors increasing the
demand for antibody-based products. In the treatment of certain diseases such as
rabies and Rh incompatibility in newborns, antibody-based products are the only
generally accepted treatment or prevention for such diseases. In addition,
medical and scientific advances are increasing the demand for antibodies for new
and improved therapies, such as the recent FDA approval of anti-D immune
globulin to treat Idiopathic Thrombocytopenic Purpura (a platelet-destroying
disease common among AIDS patients), and the relatively recent use of human
antibodies to treat rabies. The Company also believes that healthcare reform is
spurring the demand for alternatives to antibiotics and vaccines, such as the
use of antibody-based products for disease management. Additionally, increasing
regulation and concerns relating to blood safety are causing demand for a
broader array of antibody-based diagnostic tests used to evaluate blood samples.
The demand for more diverse diagnostic tests is also increasing as world
population migration is spreading diseases which were once

26
<PAGE>
confined to specific geographic areas. The Company also believes that the aging
of the U.S. population is increasing the demand for specialty antibody-based
products that are as efficacious as, but less toxic than, many current treatment
regimens.

The Company believes that there a number of factors which are limiting the
supply of antibody-based products. The supply of antibodies has been adversely
affected by the more rigorous screening procedures required by regulatory
authorities and manufacturers of these products, which have disqualified a
portion of the potential donor population. Second, as customers require
increasingly higher concentrations of antibodies the qualified pool of donors is
further reduced. This requirement has resulted in an increasing need to boost
the concentration of antibodies in donors through vaccination or
hyperimmunization. Furthermore, the regulatory licenses required for antibody
collection sites (donor centers), testing facilities and biological products
serve as barriers to entry in the industry.

In addition to the demand and supply factors discussed above, the industry
is experiencing a number of trends. One such trend is the movement by healthcare
companies towards obtaining antibodies and other biologic products from a
smaller number of suppliers who can supply a wide array of products. The
resulting enhanced relationships between healthcare companies and these
suppliers have resulted in an increased tendency by some major healthcare
companies to outsource essential complex regulatory, testing and specialized
manufacturing. In addition, the increased regulatory environment, as well as the
increasing preference of customers for value-added services, requires suppliers
to have a high level of expertise and capital resources and makes it difficult
for small companies to compete effectively. As a result of these trends, the
industry is undergoing a consolidation.

STRATEGY

The Company's strategy is to enhance its leadership position in the
specialty antibody-based products industry and to take advantage of emerging
opportunities relating to the provision of specialty biologic products and
services. The key elements of this strategy include:

INCREASE INTERNAL GROWTH. The Company intends to increase its core business
by expanding its donor base through continued advertising and marketing efforts.
The Company also intends to expand the range of antibodies it sources and
specialty services it provides at its existing donor centers that currently do
not provide all of its products and services. For example, during 1995, 19 of
its non-specialty centers, which previously were licensed only to collect
antibodies used to manufacture IVIG, were licensed by the FDA to collect higher
margin specialty antibodies. During 1995, three additional non-specialty centers
were licensed by the FDA to collect antibodies used to manufacture IVIG.
Furthermore, the Company is expanding its monoclonal manufacturing capacity to
meet expected demand.

PURSUE SELECTIVE ACQUISITIONS. The Company believes that there are
consolidation opportunities in its industry, and as a consequence of its
expertise, relationships with major customers and donor network, it is well
positioned to achieve financial and operational efficiencies through selective
acquisitions. Examples of this are the Seramune Acquisition in December 1994,
whereby the Company acquired 16 donor centers and expanded its therapeutic
product line, the acquisition of ABI in October 1995, whereby the Company
acquired two specialty donor centers, the Am-Rho Acquisition in February 1996,
whereby the Company acquired one speciality donor center and the Southeastern
Acquisition in March 1996, whereby the Company acquired six additional
non-specialty donor centers. The Company believes that such acquisitions will
enable it to leverage its core competencies and infrastructure to allow the
acquired businesses to provide, on an incremental basis, additional higher
margin specialty products and services. The Company intends to continue to
pursue acquisitions of selected donor centers as well as acquisitions of
businesses that provide services and products that are complementary to its
existing business.

EXPAND CUSTOMER RELATIONSHIPS. The Company intends to become more involved
in its customers' product development, testing and quality assurance programs in
order to increase the level of sales to certain customers and generate higher
margins. In order to continue to enhance its relationships with customers, the
Company intends to provide additional value-added services such as utilizing its
donor network and clinical testing capability to characterize and quantify
antibodies and other blood components. In addition, by

27
<PAGE>
working more closely with its customers, the Company can anticipate demand for
its products and services sooner and more effectively. In 1994, Abbott named the
Company as one of two "Preferred Providers" of clinical diagnostic antibodies,
thereby enabling the Company to become more integrated with Abbott.

IMPROVE EFFICIENCIES AND QUALITY. The Company also continues to evaluate
ways to more effectively administer vaccines that enhance the concentration and
quality of its antibody products. In addition, the Company intends to focus
resources on its donor network to be able to identify, more accurately, the
optimal donor profile, enabling the Company to decrease donor recruitment costs
and increase donor retention. The Company also plans to seek opportunities
through established monoclonal techniques to increase efficiencies and quality
of antibodies. The Company currently manufactures 50 monoclonal antibody
products for diagnostic use, which generated in excess of $9.0 million of net
sales in 1995. The Company intends to capitalize on its existing monoclonal
technology to take advantage of the increasing preference of major healthcare
companies for the more consistent and uniform antibody yields achievable through
monoclonal techniques.

CAPITALIZE UPON ADDITIONAL GROWTH OPPORTUNITIES. The Company intends to
utilize its existing donor center network and expertise in product development,
manufacturing techniques and regulatory matters to capitalize upon emerging
opportunities in the healthcare services market. The Company intends to market
to healthcare companies its expertise in donor recruitment and management, as
well as its network of donor centers, to conduct clinical trials for drugs under
development. In 1994, for example, the Company was engaged by Univax Biologics,
Inc. to conduct a clinical trial to determine the safety and efficacy of a
product derived from donors who received an experimental HIV vaccine
manufactured by Genentech, Inc. Longer term, the Company intends to pursue
opportunities in providing additional products and patient care services through
its donor center network, including autologous blood processing and collecting
and providing stem cells and other therapeutic products and services to treat a
wide variety of diseases, thereby making greater and more efficient use of its
donor center infrastructure.

OPERATIONS

The Company conducts its operations through a national network of 39 donor
centers and through laboratories located in the United States and the United
Kingdom. Many of the Company's donor centers are strategically located on or
near medical campuses, enhancing the Company's ability to source specialty
antibodies from medical community referrals. During 1995, the Company applied
for and received licenses to collect "pre-existing" antibodies from donors at 19
of its non-specialty donor centers. The Company intends to further license the
majority of its non-specialty donor centers to hyperimmunize donors for the
purpose of expanding its capacity in the collection of specialty antibodies. The
Company anticipates it may take up to 24 months to receive FDA approval to
hyperimmunize donors at any given donor center location.

DONOR RECRUITMENT. The Company obtains its specialty antibodies from donors
with high concentrations of the antibodies sought. The Company maintains an
active communication network with medical professionals nationwide to assist in
identifying these donors. In addition, the Company is able to identify and react
rapidly to disease outbreaks in order to recruit suitable donors for specialty
antibodies created by such specific diseases. The Company actively seeks to
maintain and replenish its donor base for its therapeutic products and recruits
worldwide through a dedicated sourcing team for its diagnostic products. The
Company also maintains an ongoing advertising program to recruit donors and make
medical professionals aware of its capabilities and needs.

DONOR SCREENING AND PRODUCT COLLECTION. Each donor candidate undergoes a
process that includes program explanations, extensive screening and the
collection of test samples. In addition, donors of specialty antibodies undergo
a physical examination and qualification profiling. Once the candidate is
accepted as a donor, the Company collects antibodies from the donor at its donor
centers through an FDA approved collection procedure called plasmapheresis,
which lasts between 40 and 60 minutes and is very similar to donating blood.
Each donation is quarantined at the donor center while test samples are sent to
the Company's or its customers' clinical laboratory for FDA mandated viral
marker screening tests (hepatitis,

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HIV, etc.) and characterization (i.e., special analytical tests to identify and
measure the quality of the targeted antibodies). Once all of the tests have been
successfully completed, product is then matched to customer specifications and
is generally available for shipment within ten to fourteen days of collection.

PRODUCT CHARACTERIZATION. The Company characterizes its specialty
antibodies to ensure that concentrations meet customer specifications. The
Company maintains extensive data on each of its donors for both regulatory
compliance and quality assurance. This data base enhances the Company's donor
tracking and monitoring capabilities, which help assure the quality of the
antibodies for its customers. The ability to accurately characterize and trace
the source of antibodies adds value to the products for the customer by
replacing steps the customer would otherwise have to perform.

DONOR MANAGEMENT. Through incentive programs and an emphasis on donor
service, the Company encourages full and continuing participation by its donors.
As an integral part of donor management, the Company's staff continually
communicates with donors to reinforce their commitment. The Company has
personnel and programs designed to make each visit to the donor center a smooth,
comfortable and safe experience. The Company's expertise in donor management
enables the Company to retain many donors for years of repeated, regular
donations, thereby enhancing the Company's profitability. The Company's
specialty donors typically donate once or twice per week, with many having
continued as donors for as long as ten years. A significant portion of the
Company's specialty donors have entered into contracts with the Company pursuant
to which they have agreed to donate antibodies exclusively to the Company for a
three-year period.

HYPERIMMUNIZATION. In response to industry demands to produce higher
quality products, all of the Company's 13 specialty donor centers are actively
involved in hyperimmunization of their specialty antibody donors.
Hyperimmunization is the use of FDA-approved vaccines to stimulate the
development or heighten the quantity of already existing specialty antibodies in
the donor. Although vaccines to conduct hyperimmunization for several of the
Company's products are commercially available, the Company has a key advantage
through its existing inventory of, and ongoing ability to manufacture, its own
FDA-approved vaccine to produce anti-D antibodies in donors. In some cases,
antibody-producing white cells are also collected from hyperimmunized donors and
used to develop monoclonal products. The Company intends to add
hyperimmunization capabilities at many of its non-specialty donor centers.

MONOCLONAL ANTIBODY PRODUCTION. In addition to collecting antibodies from
its donors, the Company produces monoclonal antibodies from its 50 cell lines,
which generated over $9.0 million in net sales in 1995. The Company's
FDA-licensed monoclonal manufacturing facilities in Edinburgh and Livingston,
Scotland produce monoclonal antibody products from cells derived from the
Company's donor network. Once suitable donors are identified by personnel at the
Company's donor centers, activated white cells are collected and delivered to
its research and development laboratory in London, England. The white blood
cells are cultivated into a proliferating cell line and then moved to the
Company's monoclonal facility in Edinburgh, Scotland, where the cell line is
further developed until it can be grown for commercial production. Through its
monoclonal manufacturing capability, the Company has been able to introduce new,
second generation, human monoclonal products and also begin to sell more
profitable finished products outside the United States, such as its line of
branded blood typing reagents for use by health care workers in countries
outside the United States. The Company routinely develops monoclonal antibody
cell lines for use in blood typing reagents and is currently utilizing its
expertise and facilities to develop monoclonal cell lines for production of
antibodies used for therapeutic purposes.

PRODUCTS

Through its value-added services, the Company provides the antibodies that
serve as the active ingredients in certain therapeutic and diagnostic products
manufactured by major healthcare companies. The Company's customers generally
further process the Company's products. The finished materials are then packaged
and distributed as intramuscular and intravenous therapeutic or diagnostic
products. The Company also sells some of its products, particularly antibodies
for blood typing reagents, directly to end users. Based on its knowledge of the
industry and its discussions with its customers, the Company believes that with

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respect to anti-D antibodies, it maintains the largest market share in the
industry. In 1995, the Company derived approximately 72% of its net sales from
its therapeutic product line, a substantial majority of which related to
antibodies for IVIG and anti-D, and 28% of its net sales from its specialty
diagnostic antibodies.

SPECIALTY THERAPEUTIC PRODUCTS

ANTI-D IMMUNE GLOBULIN ( "ANTI-D"). Since 1968, anti-D immune globulin,
also known as Rh Immune Globulin, has been prescribed by obstetricians to
prevent Rh incompatibility in newborns ("RhHDN"). This sometimes fatal condition
affecting Rh positive infants born to Rh negative women is due to the
incompatibility of the blood of an Rh negative mother and her Rh positive child.
In March 1995, the FDA approved a new use for this product, the treatment of
Idiopathic Thrombocytopenic Purpura ("ITP") in immunocompromised patients. ITP,
which is common in HIV positive patients, is a disease that is characterized by
destruction of the patient's platelets, which, if untreated, can result in
internal hemorrhaging and ultimately, death. This condition may affect up to
100,000 Americans.

The Company believes that demand for anti-D antibodies in the treatment of
RhHDN has generally followed the birth rate of developed countries. Continuing
supply shortages of anti-D antibodies have resulted in industry-wide price
increases over the past several years. Moreover, now that the FDA has approved
the use of anti-D antibodies for the treatment of ITP, the Company believes that
worldwide demand for anti-D antibodies may increase more rapidly over the next
five years.

ANTI-RABIES IMMUNE GLOBULIN ("RIG"). Anti-rabies immune globulin therapy is
prescribed for individuals suspected of recent exposure to the rabies virus.
Rabies is commonly transmitted by infectious saliva from the bite of a rabid
animal. RIG is administered as promptly as possible after exposure and consists
of antibodies directed against the live virus particles with which the patient
may be infected. In the post-exposure treatment regimen, RIG is administered in
conjunction with a rabies vaccine, which is used to provide the patient with an
additional active immunity to the rabies virus.

ANTI-HEPATITIS IMMUNE GLOBULINS ("ANTI-HBS" AND "ANTI-HAV"). The
traditional use for these products is for the prevention of hepatitis in
individuals who are at risk of contracting, or have had recent exposure to, the
hepatitis B or A viruses. In addition, anti-HBs are used for intensive treatment
of many liver transplant patients. The Company first began marketing anti-HAV
antibodies in 1995.

INTRAVENOUS IMMUNE GLOBULIN ("IVIG")

IVIG is derived from source plasma and is comprised of a broad spectrum of
antibodies. IVIG is used in the treatment of many medical indications (such as
CMV, ITP and Lupus), primarily for patients with suppressed immune systems, to
help build the body's defense against exposure to life threatening diseases. The
Company added the capability of producing antibodies for IVIG as a result of the
Seramune Acquisition in December 1994. In 1995, the Company derived
approximately 31% of its net sales from this product.

SPECIALTY DIAGNOSTIC PRODUCTS

ANTIBODIES FOR BLOOD TYPING REAGENTS. Blood typing reagents are used by
blood banks and hospital transfusion services to assure compatibility between
the recipient and the donor's blood type. Until recently, blood typing reagents
were made primarily from human sourced, or polyclonal, antibodies. Over the past
several years, monoclonal (cloned) antibodies have been developed to provide
high quality antibodies on a consistent basis, and many of these are now
FDA-approved for diagnostic purposes. In 1993, the FDA accelerated the
transition from polyclonal to monoclonal antibodies used for blood typing
reagents when it did not extend approval of certain agents used to stimulate the
development of polyclonal antibodies in donors. The Company currently sources or
manufactures over 60 different antibodies used in the production of blood typing
reagents that the Company believes provide it with a competitive advantage in
this market due to the desire of customers to buy an entire panel of different
antibodies for blood typing reagents from one manufacturer. These antibodies for
blood typing reagents include 14 in polyclonal form, 17 in both polyclonal and
monoclonal form and 33 in monoclonal form.

CLINICAL DIAGNOSTIC ANTIBODIES. Through its expertise in donor recruitment,
the Company is able to locate and recruit donors who will provide antibodies and
other biological specimens that are known to be

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positive or negative for a disease or infection. The Company provides these
biological specimens for use in clinical diagnostic test kit controls. The
diseases for which the Company sources the largest number of clinical diagnostic
antibodies are CMV, rheumatoid arthritis, toxoplasmosis, hepatitis and HIV. The
Company's recruiting capability is complemented by extensive in-house experience
in the laboratory disciplines of immunohematology, immunology, serology and
clinical chemistry to characterize human specimens to meet manufacturers'
requirements. The Company is a "Preferred Provider" of clinical diagnostic
antibodies to Abbott and provides additional specialized testing of such
products for them.

PRODUCT AND SERVICE DEVELOPMENT

The Company is engaged in a number of near-term development projects
designed to enhance its existing product lines. These projects include the
development of more efficacious donor immunization protocols to increase yields
and the development of more efficient techniques for the manufacture of both
polyclonal and monoclonal antibodies.

On a longer term basis the Company intends to utilize its expertise and
incorporate established technologies to expand into the product and service
areas set forth below.

The Company intends to develop therapeutic monoclonal products using the
methodology that led to the Company's ability to commercialize monoclonal
antibodies for diagnostic purposes. Monoclonal production techniques eliminate
the need for fractionation of the product and may give the Company the ability
to market more value-added finished therapeutic products directly to end users.
Specifically, in order to meet the expected demand for anti-D antibodies, the
Company has entered into a collaboration with the SNBTS for the joint
development and clinical trial of a therapeutic monoclonal anti-D product.
Pursuant to the agreement with the SNBTS, the Company has paid them
approximately $400,000 to date under the agreement and is obligated to pay
L50,000 per annum for the term of the agreement. In addition, if certain
development milestones are achieved, the Company is obligated to pay up to an
additional L450,000. If the commercialization of this product is successful, the
SNBTS will also be entitled to royalties of 6% of net sales of products derived
under the agreement and 13% of license fees received from third parties. Prior
collaboration with the SNBTS has resulted in the development of monoclonal
anti-D producing cell lines for diagnostic products. However, there can be no
assurance that this product will be successfully developed or receive the
requisite regulatory approvals, which are likely to take several years or
longer, or that the Company will be able to commercialize it.

The Company also intends to begin developing capabilities in the area of
extracorporeal blood processing, including hematopoietic stem cell ("HSC")
therapy (precursor cells found in bone marrow currently used to treat cancer
patients undergoing radiation and chemotherapy regimens), blood platelet
collection and supply and therapeutic hemapharesis (treatment of blood outside
the body). The Company believes it can take advantage of its existing donor
center infrastructure to provide a lower-cost setting for these services.

The Company intends to utilize its donor center infrastructure and expertise
in recruiting and retaining donors to assist developers of new vaccines for
infectious diseases in testing the effectiveness of the vaccine in a controlled
clinical setting, an essential step in the long-process of vaccine development.

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MARKETING AND CUSTOMERS

The Company markets specialty antibodies to over 200 customers worldwide,
including several major healthcare companies. In 1995 the Company's largest
customers included:

Bayer Corporation
Centeon (Behringwerke/Armour)
Pharmacia AB
Abbott Laboratories, Inc.
Centeon US (Armour Pharmaceutical Company)

Ortho Diagnostic Systems (Johnson & Johnson)
Gamma Biologicals, Inc.
Diamed AG
Immucor, Inc.
Diagast

In 1993, 1994 and 1995, the top ten customers accounted for approximately
76%, 75% and 82%, respectively, of the Company's sales. One of the Company's
customers, Bayer, accounted for 26%, 35% and 50% of the Company's net sales in
1993, 1994 and 1995, respectively. In 1993, Wolf Brandenburger, A.G., a European
distributor, accounted for 15% of the Company's net sales and during 1995
another customer, Behringwerke, A.G., accounted for 13% of the Company's net
sales. During 1994 and 1995, the Company's domestic sales represented
approximately 70% and 68% of net sales, respectively.

