UNITED STATES 
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934



|For the Quarterly Period
 Ended June 30, 2004 | Commission File
 Number 1-11700
|--------------------------------------------- | -------------------------------

|HEMAGEN DIAGNOSTICS, INC.                                               
|------------------------------------------------------------------------
|(Exact name of Small Business Issuer as
       Specified in its Charter)

|Delaware                |  | 04-2869857              
|----------------------- |  | ------------------------
|(State of Organization) |  | (I.R.S. Employer Number)

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

|(443) 367 5500                                  
|------------------------------------------------
|(Issuer's telephone number, including area code)

Check
whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d)
of the Securities and Exchange Act of 1934 during the preceding 12 months and (2) has been
subject to such filing requirements for the past 90 days.

Yes  [X]
                                    No  [   ]

As
of August 12, 2004, the issuer had 10,114,905 shares of Common Stock, $.01 par value per
share outstanding.

---

# HEMAGEN DIAGNOSTICS,
INC. AND SUBSIDIARIES

# INDEX

|PART I.
       FINANCIAL INFORMATION | PAGE NUMBER
|------------------------------------ | -----------
|                                     | Item 1.    
|                                     |            
|                                     |            
|                                     |            
|                                     |            
|                                     | Item 2.    
|                                     | Item 3.    

|PART II.
       OTHER INFORMATION |        
|--------------------------------- | -------
|                                  | Item 2.
|                                  | Item 6.

|SIGNATURES     |  |  | 16
|-------------- |  |  | --
|CERTIFICATIONS |  |  | 17

---

PART I     Financial
Information

Item 1.    Financial
Statements

# HEMAGEN DIAGNOSTICS,
INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)

|ASSETS                                                  | June 30,
2004 | September 30,
2003
|------------------------------------------------------- | ------------- | ------------------
|CURRENT ASSETS:                                         |               |                   
|Cash and cash equivalents                               |               |                   
|Accounts receivables, less allowance for                |               |                   
|doubtful accounts of $102,359 and $179,251 at           |               |                   
|June 30, 2004 and September 30, 2003,                   |               |                   
|respectively                                            |               |                   
|Inventories; net                                        |               |                   
|Prepaid expenses and other current assets               |               |                   
|                                                        |               |                   
|Total current assets                                    |               |                   
|                                                        |               |                   
|PROPERTY AND EQUIPMENT; net of accumulated depreciation |               |                   
|and amortization of $7,047,137 and $6,647,532 at        |               |                   
|June 30, 2004 and September 30, 2003, respectively      |               |                   
|                                                        |               |                   
|OTHER ASSETS                                            |               |                   
|                                                        |               |                   
|Total Assets                                            |               |                   
|                                                        |               |                   

The accompanying notes are an
integral part of the financial statements.

3

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# HEMAGEN DIAGNOSTICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE
SHEETS (UNAUDITED)

|LIABILITIES AND STOCKHOLDERS' EQUITY                                 | June 30,
2004 | September 30,
2003
|-------------------------------------------------------------------- | ------------- | ------------------
|                                                                     |               |                   
|CURRENT LIABILITIES:                                                 |               |                   
|Current portion Senior subordinated secured convertible notes, net   |               |                   
|of unamortized discount of $1,760,592 at June 20, 2004               |               |                   
|Accounts payable and accrued liabilities                             |               |                   
|Deferred revenue                                                     |               |                   
|                                                                     |               |                   
|Total Current Liabilities                                            |               |                   
|                                                                     |               |                   
|Senior subordinated secured convertible notes, net of                |               |                   
|unamortized discount of $2,977,060 at September 30, 2003             |               |                   
|                                                                     |               |                   
|                                                                     |               |                   
|Total liabilities                                                    |               |                   
|                                                                     |               |                   
|                                                                     |               |                   
|COMMITMENTS AND CONTINGENGIES                                        |               |                   
|                                                                     |               |                   
|STOCKHOLDERS' EQUITY                                                 |               |                   
|Preferred stock, $0.01 par value - 1,000,000 shares authorized; none |               |                   
|issued                                                               |               |                   
|Common stock, $.01 par value - 30,000,000 shares authorized;         |               |                   
|issued and outstanding:  10,214,855  and 10,204,855 at               |               |                   
|June 30, 2004 and September 30, 2003, respectively                   |               |                   
|Additional paid-in capital                                           |               |                   
|Accumulated deficit                                                  |               |                   
|Accumulated other comprehensive loss-                                |               |                   
|currency translation loss                                            |               |                   
|Less treasury stock at cost; 100,000 shares at June 30, 2004         |               |                   
|and September 30, 2003, respectively                                 |               |                   
|                                                                     |               |                   
|                                                                     |               |                   
|Total Stockholders' Equity                                           |               |                   
|                                                                     |               |                   
|Total Liabilities and Stockholders' Equity                           |               |                   
|                                                                     |               |                   

