| For      the Quarterly Period Ended March 31, 2008 | Commission      FileNumber      1-11700 |
|----------------------------------------------------|-----------------------------------------|

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

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

| (443)      367 5500                                        |
|------------------------------------------------------------|
| (Issuer’s      telephone number, including areacode) |

----

|                           |                                   |                                                                                                            |        PageNumber |
|--------------------------------|----------------------------------------|-----------------------------------------------------------------------------------------------------------------|------------------------|
|        PART      I.  |        FINANCIAL      INFORMATION |                                                                                                            |
|                           | Item      1.                           | Financial      Statements                                                                                       |                   |
|                           |                                   |                                                                                                            |                   |
|                           |                                   | Consolidated      Balance Sheets; March 31, 2008 (unaudited) and September 30,      2007                   | 3                      |
|                           |                                   |                                                                                                            |                   |
|                           |                                   | Consolidated      Statements of Operations; Three and Six Months Ended March 31, 2008      (unaudited) and 2007 | 5                      |
|                           |                                   |                                                                                                            |                   |
|                           |                                   | Consolidated      Statements of Cash Flows; Six Months Ended March 31, 2008 (unaudited)      and 2007      | 6                      |
|                           |                                   |                                                                                                            |                   |
|                           |                                   | Notes      to Consolidated Financial Statements                                                                 | 7                      |
|                           |                                   |                                                                                                            |                   |
|                           | Item      2.                           | Management’s      Discussion and Analysis and Plan of Operation                                      | 13                     |
|                           |                                   |                                                                                                            |                   |
|                           | Item      3.                           | Controls      and Procedures                                                                                    | 17                     |
|                           |                                   |                                                                                                            |
| PART      II.                  | OTHER      INFORMATION                 |                                                                                                            |
|                           |                                   |                                                                                                            |                   |
|                           | Item      2.                           | Unregistered      Sales of Equity Securities and Use Of Proceeds                                                | 17                     |
|                           |                                   |                                                                                                            |                   |
|                           | Item      6.                           | Exhibits                                                                                                        | 18                     |
|                           |                                   |                                                                                                            |                   |
|        SIGNATURES         | 19                                     |
|                           |                                   |
|        CERTIFICATIONS     |                                   |

----

|                                                                                                                                                                                    |   | March      31, 2008(unaudited) |      |   | September      30,2007 |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------|-----------|--------|------------------------|--------|
| ASSETS                                                                                                                                                                                  |   |                           |      |   |                   |   |
|                                                                                                                                                                                    |   |                           |      |   |                   |   |
| CURRENT      ASSETS:                                                                                                                                                                    |   |                           |      |   |                   |   |
| Cash                                                                                                                                                                                    |   | $                              | 215,006   |   |                   | $      | 6,592 |   |
| Accounts      receivable, less allowance for doubtful accounts of $63,287 and $51,316 at      March 31,  2008 and September      30, 2007, respectively                       |   |                           | 1,138,124 |   |                   |   | 1,000,652 |   |
| Inventories,      net                                                                                                                                                                   |   |                           | 2,014,606 |   |                   |   | 2,554,881 |   |
| Current      portion of Note Receivable                                                                                                                                                 |   |                           | 210,000   |   |                   |   | --  |   |
| Prepaid      expenses and other current assets                                                                                                                                          |   |                           | 215,510   |   |                   |   | 265,633 |   |
| Assets      Held for Sale                                                                                                                                                               |   |                           | --        |   |                   |   | 5,183 |   |
|                                                                                                                                                                                    |   |                           |      |   |                   |   |   |   |
|              Total      current assets                                                                                 |   |                           | 3,793,246 |   |                   |   | 3,832,941 |   |
|                                                                                                                                                                                    |   |                           |      |   |                   |   |   |   |
| PROPERTY AND EQUIPMENT;      net of accumulated depreciation and amortization of $      5,923,873  and $5,883,861 at      March 31, 2008 and September 30, 2007, respectively |   |                           | 525,695   |   |                   |   | 221,990 |   |
|                                                                                                                                                                                    |   |                           |      |   |                   |   |   |   |
| OTHER      ASSETS:                                                                                                                                                                      |   |                           |      |   |                   |   |   |   |
|                                                                                                                                                                                    |   |                           |      |   |                   |   |   |   |
| Note      Receivable - non-current                                                                                                                                                      |   |                           | 560,000   |   |                   |   | -- |   |
| Other      Assets                                                                                                                                                                       |   |                           | 83,840    |   |                   |   | 80,160 |   |
|              Total      other assets                                                                                   |   |                           | 643,840   |   |                   |   | 80,160 |   |
|                                                                                                                                                                                    |   |                           |      |   |                   |   |   |   |
| Total      Assets                                                                                                                                                                       |   | $                              | 4,962,781 |   |                   | $      | 4,135,091 |   |

