| For      the Quarterly Period Ended June 30, 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; June 30, 2008 (unaudited) and September 30,      2007                               | 3                      |
|                           |                              |                                                                                                                  |                   |
|                           |                              | Consolidated      Statements of Operations; Three and Nine Months Ended June 30, 2008       and 2007 (unaudited) | 5                      |
|                           |                              |                                                                                                                  |                   |
|                           |                              | Consolidated      Statements of Cash Flows; Nine Months Ended June 30, 2008  and      2007 (unaudited)      | 6                      |
|                           |                              |                                                                                                                  |                   |
|                           |                              | Notes      to Consolidated Financial Statements                                                                       | 7                      |
|                           |                              |                                                                                                                  |                   |
|                           | Item      2.                      | Management’s      Discussion and Analysis and Plan of Operation                                            | 13                     |
|                           |                              |                                                                                                                  |                   |
|                           | Item      3.                      | Controls      and Procedures                                                                                          | 18                     |
|                           |                              |                                                                                                                  |
| PART      II.                  | OTHER      INFORMATION            |                                                                                                                  |
|                           |                              |                                                                                                                  |                   |
|                           | Item      2.                      | Unregistered      Sales of Equity Securities and Use Of Proceeds                                                      | 18                     |
|                           |                              |                                                                                                                  |                   |
|                           | Item      4.                      | Submission      of Matters to a Vote of Security Holders                                                              | 19                     |
|                           |                              |                                                                                                                  |                   |
|                           | Item      6.                      | Exhibits                                                                                                              | 20                     |
|                           |                              |                                                                                                                  |                   |
|        SIGNATURES         | 21                                |
|                           |                              |
|        CERTIFICATIONS     |                              |

----

|                                                                                                                                                                                             |   | June      30,2008 (unaudited) |      |   | September      30,2007  |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------|-----------|--------|------------------------------|--------|
| ASSETS                                                                                                                                                                                           |   |                               |      |   |                         |   |
|                                                                                                                                                                                             |   |                               |      |   |                         |   |
| CURRENT      ASSETS:                                                                                                                                                                             |   |                               |      |   |                         |   |
| Cash                                                                                                                                                                                             |   | $                                  | 158,848   |   |                         | $      | 6,592 |   |
| Accounts      receivable, less allowance for doubtful      accounts of $71,512 and $51,316 at  June 30, 2008 and      September 30, 2007, respectively                            |   |                               | 856,332   |   |                         |   | 1,000,652 |   |
| Inventories,      net                                                                                                                                                                            |   |                               | 2,177,877 |   |                         |   | 2,554,881 |   |
| Current      portion of Note Receivable                                                                                                                                                          |   |                               | 210,000   |   |                         |   |   |   |
| Prepaid      expenses and other current assets                                                                                                                                                   |   |                               | 295,978   |   |                         |   | 265,633 |   |
| Assets      Held for Sale                                                                                                                                                                        |   |                               | --        |   |                         |   | 5,183 |   |
|                                                                                                                                                                                             |   |                               |      |   |                         |   |   |   |
|              Total      current assets                                                                                          |   |                               | 3,699,035 |   |                         |   | 3,832,941 |   |
|                                                                                                                                                                                             |   |                               |      |   |                         |   |   |   |
| PROPERTY AND EQUIPMENT;      net of accumulated depreciation and      amortization of   $5,991,553 and      $5,883,861 at      June 30, 2008 and September 30, 2007, respectively |   |                               | 603,354   |   |                         |   | 221,990 |   |
|                                                                                                                                                                                             |   |                               |      |   |                         |   |   |   |
| OTHER      ASSETS:                                                                                                                                                                               |   |                               |      |   |                         |   |   |   |
|                                                                                                                                                                                             |   |                               |      |   |                         |   |   |   |
| Long      Term portion of Note Receivable                                                                                                                                                        |   |                               | 507,500   |   |                         |   | -- |   |
| Other      Assets                                                                                                                                                                                |   |                               | 84,670    |   |                         |   | 80,160 |   |
|              Total      other assets                                                                                            |   |                               | 592,170   |   |                         |   | 80,160 |   |
|                                                                                                                                                                                             |   |                               |      |   |                         |   |   |   |
| Total      Assets                                                                                                                                                                                |   | $                                  | 4,894,559 |   |                         | $      | 4,135,091 |   |

