##### Table of Contents





UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-K

Annual Report Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

For the fiscal year ended September 30, 2010

Commission file number
1-11700





HEMAGEN DIAGNOSTICS, INC.

(Exact Name of Registrant as Specified in its Charter)



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 04-2869857                          
|(State or Other Jurisdiction of
Incorporation or Organization) |  | (I.R.S. employer identification No.)
|                                                               | 
|9033 Red Branch Rd., Columbia, MD                              |  | 21045                               
|(Address of Principal Executive Offices)                       |  | (Zip Code)                          

(443)
367-5500

(Issuers telephone number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act.     ̈  Yes    x  No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 of Section 15(d) of the
Act.     ̈  Yes    x  No

NoteChecking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of
the Exchange Act from their obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.    x  Yes     ̈  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files).     ̈  Yes     ̈  No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is
not contained herein, and will be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x



|                        |  |                                                 |  |                           |  |  
|----------------------- |  | ----------------------------------------------- |  | ------------------------- |  | -
|Large accelerated filer |  |  ̈                                               |  | Accelerated filer         |  |  ̈
|                        |  |                                                 | 
|Non-accelerated filer   |  |  ̈ (Do not check if a smaller reporting company) |  | Smaller reporting company |  | x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Act).     ̈  Yes    x  No

The aggregate market value of the voting stock held by non-affiliates of the registrant on March 31, 2010, was $1,231,803 based on a
closing price of $0.09 per share of Common Stock. As of December 17, 2010, 15,470,281 shares of Common Stock were outstanding.





DOCUMENTS
INCORPORATED BY REFERENCE

None.









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##### Table of Contents

HEMAGEN DIAGNOSTICS, INC.

INDEX TO ANNUAL REPORT ON FORM 10-K

Table of Contents



|         |  |                                                                                                              |    |  |    | 
|-------- |  | ------------------------------------------------------------------------------------------------------------ | -- |  | -- | 
|PART I   |  |                                                                                                              | 4  | 
|         |  |                                                                                                             
|Item 1.  |  | Business                                                                                                     |    |  | 4  | 
|Item 1A. |  | Risk Factors                                                                                                 |    |  | 10 | 
|Item 1B. |  | Unresolved Staff Comments                                                                                    |    |  | 10 | 
|Item 2.  |  | Properties                                                                                                   |    |  | 10 | 
|Item 3.  |  | Legal Proceedings                                                                                            |    |  | 11 | 
|Item 4.  |  | (Removed and Reserved)                                                                                       |    |  | 11 | 
|         | 
|PART II  |  |                                                                                                              | 12 | 
|         |  |                                                                                                             
|Item 5.  |  | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |    |  | 12 | 
|Item 6.  |  | Selected Financial Data                                                                                      |    |  | 13 | 
|Item 7.  |  | Managements Discussion and Analysis or Plan of Operation                                                    |    |  | 13 | 
|Item 7A. |  | Quantitative and Qualitative Disclosures about Market Risk                                                   |    |  | 17 | 
|Item 8.  |  | Financial Statements                                                                                         |    |  | 17 | 
|Item 9.  |  | Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure                         |    |  | 17 | 
|Item 9A. |  | Controls and Procedures                                                                                      |    |  | 18 | 
|Item 9B. |  | Other Information                                                                                            |    |  | 18 | 
|         | 
|PART III |  |                                                                                                              | 19 | 
|         |  |                                                                                                             
|Item 10. |  | Directors, Executive Officers and Corporate Governance                                                       |    |  | 19 | 
|Item 11. |  | Executive Compensation                                                                                       |    |  | 20 | 
|Item 12. |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholders
Matters              |    |  | 23 | 
|Item 13. |  | Certain Relationships and Related Transactions, and Director Independence                                    |    |  | 24 | 
|Item 14. |  | Principal Accountant Fees and Services                                                                       |    |  | 24 | 
|Item 15. |  | Exhibits and Financial Statement Schedules                                                                   |    |  | 25 | 

This Annual Report
on Form 10-K contains forward-looking statements. Certain statements contained in this report that are not historical facts constitute forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, and are
intended to be covered by the safe harbors created by that Act. Forward looking statements may be identified by words such as estimates, anticipates, projects, plans, expects,
intends, believes, should and similar expressions or the negative versions thereof and by the context in which they are used. Such statements, whether express or implied, are based on current expectations of the
company and speak only as of the date made. Reliance should not be placed on forward-looking statements because they involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to
differ materially from those expressed or implied. Hemagen undertakes no obligation to update any forward-looking statements as a result of new information or to reflect events or circumstances after the date on which they are made.

Statements concerning the establishments of reserves and adjustments for dated and obsolete products, expected financial performance,
on-going business strategies and possible future action which Hemagen intends to pursue to achieve strategic objectives constitute forward-looking information. All forward-looking statements, including those relating to the sufficiency of such
charges, implementation of strategies and the achievement of financial performance are each subject to numerous conditions, uncertainties, risks and other factors. Factors which could cause actual performance to differ materially from these
forward-looking statements, include, without



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limitation, managements analysis of Hemagens assets, liabilities and operations, the failure to sell datesensitive inventory prior to its expiration, competition, new product
development by competitors which could render particular products obsolete, the inability to develop or acquire and successfully introduce new products or improvements of existing products, recessionary pressures on the economy and the markets in
which our customers operate, costs and difficulties in complying with the laws and regulations administered by the United States Food and Drug Administration, changes in the relative strength of the U.S. Dollar and Brazilian Reals, unfavorable
political or economic developments in Brazilian operations, and the ability to assimilate successfully product acquisitions and other factors disclosed in our reports on Forms 10-K, 10-Q and 8-K filed with the SEC.



3



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##### Table of Contents

PART I



|Item 1. | Business.
|------- | ---------

Hemagen Diagnostics, Inc. is a biotechnology company that develops, manufactures, and markets approximately 68 Food and Drug Administration (FDA) cleared proprietary medical diagnostic test
kits and components. There are two different product lines, the Virgo® line and the Analyst® line. The Virgo® product line consist of various diagnostic test kits that are used to aid in the diagnosis of certain autoimmune and infectious diseases, using ELISA,
Immunoflourescence, and hemagglutination technology. The Analyst® product line is an FDA-cleared Benchtop
Clinical Chemistry Analyzer System, including consumables that are used to measure important constituents in human and animal blood. The Company was incorporated in Delaware in 1985 and became a public company in 1993. Hemagens principal
offices are located at 9033 Red Branch Road, Columbia, Maryland 21045 and the telephone number is (443) 367-5500. Hemagen maintains a website at www.hemagen.com. Investors can obtain copies of our filings with the Securities and Exchange
Commission from our web site free of charge as well as from the Securities and Exchange Commission website at www.sec.gov.

In September 1998, the Company acquired the Analyst® Benchtop
Clinical Chemistry System, which was originally designed by Dupont, from Dade Behring, Inc. The Analyst® is a
proprietary bench top clinical chemistry instrument and reagent system. The Analyst® instrument is used to test
general chemistry profiles for both the human and veterinary markets using a proprietary consumable rotor that is manufactured by Hemagen at its Columbia, Maryland facility. The Analyst® is cleared by the FDA for marketing in the United States to physician office laboratories. In December 2002, Hemagen also acquired another veterinary chemistry
analyzer system, the Endocheck. Today, Hemagen estimates that its customer base for the Analyst® is
approximately 90% veterinary practices and 10% physician office laboratory practices.

In 1995, Hemagen
completed the acquisition of a comprehensive line of diagnostic test kits utilizing immunofluorescence technology (IFA products) from Schiaparelli Biosystems, Inc. The IFA products and Hemagens comprehensive line of proprietary
diagnostic test kits based on enzyme-linked immunosorbence assay technologies (ELISA or EIA) and hemagglutination technology (HA) form the Virgo® product line. These products are used to test for autoimmune and infectious diseases and are manufactured for manual use or for use on automated instrument platforms.

The Virgo® product-line is marketed directly to reference laboratories, hospitals, and universities in the United States, among others and internationally. There are over 30
distributors that market the Virgo® product line. Hemagen also markets the Virgo® product line in South America through its wholly-owned subsidiary Hemagen Diagnosticos Comercio, Importacao
Exportacao, Ltd. (HDC), a Brazilian limited liability company.

Recent Developments

During fiscal 2010 management continued to work toward achieving its goal of increasing shareholder value and achieving sustained
profitability. Some of the important steps taken toward achieving those goals were as follows:



| |  |  | Hemagen bolstered its manufacturing, scientific and sales capabilities by recruiting several key employees and consultants.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------



| |  |  | During the year, the Company renewed its working capital line with Bay Bank.
| | - |  | ----------------------------------------------------------------------------



| |  |  | The Company looked for opportunities to consolidate operations into more efficient space, and continues to seek out and implement cost reductions.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Company improved financial performance despite revenue decline through strategic management of expenses.
| | - |  | ------------------------------------------------------------------------------------------------------------



| |  |  | The Company is working on redesigning and developing several new products.
| | - |  | --------------------------------------------------------------------------



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Technology

Analyst Instrument System

Hemagen acquired a
rotor based technology for use in the Analyst® in 1998. The Analyst® is a bench-top centrifugal clinical chemistry analyzer. The
Analyst® utilizes a consumable rotor that contains dry prepackaged reagents. The Analyst® spins the rotor, mixing the patient sample with the dry reagents, producing a result in approximately ten minutes.
Hemagen currently markets four types of rotors providing a variety of clinical chemistry tests, which are 510(k) cleared by the FDA for the human medical market and four types of rotors that are exclusively sold for the veterinary market. The
Analyst® instrument has been designated by the Clinical Laboratory Improvements Amendments (CLIA) as a
moderately complex system, and is therefore suitable for both the physician and veterinary office laboratories. Hemagens blood chemistry and Analyst® system assays are used to aid in the monitoring and measurement of health profiles, such as cholesterol, blood urea nitrogen, triglycerides, glucose and uric acid.

In addition, Hemagen has entered into agreements to distribute a hematology analyzer and an electrolyte
and blood gas analyzer to complement the Analyst®.

Autoimmune and Infectious Disease Assays

Detection of the presence and concentration of certain antibodies in human blood can assist physicians in the diagnosis of certain diseases. Hemagens assays are in vitro (outside of a
patients body) diagnostic tests that are used to measure specific substances, antibodies, in blood or other body fluids. Our assays recognize specific antibodies that bind to our assay platforms in the proper environment, making it detectable
either by the naked eye, or with the aid of a laboratory technique, which amplifies the reaction so that it is rendered visible. Hemagens hemagglutination, ELISA and immunofluorescence assays are three examples of such techniques.

Immunofluorescence

Hemagens immunofluorescence tests are manufactured using several procedures with the most common being mammalian cells grown on microscope slides treated with disease-producing organisms (viral or
bacterial). Serum from a patient is placed in contact with the infected cells on the slides. If a patient has antibodies to the organism causing the disease, the antibodies will bind to the organism. A chemical reagent is added to the slide that
binds to the organism and the antibody, if present and detectable. When the slide is illuminated with light at a specific wavelength in a fluorescent microscope, the chemically-treated cells will appear with a specific fluorescent pattern,
indicating a positive test result. If the patient does not have detectable quantities of the appropriate antibody, no fluorescence will appear producing a negative test result.

Enzyme Linked Immunosorbent Assays

ELISA or EIA tests employ small plastic wells coated with particular antigens. The test process involves introducing the patients serum into the well to allow a reaction to occur. If the antibody
being tested for is present, it will bind to the antigens on the inner surface of the well. After the wells are rinsed, the specifically bound antibody will remain while any non-specific antibodies will be washed away. To detect the quantity of the
specific antibody, other compounds (conjugate, substrate) are added which will cause a color change in the liquid, the intensity of which is proportionate to the quantity of the specific antibody found. If no color is noted, this indicates that the
patients serum did not contain detectable quantities of the specific antibody.

Hemagen has developed an application for
its ELISA technology to detect cardiovascular and inflammatory risk factors (apolipoproteins) and inflammatory signals (acute phase reactants), the latter of which are present in a patients blood prior to the clinical manifestation of
infection or inflammation. If successful, these technologies could lead to earlier detection and prevention of cardiovascular disease, the imminent rejection of transplanted organs or the onset of infections. Such earlier detection could enable
physicians to better plan appropriate treatment of patients with these conditions. Hemagen currently markets two test kits to detect inflammatory signals.



5



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##### Table of Contents

Hemagglutination

Hemagglutination is the agglutination or clumping of red blood cells (RBCs). Many substances, including certain antibodies,
when placed in contact with RBCs, will cause agglutination. Under the appropriate conditions, human RBCs may be modified or sensitized by binding specific foreign antigens to their surface. These sensitized RBCs will bind to the specific antibody
and this will cause agglutination of these cells. The presence of certain antibodies in an individuals serum (blood from which clotted RBCs have been removed) can indicate certain diseases. By sensitizing RBCs with an antigen that specifically
reacts with a particular antibody, the simple visible observation of the agglutination reaction will indicate the presence of the disease-produced antibody. The use of RBCs instead of other particles can allow for simple visual observation of the
agglutination reaction in the proper environment, and reduces the non-specific reactions seen in artificial systems such as those that utilize latex particles.