----

|                                                                                                                                                                                                                                                           |   | March      31,2008(unaudited) |        |   | September      30,2007 |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------|-------------|--------|------------------------|--------|
| LIABILITIES      AND STOCKHOLDERS’ DEFICIT                                                                                                                                                                                                               |   |                          |        |   |                   |   |
|      CURRENT      LIABILITIES:                                                                                                                                                                                                        |   |                          |        |   |                   |   |
|      Accounts      payable and accrued liabilities                                                                                                                                                                                    |   | $                             | 1,149,291   |   |                   | $      | 1,332,302 |   |
|      Revolving      line of credit                                                                                                                                                                                                    |   |                          | 283,231     |   |                   |   | 340,000 |   |
|      Deferred      revenue                                                                                                                                                                                                            |   |                          | 26,283      |   |                   |   | 17,691 |   |
|      Note      Payable – Itau Bank                                                                                                                                                                                              |   |                          | 78,739      |   |                   |   | 16,388 |   |
|                 Total      Current Liabilities                                                                                                                                 |   |                          | 1,537,544   |   |                   |   | 1,706,381 |   |
|      LONG      TERM LIABILITIES:                                                                                                                                                                                                      |   |                          |        |   |                   |   |   |   |
|      Note      Payable – Itau Bank                                                                                                                                                                                              |   |                          | 137,813     |   |                   |   | 18,200 |   |
|      Senior      subordinated secured convertible notes due September 30, 2009,      net of unamortized discount of   $107,377 and $143,575      at March      31, 2008 and September 30, 2007, respectively |   |                          | 3,942,473   |   |                   |   | 3,906,275 |   |
|                 Total      Long Term Liabilities                                                                                                                               |   |                          | 4,080,286   |   |                   |   | 3,924,475 |   |
|                 Total      liabilities                                                                                                                                         |   |                          | 5,617,830   |   |                   |   | 5,630,856 |   |
|                                                                                                                                                                                                                                                           |   |                          |        |   |                   |   |   |   |
|  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; issued      and outstanding:  15,325,281 at    March      31, 2008 and      September 30, 2007                         |   |                          | 153,252     |   |                   |   | 153,252 |   |
|      Additional      paid-in capital                                                                                                                                                                                                  |   |                          | 22,845,515  |   |                   |   | 22,842,290 |   |
|      Accumulated      deficit                                                                                                                                                                                                         |   |                          | (23,552,463 | )      |                   |   | (24,353,140 | ) |
|      Accumulated      other comprehensive loss- currency translation loss                                                                                                                                                             |   |                          | (11,716     | )      |                   |   | (48,530 | ) |
|      Less      treasury stock at cost; 100,000 shares at March 31, 2008  and      September 30, 2007, respectively.                                                                                                         |   |                          | (89,637     | )      |                   |   | (89,637 | ) |
|        Total      Stockholders’ Deficit                                                                                                                                                                               |   |                          | (655,049    | )      |                   |   | (1,495,765 | ) |
|      Total      Liabilities and Stockholders’ Deficit                                                                                                                                                                           |   | $                             | 4,962,781   |   |                   | $      | 4,135,091 |   |