----

| LIABILITIES      AND STOCKHOLDERS’ DEFICIT                                                                                                                                                                     |   | June      30, |        |   | September      30, |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------|-------------|--------|--------------------|--------|
|                                                                                                                                                                                                                 |   | 2008          |        |   | 2007               |   |
|                                                                                                                                                                                                                 |   | (unaudited)   |        |   |               |   |
| CURRENT      LIABILITIES:                                                                                                                                                                                            |   |          |        |   |               |   |
| Accounts      payable and accrued liabilities                                                                                                                                                                        |   | $             | 800,055     |   |               | $      | 1,332,302 |   |
| Revolving      line of credit                                                                                                                                                                                        |   |          | 480,000     |   |               |   | 340,000 |   |
| Deferred      revenue                                                                                                                                                                                                |   |          | 84,471      |   |               |   | 17,691 |   |
| Note      Payable – Itau Bank                                                                                                                                                                                  |   |          | 64,041      |   |               |   | 16,388 |   |
|                 Total      Current Liabilities                                                                                       |   |          | 1,428,567   |   |               |   | 1,706,381 |   |
| LONG      TERM LIABILITIES:                                                                                                                                                                                          |   |          |        |   |               |   |   |   |
| Note      Payable – Itau Bank                                                                                                                                                                                  |   |          | 153,512     |   |               |   | 18,200 |   |
| Senior      subordinated secured convertible notes due September 30,  2009, net of unamortized      discount of $89,315 and $143,575 at  June 30, 2008 and      September 30, 2007, respectively |   |          | 3,960,535   |   |               |   | 3,906,275 |   |
|                 Total      Long Term Liabilities                                                                                     |   |          | 4,114,047   |   |               |   | 3,924,475 |   |
|         Total      liabilities                                                                                                                                               |   |          | 5,542,614   |   |               |   | 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 June 30, 2008  and      September 30, 2007                                   |   |          | 153,252     |   |               |   | 153,252 |   |
| Additional      paid-in capital                                                                                                                                                                                      |   |          | 22,847,529  |   |               |   | 22,842,290 |   |
| Accumulated      deficit                                                                                                                                                                                             |   |          | (23,613,078 | )      |               |   | (24,353,140 | ) |
| Accumulated      other comprehensive income (loss)-  currency      translation income (loss)                                                                                                               |   |          | 53,879      |   |               |   | (48,530 | ) |
| Less      treasury stock at cost; 100,000 shares at June 30, 2008  and September 30,      2007, respectively                                                                                               |   |          | (89,637     | )      |               |   | (89,637 | ) |
|   Total      Stockholders’ Deficit                                                                                                                                                                   |   |          | (648,055    | )      |               |   | (1,495,765 | ) |
| Total      Liabilities and Stockholders’ Deficit                                                                                                                                                               |   | $             | 4,894,559   |   |               | $      | 4,135,091 |   |