The Company's therapeutic products are sold through its sales force of five
employees and, in certain markets, through independent brokers, to four major
and several smaller pharmaceutical companies. The majority of the Company's
therapeutic products are sold pursuant to annual purchase orders, and prices are
negotiated annually. In December 1994, in connection with the Seramune
Acquisition, the Company and Bayer entered into a five-year supply contract for
the sale of IVIG antibodies, with successive one-year automatic renewals unless
either party gives notice otherwise. Pursuant to the agreement, the Company
agreed to sell and Bayer agreed to purchase specified amounts on an escalating
basis over the five year term. Bayer also has the right under the contract to
purchase any production by the Company in excess of the stipulated minimum
amounts. The agreement provides for a fixed price until December 31, 1996, at
which time the price will become subject to annual negotiations. After such
date, targeted liter amounts to be purchased by Bayer are subject to a 20%
reduction. The agreement is subject to the maintenance of certain quality
criteria, certain termination events and production incentives. In addition,
either Bayer or the Company can reduce by up to 10% the quantity supplied upon
notification. Early termination of this agreement by Bayer could have a material
adverse effect on the Company. In connection with the Southeastern Acquisition,
the Company acquired another supply contract for the sale of IVIG antibodies to
Bayer. Such agreement expires in April 1999, with successive one-year automatic
renewals unless either party gives notice otherwise. Pursuant to this agreement,
the Company is required to sell and Bayer is required to purchase specified
amounts on an escalating basis over the five year term. Bayer also has the right
under the contract to purchase any production by the Company in excess of the
stipulated minimum amounts. The agreement provided for a fixed price until
January 31, 1995, at which time the price became subject to annual negotiations.
The price was renegotiated in March 1996 and has been fixed until March 31,
1997. The agreement is subject to the maintenance of certain quality criteria
and certain termination events. In addition, Bayer can reduce by up to 10% the
quantity supplied upon notification.

The Company sells specialty antibodies for blood typing reagents to more
than 25 manufacturers or suppliers of blood tying reagents and independent
brokers. The polyclonal blood typing reagent market can be characterized as a
spot market with limited advance sales and commitments to purchase typically
made orally after the customer receives a sample. Monoclonal antibodies used for
blood typing reagents represent a relatively new technology and require a highly
trained and technical sales staff, and tend to be sold pursuant to annual
purchase orders and, in certain cases, long term contracts. The capabilities of
the Company's facilities and staff allow for the marketing of monoclonal
antibodies for blood typing reagents in many forms, from unfinished product to
finished, vialed and branded product.

The Company's clinical diagnostic antibodies are sold to more than 150
customers in over 35 countries. Clinical diagnostic antibodies are primarily
sold to manufacturers of diagnostic test kits for incorporation as controls or
for use in product development projects. The Company maintains a separate sales
group dedicated to this product line due to the large number of customers
requiring personalized treatment and

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the special product knowledge required. The Company sells a portion of its
clinical diagnostic antibodies pursuant to a supply contract with Abbott which
expires in December 1999. The agreement with Abbott is subject to termination on
30 days notice upon the occurrence of certain events related to an uncured
breach of such agreement or immediately upon the acquisition of control of the
Company by a competitor of Abbott.

ACQUISITIONS

The antibody-based products industry is undergoing a consolidation driven
largely by the rising cost and complexity related to increased regulatory
compliance requirements. This is particularly evident in the market for
specialty antibodies. A significant component of the Company's business strategy
includes acquisitions which would enable it to participate in the consolidation
of the industry and to add complementary products and services which will expand
its current product and service portfolio.

The Company has initiated an acquisition strategy to acquire additional
donor center locations throughout the United States in order to expand its
sourcing network. The Company believes that these acquisitions will enable it to
leverage its core competencies and infrastructure to allow the acquired
businesses to provide, on an incremental basis, additional higher-margin
specialty products and services. In addition, the Company believes that
acquiring additional donor center operations will allow it to leverage its
general and administrative costs over a greater volume of production, thereby
creating economies of scale. The Company also intends to pursue acquisitions of
businesses that provide services and products that are complementary to its
existing businesses. However, there can be no assurance that the Company will be
able to complete suitable acquisitions in the future.

In accordance with this strategy, during 1995 the Company acquired two
specialty centers and three non-specialty donor centers. In the first quarter of
1996, the Company completed the acquisition of one additional specialty donor
center, assets of another specialty donor center, and six additional
non-specialty donor centers.

QUALITY ASSURANCE

The Company maintains quality assurance programs designed to assure the
efficacy and safety of its products and compliance with the requirements of
regulatory authorities and its customers. In 1994, the Company instituted its
Quality Assurance Program, which is an internally maintained regulatory
compliance program. Through the Quality Assurance Program the Company conducts
annual audits of each facility to monitor staff adherence to regulations and
protocols. These audits are designed to ensure adherence to Company procedures
and effectiveness of staff training efforts. The Company subscribes to the
Quality Plasma Program ("QPP"), which is a certification program administered by
the American Blood Resources Association ("ABRA"), an industry trade
organization. ABRA certifies only those facilities that it determines provide
the highest quality products. Most of the Company's customers require their
suppliers to be QPP certified. All of the Company's donor center facilities,
except for one recently acquired specialty donor center and one non-specialty
center in the start-up phase, are QPP certified.

COMPETITION

The Company is engaged in the business of providing antibodies, which is a
competitive and rapidly changing industry. Competition for customers is intense
and depends principally on the ability to provide products of the quality and in
the quantity required by customers. The Company competes for antibody donors
with approximately 435 donor centers in the United States. These donor centers
are operated both by customers of the Company for their own use and other
independent commercial plasma collection companies such as North American
Biologicals Inc., which the Company believes is the largest independent
collector of source plasma in the United States. In addition, the Company also
competes for donors with non-profit organizations such as the American Red Cross
and community blood banks. Certain of these competitors have access to greater
financial, marketing and other resources than the Company.

The Company competes for customers with other independent antibody product
suppliers on the basis of price, reliability and quality of product, breadth of
product line and the ability to provide value-added services. The Company
competes for donors by means of financial incentives which the Company offers
for

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the donation of the antibodies it collects, by providing donor services, by
implementing programs designed to attract and retain donors through education as
to the uses for collected antibodies, by encouraging groups to have their
members become antibody donors and by improving the attractiveness of the
Company's antibody donor centers. Certain of the Company's specialty antibody
products are derived from donors with rare antibody characteristics, resulting
in increased competition for such donors. If the Company is unable to maintain
and expand its donor base, its business and future prospects may be adversely
affected. Additionally, several companies are attempting to develop and market
products to treat diseases based upon technology which would lessen or eliminate
the need for antibodies. Such products, if successfully developed and marketed,
could adversely affect the demand for antibodies. There can be no assurance that
competition will not adversely affect the Company.

The Company believes that barriers to entry in the specialty antibody
industry are both significant and increasing. The Company believes it takes up
to 18 months to obtain FDA approval for a non-specialty donor center, and takes
from 15 to 24 months to obtain the necessary regulatory approvals in order to
begin shipping product from a specialty donor center which hyperimmunizes its
donors. In addition to these regulatory requirements, once the center is
operational, a stable donor base must be established and maintained as repeat
donors are critical to success for both quality control and profitability. A
significant volume of donated antibodies and sophisticated screening and
immunization procedures also are necessary in order to provide the diversity and
quality of antibody products demanded by the market. Due to increasing quality
requirements and more stringent testing procedures, there is an increasing need
for economies of scale which generally only large firms can provide.

GOVERNMENT AND INDUSTRY REGULATION

GENERAL. The Company's activities are subject to significant regulation by
numerous governmental authorities in the U.S. and internationally. These
regulatory authorities govern the collection, testing, manufacturing, safety,
efficacy, labeling, storage, record keeping, transportation, approval,
advertising and promotion of the Company's products. The Company believes it is
in substantial compliance with all relevant laws and regulations.

The Company is subject to extensive FDA regulation. Thirty-eight of the
Company's donor centers and the Company's monoclonal manufacturing facilities
hold establishment licenses and the Company's 13 specialty donor centers have
numerous product licenses, which are granted by the FDA for products shipped in
interstate commerce. The Company has recently received FDA approval to collect
pre-existing specialty antibodies at 19 of its non-specialty donor centers. In
addition, one of the Company's donor centers, which was opened during early
1996, is currently in the process of undergoing FDA licensure. New facilities
and new products at each location must undergo approval processes through the
FDA. Significant changes to existing facilities or products must also undergo
FDA review prior to implementation. The Company's FDA-licensed manufacturing
operations in the United States and abroad are required to adhere to FDA current
Good Manufacturing Practices and are routinely inspected by the FDA. Donor
centers must meet detailed standards for, among other things, the screening of
donors, obtaining informed consent from donors, the collection of antibodies,
training of personnel and the testing and handling of biologic products. If the
FDA believes that a company is not in compliance with applicable laws and
regulations, it can institute proceedings to issue a warning letter apprising
the company of violative conduct, detain or seize products, issue a recall,
enjoin future operations and assess civil and criminal penalties against the
company, its officers or its employees. In addition, approvals or licenses could
be withdrawn in certain circumstances. Failure to comply with regulatory
requirements or any adverse regulatory action could have a material adverse
effect on the Company.

On occasion, the Company has received notifications from the FDA of possible
deficiencies in the Company's compliance with FDA requirements. To date, the
Company believes that it has addressed or corrected such deficiencies.

The Company is also subject to additional inspections by customer quality
assurance auditors, ABRA Quality Plasma Program auditors, the Health Care
Financing Administration (HCFA), and state health departments. HCFA regulates
and certifies all clinical testing performed at each donor center and the

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Company's clinical testing laboratory under the Clinical Laboratories
Improvement Act of 1988. The Company's clinical testing laboratory in Atlanta
(Clarkston), Georgia is also licensed by the FDA and the state of Georgia.

Outside the United States, sales of the Company's products are subject to
additional regulatory requirements, which vary widely from country to country.
In the United Kingdom, the Company is subject to the U.K. Health and Safety at
Work Act, which regulates the safety precautions required of manufacturers in
the United Kingdom, and to various other regulations covering the use of
genetically engineered organisms in laboratory and manufacturing processes. In
certain countries, the Company's customers are subject to regulatory
requirements which may indirectly impact the Company. In addition, some of the
Company's customers are requiring the Company to comply with new standards for
products sold in the European Union countries (ISO9000 series standards). These
standards require special training and auditing and continued development of
internal quality assurance programs. Bioscot is the first of the Company's
subsidiaries to receive ISO9001 certification. Foreign laws and regulations
governing the Company's products may have a material impact on the Company.

The industry in which the Company operates is subject to strict regulation
and licensing by the FDA. Similar regulation exists in many of the states and
foreign countries where the Company conducts business. Changes in existing
federal, state or foreign laws or regulations could have an adverse effect on
the Company's business. The industry continually evaluates its practices and
procedures regarding new information or public concerns over diseases which may
be transmitted from donors through their blood or blood components. Based upon
such evaluation, a certain portion of the population may be prohibited from
donating in the future, or certain new testing and screening procedures may be
required to be performed with respect to certain donors. In certain
circumstances, the loss of donors, or the cost of additional testing procedures,
could have an adverse effect on the Company's operating results.

PRODUCT APPROVALS. Before new specialty antibody collection activities can
be initiated for each type of specialty antibody at any donor center, separate
approvals for each type of antibody to be collected must be obtained from the
FDA. There can be no assurance that difficulties or delays will not arise in
connection with applications for approval to conduct expanded antibody
collection activities.

Certain of the Company's monoclonal antibodies which are sold as finished
products require FDA licensing. The process of completing clinical testing and
obtaining FDA approval for a new biological product requires a number of years
and the expenditure of substantial resources due to extensive laboratory and
human testing prior to market approval. Pre-clinical studies must be conducted
in conformance with the FDA's good laboratory practice (GLP) regulations. Human
clinical testing must be conducted with the oversight of one or more
institutional review boards and the FDA and meet the requirements of regulations
regarding good clinical practices and the protection of human subjects. In the
U.S., this process includes the filing of an Investigational New Drug (IND)
exemption with the FDA, which must be accepted prior to commencement of human
trials. An IND must include pre-clinical data for the product, from which the
FDA makes a determination of the product's safety for human testing. FDA
regulations impose waiting periods and require continuous evaluation by the FDA.
In some instances the IND application process can result in substantial delay
and expense.

Clinical trials to support Product License Applications (PLAs) typically are
conducted in three sequential phases, but the phases may overlap. In Phase I,
the human trials generally begin with healthy volunteer subjects under carefully
controlled conditions, and the drug is tested for safety, dosage tolerance,
metabolism, distribution, excretion and pharmacodynamics (clinical
pharmacology). The trials progress to Phase II studies involving a limited
patient population to determine efficacy, dosage and possible adverse effects
and safety risks. When a biological product is found to be effective and to have
an acceptable safety profile in Phase II evaluations, Phase III trials are
undertaken to further evaluate clinical efficacy and to further test for safety
within an expanded patient population at geographically dispersed clinical study
sites.

At the conclusion of successful human trials, a product license application
and establishment license application are submitted to the FDA for review and
approval. The amount of detail required for such applications can be extensive.
The processing of the applications by the FDA typically takes several years to

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complete. There is no assurance that the FDA will act favorably or quickly in
making such reviews and significant difficulties or costs may be encountered by
a company in its efforts to obtain FDA approvals. The FDA may also require
post-marketing testing and surveillance to monitor the effects of approved
products or they may place conditions on approvals that could restrict the
commercial application of products. Product approvals may be withdrawn if
compliance with regulatory standards is not maintained or if problems occur
following initial marketing.

In markets outside the U.S., the licensing process is similar in concept,
but can vary greatly in detail. Since all of the Company's products are
developed for worldwide use, product development projects are designed to
provide data acceptable to the various national regulatory authorities.

Federal, state and foreign laws and regulations regarding the manufacture
and sale of blood products are subject to future change. The Company cannot
predict what impact, if any, such change might have on its business. However,
such changes could have a material impact on the Company's business.

OTHER. The Company is also subject to government regulations enforced under
the Environmental Protection Act, the Clean Air Act, the Clean Water Act, the
National Environmental Policy Act, the Toxic Substances Control Act, the
Resource Conservation and Recovery Act, the Medical Waste Tracking Act, and
other national, state or local restrictions. The Company is also subject to
workplace safety regulations under the Occupational Safety and Health Act
(OSHA). The Company believes that it is in substantial compliance with all
applicable regulations.

THIRD PARTY REIMBURSEMENT

In both domestic and foreign markets, sales by the Company's customers may
depend in part on the availability of reimbursement from third-party payors such
as government health administration authorities, private health insurers and
other organizations. Third-party payors are increasingly challenging the price
and cost-effectiveness of medical products and services. There can be no
assurance that pricing pressures experienced by the Company's customers will not
adversely affect the Company because of a determination that these products are
not cost effective or because of inadequate third-party reimbursement levels to
such customers. Moreover, the Company's profitability may be directly affected
by the availability of third party reimbursement for any finished monoclonal
product it seeks to sell.

EMPLOYEES

As of March 15, 1996, the Company employed approximately 662 persons, of
whom 608 were located in the United States and 54 were located in the United
Kingdom. None of the Company's employees is covered by a collective bargaining
agreement. The Company believes that its relationship with its employees is
satisfactory.

PROPERTIES

The Company's 39 donor centers range in size from approximately 2,000 to
8,000 square feet and are leased from unaffiliated parties under leases expiring
through February 28, 2003. A majority of these leases contain renewal options
which permit the Company to renew the leases for a five year period at the then
fair rental value. The Company believes that in the normal course of its
business it will be able to renew or replace its existing leases subject to
regulatory approval. See "-- Operations."

The Company's clinical laboratory and international headquarters are located
in Atlanta (Clarkston), GA; the monoclonal research and development laboratories
are in London, England and the Company's FDA licensed monoclonal antibody
facilities operate in Edinburgh, Scotland (large scale monoclonal production)
and Livingston, Scotland (vialing and labeling). All of these facilities are
leased under leases expiring from 1997 to 2013.

The Company has begun the expansion of its monoclonal antibody production
capabilities to meet current and future demand for both diagnostic and
therapeutic products. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources."

36
<PAGE>
PRODUCT LIABILITY AND INSURANCE

The sourcing, processing and sale of the Company's antibody-based products
involve a risk of product and professional liability claims. The Company has
obtained product liability insurance in an amount of $1.0 million per incident
and $3.0 million in the aggregate per annum for each of the Company's facilities
on an occurrence basis and professional liability insurance in the same amounts
on a claims made basis. The Company has recently obtained a $5.0 million excess
liability umbrella insurance policy. There can be no assurance that the coverage
limits of the Company's insurance policy and/or any rights of indemnification
and contribution that the Company may have with respect to its customer
contracts will offset potential claims. A successful claim against the Company
in excess of insurance coverage and not subject to indemnification could have a
material adverse affect on the Company.

LEGAL PROCEEDINGS

The Company is a party to litigation in the ordinary course of business. The
Company does not believe that such litigation is likely to have a material
adverse effect on its financial position or results of operations.

37
<PAGE>
MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth certain information with respect to the
directors and executive officers of the Company:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------------- --- -----------------------------------------------------
<S> <C> <C>
Harold J. Tenoso, Ph.D............ 57 President, Chief Executive Officer and Director
Samuel A. Penninger, Jr........... 54 Chairman of the Board of Directors
Terry Dobson...................... 50 Vice President, International Development
Charles P. Harrison............... 48 Vice President, Healthcare Services
Timm M. Hurst..................... 54 Vice President, Sales and Marketing
Gary A. Kress..................... 50 Vice President, Regulatory Affairs
Russell H. Plumb.................. 37 Vice President, Finance and Administration, Chief
Financial Officer and Treasurer
James F. Sowinski................. 46 Vice President, Operations
Marcia T. Bates................... 46 Director
James L. Currie................... 59 Director
George M. Shaw, M.D., Ph.D........ 42 Director
Matthew C. Weisman................ 54 Director
</TABLE>

Harold J. Tenoso, Ph.D. has served as President and Chief Executive Officer
of the Company since March 1993 and as a director since August 1993. Prior to
joining the Company, he served in various capacities since 1984 at UNIMED, Inc.,
a publicly-held pharmaceutical company, including as Chief Executive Officer
from January 1989 to April 1992, Chairman from January 1991 to April 1992 and
consultant from May 1992 to April 1993.

Samuel A. Penninger, Jr. has served as Chairman of the Board of Directors of
the Company since March 1993, and from March 1983 until March 1993 he served as
President and a director of the Company. Mr. Penninger founded the Company in
1971. He has served as a director of ABRA and is a member of the American
Association of Blood Banks ("AABB").

Terry Dobson has served as Vice President, International Development of the
Company since January 1995. Mr. Dobson was Managing Director of Bioscot from
January 1990 to January 1995. Prior to joining the Company upon the Company's
acquisition of Bioscot, Mr. Dobson served as the Business Manager, FDA
Responsible Head and a director of Bioscot.

Charles P. Harrison has served as Vice President, Healthcare Services of the
Company since February 1996. Prior to joining the Company he was the President,
Chief Executive Officer, Chief Financial Officer and a director of Creative
Products Resource, Inc., a new product development and drug delivery firm, from
January 1993 until January 1996. Prior to that time, he was the President, Chief
Financial Officer and a director of UNIMED, Inc., a publicly-held pharmaceutical
company, from May 1986 until May 1993. Mr. Harrison is presently a director of
Creative Products Resource, Inc.

Timm M. Hurst has served as Vice President, Sales and Marketing of the
Company since April 1994. From 1984 until April 1994, Mr. Hurst served as Vice
President in charge of disease state products, technical services and
administration of the Company. Prior to joining the Company, Mr. Hurst was the
director of Sales and Marketing for Blood Products of Delmed, Inc. Mr. Hurst is
a member of AABB.

Gary A. Kress has served as Vice President, Regulatory Affairs of the
Company since 1988. From 1974 until 1982 he served as Manager/Responsible Head
and from 1982 until 1988 he served as Director of

38
<PAGE>
Operations/Responsible Head of the Company. Mr. Kress is a member of AABB and
the American Society for Clinical Laboratory Science, and is registered as a
Medical Technologist by the American Society of Clinical Pathologists.

Russell H. Plumb has served as Vice President, Finance and Administration,
Chief Financial Officer and Treasurer since joining the Company in April 1994.
Prior to joining the Company, he was a Senior Manager in the Corporate Finance
Group at Ernst & Young from April 1991 to April 1994. Prior to joining Ernst and
Young, he was a Managing Director for Tunstall Consulting, a business advisory
firm, from October 1987 to July 1990.

James F. Sowinski has served as Vice President, Operations of the Company
since 1988. Mr. Sowinski joined the Company in 1977 as a donor center Executive
Director and Responsible Head. In addition to being a member of AABB, Mr.
Sowinski is a licensed medical technologist with a sub-specialty in
immunohematology and is a member of the Florida Association of Blood Banks.

Marcia T. Bates has been a director of the Company since November 1993.
Since June 1989, Ms. Bates has been a Vice President of BancBoston Ventures,
Inc., a venture capital fund, responsible for healthcare investing.