----

|                                                                                                                                                                                                                                                                                                                                 |   | Three      Months Ended |       |   | Six      Months Ended |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------|------------|--------|-----------------------|--------|
|                                                                                                                                                                                                                                                                                                                                 |   | March      31,2008      |       |   | March      31, 2007   |   |   | March      31,2008 |   |   | March      31,2007 |   |
|                                                                                                                                                                                                                                                                                                                                 |   |                    |       |   |                  |   |   |   |   |   |   |   |
| Net      Sales                                                                                                                                                                                                                                                                                                                       |   | $                       | 1,793,465  |   |                  | $      | 1,155,242 |   |   | $ | 3,333,311 |   |   | $ | 2,161,788 |   |
| Cost      of Sales                                                                                                                                                                                                                                                                                                                   |   |                    | 1,015,305  |   |                  |   | 554,684 |   |   |   | 1,903,941 |   |   |   | 1,234,005 |   |
| Gross      Profit                                                                                                                                                                                                                                                                                                                    |   |                    | 778,160    |   |                  |   | 600,558 |   |   |   | 1,429,370 |   |   |   | 927,783 |   |
| Operating      Expenses:                                                                                                                                                                                                                                                                                                             |   |                    |       |   |                  |   |   |   |   |   |   |   |   |   |   |   |
|        Selling,      general and administrative                                                                                                                                                                                                                                                   |   |                    | 590,882    |   |                  |   | 593,473 |   |   |   | 1,167,246 |   |   |   | 1,151,402 |   |
|        Research      and development                                                                                                                                                                                                                                                              |   |                    | 50,515     |   |                  |   | 8,854 |   |   |   | 91,593 |   |   |   | 10,884 |   |
|                 Total      operating expenses                                                                                                                                                                                                        |   |                    | 641,397    |   |                  |   | 602,327 |   |   |   | 1,258,839 |   |   |   | 1,162,286 |   |
|                 Total      operating income (loss) from continuing operations                                                                                                                                                                        |   |                    | 136,763    |   |                  |   | (1,769 | ) |   |   | 170,531 |   |   |   | (234,503 | ) |
| Other      income (expenses):                                                                                                                                                                                                                                                                                                        |   |                    |       |   |                  |   |   |   |   |   |   |   |   |   |   |   |
|        Interest      expense (net), including $17,626 and $16,658,            respectively      of debt discount amortization                                                                                                         |   |                    | (87,659    | )      |                  |   | (98,857 | ) |   |   | (176,069 | ) |   |   | (191,777 | ) |
|        Other      income (expense)                                                                                                                                                                                                                                                                |   |                    | 5,995      |   |                  |   | 5,337 |   |   |   | 6,347 |   |   |   | (4,275 | ) |
|                 Total      other expense                                                                                                                                                                                                             |   |                    | (81,664    | )      |                  |   | (93,520 | ) |   |   | (169,722 | ) |   |   | (196,052 | ) |
|                                                                                                                                                                                                                                                                                                                                 |   |                    |       |   |                  |   |   |   |   |   |   |   |   |   |   |   |
|       Net      loss, before income taxes, from continuing operations                                                                                                                                                                                                                                   |   |                    | 55,099     |   |                  |   | (95,289 | ) |   |   | 809 |   |   |   | (430,555 | ) |
|                                                                                                                                                                                                                                                                                                                                 |   |                    |       |   |                  |   |   |   |   |   |   |   |   |   |   |   |
|       Income      Tax expense                                                                                                                                                                                                                                                                          |   |                    | 27,030     |   |                  |   | 15,943 |   |   |   | 56,578 |   |   |   | 21,492 |   |
|       Net      income (loss), from continuing operations                                                                                                                                                                                                                                               |   |                    | 28,069     |   |                  |   | (111,232 | ) |   |   | (55,769 | ) |   |   | (452,047 | ) |
|                                                                                                                                                                                                                                                                                                                                 |   |                    |       |   |                  |   |   |   |   |   |   |   |   |   |   |   |
|       Income      (Loss), from Discontinued Operations (includes a gain                on sale of assets in the amount of $1,094,817 for the six      months                ending March 31, 2008) |   |                    | --         |   |                  |   | (199,094 | ) |   |   | 856,446 |   |   |   | (218,671 | ) |
| Net      income (loss):                                                                                                                                                                                                                                                                                                              |   | $                       | 28,069     |   |                  | $      | (310,326 | ) |   | $ | 800,677 |   |   | $ | (670,718 | ) |
|                                                                                                                                                                                                                                                                                                                                 |   |                    |       |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Other      comprehensive loss, net of tax:                                                                                                                                                                                                                                                                                           |   |                    |       |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Foreign      currency translation adjustments                                                                                                                                                                                                                                                                                        |   |                    | 13,393     |   |                  |   | 15,907 |   |   |   | 36,814 |   |   |   | 10,509 |   |
| Comprehensive      income (loss):                                                                                                                                                                                                                                                                                                    |   | $                       | 41,462     |   |                  | $      | (294,419 | ) |   | $ | 837,491 |   |   | $ | (660,209 | ) |
|                                                                                                                                                                                                                                                                                                                                 |   |                    |       |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Earnings      (loss) per share, from continuing operations - Basic                                                                                                                                                                                                                                                                   |   | $                       | 0.00       |   |                  | $      | (0.01 | ) |   | $ | 0.00 |   |   | $ | (0.03 | ) |
| Earnings      (loss) per share, from continuing operations - Diluted                                                                                                                                                                                                                                                                 |   | $                       | 0.00       |   |                  | $      | (0.01 | ) |   | $ | 0.00 |   |   | $ | (0.03 | ) |
| Earnings      (loss) per share, from discontinued operations - Basic                                                                                                                                                                                                                                                                 |   | $                       | 0.00       |   |                  | $      | (0.01 | ) |   | $ | 0.05 |   |   | $ | (0.01 | ) |
| Earnings      (loss) per share, from discontinued operations - Diluted                                                                                                                                                                                                                                                               |   | $                       | 0.00       |   |                  | $      | (0.01 | ) |   | $ | 0.05 |   |   | $ | (0.01 | ) |
| Earnings      (loss) per share - Basic                                                                                                                                                                                                                                                                                               |   | $                       | 0.00       |   |                  | $      | (0.02 | ) |   | $ | 0.05 |   |   | $ | (0.04 | ) |
| Earnings      (loss) per share - Diluted                                                                                                                                                                                                                                                                                             |   | $                       | 0.00       |   |                  | $      | (0.02 | ) |   | $ | 0.05 |   |   | $ | (0.04 | ) |
| Weighed      average common shares used in calculation of earnings (loss) per share -      Basic                                                                                                                                                                                                                                     |   |                    | 15,225,281 |   |                  |   | 15,225,281 |   |   |   | 15,225,281 |   |   |   | 15,225,281 |   |
| Weighed      average common shares used in calculation of earnings (loss) per share –      Diluted                                                                                                                                                                                                                             |   |                    | 15,225,281 |   |                  |   | 15,225,281 |   |   |   | 15,225,281 |   |   |   | 15,225,281 |   |

