|   | x |   | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2010. |
|--------|---|--------|---------------------------------------------------------------------------------------------------------------------------------------|

|   | o |   | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ________________ TO ________________. |
|--------|---|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Delaware              |   | 04-2869857        |
|-----------------------|--------|-------------------|
| State of Organization |   | IRS Employer I.D. |

| 9033 Red Branch Road, Columbia, Maryland  21045-2105 |
|----------------------------------------------------------------|
| (Address of principal executive offices)                       |

| (443) 367-5500                                             |
|------------------------------------------------------------|
| (Registrant’s telephone number, including area code) |

----

|                      |                         |                                                                                                  |   PageNumber |
|---------------------------|------------------------------|-------------------------------------------------------------------------------------------------------|-------------------|
|   PART I.  |   FINANCIAL INFORMATION |                                                                                                  |
|                      |                         |                                                                                                  |
|                      | Item 1.                      | Financial Statements                                                                                  |              |
|                      |                         |                                                                                                  |              |
|                      |                         | Consolidated Balance Sheets; June 30, 2010 (unaudited) and September 30, 2009                         |  3           |   |
|                      |                         |                                                                                                  |              |
|                      |                         | Consolidated Statements of Operations; Three and Nine Months Ended June 30, 2010 and 2009 (unaudited) |  5           |   |
|                      |                         |                                                                                                  |              |
|                      |                         | Consolidated Statements of Cash Flows; Nine Months Ended June 30, 2010 and 2009 (unaudited)      |  6           |   |
|                      |                         |                                                                                                  |              |
|                      |                         | Notes to Consolidated Financial Statements (unaudited)                                                |  7           |   |
|                      |                         |                                                                                                  |              |
|                      | Item 2.                      | Management’s Discussion and Analysis of Financial Condition and Results of Operation       |  11          |   |
|                      |                         |                                                                                                  |              |
|                      | Item 3.                      | Quantitative and Qualitative Disclosures About Market Risk                                            |  14          |         |
|                      |                         |                                                                                                  |              |
|                      | Item 4.                      | Controls and Procedures                                                                               |  14          |   |
|                      |                         |                                                                                                  |
| PART II.                  | OTHER INFORMATION            |                                                                                                  |
|                      |                         |                                                                                                  |              |
|                      | Item 2.                      | Unregistered Sales of Equity Securities and Use Of Proceeds                                           |  14          |   |
|                      |                         |                                                                                                  |              |
|                      | Item 5                       | Other Information                                                                                     |  15          |                 |
|                      |                         |                                                                                                  |              |
|                      | Item 6.                      | Exhibits                                                                                              |  15          |   |
|                      |                         |                                                                                                  |              |
|   SIGNATURES         |  16                     |                                                                                                  |
|                      |                         |
|   CERTIFICATIONS     |                         |

----

|                                                                                                                                                                    |   | June 30,2010(unaudited) |      |   | September 30,2009  |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------|-----------|--------|-------------------------|--------|
| ASSETS                                                                                                                                                                  |   |                    |      |   |                    |   |
|                                                                                                                                                                    |   |                    |      |   |                    |   |
| CURRENT ASSETS:                                                                                                                                                         |   |                    |      |   |                    |   |
| Cash                                                                                                                                                                    |   | $                       | 221,640   |   |                    | $      | 156,314 |   |
| Accounts receivable, less allowance for doubtful accounts  of $57,494 and $69,973 at June 30, 2010 and   September 30, 2009, respectively |   |                    | 645,070   |   |                    |   | 630,020 |   |
| Inventories, net                                                                                                                                                        |   |                    | 1,465,568 |   |                    |   | 1,703,226 |   |
| Current portion of note receivable                                                                                                                                      |   |                    | 210,000   |   |                    |   | 210,000 |   |
| Prepaid expenses and other current assets                                                                                                                               |   |                    | 203,333   |   |                    |   | 120,464 |   |
|                                                                                                                                                                    |   |                    |      |   |                    |   |   |   |
|              Total current assets                                                                      |   |                    | 2,745,611 |   |                    |   | 2,820,024 |   |
|                                                                                                                                                                    |   |                    |      |   |                    |   |   |   |
| PROPERTY AND EQUIPMENT; net of accumulated depreciation and amortization of $6,239,083 and $6,143,356   at June 30, 2010 and September 30, 2009, respectively |   |                    | 480,092   |   |                    |   | 599,008 |   |
|                                                                                                                                                                    |   |                    |      |   |                    |   |   |   |
| OTHER ASSETS:                                                                                                                                                           |   |                    |      |   |                    |   |   |   |
|                                                                                                                                                                    |   |                    |      |   |                    |   |   |   |
| Long term portion of note receivable                                                                                                                                    |   |                    | 87,500    |   |                    |   | 245,000 |   |
| Other assets                                                                                                                                                            |   |                    | 41,889    |   |                    |   | 54,300 |   |
|              Total other assets                                                                        |   |                    | 129,389   |   |                    |   | 299,300 |   |
|                                                                                                                                                                    |   |                    |      |   |                    |   |   |   |
| Total Assets                                                                                                                                                            |   | $                       | 3,355,092 |   |                    | $      | 3,718,332 |   |