To perform Hemagens hemagglutination test, a technician combines Hemagens sensitized RBCs with a patients serum in a small well with a V-shaped bottom according to directions included
with Hemagens test kits. If no agglutination takes place, the RBCs will settle to the bottom of the well, resulting in a clearly visible red dot which indicates that the test is negative. In contrast, if the particular antibody is present in
the patients blood, the RBCs will agglutinate, which prevents the RBCs from settling to the bottom of the well. Instead of the small red dot, the substance will appear a diffuse red, which indicates a positive reaction.

Current Products

Analyst® System Products

Hemagen currently markets four FDA 510(k) cleared rotor types for use on the Analyst® clinical chemistry analyzer, two general chemistry rotors, a glucose test and a lipid screen test. In addition,
Hemagen sells four rotors specifically designed for the veterinary marketplace: VET-16, VetFlex7, VetFlex and T4 rotors.

Immunofluorescence or IFA Products

Hemagens immunofluorescence products consist primarily of diagnostic assays for infectious diseases and several products for autoimmune diseases. Immunofluorescence kits are used as primary or
confirmatory tests in many large clinical laboratories worldwide. Hemagen currently sells 15 kits in the immunofluorescence format.

Hemagens immunofluorescence products are used to aid in the diagnosis of the following diseases:



|                           |  |                                   
|-------------------------- |  | ----------------------------------
|Cytomegalovirus            |  | Herpes simplex                    
|SLE (Lupus)                |  | German Measles                    
|Connective Tissue Diseases |  | Chicken Pox                       
|Primary Bilary Cirrhosis   |  | Epstein-Barr virus (Mononucleosis)
|Toxoplasmosis              |  | Chlamydia                         
|Syphilis                   |  | Measles                           
|RSV                        |  | Mumps                             
|                           |  | Autoimmune Diseases               



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ELISA Assays

Hemagen develops, manufactures and markets ELISA test kits for the detection of disease. Along with the immunofluorescence and
hemagglutination assays, Hemagens ELISA kits test for specific antibodies. The quantitative or semi-quantitative test results give useful information about the stage and prevalence of a particular disease. ELISA tests are widely used by large
laboratories, due to their ready adaptability to automation and high volume testing. Hemagens autoimmune and infectious disease ELISA kits are used in the diagnosis of the following diseases:



|                                                     |  |                                
|---------------------------------------------------- |  | -------------------------------
|Systemic Lupus Erythematous (Lupus)                  |  | Rheumatoid Arthritis           
|Scleroderma                                          |  | Sjögrens Syndrome             
|Glomerulonephritis                                   |  | Mixed Connective Tissue Disease
|Polymyositis                                         |  | Dermatomyositis                
|Primary Biliary Cirrhosis                            |  | Wegeners Granulomatosis       
|Systemic Vasculitides                                |  | Anti-Phospholipid Syndrome     
|Venous and Arterial Thromboses                       |  | Thrombocytopenia               
|Recurrent Abortion                                   |  | Toxoplasmosis                  
|Rubella (German Measles)                             |  | Cytomegalovirus Infections     
|Herpes simplex 1 & 2 Infections                      |  | Chagas Disease                 
|Varicella Zoster Infections (Chicken Pox & Shingles) |  |                                

Hemagen has also developed specialized assays for quantitative analysis of the acute phase markers,
specifically, C-Reactive Protein and Serum Amyloid A. These are believed to be important in the detection and prediction of inflammatory events associated with several diseases, including Systemic Lupus, Rheumatoid Arthritis, and Myocardial
Infarction.

Hemagen also offers ELISA & Hemagglutination screening assays, capable of verifying the presence of as
many as six analytes in a single test. This is a useful tool in a patients initial assessment. For example, if an individuals autoimmune screen 6 test is positive, individual marker kits are then used to differentially diagnose the
particular rheumatoid disease. To better serve customers needs, most of the reagents for these kits are offered in both lyophilized and liquid-stable formats.

Hemagglutination Assays

Hemagens hemagglutination assays are
based on Hemagens proprietary technique to lyophilize, or freeze dry, the RBCs which form the central component of a hemagglutination assay. Hemagens proprietary lyophilization technique for the preservation of RBCs permits
the production of standardized, easy-to-use and accurate hemagglutination tests with an extended shelf-life, most of which were previously unavailable using hemagglutination assays. The shelf-life of the lyophilized RBCs before reconstitution may be
up to 48 months. A technician reconstitutes the powdered cells in a water-based solution prior to introducing to the patients serum.

Each hemagglutination test also requires a specific formula to sensitize the RBCs prior to lyophilization such that they will react to a specific antibody. For each of its tests, Hemagen uses a
proprietary formula to combine antigens and other reagents with RBCs in a manner that allows for standard, sensitive and specific agglutination reactions. Results from Hemagens test kits are generally available within two hours. Hemagens
hemagglutination test kits aid in the diagnosis of the following diseases:



|                                 |  |                     
|-------------------------------- |  | --------------------
|SLE (Lupus)                      |  | Dermatomyositis     
|Mixed Connective Tissue Disease  |  | Polymyositis        
|Sjögrens Syndrome               |  | Rheumatoid Arthritis
|Scleroderma (Systemic Sclerosis) |  | Chagas Disease     



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Distribution and Marketing

General

In the United States, Hemagen sells its products directly
and through distributors to clinical laboratories, hospitals, veterinary offices and research organizations, among other places. Internationally, Hemagen sells its products primarily through distributors and its wholly-owned subsidiary in Brazil.
Hemagen grants both exclusive and non-exclusive distributorships, which generally cover limited geographic areas and specific test kits. Hemagen has relationships with over 30 distributors in various countries worldwide.

Hemagen markets its Virgo® product line in South America through its wholly owned subsidiary, Hemagen Diagnosticos Comerico, Importacao e Exportacao, Ltd. (HDC) in Sao Paulo,
Brazil. Hemagen also engages numerous distributors throughout South America. HDC maintains a fully staffed sales, marketing and distribution force, warehouse and administrative office. In fiscal years 2010 and 2009, Hemagen derived product sales
through HDC of $2,593,000 and $2,190,000 respectively, which represents 49% and 41% of Hemagens total sales from continuing operations, respectively.

Products Under Development

Hemagen spent approximately $25,000 and $92,000
on research and development for the fiscal years ended September 30, 2010, and 2009, respectively.

Research and
development is focused on:



| |  |  | Activities related to upgrades to the Analyst® instrument and product offering such as evaluating and developing complimentary products for Hemagens Analyst® product line to distribute to the veterinary market and alternative tests utilizing the Analyst®s rotor technology;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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

Manufacturing and Sources of Supply

Hemagen
manufactures its ELISA test kits, hemagglutination test kits, immunofluorescence test kits and Analyst® and
Endochek consumables at its Columbia, Maryland facility. The Analyst® and the Endochek instruments are
manufactured by third parties for Hemagen. Hemagen purchases many of the antigens and other reagents used in its kits from outside vendors. Certain of these antigens and reagents are from single suppliers. The Company attempts to mitigate such risk
from these single suppliers by maintaining an adequate supply of inventory and/or backup suppliers. If the products purchased from these single sources become unavailable there can be no assurances that the Company will be able to substitute a new
supplier in a timely manner and thus this could have a material adverse effect on the business, financial condition, and results of operations. Certain reagents used in Hemagens test kits are manufactured at Hemagens facilities. Hemagen
uses lyophilization equipment to preserve sensitized red blood cells for its hemagglutination test kits. All of Hemagens products are manufactured under the Quality System Regulation as defined by the FDA.

Most components used in Hemagens products are available from multiple sources. Certain raw materials that are
used in the Analyst® rotors are manufactured for the Company pursuant to manufacturing agreements with other
manufacturing companies that have been reliable vendors for the Company for many years. The Company continues to consider other potential vendors, including itself, or alternative vendors for manufacturing although there can be no assurances that we
will be able to develop any new suppliers for these raw materials used in the Analyst® product line.



8



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Government Regulation

Hemagens manufacturing, distribution and marketing of diagnostic test kits is subject to a number of both domestic and international
regulatory controls. In the United States, Hemagens production and marketing activities are subject to regulation by the U.S Food and Drug Administration (FDA), under the authority of the Federal Food, Drug, and Cosmetic Act, as
amended.

These regulations require that Hemagen must formally notify the FDA of its intentions to market in vitro
diagnostic devices through a regulatory submission process, either the 510(k) process or the Pre-market Approval (PMA) process. When a 510(k) process is used, Hemagen is required to demonstrate that the product is substantially
equivalent to another product in commercial distribution. Under the 510(k) process, Hemagen cannot proceed with sales of its diagnostic products in the United States until it receives clearance from the FDA in the form of a substantial
equivalency letter. Currently, the majority of products that are reviewed by the 510(k) process are cleared within 90 days. In certain cases, specifically for Class III devices, Hemagen must follow the PMA process which is lengthier and more
burdensome.

Hemagen is registered with the FDA as a device manufacturer and to disclose its devices. Accordingly, Hemagen is
subject to inspection on a routine basis for compliance with the FDAs Quality System Regulations. These regulations require that Hemagen manufacture its products and maintain its documents in a prescribed manner with respect to design,
manufacturing, testing, process control and distribution activities. In addition, Hemagen is required to comply with various FDA requirements for labeling, pursuant to the applicable regulations. The most recent inspections by the FDA were in
October 2010 for the Columbia, MD facility. The results of those inspections can be reviewed at www.fda.gov., the content of which is not incorporated herein. Finally, the FDA prohibits an approved device from being marketed for unapproved
applications. Hemagen believes it is in compliance with all such regulations.

In January 2004, the Company received CE
certification thereby allowing the Company to sell certain of its registered products in the European Community.

In October
2009, the Company received ISO 13485 certification in order to market additional products in the European Community and Canada. In October 2010 Hemagen was re-audited for the ISO and was recertified for 2011.

Competition

The clinical diagnostic industry is highly competitive. There are many companies, both public and private, engaged in diagnostics-related sales, including a number of well-known pharmaceutical and
chemical companies. Competition is based primarily on product reliability, customer service and price. Many of these companies have substantially greater capital resources and marketing and business organizations that are substantially greater in
size than Hemagen. Many of these companies have also been working on immunodiagnostic reagents and products, including some products believed to be similar to those currently marketed or under development by Hemagen. Hemagen believes that its
primary competitors in the market include Abaxis Inc., Bion, Bio-Rad Laboratories, Corgenix Medical Corporation, Diamedix Corporation, Heska Corporation, IDEXX Laboratories, Inc., Immco Diagnostics, INOVA Diagnostics, Inc., and Trinity Biotech Plc,
among others. Hemagen expects competition within this industry to intensify.

Product Liability

The testing, marketing and sale of clinical diagnostic products entail an inherent risk of allegations of product liability, and there can
be no assurance that product liability claims will not be asserted against Hemagen. Hemagen may incur product liability due to product failure or improper use of products by the user. Inaccurate detection may result in the failure to administer
necessary therapeutic drugs or administration of unnecessary and potentially toxic drugs. Even with proper use of a product, there may be specific instances in



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which the results obtained from Hemagens test kits could lead a physician to predict the inappropriate therapy for a particular patient. Hemagen maintains product liability insurance in the
amount of up to $2,000,000 per incident and in the aggregate which, based on Hemagens experience and industry practice, Hemagen believes to be adequate for its present operations. No assurance can be given that Hemagens insurance
coverage is sufficient to fully insure against claims which may be made against Hemagen.

Patents and Proprietary Rights

Hemagen protects its technology primarily as trade secrets rather than relying on patents, either because patent
protection is not possible or, in managements opinion, would be less effective than maintaining secrecy. In addition, Hemagen relies upon confidentiality agreements with its employees. To the extent that it relies on confidentiality agreements
and trade secret protection, there can be no assurance that Hemagens efforts to maintain secrecy will be successful or that third parties will not be able to develop the technology independently. In the future, Hemagen may apply for patent
protection for certain of its technologies if management believes such protection would be beneficial to Hemagen. The protection afforded by patents depends upon a variety of factors which may severely limit the value of the patent protection,
particularly in foreign countries, and no assurance can be given that patents, if granted, will provide meaningful protection for Hemagens technology.

Employees

As of September 30, 2010, Hemagen had twenty-three
full-time employees and six employees working on a contractual basis. Seventeen employees are in sales, marketing, general and administrative activities and twelve (including contractual personnel) are involved in production activities.

None of Hemagens employees are represented by a labor organization and Hemagen is not a party to any collective bargaining
agreement. Hemagen has never experienced any strike or work stoppage and considers its relationship with its employees to be good. However, Hemagen can give no assurances that the Company will not experience such strikes or work stoppages in the
future, either of which could have a material effect on the Companys results of operations.



|Item 1A. | Risk Factors.
|-------- | -------------

Not
applicable.



|Item 1B. | Unresolved Staff Comments.
|-------- | --------------------------

Not applicable.



|Item 2. | Properties.
|------- | -----------

Hemagen
maintains its principal administrative office, laboratory and production operations in a 27,400 square foot leased facility in Columbia, Maryland. The Company plans to reduce the space it utilizes in the Columbia, MD facility to 20,100 square feet
by March 31, 2011 and has received a commitment from the landlord to subsidize $154,400 in the form of a tenant improvement allowance. Under the Columbia lease, which runs through June 30, 2012, Hemagen will pay approximately $234,000
(assuming 27,400 square feet leased) per year in rent for the upcoming fiscal year.