----

|                                                                                                                                                                                                                                                                                                     |   | Six      Months EndedMarch      31 |     |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------|----------|
|                                                                                                                                                                                                                                                                                                     |   | 2008                               |     |   | 2007 |   |
| Cash      flows from operating activities:                                                                                                                                                                                                                                                               |   |                               |     |   |   |   |
|      Net      Income (Loss)                                                                                                                                                                                                                                                     |   | $                                  | 800,677  |   |   | $ | (670,718 | ) |
|       Adjustments      to reconcile net loss to net cash provided by operating      activities:                                                                                                                                                                            |   |                               |     |   |   |   |   |   |
|          Depreciation                                                                                                                                                                                                                                       |   |                               | 28,842   |   |   |   | 19,043 |   |
|          Amortization      of debt discount                                                                                                                                                                                                                 |   |                               | 36,198   |   |   |   | 31,681 |   |
|          (Gain)      loss on sale of assets                                                                                                                                                                                                                 |   |                               | (838,907 | ) |   |   | -- |   |
|          Provision      for Bad Debts                                                                                                                                                                                                                       |   |                               | (21,028  | ) |   |   | -- |   |
|          Stock      Based Compensation                                                                                                                                                                                                                      |   |                               | 3,225    |   |   |   | 6,112 |   |
|      Changes      in operating assets and liabilities:                                                                                                                                                                                                                          |   |                               |     |   |   |   |   |   |
|          Accounts      receivable                                                                                                                                                                                                                           |   |                               | (116,444 | ) |   |   | 118,890 |   |
|           Prepaid      expenses and other current assets                                                                                                                                                                                               |   |                               | 50,123   |   |   |   | 103,274 |   |
|          Inventories                                                                                                                                                                                                                                        |   |                               | 540,275  |   |   |   | (49,000 | ) |
|          Accounts      payable and accrued expenses                                                                                                                                                                                                         |   |                               | (183,011 | ) |   |   | 285,146 |   |
|          Other      assets                                                                                                                                                                                                                                  |   |                               | (3,680   | ) |   |   | (59,445 | ) |
|          Deferred      revenue                                                                                                                                                                                                                              |   |                               | 8,592    |   |   |   | 5,154 |   |
|             Net      cash provided by (used in) operating activities                                                                                                                                                                         |   |                               | 304,862  |   |   |   | (209,863 | ) |
|                                                                                                                                                                                                                                                                                                     |   |                               |     |   |   |   |   |   |
| Cash      flows from investing activities:                                                                                                                                                                                                                                                               |   |                               |     |   |   |   |   |   |
|      Purchase      of property and equipment                                                                                                                                                                                                                                    |   |                               | (322,843 | ) |   |   | (52,314 | ) |
|      Proceeds      from sale of assets                                                                                                                                                                                                                                          |   |                               | 4,090    |   |   |   | -- |   |
|      Payments      Received on Notes Receivable                                                                                                                                                                                                                                 |   |                               | 70,000   |   |   |   | -- |   |
|            Net      cash used in investing activities                                                                                                                                                                                             |   |                               | (248,753 | ) |   |   | (52,314 | ) |