The accompanying notes are an
integral part of the financial statements.

4

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# HEMAGEN DIAGNOSTICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS
OF OPERATIONS (UNAUDITED)

|                                         | Three Months Ended | Nine Months Ended
|---------------------------------------- | ------------------ | -----------------
|
|Revenues:                                |                    |                  
|Product sales                            |                    |                  
|                                         |                    |                  
|Costs and expenses:                      |                    |                  
|Cost of product sales                    |                    |                  
|Research and development                 |                    |                  
|Selling, general and administrative      |                    |                  
|Other operating expense                  |                    |                  
|                                         |                    |                  
|Operating income (loss)                  |                    |                  
|                                         |                    |                  
|Other expenses:                          |                    |                  
|Interest and amortization of debt        |                    |                  
|discount                                 |                    |                  
|Other                                    |                    |                  
|                                         |                    |                  
|Total other expenses                     |                    |                  
|                                         |                    |                  
|Net loss before income taxes             |                    |                  
|                                         |                    |                  
|Income tax expense                       |                    |                  
|                                         |                    |                  
|Net loss                                 |                    |                  
|                                         |                    |                  
|Net loss per share - basic and diluted:  |                    |                  
|                                         |                    |                  
|Weighted average shares used in the      |                    |                  
|calculation of loss per share -basic and |                    |                  
|diluted                                  |                    |                  
|                                         |                    |                  

The accompanying notes are an
integral part of the financial statements

5

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# HEMAGEN DIAGNOSTICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS
OF CASH FLOWS(UNAUDITED)

|                                                                      | Nine Months Ended
June 30,
|--------------------------------------------------------------------- | --------------------------
|
|Cash flows from operating activities:                                 |                           
|Net loss                                                              |                           
|Adjustments to reconcile net loss to net                              |                           
|cash provided by operating activities:                                |                           
|Depreciation and amortization                                         |                           
|Amortization of debt discount                                         |                           
|Loss on disposal of property and equipment                            |                           
|Write off of additional investment in subsidiary and                  |                           
|non-compete agreements acquired in conjunction with                   |                           
|additional investment                                                 |                           
|Changes in operating assets and liabilities:                          |                           
|Accounts and other receivables                                        |                           
|Prepaid expenses and other current assets                             |                           
|Inventories                                                           |                           
|Accounts payable and accrued expenses                                 |                           
|Deferred revenue                                                      |                           
|                                                                      |                           
|Net cash provided by operating activities                             |                           
|                                                                      |                           
|Cash flows from investing activities:                                 |                           
|Purchase of property and equipment                                    |                           
|Purchase of additional shares of common stock of Brazilian subsidiary |                           
|Disposal of property and equipment                                    |                           
|                                                                      |                           
|Net cash used in investing activities                                 |                           
|                                                                      |                           
|Cash flows from financing activities:                                 |                           
|Repayments of subordinated note payable                               |                           
|Exercise of stock options                                             |                           
|                                                                      |                           
|Net cash used in financing activities                                 |                           
|                                                                      |                           
|Effects of foreign exchange rate                                      |                           
|                                                                      |                           
|Net increase (decrease) in cash and cash equivalents                  |                           
|                                                                      |                           
|Cash and cash equivalents at beginning of period                      |                           
|                                                                      |                           
|Cash and cash equivalents at end of period                            |                           
|                                                                      |                           
|Supplemental disclosure of cash flow information:                     |                           
|                                                                      |                           
|Interest paid                                                         |                           
|                                                                      |                           
|Stock issued in satisfaction of director's fees and accrued           |                           
|expenses                                                              |                           
|                                                                      |                           

The accompanying notes are an
integral part of the financial statements.