----

|                                                                                                                                                                                                                                                                                                                                                                                                                 |   | Three      Months Ended |       |   | Nine      Months Ended |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------|------------|--------|------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                 |   | June      30,2008       |       |   | June      30,2007      |   |   | June      30,2008 |   |   | June      30,2007 |   |
| Net      Sales                                                                                                                                                                                                                                                                                                                                                                                                       |   | $                       | 1,353,199  |   |                   | $      | 1,184,739 |   |   | $ | 4,686,512 |   |   | $ | 3,346,527 |   |
| Cost      of Sales                                                                                                                                                                                                                                                                                                                                                                                                   |   |                    | 609,878    |   |                   |   | 649,824 |   |   |   | 2,513,820 |   |   |   | 1,883,829 |   |
| Gross      Profit                                                                                                                                                                                                                                                                                                                                                                                                    |   |                    | 743,321    |   |                   |   | 534,915 |   |   |   | 2,172,692 |   |   |   | 1,462,698 |   |
| Operating      Expenses:                                                                                                                                                                                                                                                                                                                                                                                             |   |                    |       |   |                   |   |   |   |   |   |   |   |   |   |   |   |
|        Selling,      general and administrative                                                                                                                                                                                                                                                                                                                                   |   |                    | 630,983    |   |                   |   | 485,238 |   |   |   | 1,798,228 |   |   |   | 1,636,640 |   |
|        Research      and development                                                                                                                                                                                                                                                                                                                                              |   |                    | 35,183     |   |                   |   | 5,783 |   |   |   | 126,776 |   |   |   | 16,668 |   |
|                 Total      operating expenses                                                                                                                                                                                                                                                                                        |   |                    | 666,166    |   |                   |   | 491,021 |   |   |   | 1,925,004 |   |   |   | 1,653,308 |   |
|                 Total      operating income (loss) from continuing operations                                                                                                                                                                                                                                                        |   |                    | 77,155     |   |                   |   | 43,894 |   |   |   | 247,688 |   |   |   | (190,610 | ) |
| Other      income (expenses):                                                                                                                                                                                                                                                                                                                                                                                        |   |                    |       |   |                   |   |   |   |   |   |   |   |   |   |   |   |
|        Interest      expense (net), including $18,062 and $16,223 for the three       months      ending June 30, 2008, respectively and $54,260 and       $48,521      for the nine months ending June 30, 2008, respectively,       of      debt discount amortization |   |                    | (105,643   | )      |                   |   | (100,382 | ) |   |   | (281,712 | ) |   |   | (292,159 | ) |
|        Other      income (expense)                                                                                                                                                                                                                                                                                                                                                |   |                    | 4,620      |   |                   |   | (1,850 | ) |   |   | 10,967 |   |   |   | (6,125 | ) |
|                 Total      other expense                                                                                                                                                                                                                                                                                             |   |                    | (101,023   | )      |                   |   | (102,232 | ) |   |   | (270,745 | ) |   |   | (298,284 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                    |       |   |                   |   |   |   |   |   |   |   |   |   |   |   |
|       Net      loss, before income taxes, from continuing operations                                                                                                                                                                                                                                                                                                                   |   |                    | (23,868    | )      |                   |   | (58,338 | ) |   |   | (23,057 | ) |   |   | (488,894 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                    |       |   |                   |   |   |   |   |   |   |   |   |   |   |   |