James L. Currie has been a director of the Company since December 1989. In
1985, Mr. Currie organized Essex Venture Partners, a venture capital fund, and
has served as its Managing General Partner since that time. Mr. Currie also
serves as a director of Ethical Holdings, Limited, a publicly-held
pharmaceutical company, and Parexel International Corp., a publicly-held
clinical trials company, and as General Partner of The Woodlands/Essex Venture
Fund III, L.P., a venture capital fund.

George M. Shaw, M.D., Ph.D. has been a director of the Company and member of
the Company's Scientific Advisory Board since August 1993. Dr. Shaw has served
as the Deputy Director and Senior Scientist at the Center for AIDS Research and
as Senior Scientist at the Comprehensive Cancer Center at the University of
Alabama at Birmingham since July 1988. Dr. Shaw has also held teaching and
research positions since 1985 in the Division of Hematology/Oncology (Department
of Internal Medicine) at the University of Alabama at Birmingham, where he is
currently a Professor of Medicine. Dr. Shaw is also currently a member of the
Scientific Advisory Board of the Pediatric AIDS Foundation Ariel Project and an
External Advisory Committee Member for the New York University Center for AIDS
Research and the University of California at San Francisco Center for AIDS
Research.

Matthew C. Weisman has been a director of the Company since May 1992. Since
1983, Mr. Weisman has been the President and Chief Executive Officer of Cobey
Corporation, a consulting and private investment company. Mr. Weisman serves as
a trustee of Hebrew Rehabilitation Center for the Aged, a chronic care hospital
and geriatric teaching and research facility. Since July 1994, Mr. Weisman has
been a director of Orchard Cove, Inc., a continuing care facility providing
independent-living, assisted-living and skilled nursing facilities.
--------------

The number of directors on the Board is presently fixed at six. The
Company's Board of Directors is divided into three classes. Directors of each
class are elected at the annual meeting of stockholders held in the year in
which the term for such class expires and serve thereafter for three years. Ms.
Bates and Mr. Weisman serve as Class 1 Directors with their terms expiring at
the 1996 Annual Meeting of Stockholders, Mr. Currie and Mr. Penninger serve as
Class 2 Directors with their terms expiring at the 1997 Annual Meeting of
Stockholders and Dr. Tenoso and Dr. Shaw serve as Class 3 Directors with their
terms expiring at the 1998 Annual Meeting of Stockholders. For further
information on the effect of the classified Board, see "Description of Capital
Stock."

The Board of Directors has a Compensation Committee, which currently
consists of Marcia T. Bates and James L. Currie. The Compensation Committee is
responsible for approving (or, at the election of the Compensation Committee,
recommending to the Board) compensation arrangements for officers and directors
of the Company, reviewing benefit plans and administering the Omnibus Plan, the
Director Plan and the Purchase Plan.

39
<PAGE>
The Board of Directors also has an Audit Committee, which currently consists
of Marcia T. Bates and Matthew C. Weisman. The Audit Committee is responsible
for selecting (or, at the election of the Audit Committee, recommending to the
Board) the independent auditors of the Company, evaluating the independent
auditors, reviewing the scope of the annual audit with management and the
independent auditors, consulting with management, internal auditors and the
independent auditors as to the systems of internal accounting controls and
reviewing the non-audit services performed by the independent auditors.

DIRECTOR COMPENSATION

Outside directors are paid $1,000 for each Board meeting attended and are
reimbursed for out-of-pocket expenses in connection with attendance at such
meetings. Under the Serologicals option plan, Dr. Shaw and Mr. Weisman received
options as Directors which became options of the Company in connection with the
Company's reorganization in November 1994. In lieu of receiving cash
compensation for serving as a Director and as a member of the Company's
Scientific Advisory Board, Dr. Shaw is compensated pursuant to a consulting
arrangement in the aggregate amount of $22,500 per annum. Dr. Shaw provides
technical and scientific consulting services to the Company relating to research
and development matters as requested by the Company from time to time.

On August 9, 1995, the Board of Directors adopted the Director Plan. The
Director Plan was amended by the Board on February 27, 1996 and approved by the
Company's stockholders on May 7, 1996. Pursuant thereto, each non-employee
Director serving on the Board on the date of the adoption of the Director Plan
and each person who thereafter becomes a non-employee Director of the Company is
automatically granted an option (the "Lump Sum Grant") to purchase 32,000 shares
of Common Stock on the date of adoption or on the day after such person's first
election to the Board, as the case may be. The Director Plan also provides for
the automatic grant of options to purchase 2,000 shares of Common Stock on an
annual basis to non-employee Directors of the Company who have (or would have,
had not the non-employee director declined a Lump Sum Grant) vested in full in
their Lump Sum Grant, commencing on the day after the first annual meeting of
stockholders commencing after such vesting. The options shall be granted on the
day after the annual meeting of stockholders at which Directors are elected each
year. The maximum number of shares subject to options available for grant under
the Director Plan is 360,000. The exercise price of the options is the fair
market value of the Common Stock on the date of grant. The exercisability of the
options vests at the rate of 25% per year commencing on the first anniversary of
the date of grant, subject to accelerated vesting of the Lump Sum Grant for
prior service as a director of the Company or any subsidiary. Dr. Shaw and Mr.
Weisman waived their rights to the Lump Sum Grant. The Compensation Committee
administers the Director Plan.

40
<PAGE>
EXECUTIVE COMPENSATION

The following table sets forth for the fiscal years ended December 31, 1995
and 1994 the compensation for services in all capacities to the Company of those
persons who were at December 31, 1995 the Company's President and Chief
Executive Officer and the other four most highly compensated executive officers
of the Company (the "Named Executive Officers"):

<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
---------------------------------------- --------------------------
OTHER ANNUAL SECURITIES ALL OTHER
SALARY BONUS COMPENSATION UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) OPTIONS (#) ($)(1)
- ----------------------------------------- --------- ---------- ------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Harold J. Tenoso, Ph.D. ................. 1995 $ 200,000 $ 88,000(2) $ 62,964(3) 24,000 $ 2,310
President and Chief Executive Officer 1994 197,413 108,000(2) 12,490(3) 165,492 2,310
Samuel A. Penninger, Jr. ................ 1995 193,265 -- 5,629(4) -- 2,310
Chairman of the Board 1994 193,265 -- 80,191(5) -- 2,310
Timm M. Hurst ........................... 1995 125,000 54,000(6) -- 14,400 --
Vice President, Sales and Marketing 1994 132,822 65,900(6) -- -- 1,327
James F. Sowinski ....................... 1995 125,000 54,000(6) 33,516(7) 14,400 2,263
Vice President, Operations 1994 119,192 65,900(6) -- -- 1,779
Gary A. Kress ........................... 1995 114,058 47,406(8) -- 13,200 2,062
Vice President, Regulatory Affairs 1994 112,055 59,406(8) -- -- 1,676
</TABLE>

- --------------
(1) Consists of Company contribution to 401(k) plan.

(2) Includes $51,000 and $66,000 of deferred compensation for 1995 and 1994,
respectively.

(3) Consists of automobile allowance, relocation expenses and reimbursement for
taxes related thereto and premiums for term life insurance.

(4) Consists of relocation expenses.

(5) Consists of $45,348 of relocation expenses and $34,843 of reimbursement for
taxes related thereto.

(6) Includes $31,125 and $40,050 of deferred compensation for 1995 and 1994,
respectively.

(7) Consists of $21,383 of relocation expenses and $12,133 of reimbursement for
taxes related thereto.

(8) Includes $27,000 and $36,000 of deferred compensation for 1995 and 1994,
respectively.

EMPLOYMENT AGREEMENTS

In connection with the commencement of Dr. Tenoso's employment, the Company
entered into an Employment Agreement with him in March 1993 providing for an
initial term of three years and subsequent automatic one-year renewals unless
earlier terminated pursuant to the provisions thereof. Such Agreement has been
automatically renewed through March 1997. Such Agreement, as amended in December
1994, provides for a current base salary of $200,000 per annum, participation in
all bonus and incentive plans of the Company and certain insurance, automobile
and relocation allowances and other benefits. In addition, pursuant to such
Agreement, Dr. Tenoso received options to purchase up to 489,492 shares of
Common Stock, 336,000 of which have an initial exercise price of $3.44 per share
and 153,492 of which have an initial exercise price of $5.50 per share. The
exercisability of all such options became vested in accordance with their terms
upon the Company's initial public offering. In connection with such vesting, the
Company recognized compensation expense of approximately $346,500 ($215,000 net
of income taxes). The shares issuable upon exercise of the options are subject
to certain registration and anti-dilution rights. See Note 4 of Notes to
Consolidated Financial Statements of the Company.

Dr. Tenoso's Agreement further provides that in the event his employment is
terminated within six months of a Change of Control or a Constructive
Termination, Dr. Tenoso shall receive a payment of 2.99

41
<PAGE>
times his highest annual salary and bonus pursuant to the Agreement. "Change of
Control" is defined in the Agreement as (a) the acquisition by an individual or
group other than Dr. Tenoso or a group including him of (i) beneficial ownership
of 30% of the Company's voting securities or (ii) all or substantially all of
the assets of the Company, (b) commencement of a tender offer for the Common
Stock, or (c) a majority change in the composition of the Board of Directors not
approved by the current directors, and a "Constructive Termination" is defined
as a change in title or positions, a material diminution in the nature or scope
of authorities, powers, functions, duties or responsibilities, or a reduction of
10% or more of compensation and benefits. Such employment Agreement provides
that Dr. Tenoso shall be entitled to a bonus equal to the largest bonus received
by him during the term of the Agreement and to his base salary and benefits for
the later of the remainder of the term and 12 months from the date of
termination in the event his employment is terminated by the Company other than
for cause (as defined in the Agreement), death or disability, or by Dr. Tenoso
for a constructive termination. Such Agreement also contains confidentiality
provisions for the period of employment and 12 months thereafter and
non-competition provisions for the period of employment and 24 months
thereafter.

In addition, the Company has entered into severance agreements with Samuel
A. Penninger, Jr., Gary A. Kress, Timm M. Hurst and James F. Sowinski. Each such
Agreement provides that (i) in the event of termination of such executive's
employment by the Company with or without cause at any time before normal
retirement age or (ii) in the event such executive's compensation is reduced or
his benefits are materially reduced and he elects to resign, such executive
shall be entitled to continue to receive his base monthly salary (generally
defined as the highest monthly salary excluding bonuses, since August 31, 1993)
for a number of months that is equal to the number of years such executive had
been employed by the Company; provided, however, that the period shall not be
shorter than 12 months and shall not be longer than 24 months.

1994 OMNIBUS INCENTIVE PLAN

In October 1994, the Board of Directors approved the Omnibus Plan, which was
amended in April 1995 and subsequently approved by the Company's stockholders.
The Omnibus Plan was amended and restated on February 27, 1996 to, among other
things, increase the number of shares of Common Stock subject to such plan from
432,000 to 1,500,000 and increase the annual limit on stock based awards from
50,000 to 100,000 per participant. The Omnibus Plan is designed to provide an
incentive to the officers and certain other key employees of and consultants to
the Company by making available to them an opportunity to acquire a proprietary
interest or to increase their proprietary interest in the Company. The Omnibus
Plan provides for compensatory awards (each an "Award") representing or
corresponding to up to 1,500,000 shares of Common Stock. Awards may be granted
for no consideration and consist of stock options, stock awards, stock
appreciation rights ("SARs"), dividend equivalents, other stock based awards
(such as phantom stock) and performance awards consisting of any combination of
the foregoing. Any Award issued under the Omnibus Plan which is forfeited,
expires or terminates prior to vesting or exercise will again be available for
Award under the Omnibus Plan.

The Compensation Committee of the Board of Directors (the "Committee")
administers the Omnibus Plan. The Committee has the full power and authority,
subject to the provisions of the Omnibus Plan, to designate participants, grant
Awards and determine the terms of all Awards. The Committee has the right to
make adjustments with respect to Awards granted under the Omnibus Plan in order
to prevent dilution of the rights of any holder. Members of the Committee are
not eligible to receive Awards under the Omnibus Plan and are disinterested
within the meaning of Section 16 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and outside directors within the meaning of Section
162(m) of the Internal Revenue Code of 1986, as amended (the "Code").

STOCK AWARDS. The Committee has the right to grant Awards of shares of
Common Stock that are subject to such restrictions (including restrictions on
transferability and limitations on the right to vote or receive dividends with
respect to the restricted shares) and such terms regarding the lapse of
restrictions as the Committee deems appropriate. Generally, upon termination of
employment for any reason during the restriction period, restricted shares shall
be forfeited to the Company.

42
<PAGE>
OPTIONS ISSUED UNDER OMNIBUS PLAN. The terms of specific options are
determined by the Committee. Options granted may be non-qualified or incentive
stock options within the meaning of Code Section 422. The exercise price per
share for a non-qualified option is subject to the determination of the
Committee. Incentive stock options may not be granted at less than 100% of the
fair market value at the date of grant. Each option will be exercisable after
the period or periods specified in the option Agreement, which will generally
not exceed 10 years from the date of grant. Options may be issued in tandem with
SARs ("Tandem Options") as a performance award. SARs may be granted upon such
terms as the Board of Directors or the Committee may from time to time
determine.

Upon the exercise of an option, the option holder shall pay to the Company
the exercise price plus the amount of the required Federal and state withholding
taxes, if any. Options may be exercised and the withholding obligation may be
paid for with cash and, with the consent of the Committee, shares of Common
Stock, other securities (including options) or other property. The periods after
termination of employment during which an option may be exercised is as
determined by the Committee. In the absence of any specific determination by the
Committee, the following rules will apply. The unexercised portion of any option
granted under the Omnibus Plan will generally be terminated (a) three months
after the date on which the optionee's employment is terminated for any reason
other than (i) cause, (ii) mental or physical disability, (iii) death or (iv)
retirement; (b) immediately upon the termination of the optionee's employment
for cause; (c) six months after the date on which the optionee's employment is
terminated by reason of mental or physical disability; or (d)(i) 12 months after
the date on which the optionee's employment is terminated by reason of
retirement or the death of the employee, or (ii) nine months after the date on
which the optionee shall die if such death shall occur during the three-month
period following the termination of the optionee's employment by reason of
retirement or mental or physical disability.

SARS. An Award may consist of SARs. Upon exercising a SAR, the holder will
be paid by the Company an amount in cash equal to the difference between the
fair market value of the shares of Common Stock on date of exercise and the fair
market value of the shares of Common Stock on the date of the grant of the SAR,
less applicable withholding of Federal and state taxes. In no event may a holder
of a SAR, who is also an employee of the Company or its subsidiaries, exercise a
SAR if the aggregate amount to be received as a result of his or her exercise of
SARs in the preceding twelve month period exceeds such employee's current base
salary.

PERFORMANCE AWARDS CONSISTING OF OPTIONS AND SARS ISSUED IN TANDEM UNDER
OMNIBUS PLAN. Upon exercise of a Tandem Option, the optionee will be entitled
to a credit toward the exercise price equal to the value of the SARs issued in
tandem with the option exercised, but not to exceed the amount of the Federal
income tax deduction allowed to the Company in respect of such SAR. Upon
exercise of a Tandem Option, the related SAR shall terminate, the value being
limited to the credit which can be applied only toward the purchase price of
Common Stock. In all cases, full payment of the net purchase price of the shares
must be made in cash or its equivalent at the time the Tandem Option is
exercised, together with the amount of the required Federal and state
withholding taxes, if any. When a SAR issued as part of a Tandem Option is
exercised, the option to which it related will cease to be exercisable to the
extent of the number of shares with respect to which the SAR was exercised.

OTHER PERFORMANCE AWARDS ISSUED UNDER THE OMNIBUS PLAN. The Omnibus Plan
authorizes the Committee to grant, to the extent permitted under Rule 16b-3
promulgated under the Exchange Act and applicable law, other Awards that are
denominated or payable in, valued by reference to, or otherwise based on or
related to Common Stock. Furthermore, the amount or terms of an Award may be
related to the performance of the Company or to such other criteria or measure
of performance as the Committee may determine.

43
<PAGE>
OPTIONS GRANTS IN LAST FISCAL YEAR

The following table sets forth each grant of stock options made during the
year ended December 31, 1995 to each of the Named Executive Officers who
received options during such year:

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF STOCK
SECURITIES % OF TOTAL PRICE APPRECIATION
UNDERLYING OPTIONS GRANTED EXERCISE FOR OPTION TERM (2)
OPTIONS TO EMPLOYEES PRICE EXPIRATION ---------------------
NAME GRANTED (1) IN FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- --------------------------------------- ----------- ---------------- ----------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Harold J. Tenoso, Ph.D................. 24,000 22.3% $ 5.50 3/10/2005 $ 83,040 $ 210,480
Timm M. Hurst.......................... 14,400 13.4 5.50 3/10/2005 49,824 126,288
James F. Sowinski...................... 14,400 13.4 5.50 3/10/2005 49,824 126,288
Gary A. Kress.......................... 13,200 12.3 5.50 3/10/2005 45,672 115,764
</TABLE>

- --------------
(1) These options become exercisable at the rate of 33 1/3% per year commencing
on the first anniversary of the date of grant.

(2) Potential realizable values are based on the fair market value per share as
determined by the Company on the date of the grant and represent
hypothetical gains that could be achieved for the respective options if
exercised at the end of the option term. The dollar amounts set forth in
these columns are the result of calculations at the five percent and ten
percent rates set by the Commission, and are not intended to forecast
possible future appreciation, if any, of the Common Stock price. There can
be no assurance that such potential realizable values will not be more or
less than that indicated in the table above.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES

The following table sets forth information with respect to (i) the number of
unexercised options held by each of the Named Executive Officers who held
options as of December 31, 1995 and (ii) the value of unexercised in-the-money
options (i.e., options for which the fair market value of the Common Stock,
which was $16.50 as of December 31, 1995, exceeded the exercise price) as of
December 31, 1995. None of the Named Executive Officers exercised any options
during the fiscal year 1995.

<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL YEAR END (#) AT FISCAL YEAR END ($)
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE (1)
- --------------------------------------------------- ----------------------------- --------------------------
<S> <C> <C>
Harold J. Tenoso, Ph.D............................. 501,492/24,000 $6,233,292/$264,000
Timm M. Hurst...................................... 0/14,400 0/$158,400
James F. Sowinski.................................. 0/14,400 0/$158,400
Gary A. Kress...................................... 0/13,200 0/$145,200
</TABLE>

- --------------
(1) Calculated on the basis of the fair market value ($16.50) of the Common
Stock as of December 31, 1995, as reported on The Nasdaq National Market,
minus the per share exercise price.

1996 EMPLOYEE STOCK PURCHASE PLAN

The Company has determined that it would be advisable and in the best
interests of the Company and its stockholders to provide incentives for the
encouragement of the highest level of performance by its employees by providing
such persons with an opportunity to obtain an ownership interest in the Company.
Accordingly, on February 27, 1996, the Board of Directors, and on May 7, 1996,
the stockholders, approved the Purchase Plan under which 250,000 shares of
Common Stock may be purchased by employees through payroll deductions
accumulated during various option periods.

44
<PAGE>
A total of 250,000 shares of Common Stock will be available for issuance
under the Purchase Plan. In the event of a change in the number or kind of
shares pursuant to a reorganization, merger, recapitalization, reclassification,
stock split, reverse stock split or similar event, appropriate adjustments will
be made with respect to the maximum number of shares subject to, and the
purchase price of shares under, the Purchase Plan.

The Purchase Plan provides eligible employees with the opportunity to
purchase shares of Common Stock pursuant to a payroll deduction program. The
Purchase Plan provides for three-month purchase periods. At the end of each
three-month purchase period, shares would be purchased automatically at 85% of
the lower of the closing price on the first or last day of the three-month
purchase period, as reported on The Nasdaq National Market.

An employee may have up to 25% of such employee's base compensation withheld
and applied to the purchase of shares under the Purchase Plan. However, during
any one year no employee may purchase Common Stock under the Purchase Plan
having a value of more than $25,000 at the time of purchase.

All employees of the Company and its domestic subsidiaries who have been
continuously employed for a period of at least six (6) months prior to the
commencement of each three-month purchase period may participate in the Purchase
Plan. However, employees who are customarily employed for less than 20 hours per
week or for less than five months in any calendar year are not eligible to
participate. Further, any employee who owns, or holds options to acquire, or
who, as a result of participation in the Purchase Plan, would own or hold
options to purchase five percent (5%) or more of the Company's securities is not
eligible to participate in the Purchase Plan.