6

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# HEMAGEN DIAGNOSTICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS

# NOTE A  BASIS OF
PRESENTATION

The Company has prepared the
accompanying unaudited consolidated financial statements in accordance with accounting
principles generally accepted in the United States of America for interim financial
information and pursuant to the rules and regulations of the Securities and Exchange
Commission instructions to Form 10-QSB and Item 310(b) of regulation S-B. These financial
statements should be read together with the financial statements and notes in the
Companys 2003 Annual Report on Form 10-KSB filed with the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles have been
condensed or omitted. The accompanying financial statements reflect all adjustments and
disclosures which, in our opinion, are necessary for fair presentation. All such
adjustments are of a normal recurring nature. The results of operations for the interim
periods are not necessarily indicative of the results of the entire year.

The Company has senior subordinated
secured convertible notes that are due on April 17, 2005. The Company is currently working
to restructure these notes prior to the maturity date on April 17, 2005. If the Company is
unable to restructure these notes prior to their maturity, the Company will have
insufficient funds available to retire these notes and potentially this will effect the
Companys ability to continue as a going concern. The Company can give no assurances
that it will be able to restructure or refinance these notes.

NOTE B  NET INCOME (LOSS)
PER SHARE

Basic earnings per common share are
computed based upon the weighted average number of common shares outstanding during the
three and nine months ended June 30, 2004 and June 30, 2003. Diluted earnings per common
share are computed based on common shares outstanding plus the effect of dilutive stock
options and other potentially dilutive common stock equivalents consisting of stock
purchase warrants and convertible debentures. The dilutive effect of stock options and
other potentially dilutive common stock equivalents is determined using the treasury stock
and if-converted method based on the Companys average stock price. Common stock
equivalents totaling 5,309,014 and 5,674,110 at June 30, 2004 and 2003, respectively, were
not included in the computation of diluted net loss per share because to do so would have
been anti-dilutive, given the Companys net loss.

NOTE C  STOCK BASED
COMPENSATION

At June 30, 2004, options for the
purchase of 2,264,014 shares of common stock with a weighted average exercise price of
$1.22 were outstanding. During the nine months ended June 30, 2004 options for the
purchase of 25,000 shares of common stock were

7

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granted
with an exercise price of $0.70 per share, which represented fair value on the date of
grant. During the nine months ended June 30, 2004, options for the purchase of 10,050
shares of Common Stock were exercised with exercise prices of $0.29 per share while
options for the purchase of 225,946 shares of common stock expired with exercise prices
ranging from $0.29 to $2.00 per share.

In December 2002, the FASB issued
Statement No. 148 Accounting for Stock-Based Compensation- Transition and
Disclosure, (SFAS 148). SFAS 148 provides for alternative methods of
transition for an entity that voluntarily changes to the fair value based method of
accounting for stock-based employee compensation and certain disclosures about the effects
of stock-based compensation. The fair value method of accounting would require the use of
an option pricing model such as the Black-Scholes option pricing model to determine the
compensation expenses associated with stock-based compensation issued in the current
period.

If the compensation cost for our
compensation plans had been determined consistent with SFAS No.148, our net income and our
net income per common and common share equivalent would have changed to the pro forma
amounts indicated below:

|                                       | Three Months Ended | Nine Months Ended
|-------------------------------------- | ------------------ | -----------------
|
|Net Loss:                              |                    |                  
|As reported                            |                    |                  
|                                       |                    |                  
|Less stock-based compensation expense: |                    |                  
|determined under the fair value        |                    |                  
|method  for all awards                 |                    |                  
|                                       |                    |                  
|Pro forma net income (loss)            |                    |                  
|                                       |                    |                  
|Net income per common share:           |                    |                  
|Basic and Diluted;                     |                    |                  
|As reported                            |                    |                  
|Pro forma                              |                    |                  

The fair value of each option grant
is estimated on the date of the grant using the Black-Scholes option-pricing model with
the following weighted-average assumptions used for grants in 2004 and 2003; dividend
yield of 0%; expected volatility of 165% and 196% for 2004 and 2003, respectively;
risk-free interest rate of 4% for both periods; and expected terms of 5.0 to 10.0 years.