----

| LIABILITIES AND STOCKHOLDERS’ DEFICIT                                                                                                                                       |   | June 30,2010(unaudited) |        |   | September 30, 2009  |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------|-------------|--------|--------------------------|--------|
| CURRENT LIABILITIES:                                                                                                                                                              |   |                    |        |   |                     |   |
| Accounts payable and accrued liabilities                                                                                                                                          |   | $                       | 707,862     |   |                     | $      | 969,135 |   |
| Revolving line of credit                                                                                                                                                          |   |                    | 398,000     |   |                     |   | 400,000 |   |
| Deferred revenue                                                                                                                                                                  |   |                    | 31,325      |   |                     |   | 51,830 |   |
| Note Payable – Itau Bank                                                                                                                                                    |   |                    | --          |   |                     |   | 28,859 |   |
|                 Total Current Liabilities                                                         |   |                    | 1,137,187   |   |                     |   | 1,449,824 |   |
|                                                                                                                                                                              |   |                    |        |   |                     |   |   |   |
| LONG TERM LIABILITIES:                                                                                                                                                            |   |                    |        |   |                     |   |   |   |
| Senior subordinated secured convertible notes                                                                                                                                     |   |                    | 4,049,858   |   |                     |   | 4,049,858 |   |
|                 Total Long Term Liabilities                                                       |   |                    | 4,049,858   |   |                     |   | 4,049,858 |   |
|         Total liabilities                                                                                                                 |   |                    | 5,187,045   |   |                     |   | 5,499,682 |   |
|                                                                                                                                                                              |   |                    |        |   |                     |   |   |   |
|  STOCKHOLDERS’ DEFICIT                                                                                                                                                 |   |                    |        |   |                     |   |   |   |
|                                                                                                                                                                              |   |                    |        |   |                     |   |   |   |
| Preferred stock, $0.01 par value - 1,000,000 shares authorized; none issued                                                                                                       |   |                    | --          |   |                     |   | -- |   |
| Common stock, $.01 par value - 30,000,000 shares authorized; 15,560,281 and 15,345,281 issued and outstanding  as of June 30, 2010 and September 30, 2009, respectively |   |                    | 155,602     |   |                     |   | 153,452 |   |
| Additional paid-in capital                                                                                                                                                        |   |                    | 22,947,450  |   |                     |   | 22,919,932 |   |
| Accumulated deficit                                                                                                                                                               |   |                    | (24,813,316 | )      |                     |   | (24,734,125 | ) |
| Accumulated other comprehensive loss-currency translation loss                                                                                                                    |   |                    | (32,052     | )      |                     |   | (30,972 | ) |
| Less treasury stock at cost; 100,000 shares at June 30, 2010 and September 30, 2009, respectively.                                                                           |   |                    | (89,637     | )      |                     |   | (89,637 | ) |
|   Total Stockholders’ Deficit                                                                                                                                     |   |                    | (1,831,953  | )      |                     |   | (1,781,350 | ) |
| Total Liabilities and Stockholders’ Deficit                                                                                                                                 |   | $                       | 3,355,092   |   |                     | $      | 3,718,332 |   |