A participant may withdraw from the Purchase Plan at any time. Termination
of a participant's employment for any reason, including retirement or death, or
the employee's failure to remain an eligible employee also terminates
participation in the Purchase Plan. In the event of termination, all payroll
deductions previously credited to the participant's account are returned,
without interest. The Purchase Plan allows for re-enrollment after waiting for
one complete three-month purchase period, except that officers and directors
would be required to wait at least six (6) months before re-enrolling.

The Purchase Plan is administered by the Board of Directors of the Company;
the Board may also adopt and appoint a committee thereof to administer the
Purchase Plan. The Board or any committee so appointed has the power to make,
amend and repeal rules and regulations for the interpretation and administration
of the Purchase Plan, all of which are final and binding upon each participant
having an interest therein.

The Purchase Plan will remain in full force until June 30, 2006 unless
terminated earlier by action of the Company's Board of Directors or until all of
the shares reserved for issuance thereunder have been issued. The Purchase Plan
may be terminated or amended from time to time by the Board of Directors,
provided that a participant's existing rights cannot be adversely affected
thereby, nor may any amendment be made without the approval of stockholders of
the Company if such amendment would authorize a sale of more shares than are
authorized for issuance or materially modify the requirements for eligibility to
participate in the plan.

LIMITATIONS ON LIABILITY OF OFFICERS AND DIRECTORS

Section 102(b)(7) of the Delaware General Corporation Law ("DGCL") enables a
corporation to eliminate or limit personal liability of members of its Board of
Directors for violations of a director's fiduciary duty of care. However, the
elimination or limitation shall not apply where there has been a breach of the
duty of loyalty, failure to act in good faith, intentional misconduct or knowing
violation of law, payment of a dividend or approval of a stock repurchase which
was deemed illegal, or where a director obtains an improper personal benefit.

The Company's Amended and Restated Certificate of Incorporation provides
that a director of the Company shall, to the maximum extent permitted by the
DGCL, have no personal liability to the Company or its stockholders for monetary
damages for breach of fiduciary duty as a director.

45
<PAGE>
DGCL Section 145 permits a corporation organized under Delaware law to
indemnify directors and officers with respect to any matter in which the
director of officer acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the Company, and, with respect
to any criminal action, he had no reasonable cause to believe his conduct was
unlawful.

The Company's Amended and Restated Certificate of Incorporation provides
that any director, officer or employee of the Company involved in any action,
suit or proceeding, whether civil, criminal, administrative, or investigative,
while acting in such capacity as a director, officer or employee of the Company
or as director, officer or employee of another entity at the request of the
Company, shall be indemnified and held harmless by the Company to the fullest
extent permitted by the DGCL, against all expense, liability and loss reasonably
incurred or suffered by such person in connection therewith.

The Company has entered into separate but identical indemnity agreements
(the "Indemnity Agreements") with each director and executive officer of the
Company and expects to enter into Indemnity Agreements with persons who become
directors or executive officers in the future. The Indemnity Agreements provide
that the Company will indemnify the director or officer (the "Indemnitee")
against any amounts that he or she becomes legally obligated to pay in
connection with any claim against him or her based upon any act, omission,
neglect or breach of duty that he or she may commit, omit or suffer while acting
in his or her capacity as a director and/or officer of the Company; provided
that such claim: (i) is not based upon the Indemnitee's gaining any personal
profit or advantage to which he or she is not legally entitled; (ii) is not for
an accounting of profits made from the purchase or sale by the Indemnitee of
securities of the Company within the meaning of Section 16(b) of the Exchange
Act or similar provisions of any state law; and (iii) is not based upon the
Indemnitee's knowingly fraudulent, deliberately dishonest or willful misconduct.
The Indemnity Agreements also provide that all costs and expenses incurred by
the Indemnitee in defending or investigating such claim shall be paid by the
Company in advance of the final disposition thereof unless a majority of
directors of the Company who are not parties to the action, independent legal
counsel in a written opinion, the stockholders of the Company or a court of
competent jurisdiction in a final, unappealable adjudication determines that:
(i) the Indemnitee did not act in good faith and in a manner that he or she
reasonably believed to be in or not opposed to the best interests of the
Company; (ii) in the case of any criminal action or proceeding, the Indemnitee
had reasonable cause to believe his or her conduct was unlawful; or (iii)
Indemnitee intentionally breached his or her duty to the Company or its
stockholders. Each Indemnitee has undertaken to repay the Company for any costs
or expenses so advanced if it shall ultimately be determined by a court of
competent jurisdiction in a final, nonappealable adjudication that he or she is
not entitled to indemnification under the Indemnity Agreements.

SCIENTIFIC ADVISORY BOARD

In March 1994, the Company formed a Scientific Advisory Board comprised of
four distinguished scientists and clinicians with expertise in the fields of
hematology, oncology, microbiology, pediatrics and cancer and AIDS research. The
Company formed the Board to provide counsel to the Company as it develops new
therapeutic and diagnostic antibody products. All of the individuals on the
Board are recognized as leading authorities in their fields. The Board has met
once and intends to meet at least three times a year in the future. The Chairman
of the Scientific Advisory Board is George M. Shaw, M.D., Ph.D., who is also a
director of the Company. See "-- Directors and Executive Officers." Members of
the Scientific Advisory Board are paid $1,200 for each meeting attended and are
reimbursed for out-of-pocket expenses in connection with such meetings. In
addition, members of the Scientific Advisory Board receive a one time grant of
options to purchase 1,000 shares under the Omnibus Plan. The Company's
Scientific Advisory Board is composed of the following individuals in addition
to Dr. Shaw:

Albert F. LoBuglio, M.D. is the Director of the Comprehensive Cancer Center
at the University of Alabama in Birmingham. Prior to his present position, Dr.
LoBuglio was the Director of the Division of Hematology and Oncology at the
Department of Medicine at the University of Alabama in Birmingham. He received
his M.D. (cum laude) at Georgetown University.

46
<PAGE>
Rein Saral, M.D. is Professor of Medicine and President of the Emory
University System of Health Care, Inc., as well as Director, The Emory Clinic.
Prior to his present position, Dr. Saral was the Clinical Director at the Bone
Marrow Transplantation Unit at the Johns Hopkins Oncology Center in Baltimore,
Maryland. He received his B.A. at Grinnell College in Grinnell, Iowa, and his
M.D. at the Johns Hopkins School of Medicine.

Richard J. Whitley, M.D. is Professor of Pediatrics, Microbiology and
Medicine, Department of Pediatrics, University of Alabama School of Medicine.
Dr. Whitley also serves as the Associate Director for the Center of AIDS
Research at the University of Alabama, as well as the Vice-Chairman, Department
of Pediatrics.

CERTAIN TRANSACTIONS

On March 31, 1993, the Company guaranteed a $300,000 promissory note
executed jointly by Samuel A. Penninger, Jr., the Chairman of the Board of
Directors of the Company, and Mary Ann Penninger, the spouse of Mr. Penninger.
The promissory note, which was fully repaid by the Penningers on December 31,
1993, was for a term of sixty months and bore interest at the rate of 8% per
annum.

The Company believes that the above described transaction was on terms fair
to the Company and its stockholders and at least as favorable to the Company as
those available from unaffiliated third parties. Any future transaction with
directors, executive officers or their affiliates will be made only if the
transaction has been approved by a majority of the then disinterested members of
the Board of Directors on the basis of their conclusion that the terms of such
transaction are no less favorable to the Company than could have been obtained
from unaffiliated parties.

47
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information as of March 31, 1996, and
as adjusted to reflect the sale of the shares of Common Stock offered hereby
(assuming no exercise of the Underwriter's over-allotment option) with respect
to the beneficial ownership of the Common Stock by (i) each person known by the
Company to be the beneficial owner of more than 5% of the outstanding shares of
Common Stock, (ii) each Selling Stockholder, (iii) each director of the Company,
(iv) each Named Executive Officer and (v) all officers and directors of the
Company as a group.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED SHARES BENEFICIALLY OWNED
BEFORE AFTER
THE OFFERING THE OFFERING (1)
----------------------------- SHARES TO -----------------------------
NAME NUMBER (2) PERCENT (3) BE SOLD NUMBER (2) PERCENT (3)
- ----------------------------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
BancBoston Ventures, Inc. ......... 1,258,474 14.9% 400,000 858,474 9.1%
100 Federal Street, Boston, MA
02110
Marcia T. Bates (4)(5) ............ 1,290,474 15.3 400,000 890,474 9.5
100 Federal Street, Boston, MA
02110
Samuel A. Penninger, Jr. (6)(7).... 954,018 11.3 250,000 704,018 7.5
Harold J. Tenoso, Ph.D. (6)(8)..... 534,492 6.0 50,000(9) 484,492 4.9
Gary A. Kress (6)(10).............. 462,486 5.5 55,000 407,486 4.3
Timm M. Hurst (11)................. 332,169 3.9 80,000 252,169 2.7
James F. Sowinski (11)(12)......... 289,018 3.4 50,000 239,018 2.5
James L. Currie (13)............... 34,000 * -- 34,000 *
George M. Shaw (14)................ 26,400 * 5,000(9) 21,400 *
Matthew C. Weisman (14)............ 24,000 * -- 24,000 *
Essex Venture Partners............. 145,455 1.7 145,000 455 *
NationsBank Capital Corp........... 363,802 4.3 100,000 263,802 2.8
Theodore L. Gail (6)(15)........... 165,240 2.0 55,000 110,240 1.2
Russell H. Plumb (6)(16)........... 47,900 * 10,000(9) 37,900 *
All executive officers and
directors
as a group (consisting of
12 individuals) (17).............. 4,022,139 43.9 900,000(18) 3,122,139 31.0
</TABLE>

- --------------
* Less than one percent.

(1) Does not reflect the exercise of the Underwriters' over-allotment option. If
the over-allotment option is fully exercised, 150,000 shares, 40,000 shares,
50,000 shares, 25,000 shares, 20,000 shares, 15,000 shares and 15,000 shares
would be sold by the Company, Mr. Penninger, Dr. Tenoso, Mr. Kress, Mr.
Hurst, Mr. Sowinski and Mr. Gail, respectively, and the amount and
percentage of Common Stock to be owned beneficially by Messrs. Penninger,
Tenoso, Kress, Hurst, Sowinski and Gail and by all executive officers and
directors as a group, after completion of the offering would be 664,018
shares (6.9%), 434,492 shares (4.3%), 382,486 shares (4.0%), 232,169 shares
(2.4%), 224,018 shares (2.3%), 95,240 shares (1.0%) and 2,972,139 shares
(29.1%), respectively.

(2) This table identifies persons having sole voting and investment power with
respect to the shares set forth opposite their names as of March 31, 1996,
except as otherwise disclosed in the footnotes to the table, according to
information publicly filed or furnished to the Company by each of them.

48
<PAGE>
(3) Shares beneficially owned, as recorded in this table, expressed as a
percentage of the shares of Common Stock outstanding as of March 31, 1996.
For purposes of calculating each person's beneficial ownership, any shares
subject to options exercisable within 60 days of March 31, 1996 are deemed
to be beneficially owned by, and outstanding with respect to, such person.

(4)Includes 32,000 shares of Common Stock issuable upon the exercise of
immediately exercisable stock options.

(5)Marcia T. Bates, a director of the Company, is a vice president of
BancBoston Ventures, Inc. Ms. Bates may be deemed to be the beneficial owner
of the shares owned by BancBoston Ventures, Inc.

(6)Addresses are c/o Serologicals Corporation, 780 Park North Boulevard, Suite
110, Clarkston, Georgia 30021.

(7)804,018 of such shares are held jointly with Mary Ann Penninger, the spouse
of Mr. Penninger. Includes 100,000 shares held by a charitable remainder
trust for which Mr. Penninger serves as trustee, which shares are included
in the 250,000 shares being sold hereunder.

(8) Includes 529,492 shares of Common Stock issuable upon the exercise of
immediately exercisable stock options.

(9) Represents shares issuable upon exercise of outstanding stock options.

(10) Includes 10,000 shares of Common Stock issuable upon the exercise of
immediately exercisable stock options.

(11) Includes 16,800 shares of Common Stock issuable upon the exercise of
immediately exercisable stock options.

(12) Includes 300 shares beneficially owned by Mr. Sowinski as custodian for his
minor children.

(13) Includes 32,000 shares of Common Stock issuable upon the exercise of
immediately exercisable stock options. Excludes 145,455 shares held by Essex
Venture Partners of which Mr. Currie is the general partner. Mr. Currie
disclaims beneficial ownership of the shares held by Essex Ventures
Partners.

(14) Represents shares of Common Stock issuable upon the exercise of immediately
exercisable stock options.

(15) Mr. Gail is an employee of the Company.

(16) Includes 47,400 shares issuable upon the exercise of immediately
exercisable stock options.

(17) Includes 750,454 shares of Common Stock issuable upon the exercise of
immediately exercisable stock options.

(18) Includes 65,000 shares issuable upon the exercise of outstanding stock
options and 400,000 shares owned by BancBoston Ventures, Inc.

49
<PAGE>
DESCRIPTION OF CAPITAL STOCK

COMMON STOCK

The Company is authorized to issue 30,000,000 shares of Common Stock, par
value $0.01 per share. As of March 31, 1996 there were 8,421,302 shares of
Common Stock outstanding, held of record by 69 holders. The holders of Common
Stock are entitled to one vote for each share held of record on all matters to
be voted on by stockholders. There is no cumulative voting with respect to the
election of directors, with the result that the holders of more than 50% of the
shares voting for the election of directors can elect all of the directors then
up for election. The holders of Common Stock are entitled to receive dividends
when, as and if declared by the Board of Directors out of funds legally
available therefor. In the event of liquidation, dissolution or winding up of
the Company, the holders of Common Stock are entitled to share ratably in all
assets remaining which are available for distribution to them after payment of
liabilities and after provision has been made for each class of stock having
preference over the Common Stock. Holders of shares of Common Stock, as such,
have no conversion, preemptive or other subscription rights, and there are, no
redemption provisions applicable to the Common Stock. All of the outstanding
shares of Common Stock are fully paid and nonassessable.

PREFERRED STOCK

The Company is authorized to issue 1,000,000 shares of preferred stock, par
value $.01 per share. The Board of Directors of the Company has the authority at
any time and from time to time to establish and designate one or more series of
preferred stock, to fix the number of shares of any series (which number may
vary between series) and to fix the dividend rights and preferences, the
redemption price (if any) and terms, liquidation rights, sinking fund provisions
(if any), conversion provisions (if any) and the voting powers (if any). The
Board of Directors, without stockholder approval, could issue preferred stock
with voting and conversion rights that could adversely affect the voting power
of holders of the Common Stock. Certain companies have used the issuance of
preferred stock as an anti-takeover device, and the Board of Directors of the
Company could, without stockholder approval, issue preferred stock with certain
voting, conversion and/or redemption rights that could discourage any attempt to
obtain control of the Company in a transaction not approved by the Board of
Directors. Although the Company does not intend to issue any shares of preferred
stock, there can be no assurance that the Company will not do so in the future.

DELAWARE ANTI-TAKEOVER LAW

The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law ("DGCL"). Section 203 provides, with certain exceptions,
that a Delaware corporation may not engage in certain business combinations with
a person or affiliate or associate of such person who is an "interested
stockholder" for a period of three years from the date such person became an
interested stockholder unless: (i) the transaction resulting in the acquiring
person's becoming an interested stockholder, or the business combination, is
approved by the board of directors of the corporation before the person becomes
an interested stockholder; (ii) the interested stockholder acquires 85% percent
or more of the outstanding voting stock of the corporation in the same
transaction which makes it an interested stockholder (excluding certain employee
stock option plans); or (iii) on or after the date the person becomes an
interested stockholder, the business combination is approved by the
corporation's board of directors and by the holders of at least 66 2/3% of the
corporation's outstanding voting stock at an annual or special meeting,
excluding shares owned by the interested stockholder. An "interested
stockholder" is defined as any person that is (x) the owner of 15% or more of
the outstanding voting stock of the corporation or (y) an affiliate or associate
of the corporation and was the owner of 15% or more of the outstanding voting
stock of the corporation at any time within the three year period immediately
prior to the date on which it is sought to be determined whether such person is
an interested stockholder. Under Delaware law, the Company could have opted out
of Section 203 but elected to be subject to its provisions.

CERTAIN PROVISIONS OF THE COMPANY'S CERTIFICATE OF INCORPORATION AND BY-LAWS

The Company's Amended and Restated Certificate of Incorporation and Amended
and Restated By-laws contain several provisions that may be deemed to have the
effect of making more difficult the acquisition of control of the Company by
means of a hostile tender offer, open market purchases, a proxy

50
<PAGE>
contest or otherwise. The provisions of the Amended and Restated Certificate of
Incorporation and the Amended and Restated By-laws discussed below are designed
to help to ensure that holders of Common Stock are treated fairly and equally in
a multi-step acquisition. In addition, they are intended to encourage persons
seeking to acquire control of the Company to initiate such an acquisition
through arm's-length negotiations with the Company's Board of Directors.

CLASSIFIED BOARD OF DIRECTORS. The Company's Amended and Restated
Certificate of Incorporation provides that the Board of Directors shall be
divided into three classes of directors serving staggered terms. One class of
directors will be elected at each annual meeting of stockholders for a
three-year term. See "Management -- Directors and Executive Officers." Thus, at
least two annual meetings of stockholders, instead of one, generally will be
required to change the majority of the Company's Board of Directors. This may
have the effect of making it more difficult to acquire control of the Company by
means of a hostile tender offer, open market purchases, a proxy contest or
otherwise.

REQUIREMENTS FOR ADVANCE NOTIFICATION OF STOCKHOLDER NOMINATION AND
PROPOSALS. The Company's Amended and Restated By-Laws require 60 to 90 days'
notice to the Company with regard to stockholder proposals and the nomination,
other than by or at the direction of the Board of Directors or a committee
thereof, of candidates for election as directors. Such notice must provide
specified information, including information regarding the ownership of Common
Stock by the person giving the notice, information regarding the proposal or the
nominees and information regarding the interest of the proponent in the proposal
or the nominations.

SIZE OF AND FILLING VACANCIES ON THE BOARD OF DIRECTORS; REMOVAL OF
DIRECTORS. The Company's Amended and Restated Certificate of Incorporation and
Amended and Restated By-laws provide that (i) the number of directors is
determined by the Board of Directors, with a lower limit of five and an upper
limit of 11 directors, (ii) a director may be removed by stockholders only for
cause with the approval of the holders of a majority of the total voting power
of all outstanding securities of the Company then entitled to vote generally in
the election of directors, voting together as a single class, (iii) subject to
the rights of the holders of any class or series of preferred stock, vacancies
in the Board of Directors resulting from death, resignation, removal (including
removal of a director by the stockholders for cause) or otherwise and newly
created directorships resulting from any increase in the number of directors
shall be filled by a majority of directors then in office and (iv) no decrease
in the authorized number of directors shall shorten the term of any incumbent
director.

STOCKHOLDER MEETINGS. The Company's Amended and Restated Certificate of
Incorporation and Amended and Restated By-laws provide that, subject only to the
rights of holders of any class or series of preferred stock, only a majority of
the Company's Board, the Chairman, the President or the Chief Executive Officer
are entitled to call an annual meeting or a special meeting of stockholders. In
addition, subject only to the rights of holders of preferred stock, stockholders
may not take any action by written consent.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is State Street Bank
and Trust Company.

51
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE

In addition, 1,500,000 shares of Common Stock are authorized for issuance
under the Omnibus Plan. Of these shares, 664,860 shares are issuable upon the
exercise of outstanding stock options granted by the Company, of which options
to purchase 218,363 are currently exercisable (exclusive of an aggregate of
15,000 shares to be sold by certain Selling Stockholders in this offering upon
the exercise of outstanding options). Further, 360,000 shares of Common Stock
are authorized for issuance under the Director Plan, of which 64,000 shares are
issuable upon the exercise of outstanding stock options granted by the Company.
In addition, 250,000 shares of Common Stock are authorized for issuance under
the Purchase Plan, none of which is issued or outstanding. Finally, options held
by an officer to purchase 439,492 shares of Common Stock are also outstanding
(exclusive of 50,000 shares to be sold by such officer in this offering upon the
exercise of outstanding options). The Company has filed registration statements
on Form S-8 with the Commission registering the shares of Common Stock that are
issuable under these plans and the option to the officer. There also are
outstanding the Convertible Note which is convertible into 250,000 shares of
Common Stock and the State Street Warrant to purchase 147,749 shares of Common
Stock. The holder of this warrant has registration rights with respect to these
shares. The Company has granted certain additional piggyback and demand
registration rights to certain beneficial owners of its securities. The exercise
of these registration rights could adversely affect the market price of the
Common Stock and could impair the Company's future ability to raise capital
through an offering of its equity securities.