|       Income      Tax expense                                                                                                                                                                                                                                                                                                                                                          |   |                    | 36,747     |   |                   |   | 16,040 |   |   |   | 93,325 |   |   |   | 37,532 |   |
|       Net      (loss) from continuing operations                                                                                                                                                                                                                                                                                                                                       |   |                    | (60,615    | )      |                   |   | (74,378 | ) |   |   | (116,382 | ) |   |   | (526,426 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                    |       |   |                   |   |   |   |   |   |   |   |   |   |   |   |
|       Income      (Loss), from Discontinued Operations (includes a gain      on      sale of assets in the amount of $1,094,817 for the ninemonths      ending      June 30, 2008)                                                                                                                                         |   |                    | --         |   |                   |   | (63,375 | ) |   |   | 856,446 |   |   |   | (282,045 | ) |
| Net      income (loss)                                                                                                                                                                                                                                                                                                                                                                                               |   | $                       | (60,615    | )      |                   | $      | (137,753 | ) |   | $ | 740,064 |   |   | $ | (808,471 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                    |       |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Other      comprehensive income, net of tax:                                                                                                                                                                                                                                                                                                                                                                         |   |                    |       |   |                   |   |   |   |   |   |   |   |   |   |   |   |
|        Foreign      currency translation adjustments                                                                                                                                                                                                                                                                                                                              |   |                    | 51,627     |   |                   |   | 21,900 |   |   |   | 90,974 |   |   |   | 32,409 |   |
| Comprehensive      income (loss):                                                                                                                                                                                                                                                                                                                                                                                    |   | $                       | (8,988     | )      |                   | $      | (115,853 | ) |   | $ | 831,038 |   |   | $ | (776,062 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                    |       |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Earnings      (loss) per share, from continuing operations – Basic                                                                                                                                                                                                                                                                                                                                             |   | $                       | 0.00       |   |                   | $      | (0.01 | ) |   | $ | (0.01 | ) |   | $ | (0.03 | ) |
| Earnings      (loss) per share, from continuing operations - Diluted                                                                                                                                                                                                                                                                                                                                                 |   | $                       | 0.00       |   |                   | $      | (0.01 | ) |   | $ | (0.01 | ) |   | $ | (0.03 | ) |
| Earnings      (loss) per share, from discontinued operations - Basic                                                                                                                                                                                                                                                                                                                                                 |   | $                       | 0.00       |   |                   | $      | (0.00 | ) |   | $ | 0.06 |   |   | $ | (0.02 | ) |
| Earnings      (loss) per share, from discontinued operations - Diluted                                                                                                                                                                                                                                                                                                                                               |   | $                       | 0.00       |   |                   | $      | (0.00 | ) |   | $ | 0.06 |   |   | $ | (0.02 | ) |
| Earnings      (loss) per share - Basic                                                                                                                                                                                                                                                                                                                                                                               |   | $                       | 0.00       |   |                   | $      | (0.01 | ) |   | $ | 0.05 |   |   | $ | (0.05 | ) |
| Earnings      (loss) per share - Diluted                                                                                                                                                                                                                                                                                                                                                                             |   | $                       | 0.00       |   |                   | $      | (0.01 | ) |   | $ | 0.05 |   |   | $ | (0.05 | ) |
| 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                                                                                                                                                                                                                                                                                                             |   |                    | 15,272,578 |   |                   |   | 15,225,281 |   |   |   | 15,268,491 |   |   |   | 15,225,281 |   |