Hemagens subsidiary, Hemagen
Diagnosticos Comercio, Importacao e Exportacao, Ltd, leases approximately 6,000 square feet of flexible office space in Sao Paulo, Brazil. The lease, which expired on June 30, 2006, has been extended without a definitive stated term. Either
party can terminate with 60 days notice. This subsidiary paid approximately $74,000 during fiscal 2010 in rent for this space. Management is currently seeking to relocate to a less expensive, and more efficient and effective space.

Management believes that all of the properties are adequately insured.



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|Item 3. | Legal Proceedings.
|------- | ------------------

Not
applicable.



|Item 4. | (Removed and Reserved)
|------- | ----------------------



11



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PART II



|Item 5. | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
|------- | -------------------------------------------------------------------------------------------------------------

Hemagens Common Stock has been traded on the over-the-counter bulletin board (OTC-BB) market since March 3, 2003 under the
symbol HMGN.OB. On November 30, 2010, the closing bid and ask price for the Common Stock as reported by the OTC-BB were $0.04 and $0.10 per share, respectively.

For the periods indicated, the following table sets for the range of high and low bid prices for the Common Stock as reported by the
OTC-BB during fiscal 2010 and 2009. These prices reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions.



|               |  |      |      |  |     |   |      | 
|-------------- |  | ---- | ---- |  | --- | - | ---- | 
|               |  | High |      |  | Low |  
|Fiscal 2010    |  |      |      |  |     |   |      | 
|First Quarter  |  | $    | 0.11 |  |     | $ | 0.07 | 
|Second Quarter |  | $    | 0.11 |  |     | $ | 0.05 | 
|Third Quarter  |  | $    | 0.10 |  |     | $ | 0.06 | 
|Fourth Quarter |  | $    | 0.10 |  |     | $ | 0.06 | 
|               |  |     
|Fiscal 2009    |  |      |      |  |     |   |      | 
|First Quarter  |  | $    | 0.15 |  |     | $ | 0.05 | 
|Second Quarter |  | $    | 0.15 |  |     | $ | 0.06 | 
|Third Quarter  |  | $    | 0.20 |  |     | $ | 0.10 | 
|Fourth Quarter |  | $    | 0.16 |  |     | $ | 0.07 | 

As of
November 9, 2010, there were 162 holders of record of Hemagens Common Stock, which Hemagen believes represents approximately 1,330 beneficial owners.

Dividends

Hemagen has never paid cash dividends. Hemagen currently intends
to retain all future earnings, if any, for use in its business and does not anticipate paying any cash dividends in the foreseeable future.

Unregistered Sales of Equity Securities and Use of Proceeds



|                     |  |                                   |        |  |                               |   |       |                                                                                     |  |  |                                                                                                              |  |  |  |   | 
|-------------------- |  | --------------------------------- | ------ |  | ----------------------------- | - | ----- | ----------------------------------------------------------------------------------- |  |  | ------------------------------------------------------------------------------------------------------------ |  |  |  | - | 
|Period               |  | (a) TotalNumberof SharesPurchased |        |  | (b)AveragePrice Paidper Share |   |       | (c) Total Number ofShares
Purchasedas Part of PubliclyAnnounced Plans orPrograms(1) |  |  | (d)Maximum Number(or ApproximateDollar Value)
ofShares that May YetBe Purchased Underthe Plans orPrograms(2) | 
|July 1-31, 2010      |  |                                   | 13,130 |  |                               | $ | 0.098 |                                                                                     |  |  | 13,130                                                                                                       |  |  |  |  | 
|August 1-30, 2010    |  |                                   | 9,422  |  |                               | $ | 0.100 |                                                                                     |  |  | 9,422                                                                                                        |  |  |  |  | 
|September 1-30, 2010 |  |                                   | 16,120 |  |                               | $ | 0.090 |                                                                                     |  |  | 16,120                                                                                                       |  |  |  |  | 
|                     |  |                                   |        |  |                               |   |       |                                                                                     |  |  |                                                                                                              |  |  |  |   | 
|Total                |  |                                   | 38,672 |  |                               | $ | 0.095 |                                                                                     |  |  | 38,672                                                                                                       |  |  |  |  | 
|                     |  |                                   |        |  |                               |   |       |                                                                                     |  |  |                                                                                                              |  |  |  |   | 



|(1) | Represents shares of the 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 purchases under the Companys Employee Stock Ownership Plan.
|--- | -------------------------------------------------------------------------------------------------------------



12



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|Item 6. | Selected Financial Data.
|------- | ------------------------

Not applicable



|Item 7. | Managements Discussion and Analysis or Plan of Operation.
|------- | ----------------------------------------------------------

Refer to Forward Looking Statements following the Index in the front of this Form 10-K.

Overview

Revenues from continuing operations for the fiscal year ended
September 30, 2010 were $5,220,170 compared to revenues for fiscal 2009 of $5,418,928; gross margin for fiscal 2010 was $2,356,205 compared to gross margin for fiscal 2009 of $2,072,386; and the net loss from continuing operations for fiscal
2010 was $156,314 compared to the net loss from continuing operations for fiscal 2009 of $729,949. Overall net loss for fiscal 2009, including discontinued operations, was $808,148. The comprehensive loss for fiscal 2010 was $107,428 compared to
comprehensive loss of $739,030 for fiscal 2009.

Historically, Hemagen has concentrated its efforts on developing,
manufacturing and marketing medical diagnostic test kits used to aid in the diagnosis of certain diseases and for assessing general health conditions. Hemagen has approximately 60 different test kits available that are 510(K) cleared for sale in the
United States by the FDA, and also sells other products that are not required to be FDA cleared.

Management has been working
to take the appropriate actions to improve the management and operations of the Company while striving to achieve sustained profitability. There can be no assurance that any of the previously discussed actions management is taking will achieve the
desired results. However, management believes that as a direct result of these actions, cash flow from operations, cash on hand at September 30, 2010 and its line of credit availability will be sufficient to finance its operations for fiscal
2011. See the Recent Developments section on page 3.

At September 30, 2010, Hemagen had $151,743 of
unrestricted cash, trade accounts receivable (net) of $669,892, working capital of $1,601,979 and a current ratio of 2.37 to 1.0.

Hemagen currently has a revolving line of credit with a bank for the purpose of financing working capital needs as required. The line of credit facility currently provides for borrowings up to $500,000,
at an annual interest rate of the prime rate plus 3/4% with an interest floor of 5.5%. The line of credit currently comes due on December 31, 2010. The Company expects the bank to renew the line at that time. As of December 17, 2010, the
outstanding balance owed on the line of credit was $398,000. The availability on the line is based on the borrowing base calculation which is made each month. As of November 30, 2010 the maximum borrowing on the line as determined by the
borrowing base calculation was $425,727. Notwithstanding the current availability on the line of credit, Hemagen can give no assurances that it will have sufficient cash flow to finance its operations.

Off-Balance Sheet Arrangements

Hemagen has no off-balance sheet arrangements.

Results of Operations

Fiscal Year Ended September 30, 2010 Compared to Fiscal Year Ended September 30, 2009

For fiscal 2010, revenues from continuing operations decreased by approximately $199,000 (3%) to approximately
$5,220,000 from approximately $5,419,000 for fiscal 2009. Approximately $352,000 of this decrease was attributed to lower sales in the Analyst® division during fiscal 2010 which were offset by an increase in overall sales in the Virgo division of approximately $189,000.



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Sales of the Analyst® Clinical Chemistry Analyzer product line were approximately $144,000 lower in fiscal 2010 as compared to fiscal 2009. Consumable sales decreased by approximately
$208,000 during the current fiscal year primarily due to the timing of sales of certain backordered products during the last quarter of the year and a loss of sales to certain customers.

Revenues from the autoimmune and infectious disease line increased by approximately $189,000 during the current year to $3,551,000 in
fiscal 2010 from $3,362,000 in fiscal 2009. Approximately $403,000 of this gain was related to sales in Brazil whose revenues were positively impacted by the gain in the foreign currency translation and was offset by a decrease in sales to one
customer during 2010 of approximately $200,000 which the Company expects to continue to supply in 2011. The average exchange rate during fiscal 2010 was 1.78 compared to 2.15 during fiscal 2009. Revenues in local Brazilian Reals for fiscal 2010 fell
approximately 9% over fiscal 2009 revenues.

Cost of product sales from continuing operations decreased approximately $483,000
(14%) to approximately $2,864,000 in fiscal 2010 from approximately $3,347,000 in fiscal 2009. Gross margin increased to 45% in fiscal 2010 as compared to a 38% gross margin in fiscal 2009. This increase in gross margin is due to a decrease in
payroll related expenses and a reduction in scrap expense during 2010. In fiscal 2009 there was a one-time charge to scrap for obsolete inventory in the amount of approximately $162,000.

Selling, general and administrative expenses from continuing operations decreased by approximately $234,000 during fiscal 2010 to
approximately $2,095,000 from approximately $2,329,000 in fiscal 2009. The decrease in overall expenses was attributable mainly to a decrease in travel and sales expenses during fiscal 2010 of approximately $97,000 and a decrease of approximately
$217,000 of payroll related expenses which were offset by an overall increase in SG&A expenses of the Brazilian subsidiary that were mainly attributable to the currency fluctuations of the Brazilian Real. The average monthly exchange rate during
fiscal 2010 was 1.78 compared to the average monthly exchange rate of 2.15 during fiscal 2009.

Research and development
expenses from continuing operations for fiscal 2010 decreased approximately $67,000 (72%) to approximately $25,000 from $92,000, in the previous year. The decrease is the result of the reduction in headcount.

For fiscal 2010, Hemagen had operating income from continuing operations of approximately $236,000 as compared to a $349,000 operating
loss in the previous fiscal year. This increase of approximately $585,000 in operating income is the result of the increase in gross margins and the lower expenses reported for fiscal 2010.

Net interest expense for fiscal year 2010 decreased by approximately $72,000 to $332,000 in 2010 from $404,000 in the prior year since
there was no amortization on the senior subordinated notes. Interest income was approximately $20,000 less than in fiscal 2009 due to the declining balance on the note receivable and interest expense was approximately $21,000 less due do the payoff
of the Brazil notes during fiscal 2010 and the lower balance carried on the line of credit throughout the current year.

In
the current fiscal year, the Company had approximately $89,000 of income tax expense as compared to $21,000 in fiscal year 2009. All of the income tax expense is related to the Companys Brazilian subsidiary and represents the net tax expense
after adjusting the benefit of loss carry-forwards utilized according to Brazilian tax law.

There was no net loss reported
from discontinued operations of the Raichem division during fiscal 2010 compared to approximately $78,000 of net loss was reported during fiscal 2009. The net loss reported during fiscal 2009 was the result of the final write-down on the remaining
inventory of Raichem.

Net loss for fiscal year 2010 decreased by approximately $652,000 to $156,000 of net loss compared to a
net loss of approximately $808,000 in the previous year. This decrease was attributable to higher gross margins, lower expenses, and a reduction in the amortization of debt discount during 2010 as compared to 2009.



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Liquidity and Capital Resources

At September 30, 2010, Hemagen had $151,743 of unrestricted cash, working capital of $1,601,979 and a current ratio of 2.37 to 1.0.
At September 30, 2009 Hemagen had $156,314 of unrestricted cash, working capital of $1,370,200 and a current ratio of 1.95 to 1.0

Hemagen currently has a revolving line of credit with a bank for the purpose of financing working capital needs as required. The line of credit currently provides for borrowings up to $500,000, at an
annual interest rate of the prime rate plus 3/4% with an interest rate floor of 5.5%. As of September 30, 2010 and December 18, 2010, there was $398,000 outstanding on the line. The companys ability to borrow on the line is based on
a borrowing base calculation dependent upon domestic receivables under 90 days and inventory. At November 30, 2010, the amount available to Hemagen to borrow against the line based on the calculation was $425,727. The line of credit comes due
on December 31, 2010 and the Company intends to renew the line with the bank at that time. However, Hemagen can give no assurances that it will have sufficient cash to repay the line of credit if it is not renewed or finance its operations.
Hemagen has no off-balance sheet financing arrangements.

During fiscal 2010, Hemagen had capital expenditures of
approximately $74,000, which included some leasehold improvements and some upgrades to several pieces of equipment.

Cash used
by operating activities was approximately $183,000; cash provided by investing activities was approximately $177,000 and cash used in financing activities was approximately $31,000. The effect of exchange rates on cash in fiscal year 2010 resulted
in a positive cash adjustment of approximately $33,000.

Hemagen believes that cash flow from operations and cash on hand at
September 30, 2010 will be sufficient to finance its operations for fiscal 2011. The line of credit currently comes due on December 31, 2010, and the Company hopes to renew the line with the bank at that time. However, Hemagen can give no
assurances that it will have sufficient cash to repay the line of credit if it is not renewed or finance its operations.