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including an affiliate, who has beneficially owned
restricted shares for at least two years from the later of the date such
restricted shares were acquired from the Company and (if applicable) the date
they were acquired from an affiliate, is entitled to sell within any three-month
period a number of shares that does not exceed the greater of 1% of the then
outstanding shares of Common Stock (93,863 shares based on the number of shares
to be outstanding immediately after this offering) or the average weekly trading
volume in the public market during the four calendar weeks preceding the date on
which notice of the sale is filed with the Commission. Sales under Rule 144 are
also subject to certain requirements as to the manner and notice of sale and the
availability of public information concerning the Company. Further, under Rule
144(k), if a period of at least three years has elapsed between the later of the
date restricted shares were acquired from the Company or an affiliate of the
Company, and the person was not an affiliate for at least three months prior to
the sale, such person would be entitled to sell the shares immediately without
regard to volume limitations and the other conditions described above.

The Company, the Selling Stockholders, the Company's directors and officers
and certain other stockholders, beneficially owning in the aggregate 3,506,511
shares of Common Stock, have agreed not to offer, sell, contract to sell or
otherwise dispose of any shares Common Stock or any securities convertible into
or exercisable or exchangeable for Common Stock without the prior written
consent of Smith Barney Inc. for a period ending 90 days after the date of this
Prospectus. No predictions can be made as to the effect, if any, that market
sales of shares of these stockholders or the availability of such shares for
future sale will have on the market price of shares of Common Stock prevailing
from time to time. The prevailing market price of Common Stock after the
offering could be adversely affected by future sales of substantial amounts of
Common Stock by these stockholders.

52
<PAGE>
UNDERWRITING

Under the terms and subject to the conditions contained in the Underwriting
Agreement dated the date hereof, each Underwriter named below has severally
agreed to purchase, and the Company and the Selling Stockholders have agreed to
sell to such Underwriter, shares of Common Stock which equal the number of
shares set forth opposite the name of such Underwriter below.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- -------------------------------------------- ----------
<S> <C>
Smith Barney Inc. .......................... 560,000
Lehman Brothers Inc. ....................... 560,000
Volpe, Welty & Company...................... 560,000
Alex. Brown & Sons Incorporated............. 60,000
Dean Witter Reynolds Inc. .................. 60,000
A.G. Edwards & Sons, Inc. .................. 60,000
Legg Mason Wood Walker, Incorporated........ 30,000

<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- -------------------------------------------- ----------
<S> <C>

Merrill Lynch, Pierce, Fenner & Smith
Incorporated............................. 60,000
Morgan Keegan & Company, Inc. .............. 30,000
PaineWebber Incorporated.................... 60,000
The Robinson-Humphrey Company, Inc. ........ 30,000
Southeast Research Partners, Inc. .......... 30,000
----------
Total................................... 2,100,000
----------
----------
</TABLE>

The Underwriters are obligated to take and pay for all shares of Common
Stock offered hereby (other than those covered by the over-allotment option
described below) if any such shares are taken.

The Underwriters, for whom Smith Barney Inc., Lehman Brothers Inc. and
Volpe, Welty & Company are acting as Representatives, propose initially to offer
part of the shares of Common Stock directly to the public at the public offering
price set forth on the cover page hereof and part to certain dealers at a price
that represents a concession not in excess of $.85 per share under the public
offering price. The Underwriters may allow, and such dealers may re-allow, a
concession not in excess of $.10 per share to other Underwriters or to certain
other dealers. After the public offering, the public offering price and such
concessions may be changed by the Underwriters.

The Company and certain Selling Stockholders have granted to the
Underwriters an option, exercisable for 30 days from the date of this
Prospectus, to purchase up to 315,000 additional shares of Common Stock at the
public offering price set forth on the cover page hereof less underwriting
discounts and commissions. See "Principal and Selling Stockholders." Of the
315,000 additional shares of Common Stock, up to 150,000 shares will be sold by
the Company and up to 165,000 shares will be sold by certain Selling
Stockholders. In the event that fewer than all of the additional shares are
sold, those additional shares being offered by Selling Stockholders will be sold
before any additional shares of the Company are sold. The Underwriters may
exercise such option to purchase additional shares solely for the purpose of
covering over-allotments, if any, incurred in connection with the sale of the
shares offered hereby. To the extent such option is exercised, each Underwriter
will become obligated, subject to certain conditions, to purchase approximately
the same percentage of such additional shares as the number set forth next to
such Underwriter's name in the preceding table bears to the total number of
shares in such table.

The Company, the Selling Stockholders and the Underwriters have agreed to
indemnify each other against certain liabilities, including liabilities under
the Securities Act.

The Company, the Selling Stockholders, the Company's directors and officers
and certain other stockholders have agreed not to offer, sell, contract to sell
or otherwise dispose of any shares of Common Stock or any securities convertible
into or exercisable or exchangeable for Common Stock, other than the shares
subject to the Underwriters' over-allotment option, without the prior written
consent of Smith Barney Inc. for a period of 90 days after the date of this
Prospectus.

The Underwriters and certain selling group members that currently act as
market makers for the Common Stock may engage in "passive market making" in the
Common Stock in accordance with Rule 10b-6A under the Exchange Act. Rule 10b-6A
permits, upon the satisfaction of certain conditions, underwriters and selling
group members participating in a distribution that are also market makers in the
security being distributed to engage in limited market making transactions
during the period when Rule 10b-6 under the Exchange Act would otherwise
prohibit such activity. In general, under Rule 10b-6A, any Underwriter or
selling group member engaged in passive market making in the Common Stock (i)
may

53
<PAGE>
not effect transactions in, or display bids for, the Common Stock at a price
that exceeds the highest bid for the Common Stock displayed by a market maker
that is not participating in the distribution of the Common Stock, (ii) may not
have net daily purchases of the Common Stock that exceed 30% of its average
daily trading volume in such stock for the two full consecutive calendar months
immediately preceding the filing date of the registration statement of which
this Prospectus forms a part and (iii) must identify its bids as bids made by a
passive market maker.

In December 1994, Volpe, Welty & Company received a fee of $222,750 plus
reimbursement for out-of-pocket expenses of $2,500 for providing financial
advisory services to the Company in connection with the Seramune Acquisition.
Over the course of 1994 and the first quarter of 1995, Volpe, Welty & Company
rendered certain other financial advisory services to the Company and did not
receive compensation therefor but was reimbursed for out-of-pocket expenses
incurred in providing such services.

LEGAL MATTERS

Certain legal matters will be passed upon for the Company by Shereff,
Friedman, Hoffman & Goodman, LLP, New York, New York, and for the Underwriters
by Dewey Ballantine, New York, New York.

EXPERTS

The Consolidated Financial Statements of the Company and the Combined
Financial Statements of the Southeastern Group included in this Prospectus and
in the Registration Statement have been audited by Arthur Andersen LLP,
independent public accountants, to the extent and for the periods set forth in
their reports appearing elsewhere herein and in the Registration Statement, and
are included herein in reliance upon the authority of said firm as experts in
giving said reports.

ADDITIONAL INFORMATION

The Company is subject to the information requirements of the Exchange Act
and in accordance therewith files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information can be inspected and copied at the public reference facilities
maintained by the Commission at Judiciary Plaza Building, 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549, and its regional offices located at 7
World Trade Center, 13th Floor, New York, New York, 10048, and 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such materials can
be obtained from the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates.

The Company has filed with the Commission, Washington, D.C., a Registration
Statement on Form S-1 under the Securities Act with respect to the Common Stock
offered hereby. This Prospectus does not contain all the information set forth
in the Registration Statement and the exhibits and schedules thereto. For
further information with respect to the Company and such Common Stock, reference
is made to such Registration Statement and exhibits. A copy of the Registration
Statement on file with the Commission may be obtained from the Commission's
principal office in Washington, D.C., upon payment of the fees prescribed by the
Commission.

The Company's Common Stock is traded on The Nasdaq National Market. Reports,
proxy statements and other information concerning the Company can also be
inspected at the offices of The Nasdaq National Market, 1735 K Street,
Washington, D.C. 20006.

54
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<S> <C>
SEROLOGICALS CORPORATION AND SUBSIDIARIES
Report of Arthur Andersen LLP, Independent Public Accountants...................... F-2
Consolidated Balance Sheets as of December 31, 1994 and 1995 and March 31, 1996
(unaudited)....................................................................... F-3
Consolidated Statements of Income for the years ended December 31, 1993, 1994 and
1995, and the Three-Month Periods ended April 2, 1995 (unaudited) and March 31,
1996 (unaudited).................................................................. F-4
Consolidated Statements of Stockholders' Equity for the years ended December 31,
1993, 1994 and 1995, and the Three-Month Period ended March 31, 1996
(unaudited)....................................................................... F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1993, 1994
and 1995, and the Three-Month Periods ended April 2, 1995 (unaudited) and March
31, 1996 (unaudited).............................................................. F-6
Notes to Consolidated Financial Statements......................................... F-7

SOUTHEASTERN GROUP
Report of Arthur Andersen LLP, Independent Public Accountants...................... F-22
Combined Balance Sheets as of December 31, 1995 and March 6, 1996 (unaudited)...... F-23
Combined Statements of Operations for the year ended December 31, 1995 and the
period from January 1, 1996 to March 6, 1996 (unaudited).......................... F-24
Combined Statements of Stockholders' Equity for the year ended December 31, 1995
and the period from January 1, 1996 to March 6, 1996 (unaudited).................. F-25
Combined Statements of Cash Flows for the year ended December 31, 1995 and the
period from January 1, 1996 to March 6, 1996 (unaudited).......................... F-26
Notes to Combined Financial Statements............................................. F-27
</TABLE>

F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors
and Stockholders of
Serologicals Corporation:

We have audited the accompanying consolidated balance sheets of SEROLOGICALS
CORPORATION (a Delaware corporation) AND SUBSIDIARIES as of December 31, 1994
and 1995 and the related consolidated statements of income, stockholders' equity
and cash flows for each of the three years in the period ended December 31,
1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Serologicals Corporation and
subsidiaries as of December 31, 1994 and 1995 and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995 in conformity with generally accepted accounting principles.

As discussed in Note 9 to the consolidated financial statements, effective
January 1, 1993, the Company changed its method of accounting for income taxes.

ARTHUR ANDERSEN LLP
Atlanta, Georgia
March 6, 1996

F-2
<PAGE>
SEROLOGICALS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ MARCH 31,
1994 1995 1996
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................... $ 6,900,854 $ 2,887,225 $ 1,570,611
Trade accounts receivable, less allowance for doubtful
accounts of $139,000 in 1994 and 1995...................... 2,443,343 5,607,840 7,254,531
Inventories................................................. 4,367,104 3,865,635 4,285,827
Deferred income taxes....................................... 293,638 173,264 170,780
Other current assets........................................ 320,163 561,496 1,072,511
----------- ----------- -----------
Total current assets...................................... 14,325,102 13,095,460 14,354,260
----------- ----------- -----------
PROPERTY AND EQUIPMENT, net................................... 6,219,376 6,595,410 7,239,829
----------- ----------- -----------
OTHER ASSETS:
Goodwill, net............................................... 26,860,573 27,960,637 32,066,828
FDA licenses................................................ 1,298,444 1,812,839 2,591,492
Debt issuance costs, net.................................... 760,858 44,762 42,086
Noncompete agreement, net................................... 497,808 544,475 1,044,815
Other....................................................... 173,222 270,242 266,988
----------- ----------- -----------
Total other assets........................................ 29,590,905 30,632,955 36,012,209
----------- ----------- -----------
$50,135,383 $50,323,825 $57,606,298
----------- ----------- -----------
----------- ----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt and capital lease
obligations................................................ $ 3,205,340 $ 272,255 $ 987,464
Accounts payable............................................ 1,414,069 2,240,215 2,555,513
Accrued liabilities......................................... 2,740,932 4,281,074 5,139,167
Accrued corporate relocation expenses....................... 370,004 50,630 43,223
Deferred revenue............................................ 534,566 77,650 --
----------- ----------- -----------
Total current liabilities................................. 8,264,911 6,921,824 8,725,367
----------- ----------- -----------
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, less current
maturities................................................... 32,708,326 6,750,945 10,559,348
----------- ----------- -----------
OTHER LIABILITIES............................................. 131,678 58,390 79,422
----------- ----------- -----------
COMMITMENTS AND CONTINGENCIES (Notes 4, 6, 7, and 14)
COMMON STOCK PUT WARRANTS..................................... 2,188,000 -- --
----------- ----------- -----------
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; 1,000,000 shares
authorized, no shares issued............................... -- -- --
Series A, convertible preferred stock, $.01 par value;
12,587 shares authorized, 12,587 and 0 shares issued and
outstanding in 1994 and 1995, respectively................. 126 -- --
Common stock, $.01 par value; 30,000,000 shares authorized,
4,131,010 and 8,406,251 shares issued and outstanding in
1994 and 1995, respectively................................ 41,310 84,063 84,214
Additional paid-in capital.................................. 2,571,071 29,339,537 29,401,566
Retained earnings........................................... 4,534,310 7,131,915 8,760,393
Unearned compensation....................................... (346,500) -- --
Cumulative translation adjustment........................... 42,151 37,151 (4,012)
----------- ----------- -----------
Total stockholders' equity................................ 6,842,468 36,592,666 38,242,161
----------- ----------- -----------
$50,135,383 $50,323,825 $57,606,298
----------- ----------- -----------
----------- ----------- -----------
</TABLE>

The accompanying notes are an integral part of these consolidated balance
sheets.

F-3
<PAGE>
SEROLOGICALS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, ----------------------
---------------------------------- APRIL 2, MARCH 31,
1993 1994 1995 1995 1996
---------- ---------- ---------- ---------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
NET SALES............................. $22,937,616 $30,100,113 $52,124,419 $11,968,239 $14,779,107
COSTS AND EXPENSES
Cost of Sales....................... 14,487,373 16,796,099 31,525,001 7,301,590 8,664,809
Selling, General, and Administrative
Expenses........................... 4,075,929 6,289,806 8,216,286 1,845,295 2,292,623
Product Development Expenses........ 727,923 829,616 1,973,924 600,758 588,794
Corporate Relocation Expenses....... 1,500,000 -- -- -- --
Other Expense....................... 141,711 11,863 1,328,147 332,402 426,388
Interest Expense.................... 426,145 407,258 2,116,018 909,279 162,811
---------- ---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES,
EXTRAORDINARY LOSS AND CUMULATIVE
EFFECT OF ACCOUNTING CHANGE.......... 1,578,535 5,765,471 6,965,043 978,915 2,643,682
PROVISION FOR INCOME TAXES............ 680,200 2,226,744 2,498,894 346,614 1,015,204
---------- ---------- ---------- ---------- ----------
INCOME BEFORE EXTRAORDINARY LOSS AND
CUMULATIVE EFFECT OF ACCOUNTING
CHANGE............................... 898,335 3,538,727 4,466,149 632,301 1,628,478
EXTRAORDINARY LOSS ON EARLY RETIREMENT
OF DEBT, net of income taxes......... -- (102,610) (1,822,988) -- --
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING FOR INCOME TAXES.......... 301,000 -- -- -- --
---------- ---------- ---------- ---------- ----------
NET INCOME............................ 1,199,335 3,436,117 2,643,161 632,301 1,628,478
ACCRETION OF COMMON STOCK PUT
WARRANTS............................. -- 186,000 45,556 25,000 --
---------- ---------- ---------- ---------- ----------
NET INCOME AVAILABLE FOR COMMON
STOCKHOLDERS......................... $1,199,335 $3,250,117 $2,597,605 $ 607,301 $1,628,478
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
NET INCOME PER COMMON SHARE --
PRIMARY:
Income before extraordinary loss and
cumulative effect of accounting
change............................. $ 0.14 $ 0.54 $ 0.58 $ 0.10 $ 0.18
Extraordinary loss.................. -- (0.02) (0.24) -- --
Cumulative effect of accounting
change............................. 0.05 -- -- -- --
---------- ---------- ---------- ---------- ----------
NET INCOME............................ $ 0.19 $ 0.52 $ 0.34 $ 0.10 $ 0.18
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
NET INCOME PER COMMON SHARE -- FULLY
DILUTED:
Income before extraordinary loss and
cumulative effect of accounting
change............................. $ 0.14 $ 0.54 $ 0.58 $ 0.10 $ 0.18
Extraordinary loss.................. -- (0.02) (0.24) -- --
Cumulative effect of accounting
change............................. 0.05 -- -- -- --
---------- ---------- ---------- ---------- ----------
NET INCOME............................ $ 0.19 $ 0.52 $ 0.34 $ 0.10 $ 0.18
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING:
Primary............................. 6,187,458 6,250,458 7,646,061 6,252,885 8,971,020
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Fully Diluted....................... 6,482,195 6,250,458 7,646,061 6,252,885 8,971,020
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
</TABLE>

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

F-4
<PAGE>
SEROLOGICALS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK PREFERRED STOCK ADDITIONAL CUMULATIVE
---------------------- ---------------------- PAID-IN RETAINED TRANSLATION
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENT
--------- ----------- --------- ----------- ---------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1992............... 3,668,640 $ 306 12,587 $ 126 $2,624,006 $ 84,858 $ (15,737)
Net income............................. -- -- -- -- -- 1,199,335 --
Change in cumulative translation
adjustment............................ -- -- -- -- -- -- 4,005
--------- ----------- --------- ----- ---------- --------- -------------
BALANCE, DECEMBER 31, 1993............... 3,668,640 306 12,587 126 2,624,006 1,284,193 (11,732)
Net income............................. -- -- -- -- -- 3,436,117 --
Retirement of treasury shares.......... (120,000) -- -- -- (363,284) -- --
Exercise of common stock warrants...... 582,370 4,853 -- -- -- -- --
Change in cumulative translation
adjustment............................ -- -- -- -- -- -- 53,883
Merger into Serologicals Holdings
Cancellation of existing shares....... (4,131,010) (5,159) (12,587) (126) -- -- --
Issuance of new shares................ 4,131,010 41,310 12,587 126 (36,151) -- --
Stock options granted.................. -- -- -- -- 346,500 -- --
Accretion of common stock put
warrants.............................. -- -- -- -- -- (186,000) --
--------- ----------- --------- ----- ---------- --------- -------------
BALANCE, DECEMBER 31, 1994............... 4,131,010 41,310 12,587 126 2,571,071 4,534,310 42,151
Net income............................. -- -- -- -- -- 2,643,161 --
Exercise of common stock warrants...... 363,802 3,534 -- -- (3,534) -- --
Conversion of preferred stock.......... 1,510,439 15,105 (12,587) (126) (14,979) -- --
Accretion of common stock put
warrants.............................. -- -- -- -- -- (45,556) --
Exercise of stock options.............. 1,000 114 -- -- 11,385 -- --
Accelerated vesting of stock options... -- -- -- -- -- -- --
Retirement of common stock put
warrants.............................. -- -- -- -- 2,233,556 -- --
Initial public offering of common
stock, net of issuance costs.......... 2,400,000 24,000 -- -- 24,542,038 -- --
Change in cumulative translation
adjustment............................ -- -- -- -- -- -- (5,000)
--------- ----------- --------- ----- ---------- --------- -------------
BALANCE, DECEMBER 31, 1995............... 8,406,251 84,063 -- -- 29,339,537 7,131,915 37,151
Net income............................. -- -- -- -- -- 1,628,478 --
Exercise of stock options.............. 15,051 151 -- -- 62,029 -- --
Change in cumulative translation
adjustment............................ -- -- -- -- -- -- (41,163)
--------- ----------- --------- ----- ---------- --------- -------------
BALANCE, MARCH 31, 1996 (UNAUDITED)...... 8,421,302 $ 84,214 -- $ -- $29,401,566 $8,760,393 $ (4,012)
--------- ----------- --------- ----- ---------- --------- -------------
--------- ----------- --------- ----- ---------- --------- -------------