----

|                                                                                                                                                                                                                                  |   | Three Months Ended |       |   | Nine Months Ended |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|------------|--------|-------------------|--------|
|                                                                                                                                                                                                                                  |   | June 30, 2010      |       |   | June 30, 2009     |   |   | June 30, 2010 |   |   | June 30, 2009 |   |
| Net Sales                                                                                                                                                                                                                             |   | $                  | 1,317,712  |   |              | $      | 1,386,660 |   |   | $ | 3,890,879 |   |   | $ | 4,073,634 |   |
| Cost of Sales                                                                                                                                                                                                                         |   |               | 702,850    |   |              |   | 832,810 |   |   |   | 2,111,945 |   |   |   | 2,486,359 |   |
| Gross Profit                                                                                                                                                                                                                          |   |               | 614,862    |   |              |   | 553,850 |   |   |   | 1,778,934 |   |   |   | 1,587,275 |   |
| Operating Expenses:                                                                                                                                                                                                                   |   |               |       |   |              |   |   |   |   |   |   |   |   |   |   |   |
|        Selling, general and administrative                                                                                                                                                         |   |               | 506,443    |   |              |   | 565,545 |   |   |   | 1,533,364 |   |   |   | 1,759,728 |   |
|        Research and development                                                                                                                                                                    |   |               | (2,157     | )      |              |   | 35,734 |   |   |   | 19,955 |   |   |   | 75,128 |   |
|                 Total operating expenses                                                                                                              |   |               | 504,286    |   |              |   | 601,279 |   |   |   | 1,553,319 |   |   |   | 1,834,856 |   |
|                 Total operating income (loss) from continuing operations                                                                              |   |               | 110,576    |   |              |   | (47,429 | ) |   |   | 225,615 |   |   |   | (247,581 | ) |
| Other income (expenses):                                                                                                                                                                                                              |   |               |       |   |              |   |   |   |   |   |   |   |   |   |   |   |
|        Interest expense (net),  including $20,234 and $58,953 for the three and     nine month periods ended June 30, 2009, of debt discount amortization. |   |               | (83,870    | )      |              |   | (111,004 | ) |   |   | (251,694 | ) |   |   | (309,268 | ) |
|        Other income                                                                                                                                                                                |   |               | 47         |   |              |   | 44 |   |   |   | 3,191 |   |   |   | 444 |   |
|        Gain on sale of assets                                                                                                                                                                      |   |               | --         |   |              |   | -- |   |   |   | 25,291 |   |   |   | 43,117 |   |
|                 Total other expense                                                                                                                   |   |               | (83,823    | )      |              |   | (110,960 | ) |   |   | (223,212 | ) |   |   | (265,707 | ) |
|                                                                                                                                                                                                                                  |   |               |       |   |              |   |   |   |   |   |   |   |   |   |   |   |
|       Net income (loss), before income taxes, from continuing operations                                                                                                                                |   |               | 26,753     |   |              |   | (158,389 | ) |   |   | 2,403 |   |   |   | (513,288 | ) |
|                                                                                                                                                                                                                                  |   |               |       |   |              |   |   |   |   |   |   |   |   |   |   |   |
|       Income Tax expense                                                                                                                                                                                |   |               | 34,766     |   |              |   | 2,816 |   |   |   | 81,594 |   |   |   | 19,288 |   |