Fiscal 2010
compared to Fiscal 2009

Hemagen used approximately $183,000 of cash in its operating activities during fiscal 2010
compared to $17,000 of cash provided from its operating activities in fiscal 2009. The cash used from the change in operating assets and liabilities was approximately $196,000 during fiscal 2010 compared to $327,000 of cash provided during fiscal
2009. A large portion of the change in operating assets and liabilities came from the decrease in inventory of approximately $302,000, the decrease in accounts payable of approximately $226,000 and the increase in prepaid expenses of approximately $
218,000.

Cash provided by investing activities totaled approximately $177,000 in fiscal 2010, as compared to approximately
$147,000 provided in fiscal 2009. The increase in net cash provided in fiscal 2010 was due to the reduced outlay of cash for the purchase of property and equipment as compared to the prior year.

Cash used in financing activities totaled approximately $31,000 in fiscal 2010 as compared to $223,000 used in fiscal 2009. The cash
utilized during the current year and prior year, went to paying down the Itau bank notes, and payments to reduce the Company borrowings on the line of credit. The Itau bank notes were fully paid off as of September 30, 2010.

Critical Accounting Policies

The preparation of consolidated financial statements in accordance with U.S generally accepted accounting principles requires us to make estimates and judgments with respect to the selection and
application of accounting policies that affect the reporting of amounts of assets, liabilities, revenues and expenses, and the disclosures of contingent assets and liabilities. We base our estimates on historical experience and on various



15



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other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual
results may differ from these estimates under different assumptions or conditions.

We believe the following critical
accounting policies and estimates have the greatest impact on the preparation of our consolidated financial statements:

Revenue Recognition

The Company manufactures and markets a broad offering of in vitro diagnostic products and services which currently include: (1) reagents and consumables for general chemistry analyzers;
(2) medical diagnostic test kits; (3) medical diagnostic instruments; and (4) maintenance services. Reagents and consumables, in addition to medical test kits, represent the largest portion of our sales. Revenues from reagents and
consumables and test kits are recognized when the product is shipped, all contractual obligations have been satisfied and it is reasonably assured that the resulting receivable is collectible.

Instruments are usually sold either directly to the customer or to a third party financing entity that in turn leases it to the end
customer. Instrument revenue is recognized upon shipment, when all contractual obligations have been satisfied and it is reasonably assured that the resulting receivable is collectible.

Revenues under product service contracts, which are generally for one year or less, are recognized ratably over the term of the contract,
based on the relative fair value of the contracts.

Accounts Receivable

The majority of the Companys accounts receivable is due from distributors (domestic and international), hospitals, universities, and
physician and veterinary offices and other entities in the medical field. Credit is extended based on evaluation of customers financial condition and, generally, collateral is not required. Accounts receivable are most often due within 30 days
and are stated at amounts due from customers net of an allowance for doubtful accounts. Any accounts outstanding longer than the contractual payment terms are considered past due. We maintain allowances for doubtful accounts based on a number of
factors, including the length of time the accounts receivable are past due, the Companys previous loss history, the customers current ability to pay its obligation to the Company, and the condition of the general economy and the industry
as a whole. The Company writes off accounts receivable when they become uncollectible, and payments subsequently received on such receivables are credited to the allowance for doubtful accounts. Actual amounts collectible could vary from our
estimates and affect our operating results.

Inventories

Inventories are stated at the lower of cost as determined by the first-in, first-out system (FIFO) or market. Market for raw
materials is based on replacement costs and, for other inventory classifications, on net realizable value. We regularly review inventory quantities on hand and record a provision for deterioration, excess and obsolete inventory based primarily on
our estimated forecast of product demand and production requirements for the next 12 to 18 months, depending on the product. Several factors may influence the realizability of our inventories, including technological change and new product
development. These factors could result in an increase in the amount of obsolete inventory on hand. Additionally, our estimates of future product demand may prove to be inaccurate, in which case we may have understated or overstated the provision
required for excess and obsolete inventory. In the future, if we determine that our inventory was overvalued, we will be required to recognize such costs in cost of goods sold at the time of such determination. Although we make every effort to
ensure the accuracy of our forecasts of future product demand, any significant unanticipated changes in demand or technological developments could have a significant impact on the value of our inventory and our reported operating results.



16



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Recent Accounting Pronouncements

The Subsequent Events Topic of the FASB ASC establishes general standards of accounting for, and disclosure of, events that occur after
the balance sheet date but before financial statements are issued or are available to be issued. This accounting standard sets forth the period after the balance sheet date during which management of a reporting entity should evaluate events or
transactions that may occur for potential recognition or disclosure in the financial statements. This standard also sets forth the circumstances under which an entity should recognize events or transactions occurring after the balance sheet
date in its financial statements and the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. This accounting standard is effective for interim or annual periods ending after June 15,
2009. In February 2010, the FASB issued ASU No. 2010-09 which amended ASC 855. This amendment, which was effective upon issuance, removed the requirement for SEC registrants to disclose the date through which such registrants have
evaluated subsequent events.

In October 2009, the FASB issued ASU 2009-13, Multiple Deliverable Revenue Arrangements,
(ASU 2009-13), which applies to all deliverables in contractual arrangements in which a vendor will perform multiple revenue-generating activities. In April 2010, the FASB issued ASU 2010-17, Revenue RecognitionMilestone
Method, (ASU 2010-17), which defines a milestone and determines when it may be appropriate to apply the milestone method of revenue recognition for research or development transactions. These pronouncements are codified in ASC Topic
605, Revenue Recognition, and will be effective for our fiscal year that begins January 1, 2011. These pronouncements may be applied prospectively or retrospectively, and early adoption is permitted. We are evaluating the impact that adoption
of ASU 2009-13 and ASU 2010-17 may have on our consolidated financial statements.

ASU 2010-01, Equity (Topic
505)Accounting for Distributions to Shareholders with Components of Stock and Cash. ASU 2010-01 was issued in January 2010 and clarifies that the stock portion of a distribution to shareholders that allows them to elect to receive
cash or stock with a potential limitation on the total amount of cash that all shareholders can elect to receive in the aggregate is considered a share issuance that is reflected in earnings per share prospectively and is not a stock dividend. ASU
2010-01 is effective for interim and annual periods ending on or after December 15, 2009, and should be applied on a retrospective basis. ASU 2010-01 had no impact on our consolidated financial statements.

ASU 2010-06, Improving Disclosure about Fair Value Measurements, was issued in January 2010 and requires additional
disclosures regarding fair value measurements, amends disclosures about post-retirement benefit plan assets and provides clarification regarding the level of disaggregation of fair value disclosures by investment class. The ASU is effective for
interim and annual reporting periods beginning after December 15, 2009, except for certain Level 3 activity disclosure requirements that will be effective for reporting periods beginning after December 15, 2010. Adoption of ASU 2010-06 had
no material impact on our consolidated financial statements.



|Item 7A. | Quantitative and Qualitative Disclosures about Market Risk.
|-------- | -----------------------------------------------------------

Not applicable.



|Item 8. | Financial Statements.
|------- | ---------------------

See Item 15 below and the Index therein for a listing of the financial statements and supplementary data filed as part of this
report.



|Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
|------- | -------------------------------------------------------------------------------------

None.



17



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##### Table of Contents



|Item 9A. | Controls and Procedures.
|-------- | ------------------------

Managements Evaluation of Disclosure Controls and Procedures

The Companys Chief Executive Officer, William P. Hales, and the Companys Principal Financial Officer, Catherine M. Davidson,
have evaluated the effectiveness of the design and operation of the Companys disclosure controls and procedures as of September 30, 2010. Based upon this evaluation, these officers believe that the Companys disclosure controls and
procedures were effective as of September 30, 2010.

Management is aware that there is a lack of segregation of duties
due to the small number of employees within the financial and administrative functions of the Company. As a result of the limitations of the resources and segregation of duties, Stegman and Company, the Companys current auditor has informed
the company that these limitations represent a material weakness in internal control over financial reporting. Management will continue to evaluate this segregation of duties issue. The Company has worked over the past year and has documented these
internal controls. This material weakness has not been remediated.

The internal control report is included in this Annual
Report on Form 10-K filed herewith, under the caption Managements Report on Internal Control over Financial Reporting.

Changes in Internal Control Over Financial Reporting

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



|Item 9B. | Other Information.
|-------- | ------------------

Not
applicable.



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##### Table of Contents

PART III

Executive Officers and Directors



|Item 10. | Directors, Executive Officers and Corporate Governance.
|-------- | -------------------------------------------------------

The following table presents information regarding the Directors of the registrant.



|                                                                |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Dr. Alan S. Cohen Director
Since 1993 Term Expires 2012 Age:
84 |  | Dr. Cohen has served as a Director of Hemagen since its inception. Dr. Cohen has been a Professor of Medicine at Boston University School of Medicine since 1968 and a Professor of
Pharmacology since 1974. He is currently Distinguished Professor of Medicine (E). Dr. Cohen is Editor-in-Chief of AMYLOID. The Journal of Protein Folding Disorders. Dr. Cohen served as the Director of the Arthritis Center of Boston University from
1976 to 1994. From 1973 to 1992, Dr. Cohen served as Chief of Medicine of Boston City Hospital. Dr. Cohen is a past president of the American College of Rheumatology. Dr. Cohen received his Bachelor of Arts degree from Harvard College and his M.D.
degree from the Boston University School of Medicine. Dr. Cohens extensive experience in the medical field, both as a practicing rheumatologist and in academic medicine and pharmacology, make him extremely knowledgeable about how the
Companys operations and products relate to the views of, and recent developments in the medical community, and render him a valuable member of the Companys Board.                                                                                                                                                                                                   
|                                                                | 
|William P. Hales Director
since 1999 Term Expires 2010 Age:
48  |  | William P. Hales has been a Director of Hemagen and its President since October 1, 1999, and has served as Hemagens CEO since 2002. Mr. Hales has been the Chairman of the
Board of Directors since February 2004. From 1991 to 1999 Mr. Hales was employed by several brokerage and investment banking firms. Prior to that, Mr. Hales spent six years in public accounting with Ernst & Young and Coopers & Lybrand
advising clients on both audit and management consulting. Mr. Hales long-time service as the principal executive officer of the Company provides him with a unique perspective as the Companys overall business strategy given its operating
history and its future goals and objectives, which, through his position on the Board, he is able to communicate with the other Directors.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                                | 
|Edward T. Lutz Director since
2004 Term Expires 2010 Age:
64    |  | Mr. Lutz has been the President and CEO of Lutz Advisors, Inc. since 2001. Prior to that Mr. Lutz served Tucker Anthony Sutro Capital Markets within the Investment Banking Group
focusing on the bank and thrift industry. He has over thirty-five years experience in bank regulation, mergers and acquisitions of troubled financial institutions, strategic planning and structuring financial transactions. Over the last 13 years he
has specialized in investment banking and consulting to bank and thrift institutions. Mr. Lutz was a member of the board of directors of Union State Bank (NYSE) and U.S.B Holding Bank which as sold to KeyBank in 2008. Mr. Lutz earned his B.A. in
Economics from Hofsta University and his M.B.A in Finance from American University. As a result of Mr. Lutzs prior experience serving on the boards of directors of multiple U.S. public companies and his financial expertise, he provides the
Board with important guidance with respect to the complex financial and governance issues facing the Company as a result of being a public-traded company. Since October 2008, Mr. Lutz has been Vice Chairman and Director of Greater Hudson Bank, NA, a
community bank located in Middletown, New York. He also serves as Chairman of that banks Audit Committee.



19



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##### Table of Contents

The executive officers as of the date of this report:



|                         |  |     |  |                                                             
|------------------------ |  | --- |  | ------------------------------------------------------------
|Name                     |  | Age |  | Position                                                    
|William P. Hales         |  | 48  |  | Chairman of the Board, President and Chief Executive Officer
|Catherine M. Davidson(a) |  | 45  |  | Controller, Principal Financial and Accounting Officer      



|(a) | On July 11, 2007 Catherine Davidson was appointed as the Companys Principal Financial Officer and Principal Accounting Officer. For the five years prior to
joining Hemagen, Ms. Davidson served as the Chief Financial Officer of Pepco Building Services, Inc., overseeing the finance and accounting functions of that company and its subsidiaries.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Our Directors will serve until the next annual meeting of stockholders. Our executive officers are appointed by our Board of Directors
and serve at the discretion of the Board of Directors.

Audit Committee

The Audit Committee is comprised of, Edward T. Lutz, (Chairman) and William P. Hales. The Board of Directors has determined that
Mr. Lutz meets the standards for independence provided under the Sarbanes-Oxley Act of 2002. All members meet standards of financial literacy. The Board has also determined that Mr. Lutz qualifies as an audit committee financial expert as
defined in regulations adopted by the Securities and Exchange Commission.

Compliance with Section 16(a) of the Exchange Act

Section 16 of the Securities Exchange Act of 1934 requires Hemagens executive officers, Directors and persons
who own more than 10% of a registered class of Hemagens equity securities to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Based on a review of reports received by it, and upon written
representations from the reporting persons, Hemagen believes that during the last fiscal year, all of its executive officers, Directors and 10% shareholders complied with Section 16 reporting.