UNEARNED TREASURY
COMPENSATION STOCK TOTAL
------------- --------- ----------
<S> <C> <C> <C>
BALANCE, DECEMBER 31, 1992............... $ -- $(363,284) $2,330,275
Net income............................. -- -- 1,199,335
Change in cumulative translation
adjustment............................ -- -- 4,005
------------- --------- ----------
BALANCE, DECEMBER 31, 1993............... -- (363,284) 3,533,615
Net income............................. -- -- 3,436,117
Retirement of treasury shares.......... -- 363,284 --
Exercise of common stock warrants...... -- -- 4,853
Change in cumulative translation
adjustment............................ -- -- 53,883
Merger into Serologicals Holdings
Cancellation of existing shares....... -- -- (5,285)
Issuance of new shares................ -- -- 5,285
Stock options granted.................. (346,500) -- --
Accretion of common stock put
warrants.............................. -- -- (186,000)
------------- --------- ----------
BALANCE, DECEMBER 31, 1994............... (346,500) -- 6,842,468
Net income............................. -- -- 2,643,161
Exercise of common stock warrants...... -- -- --
Conversion of preferred stock.......... -- -- --
Accretion of common stock put
warrants.............................. -- -- (45,556)
Exercise of stock options.............. -- -- 11,499
Accelerated vesting of stock options... 346,500 -- 346,500
Retirement of common stock put
warrants.............................. -- -- 2,233,556
Initial public offering of common
stock, net of issuance costs.......... -- -- 24,566,038
Change in cumulative translation
adjustment............................ -- -- (5,000)
------------- --------- ----------
BALANCE, DECEMBER 31, 1995............... -- -- 36,592,666
Net income............................. -- -- 1,628,478
Exercise of stock options.............. -- -- 62,180
Change in cumulative translation
adjustment............................ -- -- (41,163)
------------- --------- ----------
BALANCE, MARCH 31, 1996 (UNAUDITED)...... $ -- $ -- $38,242,161
------------- --------- ----------
------------- --------- ----------
</TABLE>

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

F-5
<PAGE>
SEROLOGICALS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDING DECEMBER 31, -------------------------
-------------------------------------- APRIL 2, MARCH 31,
1993 1994 1995 1995 1996
----------- ------------ ----------- ------------ -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income........................................... $ 1,199,335 $ 3,436,117 $ 2,643,161 $ 632,301 $1,628,478
----------- ------------ ----------- ------------ -----------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization...................... 724,753 912,109 2,628,373 718,039 815,044
Deferred income tax (benefit) provision............ (298,800) 257,340 8,260 106,997 (10,934 )
Extraordinary loss, net............................ -- 102,610 1,822,988 -- --
Cumulative effect of accounting change............. (301,000) -- -- -- --
Accrual (payments) for corporate relocation ex-
penses............................................ 1,479,000 (1,108,996) (319,374) (73,425) --
Vesting of stock options........................... -- -- 346,500 -- --
Changes in operating assets and liabilities, net of
effects from purchase of businesses:
Trade accounts receivable, net................... (932,869) 379,328 (3,027,658) (1,593,807) (1,945,357 )
Inventories...................................... (624,184) (92,031) 563,268 (355,236) (162,555 )
Other current assets............................. 59,632 (89,101) (231,921) (333,291) (499,541 )
Accounts payable................................. (39,619) 678,117 1,105,487 22,430 199,110
Accrued liabilities.............................. 963,576 1,187,230 2,295,809 484,500 407,261
Deferred revenue................................. (497,460) (860,221) (456,916) 386,546 (76,385 )
----------- ------------ ----------- ------------ -----------
Total adjustments.............................. 533,029 1,366,385 4,734,816 (637,247) (1,273,357 )
----------- ------------ ----------- ------------ -----------
Net cash provided by (used in) operating
activities.................................... 1,732,364 4,802,502 7,377,977 (4,946) 355,121
----------- ------------ ----------- ------------ -----------
INVESTING ACTIVITIES:
Purchases of property and equipment.................. (758,895) (2,075,313) (1,495,189) (403,159) (459,099 )
Proceeds from note receivable........................ 90,122 -- -- -- --
Purchase of businesses............................... -- (29,744,032) (2,696,584) -- (4,638,415 )
Other................................................ (832) (196,163) (387,782) (270,444) (2,086 )
----------- ------------ ----------- ------------ -----------
Net cash used in investing activities.......... (669,605) (32,015,508) (4,579,555) (673,603) (5,099,600 )
----------- ------------ ----------- ------------ -----------
FINANCING ACTIVITIES:
Proceeds from revolving line of credit............... 7,341,888 18,369,802 16,573,590 1,363,568 7,708,293
Payments on revolving line of credit................. (7,878,059) (19,749,184) (14,514,834) (534,264) (3,016,208 )
Proceeds from long-term debt and capital lease
obligations......................................... 386,747 34,498,000 21,747,699 21,054,555 --
Payments on long-term debt and capital lease
obligations......................................... (978,351) (1,172,272) (55,156,148) (26,699,997) (1,305,558 )
Payment of debt issuance costs....................... (140,725) (724,415) (34,895) -- --
Proceeds from issuance of warrant.................... -- 2,002,000 -- -- --
Proceeds from exercise of stock options.............. -- -- -- -- 62,181
Proceeds from initial public offering, net of issu-
ance costs.......................................... -- -- 24,577,537 -- --
----------- ------------ ----------- ------------ -----------
Net cash (used in) provided by financing
activities.................................... (1,268,500) 33,223,931 (6,807,051) (4,816,138) 3,448,708
----------- ------------ ----------- ------------ -----------
EFFECT OF CHANGES IN FOREIGN EXCHANGE RATE............. (16,620) 53,883 (5,000) 53,775 (20,843 )
----------- ------------ ----------- ------------ -----------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS... (222,361) 6,064,808 (4,013,629) (5,440,912) (1,316,614 )
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD......... 1,058,407 836,046 6,900,854 6,900,854 2,887,225
----------- ------------ ----------- ------------ -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD............... $ 836,046 $ 6,900,854 $ 2,887,225 $ 1,459,942 $1,570,611
----------- ------------ ----------- ------------ -----------
----------- ------------ ----------- ------------ -----------
</TABLE>

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

F-6
<PAGE>
SEROLOGICALS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND BUSINESS OPERATIONS
Serologicals Corporation (a Delaware corporation), formerly Serologicals
Holdings, Inc. (the "Company"), is a leading worldwide provider of specialty
human antibody-based products and services to major healthcare companies. The
Company's services, including donor recruitment, donor management and clinical
testing services, enable the Company to provide value-added, antibody-based
products that are used as the active ingredients in therapeutic and diagnostic
pharmaceutical products.

As of December 31, 1995, the Company, through its two wholly owned
subsidiaries, Serologicals, Inc. ("Serologicals") and Seramune, Inc.
("Seramune"), operated a national network of 32 donor centers (39 as of March
31, 1996) and laboratories located in the United States and Europe. Serologicals
and its wholly owned subsidiaries, Allegheny Biologicals Inc. ("ABI") and Am Rho
Laboratories, Inc. ("Am Rho"), operate 12 donor centers (13 as of March 31,
1996) that specialize in the collection of specialty antibodies. Bioscot Ltd.
("Bioscot"), a wholly owned subsidiary of Serologicals, operates two U.S. Food
and Drug Administration ("FDA") licensed monoclonal antibody manufacturing
facilities in Edinburgh, Scotland. Bioscot is organized and existing under the
laws of Scotland. Seramune, Inc. and its subsidiaries ("Seramune") operate 20
donor centers (26 as of March 31, 1996) that collect non-specialty plasma from
which a number of therapeutic products are derived.

The industry is also characterized by sales to a relatively few major
pharmaceutical companies. One of the Company's customers, Bayer Corporation
("Bayer"), accounted for approximately one-half of the Company's net sales in
1995 (Note 10). The Company has a long-term supply contract with Bayer related
to non-specialty antibodies which accounted for approximately 31% of the
Company's net sales in 1995; however, there can be no assurance that the
contract will not be terminated or that Bayer will not reduce its supply
requirements pursuant to a provision in the agreement.

Export sales from the United States represented approximately 22% of net
sales in 1995 (Note 13). Concern over blood safety has led to movements in a
number of European and other countries to restrict the importation of blood and
blood derivatives, including antibodies, collected outside the countries'
borders or, in the case of certain European countries, outside Europe. To date,
these efforts have not led to any meaningful restriction on the importation of
blood and blood derivatives and have not adversely affected the Company.

The Company's business is dependent upon its ability to attract and retain
qualified donors. A significant portion of the industry's potential donor
population has been disqualified due in large part to more rigorous screening
procedures required by regulatory authorities. The potential donor population
with certain specialty antibodies has also decreased due to aging and attrition.
The inability to locate and procure donors with specialty antibodies could
adversely affect the Company.

The Company generates significant sales outside the United States and is
subject to risks generally associated with international operations. Bioscot,
which accounted for approximately 18% of the Company's net sales in 1995 (Note
13), generates net sales and incurs expenses in foreign currencies. Accordingly,
the Company's financial results from international operations may be affected by
fluctuations in currency exchange rates.

F-7
<PAGE>
SEROLOGICALS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The accompanying consolidated financial statements include the accounts of
the Company and its two wholly owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation.

APRIL 2, 1995 AND MARCH 31, 1996

The April 2, 1995 and March 31, 1996 financial statements (and related notes
thereto) are unaudited, however, in the opinion of management, include all
adjustments which are of a recurring nature and necessary for a fair statement
of financial position, results of operations and cash flows for the periods
indicated. However, these results and cash flows are not necessarily indicative
of results and cash flows which may be expected for a twelve month period.

USE OF ESTIMATES

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

INVENTORIES

Inventories are stated at the lower of cost or market, cost being determined
on a first-in, first-out basis. Market for antibody-based product inventories is
net realizable value and for supplies is replacement cost.

Inventories at December 31, 1994 and 1995 consisted of the following:

<TABLE>
<CAPTION>
1994 1995
------------ ------------
<S> <C> <C>
Antibody-based products........................................ $ 3,950,180 $ 3,355,275
Supplies....................................................... 416,924 510,360
------------ ------------
$ 4,367,104 $ 3,865,635
------------ ------------
------------ ------------
</TABLE>

PROPERTY AND EQUIPMENT

Fixed assets are stated at cost and are depreciated using straight-line and
accelerated methods over their estimated useful lives for financial reporting
purposes. For income tax purposes, the Company uses only accelerated
depreciation methods. Depreciable lives for equipment, furniture and fixtures
range from three to ten years. Leasehold improvements are amortized over the
shorter of the lease term or the economic lives of the assets. Expenditures for
maintenance and repairs are charged to expense as incurred.

Property and equipment at December 31, 1994 and 1995 consisted of the
following:

<TABLE>
<CAPTION>
1994 1995
------------- -------------
<S> <C> <C>
Leasehold improvements...................................... $ 3,030,485 $ 4,026,564
Laboratory and office equipment and furniture and
fixtures................................................... 6,481,634 7,170,726
------------- -------------
Total property and equipment................................ 9,512,119 11,197,290
Accumulated depreciation and amortization................... (3,292,743) (4,601,880)
------------- -------------
Property and equipment, net................................. $ 6,219,376 $ 6,595,410
------------- -------------
------------- -------------
</TABLE>

F-8
<PAGE>
SEROLOGICALS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ACCRUED LIABILITIES

Accrued liabilities at December 31, 1994 and 1995 consisted of the
following:

<TABLE>
<CAPTION>
1994 1995
------------ ------------
<S> <C> <C>
Income taxes payable........................................... $ 649,144 $ 1,097,904
Accrued payroll, bonuses, and payroll taxes.................... 787,642 1,573,819
Other.......................................................... 1,304,146 1,609,351
------------ ------------
$ 2,740,932 $ 4,281,074
------------ ------------
------------ ------------
</TABLE>

REVENUE RECOGNITION AND DEFERRED REVENUE

The Company's policy is to record revenue upon the shipment of its products.
The Company also receives advance payments from customers for future delivery of
specified products. The deferred revenue related to these advance payments is
recognized when the specified products are shipped.

CASH EQUIVALENTS

For purposes of the statements of cash flows, the Company considers all
investments purchased with an original maturity of three months or less to be
cash equivalents.

INCOME TAXES

Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes" ("SFAS No.
109"). The new standard requires an asset and liability approach to accounting
for deferred income taxes based on the differences between financial reporting
and income tax bases using enacted tax rates in effect for the year in which the
differences are expected to reverse (Note 9).

FOREIGN OPERATIONS

The financial statements of Bioscot have been translated into U.S. dollars
in accordance with SFAS No. 52, "Foreign Currency Translation" ("SFAS No. 52").
Under SFAS No. 52, all balance sheet accounts are translated at the exchange
rate at year-end. Income statement items are translated at the average exchange
rate for the year. Translation adjustments are not included in determining net
income but are accumulated and reported as a separate component of stockholders'
equity. Gains and losses which result from foreign currency transactions are
included in the accompanying statements of income.

DEBT DISCOUNTS

In accordance with APB No. 16, "Business Combinations," the subordinated
notes and other notes (Note 6) which were assumed in connection with the
acquisition of Bioscot in 1989 were discounted to reflect their present values.
The notes are payable in British pounds sterling. The debt discounts are
amortized to interest expense using the effective interest method.

The Company recorded an original issue discount ("OID") of $2,002,000 in
connection with the issuance of a subordinated note and a related warrant (Note
6) in December 1994. In June 1995, the subordinated note was repaid in full with
the proceeds from the Company's Initial Public Offering ("IPO") (Note 3) and the
remaining OID was expensed. The write-off of approximately $1,400,000 (net of
income taxes) was recorded as an extraordinary loss.

GOODWILL

The excess of cost over the fair market value of the assets acquired
("goodwill") is being amortized to income on a straight-line basis over a period
of 25 years. The goodwill relates primarily to the acquisition of

F-9
<PAGE>
SEROLOGICALS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Bioscot in 1989, the Seramune Acquisition in December 1994 (Note 4), and the ABI
acquisition in October 1995 (Note 4). The Company periodically reviews the
carrying values assigned to goodwill based upon expectations of future cash
flows and operating income generated by the underlying tangible assets in
determining whether goodwill is recoverable.

FDA LICENSES

In connection with the Company's acquisitions (Note 4), it acquired the
licenses of the FDA-approved donor centers. The estimated fair value of the FDA
licenses is being amortized to income on a straight-line basis over a period of
25 years.

NONCOMPETE AGREEMENT

In connection with the Company's acquisitions (Note 4), it entered into
noncompete agreements with the sellers. The noncompete agreements for Seramune
and ABI were valued at $500,000 and $125,000, respectively, and are being
amortized to income on a straight-line basis over a period of five years, the
term of the agreements.

DEBT ISSUANCE COSTS

The Company has incurred debt issuance costs in connection with its
long-term debt (Note 6). These costs are capitalized and amortized to interest
expense over the term of the debt.

During 1994, the Company incurred debt issuance costs of approximately
$772,000 and recorded an extraordinary loss of $102,610 (net of income taxes)
related to the write-off of previously capitalized debt issuance costs. During
1995, the Company incurred debt issuance costs of approximately $35,000 and, in
conjunction with the Company's IPO, recorded an extraordinary loss of
approximately $454,000 (net of income taxes) related to the write-off of
previously capitalized debt issuance costs.

NET INCOME PER SHARE

Net income per share is computed using the weighted average number of shares
of common stock outstanding. Common equivalent shares from convertible preferred
stock (using the if-converted method) and from stock options and warrants (using
the treasury stock method) have been included in the computation when dilutive.
For periods presented, fully diluted net income per share has been presented as
applicable where the effect of including related common equivalent shares was
dilutive.

RECENT ACCOUNTING PRONOUNCEMENTS

In March 1995, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 121, "Accounting for the Impairment of Long Lived Assets and for Long Lived
Assets to Be Disposed Of," which becomes effective for fiscal years beginning
after December 15, 1995. SFAS No. 121 establishes standards for determining when
impairment losses on long lived assets have occurred and how impairment losses
should be measured. The Company adopted SFAS No. 121 effective January 1, 1996.
The financial statement impact of adopting SFAS No. 121 was not material.

In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock Based
Compensation," which becomes effective for years beginning after December 15,
1995. SFAS No. 123 establishes new financial reporting and accounting standards
for stock based compensation plans. However, entities are allowed to measure
compensation expense for stock based compensation under SFAS No. 123 or APB No.
25, "Accounting for Stock Issued to Employees". The Company has elected to
remain with the accounting under APB No. 25 and make the required pro forma
disclosures of net income and earnings per share as if the provisions of SFAS
No. 123 had been applied in its December 31, 1996 financial statements. The
potential impact of adopting this standard on the Company's pro forma
disclosures of net income and earnings per share has not been quantified at this
time.

F-10
<PAGE>
SEROLOGICALS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. INITIAL PUBLIC OFFERING
On June 14, 1995, the Company completed an IPO of 2.4 million shares of its
common stock at $11.50 per share which resulted in proceeds of $27.6 million
(before underwriting discounts and other offering expenses). The net proceeds of
approximately $24.6 million were used to reduce long-term debt. This early
retirement of debt resulted in an extraordinary loss of approximately $1.8
million (net of income taxes) due to early retirement costs associated with the
$7.5 million subordinated note and the write-down of debt issuance costs (Notes
2 and 6).

4. ACQUISITIONS
Effective December 23, 1994, the Company acquired substantially all of the
assets of the Acadiana Group through its newly formed subsidiary, Seramune, Inc.
under the terms of an asset purchase agreement (the "Seramune Acquisition"). The
acquired assets consisted primarily of fixed assets, deposits/prepaids, and
intangibles. The purchase price was approximately $29,500,000, before recording
certain acquisition expenses and adjustments, and was financed through two notes
to the sellers, a subordinated note with an affiliate of a bank, and a new
credit facility with a bank (Note 6). This acquisition was accounted for as a
purchase in accordance with APB No. 16, and accordingly, the purchase price has
been allocated to the assets acquired based on the estimated fair values as of
the acquisition date. The excess of the cost over the estimated fair value of
the net assets acquired has been allocated to goodwill.

The following unaudited pro forma data summarizes the results of operations
for the periods indicated as if the Seramune Acquisition had occurred on January
1 of each period. The unaudited pro forma information has been prepared for
comparative purposes only and does not purport to represent what the results of
operations of the Company would actually have been had the transactions occurred
on the dates indicated or what the results of operations may be in any future
period.

<TABLE>
<CAPTION>
PRO FORMA YEAR PRO FORMA YEAR
ENDED DECEMBER ENDED DECEMBER
31, 1993 31, 1994
-------------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Net sales................................. $37,958,632 $45,794,018
Income (loss) before extraordinary loss
and cumulative effect of accounting
change................................... (519,501) 2,288,166
Net income (loss)......................... (218,501) 2,185,556
Net income (loss) per common share........ $(0.03) $0.32
</TABLE>

During 1995, the Company acquired two specialty antibody centers from ABI
and individual donor centers from Eugene Plasma Corporation, Springfield Plasma
Corporation, and Alpha Therapeutics, Inc. for an aggregate acquisition cost of
approximately $3,000,000. The Company's acquisition of ABI includes a provision
for contingent consideration based upon the incremental increase in revenues of
the acquired business. The purchase agreement caps the additional consideration
at a maximum of $500,000. The consideration is expected to be determined and
paid in 1997. The Company recorded the above acquisitions using the purchase
method of accounting in accordance with APB No. 16. The costs of the
acquisitions have been allocated to the estimated fair value of the net assets
acquired. The Company has preliminarily allocated the excess of cost over the
net assets acquired to goodwill and certain identifiable intangible assets.

5. STOCKHOLDERS' EQUITY

CAPITAL STOCK

Under the terms of the amended and restated articles of incorporation (as
amended in November 1994), the Company has authorized 7,500,000 shares of common
stock, 25,000 shares of Series A Preferred Stock, and 1,000,000 shares of
preferred stock that may contain such preferences and rights as determined by
the board of directors. On May 10, 1995, the Company increased the number of
authorized shares of common stock from 7,500,000 to 30,000,000. In addition, the
number of authorized shares of

F-11
<PAGE>
SEROLOGICALS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

5. STOCKHOLDERS' EQUITY (CONTINUED)
Series A Preferred Stock was decreased from 25,000 to 12,587. Additionally, all
share information in the notes to consolidated financial statements have been
restated to give effect to the two-for-one common stock split effected on May
16, 1994 and the six-for-five stock split approved by the Company on May 10,
1995.