|                                                                                                                                                                                                                                  |   |               |       |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Net income (loss) from continuing operations:                                                                                                                                                                                         |   | $                  | (8,013     | )      |              | $      | (161,205 | ) |   | $ | (79,191 | ) |   | $ | (532,576 | ) |
|                                                                                                                                                                                                                                  |   |               |       |   |              |   |   |   |   |   |   |   |   |   |   |   |
| (Loss) Income from Discontinued Operations                                                                                                                                                                                            |   |               | --         |   |              |   | (78,199 | ) |   |   | -- |   |   |   | (78,199 | ) |
| Net Income (Loss):                                                                                                                                                                                                                    |   |               | (8,013     | )      |              |   | (239,404 | ) |   |   | (79,191 | ) |   |   | (610,775 | ) |
| Other comprehensive income (loss), net of tax:                                                                                                                                                                                        |   |               |       |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Foreign currency translation adjustments                                                                                                                                                                                              |   |               | (959       | )      |              |   | 157,161 |   |   |   | (1,080 | ) |   |   | (9,584 | ) |
| Comprehensive income (loss):                                                                                                                                                                                                          |   | $                  | (8,972     | )      |              | $      | (82,243 | ) |   | $ | (80,271 | ) |   | $ | (620,359 | ) |
|                                                                                                                                                                                                                                  |   |               |       |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Earnings (loss) per share, from continuing operations - Basic                                                                                                                                                                         |   | $                  | 0.00       |   |              | $      | (0.01 | ) |   | $ | (0.01 | ) |   | $ | (0.03 | ) |
| Earnings (loss) per share, from continuing operations - Diluted                                                                                                                                                                       |   | $                  | 0.00       |   |              | $      | (0.01 | ) |   | $ | (0.01 | ) |   | $ | (0.03 | ) |
| Earnings (loss) per share, from discontinued operations - Basic                                                                                                                                                                       |   | $                  | 0.00       |   |              | $      | (0.01 | ) |   | $ | 0.00 |   |   | $ | (0.01 | ) |
| Earnings (loss) per share, from discontinued operations - Diluted                                                                                                                                                                     |   | $                  | 0.00       |   |              | $      | (0.01 | ) |   | $ | 0.00 |   |   | $ | (0.01 | ) |
| Earnings (loss) per share - Basic                                                                                                                                                                                                     |   | $                  | 0.00       |   |              | $      | (0.02 | ) |   | $ | (0.01 | ) |   | $ | (0.04 | ) |
| Earnings (loss) per share - Diluted                                                                                                                                                                                                   |   | $                  | 0.00       |   |              | $      | (0.02 | ) |   | $ | (0.01 | ) |   | $ | (0.04 | ) |
| Weighed average common shares used in calculation of earnings (loss) per share - Basic                                                                                                                                                |   |               | 15,459,567 |   |              |   | 15,240,281 |   |   |   | 15,450,446 |   |   |   | 15,231,819 |   |
| Weighed average common shares used in calculation of earnings (loss) per share – Diluted                                                                                                                                        |   |               | 15,459,567 |   |              |   | 15,240,281 |   |   |   | 15,450,446 |   |   |   | 15,231,819 |   |