|                                                                                                                                                                                                                                                                                                     |   |                               |     |   |   |   |   |   |
| Cash      flows from financing activities:                                                                                                                                                                                                                                                               |   |                               |     |   |   |   |   |   |
|      Net      (payments) borrowings on Line of Credit                                                                                                                                                                                                                           |   |                               | (56,769  | ) |   |   | 250,000 |   |
|      Borrowings      on Notes – Itau Bank                                                                                                                                                                                                                                 |   |                               | 181,964  |   |   |   | -- |   |
|            Net      cash provided by financing activities                                                                                                                                                                                         |   |                               | 125,195  |   |   |   | 250,000 |   |
|                                                                                                                                                                                                                                                                                                     |   |                               |     |   |   |   |   |   |
| Effects      of foreign exchange rate                                                                                                                                                                                                                                                                    |   |                               | 27,110   |   |   |   | 10,960 |   |
|                                                                                                                                                                                                                                                                                                     |   |                               |     |   |   |   |   |   |
|                  Net      increase (decrease) in cash and cash equivalents                                                                                                                                          |   |                               | 208,414  |   |   |   | (1,217 | ) |
|                                                                                                                                                                                                                                                                                                     |   |                               |     |   |   |   |   |   |
| Cash      and cash equivalents at beginning of period                                                                                                                                                                                                                                                    |   |                               | 6,592    |   |   |   | 150,663 |   |
|                                                                                                                                                                                                                                                                                                     |   |                               |     |   |   |   |   |   |
| Cash      and cash equivalents at end of      period                                                                                |   | $                                  | 215,006  |   |   | $ | 149,446 |   |
| Supplemental      disclosure of cash flow information:                                                                                                                                                                                                                                                   |   |                               |     |   |   |   |   |   |
|  Cash      paid during the period for      interest                                         |   | $                                  | 164,211  |   |   | $ | 165,325 |   |
|                                                                                                                                                                                                                                                                                                     |   |

----

----

----

|                                  |   | Three      Months EndedMarch      31, |      |   | Six      Months EndedMarch      31, |   |
|---------------------------------------|--------|---------------------------------------|-----------|--------|-------------------------------------|--------|
|                                  |   | 2008                                  |      |   | 2007                                |   |   | 2008 |   |   | 2007 |   |
| Convertible      notes                |   |                                  | 5,399,800 |   |                                |   | 5,399,800 |   |   |   | 5,399,800 |   |   |   | 5,399,800 |   |
| Options      to purchase common stock |   |                                  | 2,314,014 |   |                                |   | 2,375,014 |   |   |   | 2,314,014 |   |   |   | 2,375,014 |   |
| Total      antidilutive instruments   |   |                                  | 7,713,814 |   |                                |   | 7,774,814 |   |   |   | 7,713,814 |   |   |   | 7,774,814 |   |

|                                                                           |   |  Shares |      |   | Weighted      average exercise price |    |   | Weighted      averagelife |   |
|--------------------------------------------------------------------------------|--------|--------------|-----------|--------|--------------------------------------|---------|--------|---------------------------|--------|
|                                                                           |   |         |      |   |                                 |    |   |                      |   |   |
| Options      outstanding – October 1, 2007                               |   |         | 2,289,514 |   |                                 |  $ | 1.11   |                      |   |   | 2.39 |   |
|        Granted                              |   |         | 97,000    |   |                                 |    | 0.19   |                      |   |   | 4.81 |   |
|        Exercised                            |   |         | --        |   |                                 |    | --     |                      |   |   | -- |   |
|        Forfeited,      cancelled or expired |   |         | (72,500   | )      |                                 |    | 0.24   |                      |   |   | 3.41 |   |
| Options      outstanding – March 31, 2008                                |   |         | 2,314,014 |   |                                 | $       | 1.10   |                      |   |   | 2.46 |   |
| Options      exercisable – March 31, 2008                                |   |         | 2,132,014 |   |                                 | $       | 1.17   |                      |   |   | 2.34 |   |
|                                                                           |   |         |      |   |                                 |    |   |                      |   |   |   |   |