# NOTE D  INVENTORIES

Inventories at June 30, 2004 and
September 30, 2003 consist of the following;

8

---

|                | June 30,
2004 | September 30,
2003
|--------------- | ------------- | ------------------
|Raw Materials   |               |                   
|Work-in-process |               |                   
|Finished goods  |               |                   
|                |               |                   
|                |               |                   
|Less reserves   |               |                   
|                |               |                   
|Net inventories |               |                   
|                |               |                   

# NOTE E  LINE OF
CREDIT

In September 2002, the Company obtained
a revolving line of credit with a bank for the purpose of financing working capital needs
as required. The line of credit facility provides for borrowing up to $1,000,000 at an
interest rate of Prime Rate plus 3⁄4 % and expires March 31, 2005. Maximum borrowings
under the loan are based on the domestic receivables and inventory of the Company. At June
30, 2004 there was no outstanding balance on the line of credit and the effective interest
rate on the line of credit was 4.75%. The Company has never borrowed on this line of
credit.

# NOTE F  SENIOR
SUBORDINATED SECURED CONVERTIBLE NOTES

On May 24, 2000, the Company
completed a private placement offering of senior subordinated secured convertible note
units in the face amount of $6,315,000 with net proceeds of $6,025,524. The units
consisted of senior subordinated convertible notes, common stock and detachable warrants.
Each unit was sold for $500,000 and consisted of one $500,000 senior subordinated secured
convertible note, 200,000 detachable warrants to purchase common stock and 93,750 shares
of common stock.

The senior subordinated secured
convertible notes mature on April 17, 2005, with no principal payments required until
maturity. The notes provide for quarterly interest payments at the annual rate of 8%. The
effective interest rate on these notes was calculated to be approximately 58% and an
original issue discount of approximately $5,185,000 is being amortized over the term of
the notes. The face value of the notes outstanding at June 30, 2004 and September 30, 2003
is $6,090,000. The unamortized discount on these notes equals $1,760,592 and $2,977,000 at
June 30, 2004 and September 30, 2003 respectively. As of June 30, 2004, these notes have
properly been classified as current liabilities of the Company.

The Company is currently working to
restructure these notes prior to the maturity date on April 17, 2005. If the Company is
unable to restructure these notes prior to their maturity, the Company will have
insufficient funds available to retire these notes and potentially this will effect the
Companys ability to continue as a going concern. The Company can give no assurances
that it will be able to restructure or refinance these notes.

# Managements Discussion and Analysis of Financial Condition
and Results of Operations

Certain statements in this report
that are not historical facts constitute forward-looking statements, within the meaning of
the Private Securities Litigation Reform Act of 1995, and are intended to be covered by
the safe harbors created by that Act. Reliance should not be placed on forward looking
statements because they involve unknown risks,

9

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uncertainties and other factors which
may cause actual results, performance or achievements to differ materially from those
expressed or implied. Any forward-looking statement speaks only as of the date made. The
Company undertakes no obligation to update any forward-looking statements to reflect
events or circumstances after the date on which they are made.

Forward-looking statements may be
identified by words such as estimates, anticipates,
projects, plans, expects, intends,
believes, should, and similar expressions and the negative
versions thereof and by the context in which they are used. Statements concerning the
establishments of reserves and adjustments for dated and obsolete products, expected
financial performance, on-going business strategies and possible future action which
Hemagen intends to pursue to achieve strategic objectives constitute forward-looking
information. The sufficiency of such charges, implementation of strategies and the
achievement of financial performance are each subject to numerous conditions,
uncertainties and risk factors. Factors which could cause actual performance to differ
materially from these forward-looking statements, include, without limitation,
managements analysis of Hemagens assets, liabilities and operations, the
failure to sell datesensitive inventory prior to its expiration, competition, new
product development by competitors which could render particular products obsolete, the
inability to develop or acquire and successfully introduce new products or improvements of
existing products, costs and difficulties in complying with laws and regulations
administered by the U.S. Food and Drug Administration and the ability to assimilate
successfully product acquisitions.