----

|                                                                                                                                                                                                                                                                                                                                                                                               |   | Nine Months Ended June 30, |     |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------|----------|
| Cash flows from operating activities:                                                                                                                                                                                                                                                                                                                                                              |   | 2010                       |     |   | 2009 |   |
| Net Loss                                                                |   | $                          | (79,191  | ) |   | $ | (610,775 | ) |
| Adjustments to reconcile net loss to net cash provided by operating activities:                                                                                                                                                                                                                                                                                                                    |   |                       |     |   |   |   |   |   |
|     Depreciation                                                                                                                                                                                                                                                                                                                                                               |   |                       | 122,259  |   |   |   | 114,182 |   |
|     Amortization of debt discount                                                                                                                                                                                                                                                                                                                                              |   |                       | --       |   |   |   | 58,953 |   |
|     Gain on sale of assets                                                                                                                                                                                                                                                                                                                                                     |   |                       | (25,291  | ) |   |   | (43,117 | ) |
|     (Recovery of) / Provision for Bad Debts                                                                                                                                                                                                                                                                                                                                    |   |                       | (9,720   | ) |   |   | 27,802 |   |
|     Stock Based Compensation                                                                                                                                                                                                                                                                                                                                                   |   |                       | 29,669   |   |   |   | 49,285 |   |
| Changes in operating assets and liabilities:                                                                                                                                                                                                                                                                                                                                                       |   |                       |     |   |   |   |   |   |
|     Accounts receivable                                                                                                                                                                                                                                                                                                                                                        |   |                       | (5,330   | ) |   |   | 104,332 |   |
|     Prepaid expenses and other current assets                                                                                                                                                                                                                                                                                                                                  |   |                       | (82,870  | ) |   |   | 122,026 |   |
|     Inventories                                                                                                                                                                                                                                                                                                                                                                |   |                       | 237,658  |   |   |   | 237,212 |   |
|     Accounts payable and accrued expenses                                                                                                                                                                                                                                                                                                                                      |   |                       | (261,273 | ) |   |   | (98,697 | ) |
|     Other assets                                                                                                                                                                                                                                                                                                                                                               |   |                       | 12,411   |   |   |   | 52,301 |   |
|     Deferred revenue                                                                                                                                                                                                                                                                                                                                                           |   |                       | (20,505  | ) |   |   | (14,773 | ) |
|     Net cash provided by (used in) operating activities                                                                                                                                                                                                                                                                                                                        |   |                       | (82,183  | ) |   |   | (1,269 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                               |   |                       |     |   |   |   |   |   |
| Cash flows from investing activities:                                                                                                                                                                                                                                                                                                                                                              |   |                       |     |   |   |   |   |   |
| Purchase of property and equipment                                                                                                                                                                                                                                                                                                                                                                 |   |                       | (17,946  | ) |   |   | (114,078 | ) |
| Proceeds from sale of assets                                                                                                                                                                                                                                                                                                                                                                       |   |                       | 39,912   |   |   |   | 51,805 |   |
| Payments Received on Notes Receivable                                                                                                                                                                                                                                                                                                                                                              |   |                       | 157,500  |   |   |   | 157,500 |   |
|     Net cash provided by investing activities                                                                                                                                                                                                                                                                                                                                  |   |                       | 179,466  |   |   |   | 95,227 |   |
|                                                                                                                                                                                                                                                                                                                                                                                               |   |                       |     |   |   |   |   |   |
| Cash flows from financing activities:                                                                                                                                                                                                                                                                                                                                                              |   |                       |     |   |   |   |   |   |
| Payments on Line of Credit                                                                                                                                                                                                                                                                                                                                                                         |   |                       | (2,000   | ) |   |   | (15,000 | ) |
| Payments on Notes – Itau Bank                                                                                                                                                                                                                                                                                                                                                                |   |                       | (28,859  | ) |   |   | (91,513 | ) |
|     Net cash used in financing activities                                                                                                                                                                                                                                                                                                                                      |   |                       | (30,859  | ) |   |   | (106,513 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                               |   |                       |     |   |   |   |   |   |
| Effects of foreign exchange rate                                                                                                                                                                                                                                                                                                                                                                   |   |                       | (1,098   | ) |   |   | 69,686 |   |
|                                                                                                                                                                                                                                                                                                                                                                                               |   |                       |     |   |   |   |   |   |
|      Net increase in cash and cash equivalents                                                                                                                                                                                                                                                                                                                            |   |                       | 65,326   |   |   |   | 57,131 |   |
|                                                                                                                                                                                                                                                                                                                                                                                               |   |                       |     |   |   |   |   |   |
| Cash and cash equivalents at beginning of period                                                                                                                                                                                                                                                                                                                                                   |   |                       | 156,314  |   |   |   | 98,799 |   |
|                                                                                                                                                                                                                                                                                                                                                                                               |   |                       |     |   |   |   |   |   |
| Cash and cash equivalents at end of period                                                                                                                                                                                         |   | $                          | 221,640  |   |   | $ | 155,930 |   |
|                                                                                                                                                                                                                                                                                                                                                                                               |   |                       |     |   |   |   |   |   |
| Supplemental disclosure of cash flow information:Cash paid during the period for interest                                                                                                            |   | $                          | 276,604  |   |   | $ | 289,219 |   |