----

|                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   | Nine      Months EndedJune 30, |     |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------|----------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   | 2008                           |     |   | 2007 |   |
| Cash      flows from operating activities:                                                                                                                                                                                                                                                                                                                                                                                                              |   |                           |     |   |   |   |
|  Net      Income (Loss)                                                                                                                                                                                                                                                                                                                                                                                                                            |   | $                              | 740,062  |   |   | $ | (808,471 | ) |
| Adjustments      to reconcile net loss to netcash      provided by operating activities:                                                                                                                                                                                                                                                                                                                                                                |   |                           |     |   |   |   |   |   |
|     Depreciation                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                           | 71,826   |   |   |   | 26,138 |   |
|     Amortization      of debt discount                                                                                                                                                                                                                                                                                                                                                                                              |   |                           | 54,260   |   |   |   | 48,521 |   |
|     (Gain)      on sale of assets                                                                                                                                                                                                                                                                                                                                                                                                   |   |                           | (838,907 | ) |   |   | -- |   |
|     Provision      for Bad Debts                                                                                                                                                                                                                                                                                                                                                                                                    |   |                           | 13,580   |   |   |   | -- |   |
|     Stock      Based Compensation                                                                                                                                                                                                                                                                                                                                                                                                   |   |                           | 5,239    |   |   |   | 8,733 |   |
| Changes      in operating assets and liabilities:                                                                                                                                                                                                                                                                                                                                                                                                       |   |                           |     |   |   |   |   |   |
|     Accounts      receivable                                                                                                                                                                                                                                                                                                                                                                                                        |   |                           | 130,739  |   |   |   | (414 | ) |
|     Prepaid      expenses and other current assets                                                                                                                                                                                                                                                                                                                                                                                  |   |                           | (30,344  | ) |   |   | 17,144 |   |
|     Inventories                                                                                                                                                                                                                                                                                                                                                                                                                     |   |                           | 377,004  |   |   |   | 114,887 |   |
|     Accounts      payable and accrued expenses                                                                                                                                                                                                                                                                                                                                                                                      |   |                           | (532,247 | ) |   |   | 384,833 |   |
|     Other      assets                                                                                                                                                                                                                                                                                                                                                                                                               |   |                           | (4,510   | ) |   |   | (37,165 | ) |
|  Deferred      revenue                                                                                                                                                                                                                                                                                                                                                                                                                             |   |                           | 66,781   |   |   |   | (5,900 | ) |
|     Net      cash provided by (used in) operating activities                                                                                                                                                                                                                                                                                                                                                                        |   |                           | 53,483   |   |   |   | (251,694 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                           |     |   |   |   |   |   |
| Cash      flows from investing activities:                                                                                                                                                                                                                                                                                                                                                                                                              |   |                           |     |   |   |   |   |   |
| Purchase      of property and equipment                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                           | (412,990 | ) |   |   | (79,281 | ) |
| Proceeds      from sale of assets                                                                                                                                                                                                                                                                                                                                                                                                                       |   |                           | 4,090    |   |   |   | -- |   |
| Payments      Received on Notes Receivable                                                                                                                                                                                                                                                                                                                                                                                                              |   |                           | 122,500  |   |   |   | -- |   |
|     Net      cash used in investing activities                                                                                                                                                                                                                                                                                                                                                                                      |   |                           | (286,400 | ) |   |   | (79,281 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                           |     |   |   |   |   |   |
| Cash      flows from financing activities:                                                                                                                                                                                                                                                                                                                                                                                                              |   |                           |     |   |   |   |   |   |
| Net      borrowings on Line of Credit                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                           | 140,000  |   |   |   | 250,000 |   |
| Net      borrowings on Notes – Itau Bank                                                                                                                                                                                                                                                                                                                                                                                                          |   |                           | 182,964  |   |   |   | -- |   |
|     Net      cash provided by financing activities                                                                                                                                                                                                                                                                                                                                                                                  |   |                           | 322,964  |   |   |   | 250,000 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                           |     |   |   |   |   |   |
| Effects      of foreign exchange rate                                                                                                                                                                                                                                                                                                                                                                                                                   |   |                           | 62,209   |   |   |   | 29,104 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                           |     |   |   |   |   |   |
|       Net increase      (decrease) in cash and cash equivalents                                                                                                                                                                                                                                                                                                                                                           |   |                           | 152,256  |   |   |   | (51,871 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                           |     |   |   |   |   |   |
| Cash      at beginning of period                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                           | 6,592    |   |   |   | 150,663 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |                           |     |   |   |   |   |   |
| Cash      at end of      period                                                                     |   | $                              | 158,848  |   |   | $ | 98,792 |   |
| Supplemental      disclosure of cash flow information:                                                                                                                                                                                                                                                                                                                                                                                                  |   |                           |     |   |   |   |   |   |
|  Cash      paid during the period for      interest                                                                                                                                                                                        |   | $                              | 249,855  |   |   | $ | 256,134 |   |

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

----

----

----

|                                  |   | Three      Months EndedJune      30, |      |   | Nine      Months EndedJune      30, |
|---------------------------------------|--------|--------------------------------------|-----------|--------|-------------------------------------|
|                                  |   | 2008                                 |      |   | 2007                                |   |   | 2008 |   |   | 2007 |
| Convertible      notes                |   |                                 | 5,399,800 |   |                                |   | 5,399,800 |   |   |   | 5,399,800 |   |   |   | 5,399,800 |   |
| Options      to purchase common stock |   |                                 | 2,394,014 |   |                                |   | 2,410,014 |   |   |   | 2,394,014 |   |   |   | 2,410,014 |   |
| Total      antidilutive instruments   |   |                                 | 7,793,814 |   |                                |   | 7,809,814 |   |   |   | 7,793,814 |   |   |   | 7,809,814 |   |