Overview

Hemagen Diagnostics, Inc., is a
biotechnology company that develops, manufactures, and markets more than 150 FDA-cleared
proprietary medical diagnostic test kits used to aid in the diagnosis of certain
autoimmune and infectious diseases. Hemagen also manufactures and markets a complete line
of Clinical Chemistry Reagents through its wholly owned subsidiary RAICHEM. In addition,
Hemagen manufactures and sells the Analyst®, an FDA-cleared Benchtop Clinical
Chemistry System used to measure important constituents in human and animal blood, and the
Endochek, a clinical chemistry analyzer used to measure important constituents in animal
blood. In the United States, the Company sells its products directly to physicians,
veterinarians, clinical laboratories and blood banks and on a private-label basis through
multinational distributors of medical supplies. Internationally, the Company sells its
products primarily through distributors. The Company sells the Analyst® and the
Endochek both directly and through distributors servicing both physicians office
laboratories and veterinarians offices. Hemagens products are used in many of
the largest laboratories, hospitals and blood banks around the world. Hemagen sells its
products to over 1,000 customers worldwide. The Company focuses on markets that offer
significant growth opportunities. The Company was incorporated in 1985 and became publicly
traded in 1993.

Hemagens Corporate offices are
located at 9033 Red Branch Road, Columbia, Maryland 21045 and the telephone number is
(443) 367-5500. Hemagen maintains a website at www.hemagen.com. Investors can obtain
copies of our filings with the Securities and Exchange Commission from this site free of
charge as well as from the Securities and Exchange Commission website at www.sec.gov.

10

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Critical Accounting
Policies

We have identified certain accounting
policies as critical to our business operations and the understanding of our results of
operations. The impact and any associated risks related to the identified critical
accounting policies on our business operations are discussed in our Annual Report on Form
10-KSB for the fiscal year ended September 30, 2003 filed with the Securities and Exchange
Commission.

Results of Operations

The Three Month Period Ended June 30,
2004 Compared to the Three Month Period Ended June 30, 2003

Revenues for the three-month period
ended June 30, 2004 decreased by approximately $38,000 (2%) to approximately $2,132,000
from $2,169,000 for the same period ended June 30, 2003. This decrease is primarily
attributed to lower sales at the Companys Raichem division of approximately
$168,000, lower sales of Endochek veterinary products of $17,000, and lower Virgo product
sales of $12,000. The reduction in Virgo sales mainly resulted from lower sales in the
U.S. offset by approximately $38,000 of increased Virgo sales at the Brazilian subsidiary.
These reductions were offset by an increase of $161,000 with the Analyst product line in
the period.

Cost of product sales increased by
approximately $114,000 (8%) to $1,585,000 from $1,471,000 for the same period last year.
Cost of product sales as a percentage of sales increased from 68% to 74%. This increase in
cost of sales as a percentage of sales is mainly attributed to higher costs at the
Companys Raichem division, which resulted from higher material usage in the current
period and, lower sales and production in the quarter.

Research and development expenses
increased 13,000 (22%) to approximately $71,000 from $58,000 due to the timing of
expenditures.

The Company is currently working to
complete several research and development programs including:

| |  | The development of additional assays and reagents to supplement its clinical chemistry
reagent product line which will be completed over the next three to six months and which
should allow the Company to increase its OEM sales.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | The completion of several autoimmune disease ELISA kits over the next twelve months to
expand the breadth of the Companys autoimmune product line.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------

| |  | The development of several new rotors to be used with the Analyst® Clinical Chemistry
Analyzer for the veterinary market over the next twelve to eighteen months.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | The submission of applications to the FDA to market new blood banking products, which will
take approximately eighteen to twenty four months to complete. This submission will expand
the intended use of certain FDA-approved Hemagen products from clinical use to
blood-banking use, thereby expanding the market for these products.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

11

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Selling, general and administrative
(SG&A) expenses decreased by approximately $109,000 (17%) for the three
months ended June 30, 2004 to $523,000 from $632,000 in the previous period. This
reduction is attributable to reduced administrative salary, legal, and consulting
expenses.

In the period ended June 30, 2004,
the Company recognized expenses related to writing off of an additional investment the
Company made to acquire an additional 32.7% of the ownership of its subsidiary Hemagen
Diagnosticos Comercio, Importacao e Exportacao. This acquisition of shares from minority
shareholders increases the Companys ownership to 83.7%. In addition to acquiring the
shares held by two other shareholders, the Company compensated the two former shareholders
for non-compete agreements. The total cost of the share purchase and obtaining the
non-compete agreements was $62,000. The Company decided to write off these purchases in
the current period because of the uncertainty of any future value of this investment.
Historically, the Companys Brazilian subsidiary has generated losses since its
inception in 1992. The Company acquired these shares and non-compete agreements because,
in the future, the Company is seeking to expand its marketing effort in Brazil.