----

----

|                                                                                       |   | Three Months EndedJune 30, |       |   | Nine Months EndedJune 30, |   |
|--------------------------------------------------------------------------------------------|--------|----------------------------|------------|--------|---------------------------|--------|
|                                                                                       |   | 2010                       |       |   | 2009                      |   |   | 2010 |   |   | 2009 |   |
|                                                                                       |   |                       |       |   |                      |   |   |   |   |   |   |   |
| Numerator:                                                                                 |   |                       |       |   |                      |   |   |   |   |   |   |   |
|         Net income (loss)                          |   | $                          | (8,013     | )      |                      | $      | (239,404 | ) |   | $ | (79,191 | ) |   | $ | (610,775 | ) |
|                                                                                       |   |                       |       |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| Denominator:                                                                               |   |                       |       |   |                      |   |   |   |   |   |   |   |   |   |   |   |
|         Weighted –average shares outstanding |   |                       | 15,459,567 |   |                      |   | 15,240,281 |   |   |   | 15,450,446 |   |   |   | 15,231,819 |   |
|         Effect of dilutive shares                  |   |                       | --         |   |                      |   | 313 |   |   |   | -- |   |   |   | 2,727 |   |
|         Denominator for diluted earnings per share |   |                       | 15,459,567 |   |                      |   | 15,240,594 |   |   |   | 15,450,446 |   |   |   | 15,234,546 |   |
|                                                                                       |   |                       |       |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| Basic Earnings per share                                                                   |   | $                          | 0.00       |   |                      | $      | (0.02 | ) |   | $ | (0.01 | ) |   | $ | (0.04 | ) |
| Diluted Earnings per share                                                                 |   | $                          | 0.00       |   |                      | $      | (0.02 | ) |   | $ | (0.01 | ) |   | $ | (0.04 | ) |

|                             |   | Three Months EndedJune 30, |       |   | Nine Months EndedJune 30, |   |
|----------------------------------|--------|----------------------------|------------|--------|---------------------------|--------|
|                             |   | 2010                       |       |   | 2009                      |   |   | 2010 |   |   | 2009 |   |
|                             |   |                       |       |   |                      |   |   |   |   |   |   |   |
| Convertible notes                |   |                       | 11,571,000 |   |                      |   | 5,399,800 |   |   |   | 11,571,000 |   |   |   | 5,399,800 |   |
| Options to purchase common stock |   |                       | 2,962,208  |   |                      |   | 2,889,222 |   |   |   | 2,962,208 |   |   |   | 2,889,222 |   |
| Total antidilutive instruments   |   |                       | 14,533,208 |   |                      |   | 8,289,022 |   |   |   | 14,533,208 |   |   |   | 8,289,022 |   |

|                                                                      |   |  Shares |      |   | Weighted averageexercise price |   |   | Weighted averagelife |   |
|---------------------------------------------------------------------------|--------|--------------|-----------|--------|--------------------------------|--------|--------|----------------------|--------|
|                                                                      |   |         |      |   |                           |   |   |                 |   |
| Options outstanding – October 1, 2009                               |   |         | 1,007,208 |   |                           | $      | 0.23   |                 |   |   | 6.46 |   |
|        Granted                         |   |         | 1,955,000 |   |                           |   | 0.11   |                 |   |   | 9.92 |   |
|        Exercised                       |   |         | --        |   |                           |   | --     |                 |   |   | -- |   |
|        Forfeited, cancelled or expired |   |         | --        |   |                           |   | --     |                 |   |   | -- |   |
| Options outstanding – June 30, 2010                                 |   |         | 2,962,208 |   |                           | $      | 0.15   |                 |   |   | 8.74 |   |
| Options exercisable – June 30, 2010                                 |   |         | 1,046,208 |   |                           | $      | 0.22   |                 |   |   | 7.04 |   |