Code of Ethics

The
Registrant has adopted a Code of Ethics that applies to all of our Directors, officers and employees. The Code of Ethics was filed with the Registrants Form 10-KSB for the fiscal year ended September 30, 2003, a copy of which is available
to any person without charge upon request to the Secretary.



|Item 11. | Executive Compensation.
|-------- | -----------------------

SUMMARY COMPENSATION TABLE

The following sets forth compensation paid, earned or awarded to the CEO and the other most highly paid executive officers during the last two fiscal years ended September 30:



|                               |  |         |      |  |              |  |         |             |  |  |                   |  |  |                    |   |  |                                            |  |         |                                                |  |  |                             |  |  |             |   |  |  |  |        |     |  |  |         | 
|------------------------------ |  | ------- | ---- |  | ------------ |  | ------- | ----------- |  |  | ----------------- |  |  | ------------------ | - |  | ------------------------------------------ |  | ------- | ---------------------------------------------- |  |  | --------------------------- |  |  | ----------- | - |  |  |  | ------ | --- |  |  | ------- | 
|Name and Principal Position(a) |  | Year(b) |      |  | Salary($)(c) |  |         | Bonus($)(d) |  |  | StockAwards($)(e) |  |  | OptionAwards($)(f) |   |  | Non-EquityIncentive PlanCompensation($)(g) |  |         | NonqualifiedDeferredCompensationEarnings($)(h) |  |  | All OtherCompensation($)(i) |  |  | Total($)(j) |  
|William P. Hales               |  |         | 2010 |  |              |  | 172,500 |             |  |  |                  |  |  |                    |  |  |                                            |  | 128,832 |                                                |  |  |                            |  |  |             |  |  |  |  | 41,420 | (1) |  |  | 342,752 | 
|                               |  |         | 2009 |  |              |  | 172,500 |             |  |  |                  |  |  |                    |  |  |                                            |  | 37,852  |                                                |  |  |                            |  |  |             |  |  |  |  | 40,592 | (2) |  |  | 250,944 | 
|                               |  |         |      |  |              |  |         |             | 
|Catherine M. Davidson          |  |         | 2010 |  |              |  | 115,000 |             |  |  |                  |  |  |                    |  |  |                                            |  |        |                                                |  |  |                            |  |  |             |   |  |  |  | 900    | (3) |  |  | 115,900 | 
|                               |  |         | 2009 |  |              |  | 115,000 |             |  |  |                  |  |  |                    |  |  |                                            |  |        |                                                |  |  |                            |  |  |             |   |  |  |  | 2,625  | (4) |  |  | 117,625 | 



|(1) | Represents $29,820 in provision for housing, $10,200 for a car allowance and an estimated $1,400 for the Companys contributions in the Employee Stock Ownership
Plan for the plan year ending September 2010.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

|(2) | Represents $26,760 in provision for housing, $9,741 for a car allowance and $4,091 for the Companys contributions in the Employee Stock Ownership Plan for the
plan year ending September 2009.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Represents Companys estimated contributions in the Employee Stock Ownership plan for plan year ending September 2010.
|--- | ----------------------------------------------------------------------------------------------------------------------

|(4) | Represents Companys contributions in the Employee Stock Ownership plan for plan year ending September 2009.
|--- | ------------------------------------------------------------------------------------------------------------

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END



|                      |  |                                                                   |              |  |                                                                     |  |           |                                                                                         |  |  |                           |  |  |                         |     |  |                                                       |  |            |                                                            |  |  |                                                                                              |  |  |                                                                                                             |   |  |  |  |   |  |  |  |   | 
|--------------------- |  | ----------------------------------------------------------------- | ------------ |  | ------------------------------------------------------------------- |  | --------- | --------------------------------------------------------------------------------------- |  |  | ------------------------- |  |  | ----------------------- | --- |  | ----------------------------------------------------- |  | ---------- | ---------------------------------------------------------- |  |  | -------------------------------------------------------------------------------------------- |  |  | ----------------------------------------------------------------------------------------------------------- | - |  |  |  | - |  |  |  | - | 
|Option Awards         |  |                                                                   | Stock Awards | 
|Name(a)               |  | Number ofSecuritiesUnderlyingUnexercisedOptions
(#)Exercisable(b) |              |  | Number ofSecuritiesUnderlyingUnexercisedOptions
(#)Unexercisable(c) |  |           | EquityIncentivePlanAwardsNumber
ofSecuritiesUnderlyingUnexercisedUnearnedOptions (#)(d) |  |  | OptionExercisePrice($)(e) |  |  | OptionExpirationDate(f) |     |  | NumberofSharesor Unitsof
StockThatHaveNotVested(#)(g) |  |            | MarketValueofSharesor Unitsof
StockThatHaveNotVested($)(h) |  |  | EquityIncentivePlanAwards:NumberofUnearnedShares,Units
orOtherRightsThatHave NotVested(#)(i) |  |  | EquityIncentivePlanAwards:Marketor PayoutValue
ofUnearnedShares,Units orOtherRightsThatHave NotVested($)(j) |  
|William P. Hales      |  |                                                                   | 250,000      |  |                                                                     |  |          |                                                                                         |  |  |                          |  |  |                         | .20 |  |                                                       |  | 10/25/2015 |                                                            |  |  |                                                                                             |  |  |                                                                                                             |  |  |  |  |  |  |  |  |  | 
|                      |  |                                                                   | 406,208      |  |                                                                     |  |          |                                                                                         |  |  |                          |  |  |                         | .19 |  |                                                       |  | 03/04/2019 |                                                            |  |  |                                                                                             |  |  |                                                                                                             |  |  |  |  |  |  |  |  |  | 
|                      |  |                                                                   |             |  |                                                                     |  | 1,850,000 | (1)                                                                                     |  |  |                          |  |  |                         | .11 |  |                                                       |  | 05/27/2020 |                                                            |  |  |                                                                                             |  |  |                                                                                                             |  |  |  |  |  |  |  |  |  | 
|                      |  |                                                                   | 85,000       |  |                                                                     |  |          |                                                                                         |  |  |                          |  |  |                         | .07 |  |                                                       |  | 05/27/2020 |                                                            |  |  |                                                                                             |  |  |                                                                                                             |  |  |  |  |  |  |  |  |  | 
|                      |  |                                                                   |              |  |                                                                     |  |           |                                                                                         | 
|Catherine M. Davidson |  |                                                                   | 21,000       |  |                                                                     |  | 14,000    | (2)                                                                                     |  |  |                          |  |  |                         | .22 |  |                                                       |  | 04/23/2012 |                                                            |  |  |                                                                                             |  |  |                                                                                                             |  |  |  |  |  |  |  |  |  | 
|                      |  |                                                                   | 6,666        |  |                                                                     |  | 3,334     | (3)                                                                                     |  |  |                          |  |  |                         | .19 |  |                                                       |  | 01/10/2013 |                                                            |  |  |                                                                                             |  |  |                                                                                                             |  |  |  |  |  |  |  |  |  | 



|(1) | These unexercisable options will vest as follows:
|--- | -------------------------------------------------



|          |  |             
|--------- |  | ------------
|# Options |  | Vesting Date
|616,667   |  | 05/27/2011  
|616,667   |  | 05/27/2012  
|616,666   |  | 05/27/2013  



|(2) | These unexercisable options will vest as follows:
|--- | -------------------------------------------------



|          |  |             
|--------- |  | ------------
|# Options |  | Vesting Date
|7,000     |  | 04/23/2011  
|7,000     |  | 04/23/2012  



|(3) | These unexercisable options will vest as follows:
|--- | -------------------------------------------------



|          |  |             
|--------- |  | ------------
|# Options |  | Vesting Date
|3,334     |  | 01/10/2011  



21



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##### Table of Contents

Director Compensation

Non-employee Directors receive a $2,500 cash payment per quarter and receive 2,500 shares each quarter of the Companys common stock as compensation. Non-employee Directors of the Company are
granted an option to purchase 10,000 shares of the Companys common stock at the election of their three-year term. In addition, Non-employee Directors that serve on a committee or committees of the Board of Directors are granted an option
to purchase 5,000 shares of the Companys common stock at the annual appointment of their position. The following chart shows director compensation for the fiscal year ended September 30, 2010.



|               |  |                                |        |  |                   |  |     |                    |  |  |                                            |  |  |                                                |   |  |                             |  |   |             |  |  |   |  |  |  |        | 
|-------------- |  | ------------------------------ | ------ |  | ----------------- |  | --- | ------------------ |  |  | ------------------------------------------ |  |  | ---------------------------------------------- | - |  | --------------------------- |  | - | ----------- |  |  | - |  |  |  | ------ | 
|Name (a)       |  | FeesEarned orPaid
inCash($)(b) |        |  | StockAwards($)(c) |  |     | OptionAwards($)(d) |  |  | Non-EquityIncentive
PlanCompensation($)(e) |  |  | NonqualifiedDeferredCompensationEarnings($)(f) |   |  | All
OtherCompensation($)(g) |  |   | Total($)(h) | 
|Alan S. Cohen  |  |                                | 10,000 |  |                   |  | 875 |                    |  |  | 336                                        |  |  |                                                |  |  |                             |  |  |             |  |  |  |  |  |  | 11,211 | 
|Edward T. Lutz |  |                                | 10,000 |  |                   |  | 875 |                    |  |  | 1,009                                      |  |  |                                                |  |  |                             |  |  |             |  |  |  |  |  |  | 11,884 | 

The following table
shows the aggregate number of shares of stock and options held as of September 30, 2010 for each director.



|               |  |                       |         |  |           |  |        | 
|-------------- |  | --------------------- | ------- |  | --------- |  | ------ | 
|Name           |  | # Shares Common Stock |         |  | # Options | 
|Alan S. Cohen  |  |                       | 321,321 |  |           |  | 85,000 | 
|Edward T. Lutz |  |                       | 161,682 |  |           |  | 75,000 | 



22



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##### Table of Contents



|Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters.
|-------- | ------------------------------------------------------------------------------------------------

Beneficial Ownership of Common Stock

The following table reports information regarding the beneficial ownership of our common stock as of November 9, 2010, by each person or entity known by us to be the beneficial owner of more than 5%
of the outstanding shares of common stock, each of our Directors and named executive officers, and all of our Directors and executive officers as a group.



|                                                                                                                     |  |                                      |           |     |                 |  |      |  
|-------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------ | --------- | --- | --------------- |  | ---- | -
|Name and Address of Beneficial Owner                                                                                 |  | Amount and Natureof Beneficial Owner |           |     | Percent ofClass | 
|William P. Hales President
& CEO, Director 9033 Red Branch Rd.
Columbia, MD 21045                                    |  |                                      | 1,995,072 | (1) |                 |  | 12.1 | %
|                                                                                                                     |  |                                     
|Jonathan E. Rothschild 1061-B
Shary Circle Concord, CA 94518                                                         |  |                                      | 1,142,315 | (2) |                 |  | 6.9  | %
|                                                                                                                     |  |                                     
|Dr. Alan Cohen
Director 99 Florence Street
Bldg 60, Unit 4A Chestnut Hill, MA
02467                                  |  |                                      | 408,821   | (3) |                 |  | 2.5  | %
|                                                                                                                     |  |                                     
|Edward T. Lutz
Director 6 West Sanders St.
Greenlawn, NY 11740                                                       |  |                                      | 239,182   | (4) |                 |  | 1.4  | %
|                                                                                                                     |  |                                     
|Catherine M. Davidson
Controller, Principal Financial and Accounting Officer 9033 Red Branch Road Columbia, MD 21045 |  |                                      | 83,491    | (5) |                 |  | 0.5  | %
|                                                                                                                     |  |                                     
|All Directors and Executive Officers as a Group (4 persons)                                                          |  |                                      | 2,726,566 |     |                 |  | 16.5 | %



|(1) | Share ownership includes 741,208 shares issuable upon the exercise of options within 60 days and 120,414 shares in the employee ESOP plan as of the plan year ending
September 30, 2009.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Based on Mr. Rothchilds shares owned as reported on stock ownership report as of April 29, 2010 record date.
|--- | -------------------------------------------------------------------------------------------------------------

|(3) | Includes 85,000 shares issuable upon the exercise of options within 60 days.
|--- | ----------------------------------------------------------------------------

|(4) | Includes 75,000 shares issuable upon the exercise of options within 60 days.
|--- | ----------------------------------------------------------------------------

|(5) | Share ownership includes 27,667 shares issuable upon the exercise of options within 60 days and 55,824 shares in the employee ESOP plan as of the plan year ending
September 30, 2009.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



23



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##### Table of Contents

Securities Authorized for Issuance under Equity Compensation Plans

The following table sets forth our Securities authorized for issuance under our currently effective Equity Compensation Plans.