The operating loss for the current
period was $109,000 as compared to $8,000 income in the prior period, a reduction of
$117,000 from the prior period. This reduction is mainly attributed to the write-off of
the investment in the Brazilian subsidiary and lower sales and margin at the
Companys Raichem division.

Other expenses increased
approximately $200,000 (50%) to approximately $600,000 in the three months ended June 30,
2004 from $400,000 in the prior period, due to increased interest expense. Interest
expense for the three months ended June 30, 2004, was $596,000 as compared to $388,000 in
the three months ended June 30, 2003, primarily as the result of the increase in the
non-cash amortization of discount on the Senior Subordinated Convertible Notes. (See
Liquidity and Capital Resources).

Income tax expense for the quarter
ended June 30, 2004 was $5,000 as compared to no expense for the quarter ended June 30,
2003. This tax expense resulted from income realized at the Companys Brazilian
subsidiary.

The net loss for the period was
approximately $713,000 for the three months ended June 30, 2004 as compared to a net loss
of approximately $392,000 in the prior period. The increase in the net loss from the prior
period mainly resulted from higher interest expenses associated with the amortization of
discount on the Senior Subordinated Convertible Notes, higher cost of sales, and an
increase in other operating expenses, offset by lower selling, general and administrative
expenses.

The Nine Month Period Ended June 30,
2004 Compared to the Nine Month Period Ended June 30, 2003

Revenues for the nine-month period
ended June 30, 2004 decreased by approximately $416,000 (7%) to approximately $5,785,000
from $6,201,000 for the same period ended June 30, 2003. This decrease is primarily
attributed to:

12

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| |  | Reduced sales of approximately $389,000 with the Companys Virgo autoimmune and
infectious disease product line of which $226,000 resulted from the loss of a contract
with a large reference laboratory customer, $85,000 of lower sales to a smaller reference
lab due to its being acquired by another reference laboratory that centralized its
purchasing, and $78,000 of lower sales to foreign distributors.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Lower sales at the Companys Raichem division of approximately $250,000, which mainly
resulted from lower sales to a domestic OEM customer of $214,000 and reduced sales to
foreign OEMs of approximately $48,000.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Lower sales of Analyst products of approximately $17,000. As previously noted, the Company
realized an increase in sales of the Analyst products during the three months ended June
30, 2004. The Company expects Analyst sales for the full year to be consistent with the
prior years sales.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Offsetting these decreases, was an increase in autoimmune and infectious disease product
sales at the Companys Brazilian subsidiary of approximately $240,000.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

Cost of product sales decreased by
approximately $375,000 (9%) to approximately $3,850,000 for the nine-month period ended
June 30, 2004 as compared to approximately $4,226,000 in the prior period. As a percentage
of sales, cost of product sales decreased to 67% of sales from 68% of sales in the prior
period. The decrease in cost of product sales is attributed to lower product costs and
improved margins experienced at the Companys Brazilian subsidiary. The Brazilian
subsidiarys cost of product sales decreased to 44% of sales as compared to 68% in
the prior period, which was mainly due to an improvement in the exchange rate of Brazilian
Reals from the prior year. The Brazilian subsidiarys product costs have been
consistently in US dollars while the revenue dollars have been consistently charged in
Brazilian Reals, therefore as the exchange rate for Reals improved the cost of product
sales as a percentage of sales decreased.

Research and development expenses
increased by $15,000 (9%) to $182,000 from $167,000 in the prior period as a result of the
timing of project expenditures in the current period. For detail of current research and
development projects see the comparison of three-month periods ended June 30, 2004 and
2003.

Selling, general and administrative
expenses decreased by approximately $229,000 (12%) to approximately $1,743,000 from
$1,972,000 due primarily to reduced salary and consulting expenses.

Other operating expenses for the
current period were $62,000 as compared to no expense for the prior period. For a detailed
explanation of this change see the comparison of the three months ended June 30, 2004 and
2003.

The operating loss for the nine
months ended June 30, 2004 was $52,000 as compared to a $163,000 operating loss for the
nine month period ended June 30, 2003, a reduction in the operating loss of $111,000 from
the prior period. This reduction in operating loss is mainly attributed to lower selling,
general, and administrative expenses and reduced cost of product sales.