----

|                    |   | Three Months EndedJune 30, |    |   | Nine Months EndedJune 30, |   |
|-------------------------|--------|----------------------------|---------|--------|---------------------------|--------|
|                    |   | 2010                       |    |   | 2009                      |   |   | 2010 |   |   | 2009 |   |
| Dividend yield          |   |                       | --      |   |                      |   | -- |   |   |   | -- |   |   |   | -- |   |
| Expected volatility     |   |                       | 125.86% |   |                      |   | 120.20% |   |   |   | 125.86% |   |   |   | 95.1% - 120.20% |   |
| Risk-free interest rate |   |                       | 3.34%   |   |                      |   | 3.16% |   |   |   | 3.34% |   |   |   | 1.67% - 3.16% |   |
| Expected life in years  |   |                       | 10      |   |                      |   | 10 |   |   |   | 10 |   |   |   | 1.5 - 10 |   |

|             |   | June 30,2010 |      |   | September 30,2009 |   |
|------------------|--------|--------------|-----------|--------|-------------------|--------|
| Raw Materials    |   | $            | 1,119,809 |   |              | $      | 1,350,828 |   |
| Work-in-process  |   |         | 135,923   |   |              |   | 164,183 |   |
| Finished goods   |   |         | 881,827   |   |              |   | 938,703 |   |
|             |   |         | 2,137,559 |   |              |   | 2,453,714 |   |
| Less reserves    |   |         | (671,991  | )      |              |   | (750,488 | ) |
| Inventories, net |   | $            | 1,465,568 |   |              | $      | 1,703,226 |   |

----

|                                            |   | United*States |      |   | Brazil |   |      | Consolidated |   |
|-------------------------------------------------|--------|---------------|-----------|--------|--------|--------|-----------|--------------|--------|
| June 30, 2010:                                  |   |          |      |   |   |   |      |         |   |
|      Revenues          |   | $             | 1,973,358 |   |   | $      | 1,917,521 |         |   | $ | 3,890,879 |   |
|      Long-lived assets |   | $             | 263,326   |   |   | $      | 346,155   |         |   | $ | 609,481 |   |
|  June 30, 2009:                            |   |          |      |   |   |   |      |         |   |   |   |   |
|      Revenues          |   | $             | 2,477,340 |   |   | $      | 1,596,294 |         |   | $ | 4,073,634 |   |
|      Long-lived assets |   | $             | 522,060   |   |   | $      | 430,206   |         |   | $ | 952,266 |   |

----

|                                                       |   | Three Months Ended |   |   | Nine Months Ended |   |
|------------------------------------------------------------|--------|--------------------|--------|--------|-------------------|--------|
|                                                       |   | June 30,2010       |   |   | June 30,2009      |   |   | June 30,2010 |   |   | June 30,2009 |   |
| Net sales                                                  |   | $                  | --     |   |              | $      | 91,911 |   |   | $ | -- |   |   | $ | 129,695 |   |
| Costs of sales                                             |   |               | --     |   |              |   | 170,110 |   |   |   | -- |   |   |   | 207,894 |   |
| Gross Profit                                               |   |               | --     |   |              |   | (78,199 | ) |   |   | -- |   |   |   | (78,199 | ) |
|                                                       |   |               |   |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Operating expenses:                                        |   |               |   |   |              |   |   |   |   |   |   |   |   |   |   |   |
|   Selling, general and administrative            |   |               | --     |   |              |   | -- |   |   |   | -- |   |   |   | -- |   |
|   Research and development                       |   |               | --     |   |              |   | -- |   |   |   | -- |   |   |   | -- |   |
|     Total operating costs and expenses |   |               | --     |   |              |   | -- |   |   |   | -- |   |   |   | -- |   |
|                                                       |   |               |   |   |              |   |   |   |   |   |   |   |   |   |   |   |
|     Operating loss                          |   |               | --     |   |              |   | (78,199 | ) |   |   | -- |   |   |   | (78,199 | ) |
|                                                       |   |               |   |   |              |   |   |   |   |   |   |   |   |   |   |   |
| Other income (expenses):                                   |   |               |   |   |              |   |   |   |   |   |   |   |   |   |   |   |
|       Other Income (expense) |   |               | --     |   |              |   | -- |   |   |   | -- |   |   |   | -- |   |
|       Gain on Sale of Assets |   |               | --     |   |              |   | -- |   |   |   | -- |   |   |   | -- |   |
|     Total other income (expense)       |   |               | --     |   |              |   | -- |   |   |   | -- |   |   |   | -- |   |
|                                                       |   |               |   |   |              |   |   |   |   |   |   |   |   |   |   |   |
|   Net income (loss) before income taxes          |   |               | --     |   |              |   | (78,199 | ) |   |   | -- |   |   |   | (78,199 | ) |
|                                                       |   |               |   |   |              |   |   |   |   |   |   |   |   |   |   |   |
|   Income Tax                                     |   |               | --     |   |              |   | -- |   |   |   | -- |   |   |   | -- |   |
| Net income (loss) from discontinued operations             |   |               | --     |   |              |   | (78,199 | ) |   |   | -- |   |   |   | (78,199 | ) |