----

|                                                                           |   |  Shares |      |   | Weighted      average exercise price |    |   | Weighted      averagelife |   |
|--------------------------------------------------------------------------------|--------|--------------|-----------|--------|--------------------------------------|---------|--------|---------------------------|--------|
|                                                                           |   |         |      |   |                                 |    |   |                      |   |   |
| Options      outstanding – October 1, 2007                               |   |         | 2,289,514 |   |                                 |  $ | 1.11   |                      |   |   | 2.39 |   |
|        Granted                              |   |         | 227,000   |   |                                 |    | 0.22   |                      |   |   | 7.39 |   |
|        Exercised                            |   |         | --        |   |                                 |    | --     |                      |   |   | -- |   |
|        Forfeited,      cancelled or expired |   |         | (72,500   | )      |                                 |    | 0.24   |                      |   |   | 3.16 |   |
| Options      outstanding – June 30, 2008                                 |   |         | 2,444,014 |   |                                 | $       | 1.05   |                      |   |   | 2.60 |   |
| Options      exercisable – June 30, 2008                                 |   |         | 2,259,014 |   |                                 | $       | 1.12   |                      |   |   | 2.51 |   |

|                         |   | Three      and Nine Months EndedJune      30, |   |
|------------------------------|--------|-----------------------------------------------|--------|
|                         |   | 2008                                          |   |   | 2007 |   |
| Dividend      yield          |   |                                          | --     |   |   |   | -- |   |
| Expected      volatility     |   |                                          | 87.4%  |   |   |   | 82% |   |
| Risk-free      interest rate |   |                                          | 4%     |   |   |   | 4% |   |
| Expected      life in years  |   |                                          | 10     |   |   |   | 10 |   |

|                                 |   | June      30,2008 |      |   | September      30,2007 |   |
|--------------------------------------|--------|-------------------|-----------|--------|------------------------|--------|
|                                 |   |              |      |   |                   |   |
| Raw      Materials                   |   | $                 | 1,474,570 |   |                   | $      | 1,510,204 |   |
| Work-in-process                      |   |              | 165,697   |   |                   |   | 163,218 |   |
| Finished      goods                  |   |              | 1,069,907 |   |                   |   | 1,481,295 |   |
|        |   |              | 2,710,174 |   |                   |   | 3,154,717 |   |
| Less      reserves                   |   |              | (532,297  | )      |                   |   | (599,836 | ) |
| Inventories,      net                |   | $                 | 2,177,877 |   |                   | $      | 2,554,881 |   |

----

|                                                 |   | United*States |      |   | Brazil |   |      | Consolidated |   |
|------------------------------------------------------|--------|---------------|-----------|--------|--------|--------|-----------|--------------|--------|
| Nine      Months Ended June      30, 2008:           |   |          |      |   |   |   |      |         |   |
|      Revenues               |   | $             | 2,927,251 |   |   | $      | 1,759,261 |         |   | $ | 4,686,512 |   |
|      Long-lived      assets |   |          | 710,070   |   |   |   | 485,454   |         |   |   | 1,195,524 |   |
|                                                 |   |          |      |   |   |   |      |         |   |   |   |   |
| Nine      Months Ended June      30, 2007:           |   |          |      |   |   |   |      |         |   |   |   |   |
|      Revenues               |   | $             | 2,368,581 |   |   | $      | 977,946   |         |   | $ | 3,346,527 |   |
|      Long-lived      assets |   |          | 169,234   |   |   |   | 130,472   |         |   |   | 299,706 |   |