----

|                         |   | Three      and Six Months EndedMarch      31, |   |
|------------------------------|--------|-----------------------------------------------|--------|
|                         |   | 2008                                          |   |   | 2007 |   |
| Dividend      yield          |   |                                          | --     |   |   |   | -- |   |
| Expected      volatility     |   |                                          | 87.4   | % |   |   | 82 | % |
| Risk-free      interest rate |   |                                          | 4      | % |   |   | 4 | % |
| Expected      life in years  |   |                                          | 10     |   |   |   | 10 |   |

|                  |   | March      31,2008 |      |   | September      30,2007 |   |
|-----------------------|--------|--------------------|-----------|--------|------------------------|--------|
|                  |   |               |      |   |                   |   |
| Raw      Materials    |   | $                  | 1,430,351 |   |                   | $      | 1,510,204 |   |
| Work-in-process       |   |               | 196,812   |   |                   |   | 163,218 |   |
| Finished      goods   |   |               | 998,560   |   |                   |   | 1,481,295 |   |
|                  |   |               | 2,625,723 |   |                   |   | 3,154,717 |   |
| Less      reserves    |   |               | (611,117  | )      |                   |   | (599,836 | ) |
| Inventories,      net |   | $                  | 2,014,606 |   |                   | $      | 2,554,881 |   |

----

|                                                 |   | United*States |      |   | Brazil |   |      | Consolidated |   |
|------------------------------------------------------|--------|---------------|-----------|--------|--------|--------|-----------|--------------|--------|
| March      31, 2008:                                 |   |          |      |   |   |   |      |         |   |
|      Revenues               |   |          | 2,254,242 |   |   |   | 1,079,069 |         |   |   | 3,333,311 |   |
|      Long-lived      assets |   |          | 734,044   |   |   |   | 435,491   |         |   |   | 1,169,535 |   |
|                                                 |   |          |      |   |   |   |      |         |   |   |   |   |
| March      31, 2007:                                 |   |          |      |   |   |   |      |         |   |   |   |   |
|      Revenues               |   |          | 1,540,768 |   |   |   | 621,020   |         |   |   | 2,161,788 |   |
|      Long-lived      assets |   |          | 199,686   |   |   |   | 98,670    |         |   |   | 298,356 |   |

----

|                                                                                                      |   | Three      Months Ended |    |   | Six      Months Ended |   |
|-----------------------------------------------------------------------------------------------------------|--------|-------------------------|---------|--------|-----------------------|--------|
|                                                                                                      |   | March      31,2008      |    |   | March      31,2007    |   |   | March      31,2008 |   |   | March      31,2007 |   |
|                                                                                                      |   |                    |    |   |                  |   |   |   |   |   |   |   |
| Net      sales                                                                                            |   | $                       | 154,079 |   |                  | $      | 539,700 |   |   | $ | 371,240 |   |   | $ | 921,439 |   |
| Costs      of sales                                                                                       |   |                    | 154,079 |   |                  |   | 597,517 |   |   |   | 410,967 |   |   |   | 871,675 |   |
| Gross      Profit                                                                                         |   |                    | --      |   |                  |   | (57,817 | ) |   |   | (39,727 | ) |   |   | 49,764 |   |
|                                                                                                      |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                      |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Operating      expenses:                                                                                  |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
|     Selling,      general and administrative                                          |   |                    | --      |   |                  |   | 57,992 |   |   |   | 196,936 |   |   |   | 121,236 |   |
|     Research      and development                                                     |   |                    | --      |   |                  |   | 83,284 |   |   |   | 1,708 |   |   |   | 147,198 |   |
|           Total      operating costs and expenses       |   |                    | --      |   |                  |   | 141,276 |   |   |   | 198,644 |   |   |   | 268,434 |   |
|                                                                                                      |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
|       Operating      loss                                                   |   |                    | --      |   |                  |   | (199,093 | ) |   |   | (238,371 | ) |   |   | (218,670 | ) |
|                                                                                                      |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Other      income (expenses):                                                                             |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
|       Other      Income (expense)                                           |   |                    | --      |   |                  |   | (1 | ) |   |   |   |   |   |   | (1 | ) |
|       Gain      on Sale of Assets                                           |   |                    | --      |   |                  |   | -- |   |   |   | 1,094,817 |   |   |   | -- |   |
|             Total      other income (expense) |   |                    | --      |   |                  |   | (1 | ) |   |   | 1,094,817 |   |   |   | (1 | ) |
|                                                                                                      |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
|       Net      income (loss) before income taxes                            |   |                    | --      |   |                  |   | (199,094 | ) |   |   | 856,446 |   |   |   | (218,671 | ) |
|                                                                                                      |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
|          Income      Tax                                     |   |                    | --      |   |                  |   | -- |   |   |   | -- |   |   |   | -- |   |
|                                                                                                      |   |                    |    |   |                  |   |   |   |   |   |   |   |   |   |   |   |
| Net      income (loss) from discontinued operations                                                       |   |                    | --      |   |                  |   | (199,094 | ) |   |   | 856,446 |   |   |   | (218,671 | ) |