SERIES A PREFERRED STOCK

On June 14, 1995, all outstanding shares of Series A Preferred Stock were
converted into shares of common stock of the Company in conjunction with the
Company's successful completion of its IPO. The holders of the Series A
Preferred Stock received 1,510,439 shares of the Company's common stock.

COMMON STOCK WARRANTS

In connection with a bank credit agreement entered into in March 1993 (Note
6), the Company issued a warrant to a bank to purchase 147,749 shares of the
Company's common stock at an exercise price of $3.44 per share of common stock.
The warrant becomes exercisable at any time on or before March 9, 2003. No value
was assigned to the warrant. The warrant holder had a put option to require the
Company to repurchase the warrant or any shares previously purchased by the
warrant holder exercisable on the earlier of an IPO by the Company, or on no
more than three separate occasions during the period from March 9, 1996 to March
9, 2003. The common stock put warrant was being accreted to its highest
redemption price, as defined in the agreement, from the date of issuance to June
14, 1995 and was separately classified in the accompanying balance sheets as
"common stock put warrants". The accretion was $186,000 and $45,556 in 1994 and
1995, respectively. Upon the successful completion of the Company's IPO on June
14, 1995, the put option was waived by the warrant holder and the accretion
related to the common stock put warrants was reclassified to additional paid-in
capital.

On April 29, 1994, the Company entered into warrant exercise agreements with
its two preferred stockholders whereby they exercised warrants and purchased
582,370 shares of common stock for $.01 per share. The purchase consideration of
$4,853 was based on the 485,308 shares acquired at $.01 per share prior to the
six-for-five common stock split in 1995. The warrants were originally issued on
December 20, 1989 at an exercise price of $.01 per share unless certain
operating income levels were achieved. Since the specified operating income
levels were not achieved, the warrant exercise price remained at $.01 per share.

In connection with the issuance of the $7,500,000 (face amount) subordinated
note (the "Subordinated Note") in December 1994 (Note 6), the Company issued a
warrant (the "NationsBanc Warrant") to an affiliate of a bank ("NationsBanc") to
purchase 364,036 shares of the Company's common stock at an exercise price of
$.01 per share. The Company assigned the NationsBanc Warrant a value of
$2,002,000 based on an estimated fair value of $5.50 per common share on the
date of issuance. As of December 31, 1994, the NationsBanc Warrant was
classified within common stock put warrants in the accompanying balance sheets.
During 1995, the Company paid the Subordinated Note with the proceeds from the
IPO and wrote off the remaining OID (Note 2). Additionally, in September 1995,
NationsBanc exercised the NationsBanc Warrant to purchase 363,802 shares of the
Company's common stock at the exercise price of $.01 per share on a net issuance
basis.

RETIREMENT OF TREASURY SHARES

During June 1992, the Company repurchased 120,000 shares of its common stock
for $363,284. The stock repurchase was accounted for as a treasury stock
transaction in 1992 and these shares were subsequently retired in November 1994.
As a result, the treasury stock was eliminated with a corresponding charge to
additional paid-in capital during 1994.

OFFICER STOCK OPTIONS

During March 1993, the Company entered into an employment agreement with an
officer. As part of the agreement, the officer was granted two options (the
"base option" and the "market option") to purchase shares of common stock. Under
each option, the officer can purchase up to 168,000 shares of the Company's

F-12
<PAGE>
SEROLOGICALS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

5. STOCKHOLDERS' EQUITY (CONTINUED)
common stock at an exercise price of $3.44 per share (the estimated fair value
on the date of grant). During December 1994, the market option was amended in
order to fix the vesting period while the option price per share remained at
$3.44. The amendment of the market option created a new measurement date under
APB No. 25, which resulted in the Company recording unearned compensation (a
contra-account to stockholders' equity) and an increase in additional paid-in
capital in the amount of $346,500 as a result of granting the option at an
amount below estimated fair value. In conjunction with the amendment of the
market option, the officer was granted additional options to purchase 153,492
shares of common stock at an exercise price of $5.50, the fair market value at
the date of grant. All options have a term of ten years and became fully vested
as of the IPO date of June 14, 1995. As a result, in June 1995, the Company
recognized the compensation expense related to the accelerated vesting of the
officer's stock options.

1994 OMNIBUS INCENTIVE PLAN

During November 1994, the Company approved the Omnibus Stock Incentive Plan
(the "Omnibus Plan"). The Omnibus Plan provides for the issuance of stock
options to key employees and directors. The Company has reserved 432,000 shares
for issuance under the Omnibus Plan. Options granted under the Omnibus Plan can
have varying terms as determined by the board of directors. Options granted
through 1995 under the Omnibus Plan vest ratably over three years and have a
term of ten years. At December 31, 1995, 95,600 options to acquire shares of
common stock were vested under the Omnibus Plan. A summary of changes of options
outstanding and other related information is as follows:

<TABLE>
<CAPTION>
SHARES PRICE RANGE
--------- -------------
<S> <C> <C>
Outstanding at December 31, 1993................................. -- --
Granted........................................................ 153,600 $ 3.44-$6.88
---------
Outstanding at December 31, 1994................................. 153,600 $ 3.44-$6.88
Granted........................................................ 107,441 $ 5.50-$6.88
---------
Outstanding at December 31, 1995................................. 261,041 $ 3.44-$6.88
---------
---------
</TABLE>

As of December 31, 1995, the Company had 170,959 shares available for grant
under the Omnibus Plan. Subsequent to year-end, the Company amended the Omnibus
Plan, subject to stockholder approval, to increase the number of shares reserved
under the Omnibus Plan to 1,500,000. Additionally, subsequent to year-end, the
Company granted options under the Omnibus Plan totaling 434,750 shares, subject
to stockholder approval of the increase in the number of shares available for
grant thereunder, at prices ranging from $15.00 to $18.50 per share. After
considering these subsequent events, the number of option shares available for
grant under the Omnibus Plan is 804,209.

1995 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN

During August 1995, the Company initiated the Non-employee Director Stock
Option Plan (the "Director Plan"). The Director Plan provides for the issuance
of stock options to non-employee directors. The Company has reserved 160,000
shares for issuance under the Omnibus Plan. Pursuant to the Director Plan, each
person who thereafter becomes a non-employee director of the Company is
automatically granted an option to purchase 32,000 shares of Common stock on the
date of adoption or on the day after such person's first election to the Board.
The exercise price of the options is the fair market value of the Common

F-13
<PAGE>
SEROLOGICALS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

5. STOCKHOLDERS' EQUITY (CONTINUED)
Stock on the date of grant. Options granted to date under the Director Plan are
fully vested upon issuance. At December 31, 1995, 64,000 shares had vested under
the Director Plan. A summary of changes in options outstanding and other related
information is as follows:

<TABLE>
<CAPTION>
PRICE
SHARES RANGE
--------- ---------
<S> <C> <C>
Outstanding at December 31, 1994........................................ -- --
Granted............................................................... 64,000 $ 12.75
---------
Outstanding at December 31, 1995........................................ 64,000 $ 12.75
---------
---------
</TABLE>

As of December 31, 1995, the Company had 96,000 shares available for grant
under the Director Plan. Subsequent to year end, the Company increased the
number of shares reserved under the Director Plan to 360,000, subject to
shareholder approval. After giving effect to such increase, the number of option
shares available for grant under the Director Plan is 296,000.

COMMON SHARES RESERVED FOR ISSUANCE

Shares of common stock reserved for issuance at December 31, 1994 and 1995
consisted of the following:

<TABLE>
<CAPTION>
1994 1995
---------- ----------
<S> <C> <C>
Various stock option agreements.................................. 921,492 1,081,492
Conversion of preferred stock.................................... 1,510,440 --
Warrants......................................................... 511,784 147,789
---------- ----------
2,943,716 1,229,281
---------- ----------
---------- ----------
</TABLE>

The Company has reserved a sufficient number of common shares for the
potential conversion of the convertible subordinated note (Note 6).

F-14
<PAGE>
SEROLOGICALS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
Long-term debt and capital lease obligations at December 31, 1994 and 1995
and March 31, 1996 consisted of the following:

<TABLE>
<CAPTION>
DECEMBER 31
--------------------- MARCH 31,
1994 1995 1996
---------- --------- ----------
(UNAUDITED)
<S> <C> <C> <C>
$20,000,000 revolving credit facility, variable
interest rate (7.43% and 6.9% at December 31, 1995 and
March 31, 1996 (unaudited), respectively), payable on
July 20, 1998......................................... $ -- $2,058,756 $6,750,841
$3,500,000 convertible subordinated note payable,
interest at 12% at December 31, 1994 and 1995 and 9%
at March 31, 1996 (unaudited); interest payable
monthly, payable on December 23, 1997................. 3,500,000 3,500,000 3,500,000
$25,500,000 promissory note payable, paid in full on
January 3, 1995, with proceeds from the new credit
facility and the Subordinated Note; secured by a
letter of credit with a bank.......................... 25,500,000 -- --
$7,500,000 senior subordinated note payable, interest
at 10.9% payable quarterly (net of unamortized
discount of $1,995,733 and $0 at December 31, 1994 and
1995, respectively); paid in full on June 14, 1995,
with the proceeds from the IPO........................ 5,504,267 -- --
Subordinated note payable with an effective interest
rate of 16%, principal due in full on February 1,
1997; interest at 5% payable quarterly (net of
unamortized discount of $101,016, $66,773 and $57,477
at December 31, 1994 and 1995 and March 31, 1996
(unaudited), respectively)............................ 716,567 748,552 744,566
Capital lease obligations at varying interest rates and
terms, maturing through July 1999..................... 382,689 201,674 182,230
Other notes at varying interest rates and terms
maturing through March 2000 (net of unamortized
discount of $16,459, $10,213 and $8,615 at December
31, 1994 and 1995 and March 31, 1996 (unaudited),
respectively)......................................... 310,143 514,218 369,175
---------- --------- ----------
35,913,666 7,023,200 11,546,812
Less current maturities................................ 3,205,340 272,255 987,464
---------- --------- ----------
$32,708,326 $6,750,945 $10,559,348
---------- --------- ----------
---------- --------- ----------
</TABLE>

In connection with the Seramune Acquisition (Note 4) in December 1994, the
Company issued the sellers a $25,500,000 promissory note (the "Seller Note") and
a $3,500,000 convertible subordinated note (the "Convertible Note"). The Seller
Note was noninterest-bearing, secured by a letter of credit with a bank, and
repaid on January 3, 1995 with proceeds from the new bank credit facility and
the Subordinated Note discussed below. The Convertible Note had an interest rate
of 12% (payable monthly) and is due on December 23, 1997. The Convertible Note
had a conversion feature whereby it could be converted into shares of the
Company's common stock at 95% of the Company's IPO price ($10.93). Subsequent to
year end, the Company amended its Convertible Note. Under the amended agreement,
the interest rate was reduced to 9%, the conversion price was changed to $14.00
per share of common stock, and the note is callable no earlier than January 21,
1997. The note is convertible at the option of the holder.

F-15
<PAGE>
SEROLOGICALS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS (CONTINUED)
On December 21, 1994, the Company entered into new credit agreements (the
"New Credit Facility") with NationsBank, N.A. providing for maximum borrowings
of $27,500,000. The New Credit Facility was divided into a $21,000,000 term note
(the "Term Note") and a $6,500,000 revolving line of credit (the "Revolver"). On
January 3, 1995, the Company obtained $21,000,000 in proceeds from the Term Note
and used these funds along with the proceeds from the Subordinated Note to repay
the Seller Note. The Company repaid the Subordinated Note and reduced the
principal amount outstanding under the Term Note with the proceeds from the
Company's IPO (Note 3) during 1995.

On July 20, 1995, the Company amended its Revolver with NationsBank, N.A.
(the "New Revolver"). The New Revolver provides for maximum borrowings of
$20,000,000, bears interest at a variable rate, is payable in full on July 20,
1998 and provides for maximum borrowings of up to $15,000,000 for future
acquisitions. The Company may elect either a floating rate or Eurodollar
interest rate option applicable to borrowings under the New Revolver. The
floating rate and Eurodollar interest rate options are based on the base rate,
as defined, plus a floating rate margin that fluctuates on the basis of the
Company's leverage ratio. The initial floating rate margin under the New
Revolver is 0% for the floating rate option and 1.5% for the Eurodollar rate
option. The Company is required to pay a fee of .375% on the unused portion of
the New Revolver. The New Revolver is secured by substantially all of the assets
of the Company, the Company's stock in its subsidiaries, and the Company's
supply contract with a major customer. The New Revolver also contains certain
financial covenants that require the maintenance of minimum levels of cash flow
coverage, debt service coverage and minimum levels of net worth.

Future maturities of long-term debt and capital lease obligations at
December 31, 1995 are as follows:

<TABLE>
<S> <C>
1996.................................................... $ 272,255
1997.................................................... 4,465,269
1998.................................................... 2,207,163
1999.................................................... 130,199
2000.................................................... 25,210
-----------
7,100,096
Less unamortized discount............................... (76,896)
-----------
$ 7,023,200
-----------
-----------
</TABLE>

The Company made interest payments of approximately $399,000, $322,000, and
$2,206,000 during 1993, 1994, and 1995, respectively. During 1993, 1994, and
1995, the Company entered into capital lease arrangements for property and
equipment for an aggregate principal amount of approximately $295,000, $140,000,
and $0, respectively.

The Company has an interest rate cap which has the effect of limiting its
exposure to an increase in interest rates with respect to $10,000,000 of
variable rate debt. The agreement has the effect of capping the Eurodollar base
rate (LIBOR) at 8.25%. The amount paid for this agreement was $160,000 and the
Company has no exposure to additional costs related thereto. The Company is
amortizing the deferred cost related to the interest rate cap over the life of
the contract as interest expense.

F-16
<PAGE>
SEROLOGICALS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7. COMMITMENTS AND CONTINGENCIES

OPERATING LEASES

The Company leases certain office space and laboratory equipment under
noncancelable operating lease agreements. Future minimum annual rental
obligations under noncancelable operating leases as of December 31, 1995 are as
follows:

<TABLE>
<S> <C>
1996.................................................... $ 1,715,785
1997.................................................... 1,371,132
1998.................................................... 1,028,219
1999.................................................... 936,272
2000.................................................... 259,990
Thereafter.............................................. 54,162
-----------
$ 5,365,560
-----------
-----------
</TABLE>

Rent expense was approximately $841,000, $766,000, and $1,838,000 during
1993, 1994, and 1995, respectively.

SUPPLY CONTRACT

The Company is in the second year of a five-year supply contract to sell
non-specialty antibodies to a customer at specified prices. The contract
includes escalating minimum annual purchase amounts by the customer subject to
the rights of such customer to reduce the amount purchased under certain terms.
The Company expects to meet its obligations under the supply contract.

LITIGATION

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

8. DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

CASH EQUIVALENTS

The Company estimates that the fair value of cash equivalents approximates
carrying value due to the relatively short maturity of these instruments.

NOTES PAYABLE

The Company estimates that the fair value of notes payable approximates
carrying value based upon its effective current borrowing rate for issuance of
debt with similar terms and remaining maturities.

INTEREST RATE CAP

The Company estimates that the fair value of its interest rate cap agreement
approximates the net carrying value of the agreement at December 31, 1995.

Disclosure about the estimated fair value of financial instruments is based
on pertinent information available to management as of December 31, 1995.
Although management is not aware of any factors that would significantly affect
the reasonable fair value amounts, such amounts have not been comprehensively
revalued for purposes of these financial statements since this date and current
estimates of fair value may differ significantly from the amounts presented
herein.

F-17
<PAGE>
SEROLOGICALS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9. INCOME TAXES
Effective January 1, 1993, the Company adopted SFAS No. 109 using the
cumulative catch-up method. Adoption of SFAS No. 109 resulted in a net credit to
income of $301,000 for the cumulative effect of this change in accounting
principle. The adoption of SFAS No. 109 had the effect of reducing 1993 income
before the cumulative effect of accounting change by $301,000.

The income tax provision (benefit) for the years ended December 31, 1993,
1994, and 1995 consisted of the following:

<TABLE>
<CAPTION>
1993 1994 1995
----------- ------------ ------------
<S> <C> <C> <C>
Current:
U.S. federal and state............................. $ 979,000 $ 1,534,404 $ 1,714,296
International...................................... -- 435,000 776,338
----------- ------------ ------------
979,000 1,969,404 2,490,634
----------- ------------ ------------
Deferred:
U.S. federal and state............................. (599,800) 290,744 8,260
International...................................... 301,000 (33,404) 0
----------- ------------ ------------
(298,800) 257,340 8,260
----------- ------------ ------------
Income tax provision................................. $ 680,200 $ 2,226,744 $ 2,498,894
----------- ------------ ------------
----------- ------------ ------------
</TABLE>

The income tax provision as reported in the statements of income differs
from the amounts computed by applying federal statutory rates due to the
following:

<TABLE>
<CAPTION>
1993 1994 1995
---------- ------------ ------------
<S> <C> <C> <C>
Federal income taxes at statutory rate................ $ 536,702 $ 1,960,260 $ 2,368,115
State income taxes, net of federal income tax
benefit.............................................. 56,385 250,306 278,601
Goodwill amortization................................. 19,063 19,063 19,063
Other................................................. 68,050 (2,885) (166,885)
---------- ------------ ------------
$ 680,200 $ 2,226,744 $ 2,498,894
---------- ------------ ------------
---------- ------------ ------------
</TABLE>

F-18
<PAGE>
SEROLOGICALS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9. INCOME TAXES (CONTINUED)
Deferred income tax assets and liabilities for 1994 and 1995 reflect the
impact of temporary differences between the amounts of assets and liabilities
for financial reporting and income tax reporting purposes. Temporary differences
which give rise to deferred tax assets and liabilities at December 31, 1994 and
1995 are as follows:

<TABLE>
<CAPTION>
1994 1995
----------- -----------
<S> <C> <C>
Deferred tax assets:
Accrued corporate reorganization expenses...................... $ 129,200 $ 19,000
Accruals and reserves.......................................... 115,460 489,095
Unearned compensation.......................................... -- 131,670
Other.......................................................... 201,900 94,584
----------- -----------
446,560 734,349
----------- -----------
Deferred tax liabilities:
Goodwill amortization.......................................... -- (319,632)
Excess tax depreciation........................................ (184,600) (242,255)
Other.......................................................... (100,000) (18,762)
----------- -----------
(284,600) (580,649)
----------- -----------
Net deferred tax asset........................................... $ 161,960 $ 153,700
----------- -----------
----------- -----------
</TABLE>

The Company did not record any valuation allowance against the deferred tax
asset at December 31, 1995 because it is more likely than not that the deferred
tax asset will be realizable through future taxable income.

The Company made income tax payments of approximately $226,000, $1,953,000,
and $1,176,000 during 1993, 1994, and 1995, respectively.

10. SIGNIFICANT CUSTOMERS
The Company's ten largest customers accounted for approximately 76%, 75%,
and 82% of net sales for the years ended December 31, 1993, 1994, and 1995,
respectively. Certain customers made up greater than 10% of net sales of the
Company for the years ended December 31, 1993, 1994, and 1995 as follows:

<TABLE>
<CAPTION>
1993 1994 1995
----------- ----------- -----------
<S> <C> <C> <C>
Bayer Corporation................................................ 26.4% 34.9% 49.7%
WBAG............................................................. 14.7 8.0 --
Berhingwerke..................................................... -- -- 13.0%
</TABLE>

In 1993 and 1994, Behringwerke purchased the Company's products through
WBAG, a European distributor.

11. EMPLOYEE SAVINGS PLAN
The Company maintains a separate defined contribution 401(k) savings plan
for all eligible employees. Under the plan, the Company contributes a specified
percentage of each eligible employee's compensation. The employees become fully
vested in the Company's contribution after three years of service. The Company's
contributions approximated $52,000, $57,000, and $69,000 in 1993, 1994, and
1995, respectively.

12. CORPORATE RELOCATION EXPENSES
During November 1993, the board of directors approved the relocation of the
Company's corporate headquarters from Pensacola, Florida, to Atlanta, Georgia.
The Company recorded a charge in 1993 of $1,500,000 for the estimated costs of
the relocation.