13

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Other expenses (income) increased by
approximately $525,000 (49%) to approximately $1,597,000 from approximately $1,072,000 for
the nine month period ended June 30, 2003 as a result of higher interest expense
associated with the non-cash amortization of debt discount related to the Senior
Subordinated Convertible Notes. (See Liquidity and Capital Resources).

Income tax expense for the nine
months ended June 30, 2004 was $24,000 compared to no expense for the nine months ended
June 30, 2003. This tax expense resulted from income realized at the Companys
Brazilian subsidiary.

The net loss for the nine months
ended June 30, 2004 was $1,673,000 as compared to a net loss of approximately $1,235,000
in the same period last year. This increase in the net loss is mainly attributed to the
increased interest expense related to the non cash amortization of debt discount on the
senior subordinated convertible notes of approximately $521,000, offset by lower selling,
general and administrative expenses.

Liquidity and Capital
Resources

At June 30, 2004, Hemagen had
$484,000 of cash, and negative working capital of approximately $517,000. At June 30, 2003
the Company had $672,000 of cash, working capital of $3,487,000.

The Companys outstanding Senior
Subordinated Secured Convertible Notes became current liabilities of the Company
significantly reducing our working capital in the current period. On April 17, 2005, the
Companys Senior Subordinated Secured Convertible Notes outstanding of $6,090,000
become due and payable. The outstanding Senior Subordinated Secured Convertible notes
became current liabilities of the Company significantly reducing our working capital.
Hemagen is currently in discussion with the current noteholders to restructure the notes
with a new instrument in its place. Hemagen will not have sufficient cash to pay off these
notes unless it successfully restructures its current notes, or raises cash in a new debt
or equity issuance. The new instrument that the Company is proposing to noteholders may include
preferred stock that is convertible into common stock and potentially will have a dilutive impact
on the shareholders of the Company, as well as converting of a portion of the debt into
common stock at the restructure date. The Company believes it will be able to restructure
its debt in the near term, but can give no assurances that it will be able to restructure,
refinance or repay these notes.

During the nine month period ended
June 30, 2004, Hemagen used $198,000 of cash from operating activities, $35,000 of cash
was used in investing activities, offset by $3,000 of cash provided by financing
activities. In addition, $62,000 in cash was used to purchase 32.7% of ownership as well
as to secure non-compete agreements from two former shareholders of its Brazilian
subsidiary, Hemagen Diagnosticos Comercio, Importacao e Exportacao. Hemagen now owns 83.7%
of the Brazilian subsidiary.

In September 2002, the Company
obtained a revolving line of credit with a bank for the purpose of financing working
capital needs as required. The line of credit facility provides for borrowing up to
$1,000,000 at an interest rate of Prime Rate plus 3⁄4 %. To date, the Company has not
borrowed on the line of credit and the effective interest rate on the line of credit is
4.75%.

14

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Hemagen believes that cash flow from
operations, cash on hand at March 31, 2004, and its credit available under its line of
credit facility will be sufficient to finance its operations and capital expenditures over
the next twelve months. Furthermore, without restructuring the debt or completing a new
debt or equity offering, these sources will be insufficient to repay all of the Senior Subordinated
Convertible Notes on April 17, 2005. Hemagen can give no assurances that it will be able
to restructure or refinance the notes, or have sufficient cash flow to finance its
operations. Hemagen has no off-balance sheet financing arrangements.

The Nine Month Period Ended June 30,
2004 Compared to the Nine Month Period Ended June 30, 2003

Net cash used by operating activities
during the nine months ended June 30, 2004 increased by $539,000 to $198,000 used in the
nine months ended June 30, 2003 as compared to $341,000 generated in the prior period. The
cash used by the change in operating assets and liabilities represented a change of
approximately $628,000 (164%) to approximately $164,000 of cash used in the nine month
period ended June 30, 2004 as compared to $384,000 generated in the prior period. The net
loss after adjusting for non-cash items such as depreciation and amortization of discount
on debt, for the nine months ended June 30, 2004 generated cash of approximately $48,000
as compared to $43,000 of cash used in the previous period. The cash generated in the
current period is net of $42,000 paid to two former minority shareholders of the Brazilian
subsidiary for non-compete agreements in conjunction with the acquisition of their
ownership. The increase in cash used by the change in operating assets mainly resulted
from the reduction of cash collections from Accounts Receivable in the current year as
compared to the prior period. In general, the collection of accounts receivable have been
slower than the previous year as more customers have been paying later and more recently
more of the Companys sales have been with foreign customers who typically have
longer terms than domestic customers. In addition, the Company has paid many of its trade
vendors earlier than it had in the past and plans on maintaining its trade payables at
this level going forward.