|                                                           |  |                                                                                          |           |     |                                                                          |   |      |                                                                                                                                        |  |  |           |    
|---------------------------------------------------------- |  | ---------------------------------------------------------------------------------------- | --------- | --- | ------------------------------------------------------------------------ | - | ---- | -------------------------------------------------------------------------------------------------------------------------------------- |  |  | --------- | ---
|Plan category                                              |  | Number of securities to beissued upon exercise ofoutstanding
options,warrants and rights |           |     | Weighted-averageexercise price ofoutstanding options,warrants and
rights |   |      | Number of securitiesremaining available for futureissuance under
equitycompensation plans(excluding securitiesreflected in column (a)) | 
|Equity compensation plans approved by security holders     |  |                                                                                          | 2,932,208 | (1) |                                                                          | $ | 0.15 |                                                                                                                                        |  |  | 1,067,792 | (2)
|Equity compensation plans not approved by security holders |  |                                                                                          |          |     |                                                                          |   |     |                                                                                                                                        |  |  |          |    
|Total                                                      |  |                                                                                          | 2,932,208 | (1) |                                                                          | $ | 0.15 |                                                                                                                                        |  |  | 1,067,792 | (2)



|(1) | Amount includes 351,000 options for the purchase of common stock pursuant to the Companys 2001 Stock Option Plan approved by the shareholders on February 27,
2001, 80,000 options for the purchase of common stock pursuant to the Companys 2000 Directors Stock Option Plan approved by the shareholders on April 25, 2000, and 2,501,208 options for purchases of common stock pursuant to the
Companys 2007 Stock Option Plan approved by the shareholders on April 24, 2007 that have been issued as of September 30, 2010.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Amount represents options for the purchase of common stock approved by the shareholders pursuant to the Companys 2001 Stock Option Plan and the 2007 Stock Option
plan that have not been issued as of as of September 30, 2010.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Item 13. | Certain Relationships and Related Transactions, and Director Independence.
|-------- | --------------------------------------------------------------------------

Director Independence

The Board of Directors affirmatively determines the
independence of each director and nominee for election as a director based on the definition of independence contained in the NASDAQ rules and the applicable regulations of the Securities and Exchange Commission. Based on these standards, Edward T.
Lutz and Dr. Alan S. Cohen, who comprise a majority of the Board of Directors, both qualify as independent directors.



|Item 14. | Principal Accountant Fees and Services.
|-------- | ---------------------------------------

Hemagens independent public accountants are Stegman and Company. Stegman and Company has served in that capacity since fiscal year 2007. Aggregate fees billed to Hemagen in fiscal 2010 and
2009 by its principal accountants, Stegman and Company were:



|                                             |  |      |        |     |      |   |        |    
|-------------------------------------------- |  | ---- | ------ | --- | ---- | - | ------ | ---
|                                             |  | 2009 |        |     | 2010 |  
|Audit fees and SAS 100 quarterly review fees |  | $    | 57,456 |     |      | $ | 60,081 |    
|Auditrelated fees                           |  |      |       |     |      |   |       |    
|Tax fees                                     |  | $    | 7,000  | (a) |      | $ | 5,000  | (a)
|All other fees                               |  |      |       |     |      |   |       |    
|                                             |  |      |        |     |      |   |        |    
|                                             |  | $    | 64,456 |     |      | $ | 65,081 |    
|                                             |  |      |        |     |      |   |        |    



|(a) | The Audit Committee believes the provision of these services is compatible with maintaining the principal accountants independence.
|--- | ------------------------------------------------------------------------------------------------------------------------------------

Audit Fees. Audit services of Stegman and Company for fiscal 2010 and 2009 consisted of examination of the consolidated
financial statements of the Company, quarterly reviews of the financial statements and services related to the filings made with the Securities and Exchange Commission.



24



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##### Table of Contents

Tax Fees. Tax fees included charges primarily related to the preparation of
federal and state tax returns.

All Other Fees. Stegman and Company for services other than as described under
Audit Fees and Tax Fees for the 2010 and 2009 fiscal years.

All of the services described above were
approved by the Audit Committee. The Audit Committee has not adopted formal pre-approval policies, but has the sole authority to engage the Companys outside auditing and tax preparation firms and must approve all tax consulting and
auditing arrangements with the independent accounting firm prior to the performance of any services. Approval for such services is evaluated during the Audit Committee meetings and must be documented by signature of an Audit Committee member on
the engagement letter of the independent accounting firm.



|Item 15. | Exhibits and Financial Statement Schedules.
|-------- | -------------------------------------------

(a)(1) and (2) Financial Statements and Schedules



|                                                                                                                 |  |      |     | 
|---------------------------------------------------------------------------------------------------------------- |  | ---- | --- | 
|                                                                                                                 |  | Page |    
|Managements Report on Internal Control Over Financial Reporting                                                 |  |      | F-2 | 
|Report of Independent Registered Public Accounting Firm                                                          |  |      | F-3 | 
|Consolidated Balance Sheets at September 30, 2010 and 2009                                                       |  |      | F-4 | 
|Consolidated Statements of Operations and Comprehensive Income for the years ended September 
30, 2010, and 2009 |  |      | F-6 | 
|Consolidated Statements of Stockholders Equity for the years ended September 30, 2010 and
2009                  |  |      | F-7 | 
|Consolidated Statements of Cash Flows for the years ended September 30, 2010 and
2009                            |  |      | F-8 | 
|Notes to Consolidated Financial Statements                                                                       |  |      | F-9 | 

(a)(3) Exhibit List.



|            |  |                                                                                                                                                                                                        
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description of Exhibit                                                                                                                                                                                 
|3.1         |  | Restated Certificate of Incorporation (Incorporated by reference to Hemagens Form 8-K filed with the Commission on May 28, 2010.)                                                                     
|            | 
|3.2         |  | Amended and Restated Bylaws (Incorporated by reference to Hemagens Form 8-K filed with the Commission on March 29, 2010.)                                                                             
|            | 
|4.1         |  | Specimen Stock Certificate (Incorporated by reference to Registration Statement on Form 8-A filed with the Commission on February 10, 1999)                                                            
|            | 
|10.17       |  | Description of the Lease for office space of HDC in Sao Paulo, Brazil (Incorporated by reference to Hemagens Form 10-KSB for the fiscal year ended September 30,
2005)                                
|            | 
|10.29       |  | Form of 8% Senior Subordinated Secured Convertible Note due September 30, 2014 (Hemagens Schedule T-O filed with the Commission on September 1, 2009)                                                 
|            | 
|10.30       |  | Second Amendment to the Lease between the Company and 9033 Red Branch Road, L.L.C. dated June 9, 2000 (Incorporated by reference to Hemagens Form 10-KSB for the fiscal year
ended September 30, 2000)
|            | 
|10.32       |  | Second Restructuring Agreement between the Company and Dade Behring, Inc. dated November 9, 2000 (Incorporated by reference to Hemagens Form 10-KSB for the fiscal year ended
September 30, 2001)     
|            | 
|10.33*      |  | 2000 Directors Stock Option Plan (Incorporated by reference to Hemagens 10-KSB for the year ended September 30,
2008)                                                                                



25



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##### Table of Contents

|            |  |                                                                                                                                                                                                                                                      
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description of Exhibit                                                                                                                                                                                                                               
|10.35*      |  | 2001 Stock Option Plan (Incorporated by reference to Hemagens Definitive Proxy Statement filed with the Commission on January 29, 2001)                                                                                                             
|            | 
|10.40       |  | Line of Credit Financing Agreement between Hemagen Diagnostics, Inc. and Reagents Applications, Inc. and Bay National Bank dated September 26, 2002 (Incorporated by reference to
Hemagens Form 10-KSB for the fiscal year ended September 30, 2002)
|            | 
|10.42*      |  | Directors Rule 10b5-1 Stock Purchase Plan (Incorporated by reference to Hemagens Form 10-KSB for the fiscal year ended September 30, 2003)                                                                                                          
|            | 
|10.44*      |  | Hemagen Employee Stock Ownership Plan (Incorporated by reference to Hemagens Form 10-KSB for the year ended September 30, 2004)                                                                                                                     
|            | 
|10.45       |  | Trust Agreement for the Hemagen Employee Stock Ownership Plan (Incorporated by reference to Hemagens Form 10-KSB for the year ended September 30, 2004)                                                                                             
|            | 
|10.50       |  | Quota Purchase and Sale Agreement and Non-Competition Agreement (Incorporated by reference to Hemagens Form 10-KSB for the year ended September 30, 2004)                                                                                           
|            | 
|10.60       |  | 2007 Stock Incentive Plan (Incorporated by reference to Hemagens Definitive Proxy Statement filed with the Commission on March 21, 2007)                                                                                                            
|            | 
|10.65       |  | Third Amendment to the Lease between the Company and 9033 Red Branch Road, L.L.C. dated June 9, 2000 (Incorporated by reference to Hemagens Form 8-K filed with the
Commission on September 12, 2007)                                               
|            | 
|10.70       |  | Asset Purchase Agreement between Reagents Applications, Inc. and Cliniqa Corporation dated October 8, 2007 (Incorporated by reference to Hemagens Form 8-K filed with the
Commission on October 12, 2007)                                           
|            | 
|10.75       |  | Promissory Note between Hemagen Diagnostics, Inc. and Cliniqa Corporation dated October 8, 2007 (Incorporated by reference to Hemagens Form 8-K filed with the Commission on
October 12, 2007)                                                      
|            | 
|10.80       |  | Inventory Purchase Agreement between Reagents Applications, Inc. and Cliniqa Corporation dated October 8, 2007 (Incorporated by reference to Hemagens Form 8-K filed with the
Commission on October 12, 2007)                                       
|            | 
|10.85       |  | Executive Employment Agreement between Hemagen Diagnostics, Inc. and William P. Hales effective as of May 27, 2010 (Incorporated by reference to Hemagens Form 8-K filed with
the Commission on May 28, 2010.)                                      
|            | 
|14          |  | Code of Ethics Policy (Incorporated by reference to Hemagens Form 10-KSB for the fiscal year ended September 30, 2003)                                                                                                                              
|            | 
|23.1        |  | Consent of Stegman and Company (Filed herewith)                                                                                                                                                                                                      
|            | 
|31.1        |  | Certification of Principal Executive Officer pursuant to Rule 13a-14(a) (Filed herewith)                                                                                                                                                             
|            | 
|31.2        |  | Certification of Principal Financial Officer pursuant to Rule 13a-14(a) (Filed herewith)                                                                                                                                                             
|            | 
|32.1        |  | Section 1350 Certification of Chief Executive Officer (Filed herewith)                                                                                                                                                                               
|            | 
|32.2        |  | Section 1350 Certification of Chief Financial Officer (Filed herewith)                                                                                                                                                                               



|* | Management compensatory contracts.
|- | ----------------------------------

Hemagen will provide shareholders with any exhibit upon the payment of a specified reasonable fee, which fee shall be limited to Hemagens reasonable expenses in furnishing such exhibit.



26



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##### Table of Contents

SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



|                        |  |  |  |                           |  |                                         
|----------------------- |  |  |  | ------------------------- |  | ----------------------------------------
|Date: December 23, 2010 |  |  |  | HEMAGEN DIAGNOSTICS, INC.
|                        |  |  | 
|                        |  |  |  | By:                       |  | /s/    WILLIAM P.
HALES                 
|                        |  |  |  |                           |  | William P. Hales, Chairman of the Board,
|                        |  |  |  |                           |  | President & Chief Executive Officer     

In accordance with the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.



|                                                   |  |                                                              |  |                  
|-------------------------------------------------- |  | ------------------------------------------------------------ |  | -----------------
|Name                                               |  | Capacity                                                     |  | Date             
|                                                   |  |                                                             
|/s/    WILLIAM P.
HALES William P. Hales           |  | Chairman of the Board, President and Chief Executive Officer |  | December 23, 2010
|                                                   |  |                                                             
|/s/    ALAN S.
COHEN Alan S. Cohen                 |  | Director                                                     |  | December 23, 2010
|                                                   |  |                                                             
|/s/    EDWARD T.
LUTZ Edward T. Lutz               |  | Director                                                     |  | December 23, 2010
|                                                   |  |                                                             
|/s/    CATHERINE M.
DAVIDSON Catherine M. Davidson |  | Principal Financial Officer and Principal Accounting Officer |  | December 23, 2010



27



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##### Table of Contents

|                                                                                                               |  |  |     | 
|-------------------------------------------------------------------------------------------------------------- |  |  | --- | 
|MANAGEMENTS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING                                               |  |  | F-2 | 
|                                                                                                               | 
|REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                                                        |  |  | F-3 | 
|                                                                                                               | 
|CONSOLIDATED FINANCIAL STATEMENTS:                                                                             |  |  |     | 
|                                                                                                               | 
|CONSOLIDATED BALANCE SHEETS AT SEPTEMBER 30, 2010 AND 2009                                                     |  |  | F-4 | 
|                                                                                                               | 
|CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME FOR THE YEARS ENDED SEPTEMBER 30, 2010 AND 2009 |  |  | F-6 | 
|                                                                                                               | 
|CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS DEFICIT FOR THE YEARS ENDED SEPTEMBER 30, 2010 AND 2009    |  |  | F-7 | 
|                                                                                                               | 
|CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED SEPTEMBER 30, 2010 AND 2009                          |  |  | F-8 | 
|                                                                                                               | 
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                                                     |  |  | F-9 | 



F-1



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##### Table of Contents

MANAGEMENTS REPORT ON INTERNAL CONTROL OVER FINANCIAL
REPORTING

The Companys management is responsible for establishing and maintaining adequate internal control over
financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934, as amended). The Companys internal control over financial reporting includes those policies and procedures that (i) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation
of consolidated financial statements in accordance with GAAP and that receipts and expenditures of the Company are being made only in accordance with the authorizations of management and the Directors of the Company; and (iii) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Companys assets that could have a material effect on the Consolidated Financial Statements.