----

|                  |   | March      31,2008 |     |
|-----------------------|--------|--------------------|----------|
| Raw      Materials    |   | $                  | 209,849  |   |
| Work-in-process       |   |               | 1,903    |   |
| Finished      goods   |   |               | 219,591  |   |
|                  |   |               | 431,343  |   |
| Less      reserves    |   |               | (108,451 | ) |
| Inventories,      net |   | $                  | 322,892  |   |

----

| · | Activities      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’ rotortechnology; |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

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

----

----

----

|   | Item      2.     Unregistered Sales of Equity      Securities and Use ofProceeds. |
|--------|------------------------------------------------------------------------------------------------------------|

----

| Period                   |   | (a)Total      Number of Shares Purchased |   |   | (b)AveragePrice      Paid per Share |   |   | (c)Total      Number of Shares Purchased as Part of Publicly Announced Plans or      Programs(1) |   |   | (d)Maximum      Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased      Under the Plans or Programs (2) |   |
|--------------------------|--------|-----------------------------------------------|--------|--------|-------------------------------------|--------|--------|--------------------------------------------------------------------------------------------------|--------|--------|-------------------------------------------------------------------------------------------------------------------------------|--------|
| January      1-31, 2008  |   |                                          | 3,375  |   |                                | $      | 0.19   |                                                                                             |   |   | 3,375                                                                                                                         |   |   |   | - |   |
| February      1-29, 2008 |   |                                          | --     |   |                                |   | --     |                                                                                             |   |   | --                                                                                                                            |   |   |   | - |   |
| March      1-31, 2008    |   |                                          | --     |   |                                |   | --     |                                                                                             |   |   | --                                                                                                                            |   |   |   | - |   |
| Total                    |   |                                          | 3,375  |   |                                | $      | 0.19   |                                                                                             |   |   | 3,375                                                                                                                         |   |   |   | - |   |

|   | (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 Chief Executive Officer pursuant to Rule 13a-14(a)                                                           |
|-------------------|------------------------------------------------------------------------------------------------------------------------------------|
|              |                                                                                                                               |
| Exhibit      31.2 | Certification      of Principal 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 Principal Financial Officer pursuant to Section 1350 of Chapter 63 of      Title 18 of the United StatesCode |

----

|              | Hemagen Diagnostics,      Inc.(Registrant)   |                                       |
|-------------------|--------------------------------------------------------|--------------------------------------------|
|              |                                                   |                                       |   |
| May      14, 2008 | By:                                                    | /s/William      P. Hales                   |   |
|              |                                                   | William      P. Hales                      |   |
|              |                                                   | Preisdent      and Chief Executive Officer |   |
|              |                                                   |                                       |   |

|              |   |                                |   |
|-------------------|--------|-------------------------------------|--------|
| May      14, 2008 | By:    | /s/Catherine      M. Davidson  |   |
|              |   | Catherine      M. Davidson          |   |
|              |   | Principal      Financial Officer    |   |
|              |   |                                |   |