Approximately $35,000 of cash was
used in investing activities in the nine months ended June 30, 2004 as compared to $1,000
of cash used for investing activities in the nine months ended June 30, 2003. The cash
used in current period is attributed to $23,000 spent on capital expenditures, and $20,000
spent to purchase an additional 32.7% of the stock of the Companys Brazilian
subsidiary, offset by $8,000 generated from the disposal of property and equipment. This
change in cash used is attributed to capital expenditures in the current period net of
fixed asset disposals. At this time, Hemagen has no commitments for capital expenditures;
however, the Companys corporate headquarters lease expires in approximately three
years and the lease of the Companys San Diego facility expires in approximately one
year. As such, the Company is currently evaluating its future facility requirements which
may result in substantial capital investment or improvement in the near term.

Approximately $3,000 of cash was
generated from financing activities in the nine months ended June 30, 2004 as compared to
$157,000 used in the nine months ended June 30, 2003. The cash used in the prior year was
attributed to the scheduled

15

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payments required for the
subordinated note payable to Dade Behring, Inc. that was paid off in November 2002.

16

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# Item 3.    Controls and Procedures

The Companys Chief Executive
Officer, William P. Hales, and Chief Financial Officer, Deborah F. Ricci, have reviewed
the Companys disclosure controls and procedures as of June 30, 2004. Based upon this
review, these officers believe that the Companys disclosure controls and procedures
are effective in ensuring that material information related to the Company is made known
to them as of June 30, 2004 by others within the Company.

There has been no change in the
Companys internal control over financial reporting that occurred during the last
fiscal quarter that has materially affected or is reasonably likely to materially affect
Hemagens internal control over financial reporting.

# PART II.       OTHER
INFORMATION

# Item 2.        Changes in
Securities and Small Business Issuer Purchases of Equity Securities.

|Period                                 | (a) Total Number
of Shares (or
Units) Purchased | (b)
Average
Price Paid per Share
(or Unit) | (c) Total Number of
Shares (or Units)
Purchased as Part of
Publicly Announced
Plans or Programs | (d) Maximum Number (or
Approximate Dollar Value)
of Shares (or Units) that
May Yet Be Purchased Under
the Plans or Programs
|-------------------------------------- | ----------------------------------------------- | ------------------------------------------ | ----------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------
|February 19, 2004 to February 23, 2004 |                                                 | 13,407                                     |                                                                                                 | $075                                                                                                                       
|                                       |                                                 |                                            |                                                                                                 |                                                                                                                            
|April 22,  2004 to May 11, 2004        |                                                 | 12,837                                     |                                                                                                 | $0.75                                                                                                                      
|                                       |                                                 |                                            |                                                                                                 |                                                                                                                            
|Total                                  |                                                 | 26,244                                     |                                                                                                 | $0.75                                                                                                                      

| | (1) | Represents shares of Companys Common Stock purchase in 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 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.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------

17

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# Item 6.       Exhibits and
Reports on Form 8-K.

(a)
    Exhibits

| | Exhibit 31.1 | Certification of Chief Executive Officer pursuant to                           Rule
13a-14(a)
| | ------------ | ---------------------------------------------------------------------------------------------

| | Exhibit 31.2 | Certification of Chief Financial Officer pursuant to                           Rule
13a-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 Chief Financial Officer pursuant to Section 1350 of Chapter 63 of
Title 18 of the United States Code
| | ------------ | ---------------------------------------------------------------------------------------------------------------------

SIGNATURES

Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf of the undersigned thereunto duly authorized.

|August 13, 2004August 13, 2004 |  | Hemagen Diagnostics, Inc.
(Registrant)BY: /s/William P. Hales
William P. HalesPresident andChief Executive OfficerBY: /s/Deborah F. Ricci
Deborah F. RicciChief Financial Officer
|------------------------------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------