Because of its inherent limitations, internal control over financial reporting can only provide reasonable, but not absolute assurance
with respect to financial statement preparation and presentation and may not prevent or detect misstatements. Further, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree or compliance with the policies or procedures may deteriorate.

As
required by Section 404 of the Sarbanes Oxley Act of 2002, management assessed the effectiveness of the Companys internal control over financial reporting as of September 30, 2010. Managements assessment is based on the
criteria established in the Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. In assessing the internal controls, management is aware that there is a lack of segregation of
duties due to the small number of employees within the financial and administrative functions of the Company. As a result of the limitations of the resources and segregation of duties, management acknowledges a material weakness in internal control
over financial reporting. As a result, the Companys Chief Executive Officer and Principal Financial Officer concluded that, as of September 30, 2010, the Companys internal controls over financial reporting were ineffective. This
material weakness has not been remediated.

This annual report does not include an attestation report of the Companys
registered public accounting firm regarding internal control over financial reporting. Managements report was not subject to attestation by the Companys registered public accounting firm pursuant to temporary rules of the Securities and
Exchange Commission that permit the Company to provide only managements report in this annual report.

/s/    WILLIAM P.
HALESWilliam P. Hales President and Chief Executive Officer December 23,
2010/s/    CATHERINE M.
DAVIDSONCatherine M. Davidson Principal Financial Officer December 23,
2010




F-2



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##### Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Hemagen Diagnostics, Inc.

We have audited the accompanying consolidated balance
sheets of Hemagen Diagnostics, Inc. and subsidiaries (the Company) as of September 30, 2010 and 2009, and the related consolidated statements of operations and comprehensive income, changes in stockholders deficit, and cash
flows for the years then ended. These consolidated financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. We were not engaged to perform an audit of the Companys internal control
over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial
statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated
financial position of Hemagen Diagnostics, Inc. and subsidiaries as of September 30, 2010 and 2009, and the results of its operations and cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.

/s/ Stegman and Company

Baltimore, Maryland

December 23, 2010



F-3



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##### Table of Contents

Hemagen Diagnostics, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS

As of September 30, 2010 and 2009



|                                                                                                                                                  |  |      |           |  |      |   |           | 
|------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | --------- |  | ---- | - | --------- | 
|                                                                                                                                                  |  | 2010 |           |  | 2009 |  
|ASSETS                                                                                                                                            |  |      |           |  |      |   |           | 
|                                                                                                                                                  |  |     
|CURRENT ASSETS:                                                                                                                                   |  |      |           |  |      |   |           | 
|Cash                                                                                                                                              |  | $    | 151,743   |  |      | $ | 156,314   | 
|Accounts Receivable, less allowance for doubtful accounts of $60,016 and $69,973 at September 30, 2010 and 2009,
respectively                     |  |      | 669,892   |  |      |   | 630,020   | 
|Inventories, net                                                                                                                                  |  |      | 1,386,317 |  |      |   | 1,703,226 | 
|Current Portion of Note Receivable                                                                                                                |  |      | 210,000   |  |      |   | 210,000   | 
|Prepaid expenses and other current assets                                                                                                         |  |      | 352,534   |  |      |   | 120,464   | 
|                                                                                                                                                  |  |      |           |  |      |   |           | 
|Total current assets                                                                                                                              |  |      | 2,770,486 |  |      |   | 2,820,024 | 
|                                                                                                                                                  |  |      |           |  |      |   |           | 
|PROPERTY AND EQUIPMENT;net of accumulated depreciation and amortization of $6,297,906 and $6,143,356 at
September 30, 2010 and 2009, respectively |  |      | 525,658   |  |      |   | 599,008   | 
|                                                                                                                                                  |  |      |           |  |      |   |           | 
|OTHER ASSETS:                                                                                                                                     |  |      |           |  |      |   |           | 
|Long term portion of Note Receivable                                                                                                              |  |      | 35,000    |  |      |   | 245,000   | 
|Other Assets                                                                                                                                      |  |      | 40,250    |  |      |   | 54,300    | 
|                                                                                                                                                  |  |      |           |  |      |   |           | 
|Total other assets                                                                                                                                |  |      | 75,250    |  |      |   | 299,300   | 
|                                                                                                                                                  |  |      |           |  |      |   |           | 
|Total Assets                                                                                                                                      |  | $    | 3,371,394 |  |      | $ | 3,718,332 | 
|                                                                                                                                                  |  |      |           |  |      |   |           | 

The accompanying notes are an integral part of these financial statements



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##### Table of Contents

Hemagen Diagnostics, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS

As of September 30, 2010 and 2009



|                                                                                                                                                                 |  |      |             |   |      |   |             |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ----------- | - | ---- | - | ----------- | -
|                                                                                                                                                                 |  | 2010 |             |   | 2009 |  
|LIABILITIES AND STOCKHOLDERS DEFICIT                                                                                                                            |  |      |             |   |      |   |             |  
|                                                                                                                                                                 |  |     
|CURRENT LIABILITIES:                                                                                                                                             |  |      |             |   |      |   |             |  
|Accounts payable and accrued liabilities                                                                                                                         |  | $    | 743,170     |   |      | $ | 969,135     |  
|Revolving line of credit                                                                                                                                         |  |      | 398,000     |   |      |   | 400,000     |  
|Deferred revenue                                                                                                                                                 |  |      | 27,337      |   |      |   | 51,830      |  
|Note payableItaú Bank                                                                                                                                           |  |      |            |   |      |   | 28,859      |  
|                                                                                                                                                                 |  |      |             |   |      |   |             |  
|Total current liabilities                                                                                                                                        |  |      | 1,168,507   |   |      |   | 1,449,824   |  
|                                                                                                                                                                 |  |      |             |   |      |   |             |  
|LONG-TERM LIABILITIES:                                                                                                                                           |  |      |             |   |      |   |             |  
|Senior subordinated secured convertible notes                                                                                                                    |  |      | 4,049,858   |   |      |   | 4,049,858   |  
|                                                                                                                                                                 |  |      |             |   |      |   |             |  
|Total Long-Term Liabilities                                                                                                                                      |  |      | 4,049,858   |   |      |   | 4,049,858   |  
|                                                                                                                                                                 |  |      |             |   |      |   |             |  
|Total liabilities                                                                                                                                                |  |      | 5,218,365   |   |      |   | 5,499,682   |  
|                                                                                                                                                                 |  |      |             |   |      |   |             |  
|STOCKHOLDERS DEFICIT                                                                                                                                            |  |      |             |   |      |   |             |  
|Preferred stock, $0.01 par value1,000,000 shares authorized; none issued                                                                                        |  |      |            |   |      |   |            |  
|Common stock, $0.01 par value45,000,000 shares authorized; 15,565,281 and 15,345,281 shares issued and outstanding at
September 30, 2010 and 2009, respectively |  |      | 155,652     |   |      |   | 153,452     |  
|Additional paid-in capital                                                                                                                                       |  |      | 22,959,539  |   |      |   | 22,919,932  |  
|Accumulated deficit                                                                                                                                              |  |      | (24,890,439 | ) |      |   | (24,734,125 | )
|Less treasury stock at cost; 100,000 shares at September 30, 2010 and 2009, respectively                                                                         |  |      | (89,637     | ) |      |   | (89,637     | )
|Accumulated other comprehensive losscurrency translation loss                                                                                                   |  |      | 17,914      |   |      |   | (30,972     | )
|                                                                                                                                                                 |  |      |             |   |      |   |             |  
|Total stockholders deficit                                                                                                                                      |  |      | (1,846,971  | ) |      |   | (1,781,350  | )
|                                                                                                                                                                 |  |      |             |   |      |   |             |  
|Total liabilities and stockholders deficit                                                                                                                      |  | $    | 3,371,394   |   |      | $ | 3,718,332   |  
|                                                                                                                                                                 |  |      |             |   |      |   |             |  

The accompanying notes are an integral part of these financial statements



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##### Table of Contents

Hemagen Diagnostics, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

For The Years Ended September 30, 2010 and 2009



|                                                                                                                   |  |      |            |   |      |   |            |  
|------------------------------------------------------------------------------------------------------------------ |  | ---- | ---------- | - | ---- | - | ---------- | -
|                                                                                                                   |  | 2010 |            |   | 2009 |  
|Net sales                                                                                                          |  | $    | 5,220,170  |   |      | $ | 5,418,928  |  
|Cost of sales                                                                                                      |  |      | 2,863,965  |   |      |   | 3,346,542  |  
|                                                                                                                   |  |      |            |   |      |   |            |  
|Gross Profit                                                                                                       |  |      | 2,356,205  |   |      |   | 2,072,386  |  
|Operating Expenses:                                                                                                |  |      |            |   |      |   |            |  
|Selling, general and administrative                                                                                |  |      | 2,095,035  |   |      |   | 2,328,946  |  
|Research and development                                                                                           |  |      | 25,224     |   |      |   | 92,154     |  
|                                                                                                                   |  |      |            |   |      |   |            |  
|Total operating expenses                                                                                           |  |      | 2,120,259  |   |      |   | 2,421,100  |  
|                                                                                                                   |  |      |            |   |      |   |            |  
|Total operating income (loss) from continuing operations                                                           |  |      | 235,946    |   |      |   | (348,714   | )
|Other income (expenses)                                                                                            |  |      |            |   |      |   |            |  
|Interest expense, (net), including $70,595, of debt discount amortization for the period ending September 30,
2009 |  |      | (332,262   | ) |      |   | (404,087   | )
|Gain on Sale of Assets                                                                                             |  |      | 26,290     |   |      |   | 43,117     |  
|Other income (expense)                                                                                             |  |      | 3,291      |   |      |   | 556        |  
|                                                                                                                   |  |      |            |   |      |   |            |  
|Total other expense                                                                                                |  |      | (302,681   | ) |      |   | (360,414   | )
|                                                                                                                   |  |      |            |   |      |   |            |  
|Net loss, before income taxes, from continuing operations                                                          |  |      | (66,735    | ) |      |   | (709,128   | )
|Income tax expense                                                                                                 |  |      | (89,579    | ) |      |   | (20,821    | )
|                                                                                                                   |  |      |            |   |      |   |            |  
|Net loss, from continuing operations                                                                               |  |      | (156,314   | ) |      |   | (729,949   | )
|(Loss) income, from Discontinued Operations                                                                        |  |      |           |   |      |   | (78,199    | )
|                                                                                                                   |  |      |            |   |      |   |            |  
|Net (loss) income                                                                                                  |  |      | (156,314   | ) |      |   | (808,148   | )
|Other comprehensive (loss) income, net of tax:                                                                     |  |      |            |   |      |   |            |  
|Foreign currency translation adjustment                                                                            |  |      | 48,886     |   |      |   | 69,118     |  
|                                                                                                                   |  |      |            |   |      |   |            |  
|Other comprehensive income (loss)                                                                                  |  |      | 48,886     |   |      |   | 69,118     |  
|                                                                                                                   |  |      |            |   |      |   |            |  
|Comprehensive (loss) income                                                                                        |  | $    | (107,428   | ) |      | $ | (739,030   | )
|                                                                                                                   |  |      |            |   |      |   |            |  
|Net (loss) per share, from continuing operationsBasic                                                             |  | $    | (0.01      | ) |      | $ | (0.05      | )
|                                                                                                                   |  |      |            |   |      |   |            |  
|Net (loss) per share, from continuing operationsDiluted                                                           |  | $    | (0.01      | ) |      | $ | (0.05      | )
|                                                                                                                   |  |      |            |   |      |   |            |  
|Net income (loss) per share, from discontinued operationsBasic                                                    |  | $    | (0.00      | ) |      | $ | (0.01      | )
|                                                                                                                   |  |      |            |   |      |   |            |  
|Net income (loss) per share, from discontinued operationsDiluted                                                  |  | $    | (0.00      | ) |      | $ | (0.01      | )
|                                                                                                                   |  |      |            |   |      |   |            |  
|Net income (loss) per shareBasic                                                                                  |  | $    | (0.01      | ) |      | $ | (0.05      | )
|                                                                                                                   |  |      |            |   |      |   |            |  
|Net income (loss) per shareDiluted                                                                                |  | $    | (0.01      | ) |      | $ | (0.05      | )
|                                                                                                                   |  |      |            |   |      |   |            |  
|Weighted average common shares used in the calculation of net (loss) income per shareBasic                        |  |      | 15,454,103 |   |      |   | 15,234,651 |  
|                                                                                                                   |  |      |            |   |      |   |            |  
|Weighted average common shares used in the calculation of net (loss) income per shareDiluted                      |  |      | 15,454,103 |   |      |   | 15,234,651 |  
|                                                                                                                   |  |      |            |   |      |   |            |  