----

| · | Taking steps related to upgrading the Analyst instrument and product offerings such as evaluating and developing complimentary products for Hemagen’s Analyst product line to distribute to the veterinary market and alternative tests utilizing the Analysts’ rotor technology; |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | Developing new and enhancing existing ELISA kits; and |
|--------|-------------------------------------------------------|

| · | Developing and enhancing IFA kits. |
|--------|------------------------------------|

----

----

| Period           |   | (a)  Total Numberof Shares Purchased |   |   | (b)  AveragePrice Paidper Share |   |   | (c) Total Number of SharesPurchased as Part ofPublicly AnnouncedPlans or Programs(1) |   |   | (d)Maximum Number (orApproximate Dollar Value)of Shares that May Yet Be Purchased Under thePlans or Programs (2) |   |
|------------------|--------|------------------------------------------------|--------|--------|-------------------------------------------|--------|--------|-------------------------------------------------------------------------------------------|--------|--------|------------------------------------------------------------------------------------------------------------------|--------|
| April 1-30, 2010 |   |                                           | --     |   |                                      |   | --     |                                                                                      |   |   | --                                                                                                               |   |   |   | - |   |
| May 1-31, 2010   |   |                                           | --     |   |                                      |   | --     |                                                                                      |   |   | --                                                                                                               |   |   |   | - |   |
| June 1-30, 2010  |   |                                           | 8,060  |   |                                      | $      | 0.098  |                                                                                      |   |   | 8,060                                                                                                            |   |   |   | - |   |
| Total            |   |                                           | 8,060  |   |                                      | $      | 0.098  |                                                                                      |   |   | 8,060                                                                                                            |   |   |   | - |   |

|   | (1) | Represents shares of Company’s Common Stock purchased pursuant to the Company’s Employee Stock Ownership Plan (ESOP) that was established October 1, 2003 with no expiration.  The purpose of the plan is not to repurchase, but rather it is an employee benefit plan. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | There is no maximum number of shares that may be purchased under the Company’s Employee Stock Ownership Plan. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------|

----

| Exhibit 31.1 | Certification of Principal Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a)                                    |
|--------------|---------------------------------------------------------------------------------------------------------------------------|
|         |                                                                                                                      |
| Exhibit 31.2 | Certification of Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a)                                    |
|         |                                                                                                                      |
| Exhibit 32.1 | Certification of Chief Executive Officer pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code     |
|         |                                                                                                                      |
| Exhibit 32.2 | Certification of Principal Financial Officer pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code |

----

|            | Hemagen Diagnostics, Inc.(Registrant) |                                  |
|-----------------|---------------------------------------|---------------------------------------|
|            |                                  |                                  |   |
| August 16, 2010 | By:                                   | /s/ William P. Hales             |   |
|            |                                  | William P. Hales                      |   |
|            |                                  | President and Chief Executive Officer |   |
|            |                                  |                                  |   |

|                 |   |                           |   |
|----------------------|--------|--------------------------------|--------|
| August 16, 2010 | By:    | /s/ Catherine M. Davidson |   |
|                 |   | Catherine M. Davidson          |   |
|                 |   | Principal Financial Officer    |   |