F-19
<PAGE>
SEROLOGICALS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

13. SEGMENT REPORTING
The Company's operations consist of two primary geographic segments, the
United States and Europe, as set forth below:

<TABLE>
<CAPTION>
1993 1994 1995
------------- ------------- -------------
<S> <C> <C> <C>
Net sales to unaffiliated customers:
United States................................. $ 18,907,147 $ 23,895,809 $ 42,851,428
Europe........................................ 4,030,469 6,204,304 9,272,991
------------- ------------- -------------
$ 22,937,616 $ 30,100,113 $ 52,124,419
------------- ------------- -------------
------------- ------------- -------------
Income from operations:
United States................................. $ 1,423,613 $ 4,742,794 $ 6,766,926
Europe........................................ 722,778 1,441,798 2,279,065
------------- ------------- -------------
$ 2,146,391 $ 6,184,592 $ 9,045,991
------------- ------------- -------------
------------- ------------- -------------
Identifiable assets:
United States................................. $ 8,920,697 $ 45,506,763 $ 44,685,600
Europe........................................ 3,890,312 4,628,620 5,638,225
------------- ------------- -------------
$ 12,811,009 $ 50,135,383 $ 50,323,825
------------- ------------- -------------
------------- ------------- -------------
Capital expenditures:
United States................................. $ 657,982 $ 1,372,269 $ 1,050,321
Europe........................................ 100,913 703,044 444,868
------------- ------------- -------------
$ 758,895 $ 2,075,313 $ 1,495,189
------------- ------------- -------------
------------- ------------- -------------
Depreciation and amortization:
United States................................. $ 308,412 $ 533,347 $ 2,159,396
Europe........................................ 416,341 378,762 468,977
------------- ------------- -------------
$ 724,753 $ 912,109 $ 2,628,373
------------- ------------- -------------
------------- ------------- -------------
</TABLE>

Total export sales from the United States to Europe were approximately
$3,668,000, $5,322,000, and $11,598,000 during 1993, 1994, and 1995,
respectively. The remaining sales to customers outside the United States were
sourced from Bioscot.

14. SUBSEQUENT EVENTS
In addition to the subsequent events disclosed in Notes 5 and 6, the
following events have occurred subsequent to December 31, 1995:

On February 14, 1996, the Company acquired a specialty antibody center and
other assets from Am-Rho Laboratories, Inc. for approximately $1.7 million. The
Company formed a wholly owned subsidiary of Serologicals for the purpose of
acquiring the assets of such center. The Company will account for the
acquisition as a purchase in accordance with APB No. 16.

On February 27, 1996, the Company's board of directors approved the
authorization of an employee stock purchase plan for eligible employees of the
Company and designated subsidiaries and authorized 250,000 shares for issuance
under this plan. Participants may use up to 25% of their compensation, to a
maximum of $25,000 per year, to purchase the Company's common stock at the end
of each fiscal quarter for 85% of the lower of the beginning or ending stock
price in the plan period.

Effective March 6, 1996, the Company acquired the stock of Southeastern
Biologics, Inc. and Plasma Management Inc., and the assets of Concho Biologics,
Inc. (collectively referred to as the "Southeastern

F-20
<PAGE>
SEROLOGICALS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

14. SUBSEQUENT EVENTS (CONTINUED)
Acquisition") for approximately $4.75 million plus additional consideration
based upon the performance of the acquired businesses. The acquired companies
will become wholly owned subsidiaries of Seramune. The acquisition will be
accounted for as a purchase in accordance with APB No. 16.

F-21
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors
and Stockholders of
Serologicals Corporation:

We have audited the accompanying combined balance sheet of SOUTHEASTERN
GROUP (as described in Note 1) as of December 31, 1995 and the related combined
statements of operations, changes in stockholders' equity, and cash flows for
the year then ended. These financial statements are the responsibility of the
Group's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Southeastern Group as of
December 31, 1995 and the results of their operations and their cash flows for
the year then ended in conformity with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Atlanta, Georgia
April 10, 1996

F-22
<PAGE>
SOUTHEASTERN GROUP (NOTE 1)
COMBINED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 6,
1995 1996
------------- -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.......................................................... $ 105,747 $ 68,975
Accounts receivable................................................................ 216,945 164,731
Inventories........................................................................ 266,198 242,000
Due from affiliates................................................................ 202,286 197,417
Prepaids and other current assets.................................................. 12,282 14,966
------------- -------------
Total current assets............................................................. 803,458 688,089
------------- -------------
PROPERTY AND EQUIPMENT:
Furniture, fixtures, and equipment................................................. 775,335 781,930
Leasehold improvements............................................................. 480,828 480,833
------------- -------------
1,256,163 1,262,763
Less accumulated depreciation...................................................... (662,563) (677,470)
------------- -------------
Net property and equipment....................................................... 593,600 585,293
------------- -------------
OTHER ASSETS:
Goodwill, net of accumulated amortization of $23,190 and $25,249 as of December 31,
1995 and March 6, 1996, respectively.............................................. 103,639 101,580
Other.............................................................................. 10,634 10,634
------------- -------------
Total other assets............................................................... 114,273 112,214
------------- -------------
$ 1,511,331 $ 1,385,596
------------- -------------
------------- -------------

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Current maturities of long-term debt............................................... $ 583,334 $ 588,334
Due to affiliates.................................................................. 68,000 40,000
Accounts payable................................................................... 52,171 92,890
Accrued liabilities................................................................ 108,884 77,399
------------- -------------
Total current liabilities........................................................ 812,389 798,623
------------- -------------
LONG-TERM DEBT, less current maturities.............................................. 666,666 555,555
------------- -------------
COMMITMENTS AND CONTINGENCIES (Note 5)
STOCKHOLDERS' EQUITY:
Common stock, no par value; 15,500 shares authorized, 2,580 shares issued and
outstanding....................................................................... 67,000 67,000
Accumulated deficit................................................................ (34,724) (35,582)
------------- -------------
Total stockholders' equity....................................................... 32,276 31,418
------------- -------------
$ 1,511,331 $ 1,385,596
------------- -------------
------------- -------------
</TABLE>

The accompanying notes are an integral part of these combined balance sheets.

F-23
<PAGE>
SOUTHEASTERN GROUP (NOTE 1)

COMBINED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1,
YEAR ENDED 1996
DECEMBER 31, TO
1995 MARCH 6, 1996
------------- -------------
(UNAUDITED)
<S> <C> <C>

NET SALES........................................................... $ 4,747,937 $ 1,015,796
COSTS AND EXPENSES:
Cost of sales..................................................... 4,174,259 891,953
Selling, general, and administrative.............................. 674,286 103,978
Other expense (income), net....................................... (57,252) 2,059
Interest expense.................................................. 91,721 18,664
------------- -------------
LOSS BEFORE INCOME TAXES............................................ (135,077) (858)
BENEFIT FROM INCOME TAXES........................................... 39,600 --
------------- -------------
NET LOSS............................................................ $ (95,477) $ (858)
------------- -------------
------------- -------------
</TABLE>

The accompanying notes are an integral part of these combined statements.

F-24
<PAGE>
SOUTHEASTERN GROUP (NOTE 1)
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
COMMON STOCK TOTAL
-------------------- ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT DEFICIT EQUITY
--------- --------- ------------ ------------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1994....................................... 2,580 $ 67,000 $ 60,753 $ 127,753
Net loss....................................................... -- -- (95,477) (95,477)
--------- --------- ------------ ------------
BALANCE, December 31, 1995....................................... 2,580 67,000 (34,724) 32,276
Net loss....................................................... -- -- (858) (858)
--------- --------- ------------ ------------
BALANCE, March 6, 1996 (Unaudited)............................... 2,580 $ 67,000 $ (35,582) $ 31,418
--------- --------- ------------ ------------
--------- --------- ------------ ------------
</TABLE>

The accompanying notes are an integral part of these combined statements.

F-25
<PAGE>
SOUTHEASTERN GROUP (NOTE 1)
COMBINED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1,
YEAR ENDED 1996 TO
DECEMBER 31, MARCH 6,
1995 1996
------------ -----------
(UNAUDITED)
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss............................................................................ $ (95,477) $ (858)
------------ -----------
Adjustments to reconcile net loss to net cash provided by (used in) operating
activities:
Depreciation and amortization..................................................... 122,132 16,966
Deferred income tax benefit....................................................... (44,600) --
Gain on disposal of assets........................................................ (39,500) --
Changes in operating assets and liabilities:
Accounts receivable............................................................... (61,063) 52,214
Inventories....................................................................... 24,886 24,198
Due from affiliates............................................................... 246,895 4,869
Other assets...................................................................... (5,924) (2,684)
Due to affiliates................................................................. (5,000) (28,000)
Accounts payable.................................................................. 6,193 40,719
Accrued liabilities............................................................... (195,518) (31,485)
------------ -----------
Total adjustments............................................................. 48,501 76,797
------------ -----------
Net cash (used in) provided by operating activities........................... (46,976) 75,939
------------ -----------
INVESTING ACTIVITIES:
Purchases of property and equipment................................................. (361,837) (6,600)
Proceeds from sale of assets........................................................ 167,373 --
------------ -----------
Net cash used in investing activities......................................... (194,464) (6,600)
------------ -----------
FINANCING ACTIVITIES:
Proceeds from revolving line of credit.............................................. 955,000 40,000
Payments on revolving line of credit................................................ (920,000) --
Proceeds from long-term debt........................................................ 252,000 --
Payments on long-term debt.......................................................... (112,837) (146,111)
------------ -----------
Net cash (used in) provided by financing activities........................... 174,163 (106,111)
------------ -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS............................................. (67,277) (36,772)
CASH AND CASH EQUIVALENTS, beginning of period........................................ 173,024 105,747
------------ -----------
CASH AND CASH EQUIVALENTS, end of period.............................................. $ 105,747 $ 68,975
------------ -----------
------------ -----------
</TABLE>

F-26
<PAGE>
SOUTHEASTERN GROUP

NOTES TO COMBINED FINANCIAL STATEMENTS

1. ORGANIZATION AND BUSINESS OPERATIONS
The Southeastern Group (the "Group") consists of three corporations under
common control which operate six U.S Food and Drug Administration licensed donor
centers located in Iowa, Louisiana, and Texas. The common stock ownership of the
Group primarily consists of three principal stockholders (the "Principal
Stockholders"). The donor centers collect non-specialty antibodies derived from
source plasma used as the active ingredients in Intravenous Immune Globulin
("IVIG"), a therapeutic pharmaceutical product which the Company sells to Bayer
Corporation ("Bayer"), under the terms of a plasma supply agreement. The supply
agreement provides for the purchase of specified amounts over the life of the
five-year term. The contract expires in 1999, with successive one-year renewals,
unless either party gives notice otherwise. There can be no guarantees that
Bayer will not reduce its supply requirements pursuant to a provision in the
agreement. Three separate corporations operate the donor centers as detailed
below. The accompanying combined financial statements include the following
entities:

<TABLE>
<CAPTION>
FEDERAL
JURISDICTION INCOME
OF TAX
NAME LOCATION INCORPORATION STATUS
- --------------------------------- --------------------------------- ------------ ---------
(Notes 2
and 6)
<S> <C> <C> <C>
Southeastern Biologics, Inc. Baton Rouge, Louisiana, and Cedar Louisiana
(two centers) Falls, Iowa C
Plasma Management, Inc. (three Monroe, Louisiana; Austin, Texas; Louisiana
centers) and Alexandria, Louisiana C
Concho Biologics, Inc. San Angelo, Texas Texas S
</TABLE>

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF COMBINATION AND PRESENTATION

The accompanying combined financial statements of the Group have been
presented on a combined basis because of common ownership, control, and
management and because the entities are subject to a business combination with
Serologicals Corporation (the "Company"), a Delaware corporation, on March 6,
1996 (Note 8). The combined financial statements contain all accounts of the
Group. All significant intercompany accounts and transactions have been
eliminated in combination.

USE OF ESTIMATES

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

INVENTORIES

PROPERTY AND EQUIPMENT

Fixed assets are stated at cost and are depreciated using straight-line and
accelerated methods over their estimated useful lives. Depreciable lives for
furniture, fixtures, and equipment range from five to seven years. Leasehold
improvements are amortized over the shorter of the lease terms or the economic
lives of the assets. Expenditures for maintenance and repairs are charged to
expense as incurred.

F-27
<PAGE>
SOUTHEASTERN GROUP

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
REVENUE RECOGNITION

The Group's policy is to record revenue upon the shipment of its products.

INCOME TAXES

One of the entities in the Group has elected status as an S corporation for
federal income tax purposes (Note 1). Accordingly, all tax attributes (i.e.,
items of gain, loss, credits, etc.) are reported on the respective stockholders'
individual income tax returns. No pro forma income tax provision was reflected
as the provision and related tax attributes were not material.

The C corporations of the Group (Note 1) are included in the consolidated
federal income tax returns of their respective parent companies. The income tax
provisions for the C corporations are computed on a separate company
(stand-alone) basis. State income taxes are based on the state income tax rates
in effect in the states where the C corporations operate. The C corporations do
not have formal tax sharing arrangements with their parent companies.

Effective January 1, 1992, the C corporations of the Group adopted Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
No. 109"). SFAS No. 109 requires an asset and liability approach to accounting
for deferred income taxes based on the differences between financial reporting
and income tax bases using enacted tax rates in effect for the year in which the
differences are expected to reverse (Note 6).

GOODWILL

The excess of cost over the net assets acquired ("goodwill") is being
amortized to income on a straight line basis over a period of 25 years. The
goodwill relates to the purchase of two donor centers during 1991 and one donor
center during 1994. The Group periodically reviews the carrying values assigned
to goodwill based upon expectations of undiscounted future cash flows and
operating income generated by the underlying tangible assets in determining
whether goodwill is recoverable.

CASH EQUIVALENTS

For purposes of the statement of cash flows, the Group considers all
investments purchased with an original maturity of three months or less to be
cash equivalents.

RECENT ACCOUNTING PRONOUNCEMENTS

In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 121 ("SFAS 121"), "Accounting
for the Impairment of Long Lived Assets and for Long Lived Assets to be Disposed
Of", which becomes effective for fiscal years beginning after December 15, 1995.
SFAS 121 establishes standards for determining when impairment losses on long
lived assets have occurred and how impairment losses should be measured. The
Group adopted SFAS 121 effective January 1, 1996. The financial statement impact
of adopting SFAS 121 was not material.

F-28
<PAGE>
SOUTHEASTERN GROUP

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

3. LONG-TERM DEBT
Long-term debt at December 31, 1995 and March 6, 1996 (unaudited) consisted
of the following:

<TABLE>
<CAPTION>
DECEMBER MARCH 6,
31, 1995 1996
----------- ---------
(UNAUDITED)
<S> <C> <C>
Term notes payable, bearing interest at either prime
or LIBOR (5.69% and 5.42% at December 31, 1995 and
March 6, 1996 (unaudited), respectively) plus 1%,
payable in semiannual installments of $111,111;
interest payable quarterly $1,000,000 $ 888,889

$250,000 revolving line of credit with a bank at
prime (8.5% and 8.25% at December 31, 1995 and
March 6, 1996 (unaudited), respectively) plus
1.75%; interest payable monthly 165,000 165,000

$100,000 revolving line of credit with a bank at
prime (8.5% and 8.25% at December 31, 1995 and
March 6, 1996 (unaudited), respectively) plus
1.25%; interest payable at maturity 50,000 90,000

Other notes at varying interest rates and terms 35,000 --
----------- ---------
1,250,000 1,143,889

Less current maturities (583,334) (588,334)
----------- ---------
$ 666,666 $ 555,555
----------- ---------
----------- ---------
</TABLE>

Future maturities of long-term debt at December 31, 1995 are as follows:

The long-term debt obligations of the Group are secured by its inventory,
certificates of deposits, and certain life insurance policies. The Group's
obligations do not contain any restrictive convenants. The Group made interest
payments of approximately $90,000 during 1995 and $4,000 for the period from
January 1, 1996 to March 6, 1996.

4. DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

CASH EQUIVALENTS

The Group estimates that the fair value of cash equivalents approximates
carrying value due to the relatively short maturity of these instruments.

NOTES PAYABLE

The Group estimates that the fair value of notes payable approximates
carrying value based upon its effective current borrowing rate for issuance of
debt with similar terms and remaining maturities.

F-29
<PAGE>
SOUTHEASTERN GROUP

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

5. COMMITMENTS AND CONTINGENCIES

OPERATING LEASES

The Group leases certain office space and equipment under noncancelable
operating lease agreements. Future minimum annual rental obligations under
noncancelable operating leases at December 31, 1995 were as follows:

<TABLE>
<S> <C>
Year ending December 31:
1996.................................................... $ 326,690
1997.................................................... 297,763
1998.................................................... 266,470
1999.................................................... 258,000
2000.................................................... 73,000
-----------
$ 1,221,923
-----------
-----------
</TABLE>

Rent expense totaled approximately $280,000 during 1995. Of the total rent
expense, approximately $150,000 was paid to the Principal Stockholders (Note 7).

LITIGATION

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

6. INCOME TAXES
The income tax provision for 1995 consisted of the following:

<TABLE>
<S> <C>
Current:
U.S. Federal and State.......................................... $ 5,000
Deferred:
U.S. Federal and State.......................................... (44,600)
---------
Total income tax benefit.................................. $ (39,600)
---------
---------
</TABLE>

Deferred income tax assets and liabilities reflect the impact of temporary
differences between the amounts of assets and liabilities for financial
reporting and income tax reporting purposes. As of December 31, 1995, temporary
differences which give rise to deferred tax assets and liabilities are as
follows:

<TABLE>
<S> <C>
Deferred tax asset:
Net operating losses......................... $ 133,000
--------------
Deferred tax liabilities:
Tax depreciation in excess of book
depreciation................................ (30,000)
Accruals for book in excess of tax........... (111,740)
--------------
Net deferred tax liability................... $ (8,740)
--------------
--------------
</TABLE>

The components of the deferred tax assets and liabilities of the S
corporation are not material to the combined financial position of the Group and
therefore are not disclosed. The federal statutory corporate rate is 35%. The
only significant reconciling item between the federal statutory rate and the
Group's effective tax rate for the period ended December 31, 1995 is state
taxes, net of the federal income tax benefit. At December 31, 1995, the Group
has estimated tax net operating loss ("NOL") carryforwards of approximately
$350,000 available to reduce future federal taxable income. The NOL
carryforwards expire in 2010 and are subject to examination by the Internal
Revenue Service.

F-30
<PAGE>
SOUTHEASTERN GROUP

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

7. RELATED-PARTY TRANSACTIONS

The Group rents certain facilities and equipment from the Principal
Stockholders (Note 5) under short-term lease agreements. At December 31, 1995,
the Group owed the Principal Stockholders $40,000 for accrued rent associated
with such leases, and is included in due to affiliates in the accompanying
combined balance sheets.

At December 31, 1995, the Group also owed affiliates amounts totaling
$28,000 and had amounts due from affiliates totaling $202,286. Those amounts are
separately stated on the face of the accompanying combined balance sheets.

8. SUBSEQUENT EVENT

ACQUISITION BY SERAMUNE, INC.

Effective March 6, 1996, the Company acquired the stock of Southeastern
Biologics, Inc. and Plasma Management, Inc., and the assets of Concho Biologics,
Inc. (collectively referred to as the "Southeastern Acquisition") for
approximately $4.75 million plus additional consideration based upon the
performance of the acquired businesses. The acquired companies will become
wholly owned subsidiaries of Seramune, Inc., a wholly owned subsidiary of the
Company. The acquisition will be accounted for under the purchase method of
accounting in accordance with APB No. 16.

F-31
<PAGE>
Montage of pictures showing donor facility, donor, scientist, technician,
product and mother and child.
<PAGE>
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------

NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY SECURITY OTHER THAN THE SHARES OF COMMON STOCK OFFERED HEREBY, NOR DOES
IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS
UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE
SUBSEQUENT TO THE DATE HEREOF.

--------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary............................. 3
Risk Factors................................... 6
Use of Proceeds................................ 12
Price Range of Common Stock.................... 12
Dividend Policy................................ 12
Capitalization................................. 13
Selected Historical Financial Data............. 14
Pro Forma Financial Information................ 15
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 19
Business....................................... 26
Management..................................... 38
Certain Transactions........................... 47
Principal and Selling Stockholders............. 48
Description of Capital Stock................... 50
Shares Eligible for Future Sale................ 52
Underwriting................................... 53
Legal Matters.................................. 54
Experts........................................ 54
Additional Information......................... 54
Index to Financial Statements.................. F-1
</TABLE>

2,100,000 SHARES

[LOGO]

COMMON STOCK

--------

PROSPECTUS

MAY 29, 1996

---------

SMITH BARNEY INC.

LEHMAN BROTHERS

VOLPE, WELTY & COMPANY

- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------