----

|                                                                                                      |   | Three      Months Ended |   |   | Nine      Months Ended |   |
|-----------------------------------------------------------------------------------------------------------|--------|-------------------------|--------|--------|------------------------|--------|
|                                                                                                      |   | June      30,2008       |   |   | June      30,2007      |   |   | June      30,2008 |   |   | June      30,2007 |   |
|                                                                                                      |   |                    |   |   |                   |   |   |   |   |   |   |   |
| Net      sales                                                                                            |   | $                       | 68,898 |   |                   | $      | 582,517 |   |   | $ | 440,137 |   |   | $ | 1,503,956 |   |
| Costs      of sales                                                                                       |   |                    | 68,898 |   |                   |   | 485,497 |   |   |   | 479,864 |   |   |   | 1,357,172 |   |
| Gross      Profit                                                                                         |   |                    | --     |   |                   |   | 97,020 |   |   |   | (39,727 | ) |   |   | 146,784 |   |
|                                                                                                      |   |                    |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                      |   |                    |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Operating      expenses:                                                                                  |   |                    |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |
|     Selling,      general and administrative                                          |   |                    | --     |   |                   |   | 94,646 |   |   |   | 196,936 |   |   |   | 215,882 |   |
|     Research      and development                                                     |   |                    | --     |   |                   |   | 65,731 |   |   |   | 1,708 |   |   |   | 212,928 |   |
|           Total      operating costs and expenses       |   |                    | --     |   |                   |   | 160,377 |   |   |   | 198,644 |   |   |   | 428,810 |   |
|                                                                                                      |   |                    |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |
|       Operating      loss                                                   |   |                    | --     |   |                   |   | (63,357 | ) |   |   | (238,371 | ) |   |   | (282,026 | ) |
|                                                                                                      |   |                    |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Other      income (expenses):                                                                             |   |                    |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |
|       Other      Income (expense)                                           |   |                    | --     |   |                   |   | (18 | ) |   |   |   |   |   |   | (19 | ) |
|       Gain      on Sale of Assets                                           |   |                    | --     |   |                   |   | -- |   |   |   | 1,094,817 |   |   |   | -- |   |
|             Total      other income (expense) |   |                    | --     |   |                   |   | (18 | ) |   |   | 1,094,817 |   |   |   | (19 | ) |
|                                                                                                      |   |                    |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |
|       Net      income (loss) before income taxes                            |   |                    | --     |   |                   |   | (63,375 | ) |   |   | 856,446 |   |   |   | (282,045 | ) |
|                                                                                                      |   |                    |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |
|          Income      Tax                                     |   |                    | --     |   |                   |   | -- |   |   |   | -- |   |   |   | -- |   |
|                                                                                                      |   |                    |   |   |                   |   |   |   |   |   |   |   |   |   |   |   |
| Net      income (loss) from discontinued operations                                                       |   | $                       | --     |   |                   | $      | (63,375 | ) |   | $ | 856,446 |   |   | $ | (282,045 | ) |

----

|                  |   | June      30,2008 |    |
|-----------------------|--------|-------------------|---------|
| Raw      Materials    |   | $                 | 167,728 |   |
| Work-in-process       |   |              | 444     |   |
| Finished      goods   |   |              | 87,650  |   |
|                  |   |              | 255,822 |   |
| Less      reserves    |   |              | (14,036 | ) |
| Inventories,      net |   | $                 | 241,786 |   |

----

| · | 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) |   |
|-----------------------|--------|-----------------------------------------------|--------|--------|-------------------------------------|--------|--------|--------------------------------------------------------------------------------------------------------|--------|--------|-------------------------------------------------------------------------------------------------------------------------------|--------|
| April      1-30, 2008 |   |                                          | 3,250  |   |                                | $      | 0.16   |                                                                                                   |   |   | 3,250                                                                                                                         |   |   |   | - |   |
| May      1-31, 2008   |   |                                          | 9,750  |   |                                | $      | 0.14   |                                                                                                   |   |   | 9,750                                                                                                                         |   |   |   | - |   |
| June      1-30, 2008  |   |                                          | 9,750  |   |                                | $      | 0.21   |                                                                                                   |   |   | 9,750                                                                                                                         |   |   |   | - |   |
| Total                 |   |                                          | 22,750 |   |                                | $      | 0.17   |                                                                                                   |   |   | 22,750                                                                                                                        |   |   |   | - |   |

|   | (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) |                                       |
|----------------------|--------------------------------------------|--------------------------------------------|
|                 |                                       |                                       |   |
| August      13, 2008 | By:                                        | /s/William      P. Hales                   |   |
|                 |                                       | William      P. Hales                      |   |
|                 |                                       | President      and Chief Executive Officer |   |
|                 |                                       |                                       |   |
| August      13, 2008 | By:                                   | /s/ Catherine      M. Davidson        |   |
|                 |                                       | Catherine      M. Davidson                 |   |
|                 |                                       | Principal      Financial Officer           |   |