The accompanying notes are an integral part of these financial statements



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##### Table of Contents

Hemagen Diagnostics, Inc. and Subsidiaries

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS DEFICIT

For the Years Ended September 30, 2010 and 2009



|                                        |  |              |            |  |                          |   |         |                    |  |   |                                   |  |  |                |             |   |                           |   |          |   |  |  |          |   |  |   |         |   |  |   |            |  
|--------------------------------------- |  | ------------ | ---------- |  | ------------------------ | - | ------- | ------------------ |  | - | --------------------------------- |  |  | -------------- | ----------- | - | ------------------------- | - | -------- | - |  |  | -------- | - |  | - | ------- | - |  | - | ---------- | -
|                                        |  | Common Stock |            |  | AdditionalPaid inCapital |   |         | AccumulatedDeficit |  |   | AccumulatedOtherComprehensiveLoss |  |  | Treasury Stock |             |   | TotalStockholdersDeficit |  
|                                        |  | Shares       |            |  | Par Value                |   |         |                    |  |   | Shares                            |  |  | Cost           |             |  
|Balance as of October 1, 2008           |  |              | 15,325,281 |  |                          | $ | 153,252 |                    |  | $ | 22,867,507                        |  |  | $              | (23,925,977 | ) |                           | $ | (100,090 | ) |  |  | (100,000 | ) |  | $ | (89,637 | ) |  | $ | (1,094,945 | )
|Net Income                              |  |              |           |  |                          |   |        |                    |  |   |                                  |  |  |                | (808,148    | ) |                           |   |         |   |  |  |         |   |  |   |        |   |  |   | (808,148   | )
|Foreign Exchange translation adjustment |  |              |           |  |                          |   |        |                    |  |   |                                  |  |  |                |            |   |                           |   | 69,118   |   |  |  |         |   |  |   |        |   |  |   | 69,118     |  
|Stock Based Compensation                |  |              |           |  |                          |   |        |                    |  |   | 51,075                            |  |  |                |            |   |                           |   |         |   |  |  |         |   |  |   |        |   |  |   | 51,075     |  
|                                        |  |              |            |  |                          |   |         |                    |  |   |                                   |  |  |                |             |   |                           |   |          |   |  |  |          |   |  |   |         |   |  |   |            |  
|Balance at September 30, 2009           |  |              | 15,345,281 |  |                          | $ | 153,452 |                    |  | $ | 22,919,932                        |  |  | $              | (24,734,125 | ) |                           | $ | (30,972  | ) |  |  | (100,000 | ) |  | $ | (89,637 | ) |  | $ | (1,781,350 | )
|Net Loss                                |  |              |            |  |                          |   |         |                    |  |   |                                   |  |  |                | (156,314    | ) |                           |   |          |   |  |  |          |   |  |   |         |   |  |   | (156,314   | )
|Foreign Exchange translation adjustment |  |              |            |  |                          |   |         |                    |  |   |                                   |  |  |                |             |   |                           |   | 48,886   |   |  |  |          |   |  |   |         |   |  |   | 48,886     |  
|Stock Based Compensation                |  |              |            |  |                          |   |         |                    |  |   | 25,957                            |  |  |                |             |   |                           |   |          |   |  |  |          |   |  |   |         |   |  |   | 25,957     |  
|Issuance of Common Stock                |  |              | 220,000    |  |                          |   | 2,200   |                    |  |   | 13,650                            |  |  |                |             |   |                           |   |          |   |  |  |          |   |  |   |         |   |  |   | 15,850     |  
|                                        |  |              |            |  |                          |   |         |                    |  |   |                                   |  |  |                |             |   |                           |   |          |   |  |  |          |   |  |   |         |   |  |   |            |  
|Balance at September 30, 2010           |  |              | 15,565,281 |  |                          | $ | 155,652 |                    |  | $ | 22,959,539                        |  |  | $              | (24,890,440 | ) |                           | $ | 17,914   |   |  |  | (100,000 | ) |  | $ | (89,637 | ) |  | $ | (1,846,971 | )
|                                        |  |              |            |  |                          |   |         |                    |  |   |                                   |  |  |                |             |   |                           |   |          |   |  |  |          |   |  |   |         |   |  |   |            |  

The accompanying notes are an integral part of these financial statements



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##### Table of Contents

Hemagen Diagnostics, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOW

For The Years Ended September 30, 2010 and 2009



|                                                                                    |  |      |          |   |      |   |          |  
|----------------------------------------------------------------------------------- |  | ---- | -------- | - | ---- | - | -------- | -
|                                                                                    |  | 2010 |          |   | 2009 |  
|Cash flows from operating activities                                                |  |      |          |   |      |   |          |  
|Net (loss) income                                                                   |  | $    | (156,314 | ) |      | $ | (808,148 | )
|Adjustments to reconcile net income (loss) to net cash used in operating activities |  |      |          |   |      |   |          |  
|Depreciation and amortization                                                       |  |      | 163,943  |   |      |   | 156,736  |  
|Amortization of debt discount                                                       |  |      |         |   |      |   | 70,595   |  
|Stock based compensation                                                            |  |      | 41,807   |   |      |   | 52,625   |  
|Inventory obsolescence                                                              |  |      |         |   |      |   | 228,199  |  
|Bad debt expense                                                                    |  |      | (9,724   | ) |      |   | 32,611   |  
|Gain on the sale of assets                                                          |  |      | (26,290  | ) |      |   | (43,117  | )
|Changes in operating assets and liabilities:                                        |  |      |          |   |      |   |          |  
|Accounts receivable                                                                 |  |      | (30,148  | ) |      |   | 203,675  |  
|Inventories                                                                         |  |      | 302,026  |   |      |   | 105,624  |  
|Prepaid expenses and other assets                                                   |  |      | (218,021 | ) |      |   | 227,332  |  
|Accounts payable and accrued liabilities                                            |  |      | (225,965 | ) |      |   | (158,464 | )
|Deferred revenue                                                                    |  |      | (24,493  | ) |      |   | (50,851  | )
|                                                                                    |  |      |          |   |      |   |          |  
|Net cash provided by operating activities                                           |  |      | (183,179 | ) |      |   | 16,817   |  
|                                                                                    |  |      |          |   |      |   |          |  
|Cash flows from investing activities                                                |  |      |          |   |      |   |          |  
|Purchase of property and equipment                                                  |  |      | (74,142  | ) |      |   | (114,888 | )
|Proceeds from the sale of assets                                                    |  |      | 40,911   |   |      |   | 51,805   |  
|Payments received on Note Receivable                                                |  |      | 210,000  |   |      |   | 210,000  |  
|                                                                                    |  |      |          |   |      |   |          |  
|Net cash provided (used) by investing activities                                    |  |      | 176,769  |   |      |   | 146,917  |  
|                                                                                    |  |      |          |   |      |   |          |  
|Cash flows from financing activities                                                |  |      |          |   |      |   |          |  
|Net (payments) borrowings on revolving line of credit                               |  |      | (2,000   | ) |      |   | (100,000 | )
|Payments made on Itau Bank Note                                                     |  |      | (28,859  | ) |      |   | (122,864 | )
|                                                                                    |  |      |          |   |      |   |          |  
|Net cash (used) provided by financing activities                                    |  |      | (30,859  | ) |      |   | (222,864 | )
|                                                                                    |  |      |          |   |      |   |          |  
|Effect of exchange rates on cash and cash equivalents                               |  |      | 32,698   |   |      |   | 116,645  |  
|                                                                                    |  |      |          |   |      |   |          |  
|Net change in cash and cash equivalents                                             |  |      | (4,571   | ) |      |   | 57,515   |  
|                                                                                    |  |      |          |   |      |   |          |  
|Cash, beginning of year                                                             |  |      | 156,314  |   |      |   | 98,799   |  
|                                                                                    |  |      |          |   |      |   |          |  
|Cash, end of year                                                                   |  | $    | 151,743  |   |      | $ | 156,314  |  
|                                                                                    |  |      |          |   |      |   |          |  

The accompanying notes are an integral part of these financial statements



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##### Table of Contents

Hemagen Diagnostics, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For The Years Ending September 30, 2010 and 2009

NOTE 1NATURE OF BUSINESS

Hemagen Diagnostics, Inc. (the Company), a Delaware company, is a biotechnology company
that develops, manufactures, and markets more than 68 FDA-cleared proprietary medical diagnostic test kits. Hemagen has two different product lines. The Virgo® product line consists of diagnostic test kits that are used to aid in the diagnosis of certain autoimmune and infectious diseases, using ELISA,
Immunofluorescence, and hemagglutination technology. The Analyst®product line is an FDA-cleared benchtop
clinical chemistry analyzer system, including consumables, that is used to measure important constituents in human and animal blood. In the United States, the Company sells its products through distributors and directly to physicians, veterinarians,
clinical laboratories and blood banks and on a private-label basis through multinational distributors. Internationally, the Company sells its products primarily through distributors. The Company was incorporated in 1985 and became a public company
in 1993.

NOTE 2FINANCIAL CONDITION

At September 30, 2010, Hemagen had $151,743 of unrestricted cash, working capital of $1,601,979 and a current ratio of 2.37 to 1.0. Hemagen currently has a revolving line of credit with a bank for
the purpose of financing working capital needs as required. The line of credit currently provides for borrowings up to $500,000, at an annual interest rate of the prime rate plus 3/4% with an interest rate floor of 5.5%. As of December 18,
2010, there was $398,000 outstanding on the line. Hemagen believes that cash flow from operations and cash on hand at September 30, 2010 will be sufficient to finance its operations for fiscal 2010. The companys ability to borrow on the
line is based on a borrowing base calculation dependent upon domestic receivables under 90 days and inventory. At November 30, 2010, the amount available to Hemagen to borrow against the line based on the calculation was $425,727. The line of
credit comes due on December 31, 2010 and the Company intends to renew the line with the bank at that time. However, Hemagen can give no assurances that it will have sufficient cash to repay the line of credit if it is not renewed or finance
its operations. Hemagen has no off-balance sheet financing arrangements.

NOTE 3SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company; its wholly owned subsidiaries, Reagents Applications, Inc. (RAI) and Hemagen Diagnostics
Commercio, Importaco & Exporataco, Ltd. (HDC). All significant intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

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

Foreign Currency Translation

The financial position and results of operations of HDC are measured using HDCs local currency, the Brazilian Real, as the functional currency. Revenues and expenses of HDC have been translated into
U.S. dollars



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##### Table of Contents

Hemagen Diagnostics, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTSCONTINUED

For The Years Ending September 30, 2010 and 2009



at average exchange rates prevailing during the year. Assets and liabilities have been translated at the rates of exchange on the balance sheet date. The resulting translation gain and loss
adjustments are recorded directly as a separate component of stockholders equity.

Cash Equivalents

The Company considers all investments with original maturities of three months or less at the date of purchase to be cash equivalents. The
Company may have amounts in cash accounts in excess of federally insured limits throughout the year.

Accounts Receivable

A majority of the Companys accounts receivable are due from distributors (domestic and international), hospitals, universities, and
physician and veterinary offices and other entities in the medical field. Credit is extended based on evaluation of a customers financial condition and, generally, collateral is not required. Accounts receivable are stated at amounts due from
customers net of an allowance for doubtful accounts. Accounts with outstanding balances for longer than the contractual payment terms are considered past due. The Company determines its allowance by considering a number of factors, including the
length of time trade accounts receivable are past due, the Companys previous loss history, the customers current ability to pay its obligation to the Company, and the condition of the general economy and the industry as a whole. The
Company writes off accounts receivable when they become uncollectible, and payments subsequently received on such receivables are posted against the allowance for doubtful accounts. The balance of the allowance for doubtful accounts was $60,016 and
$69,973 on September 30, 2010 and 2009, respectively. The Company does not accrue interest on accounts receivable past due.

Inventories

Inventories
are stated at the lower of cost, determined on the first-in, first-out basis, or market. Inventory reserves are established for obsolescence based on expiration dating of perishable products and excess levels of inventory on hand. The Company had
$738,972 and $750,488 of inventory reserves as of September 30, 2010 and 2009, respectively.

Long-lived Assets

The Company reviews the carrying values of its long-lived assets for possible impairment annually or whenever events or changes in
circumstances indicate that the carrying amount of the assets may not be recoverable. If the review indicates that long-lived assets are not recoverable (i.e., the carrying amount is less than the future projected undiscounted cash flows), the
carrying amount would be reduced to fair value and a charge to income would be recorded. Hemagen did not have any long-lived assets whose balances needed to be reduced.

Property and Equipment

Property and equipment is stated at net book value.
Depreciation is provided on a straight-line basis over the estimated useful lives of the related assets, which range from 3 to 10 years. Expenditures for repairs and maintenance are expensed as incurred.



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##### Table of Contents

Hemagen Diagnostics, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTSCONTINUED

For The Years Ending September 30, 2010 and 2009



Other Assets

Other assets, net at September 30, 2010 and 2009 consists of product registration certificates that are being amortized over their 5 year life, security deposits relating to the facilities that are
being leased, and the long term portion of the Note Receivable.

Income Taxes

The Company follows the liability method of accounting for income taxes. Under this method, deferred tax liabilities and assets are
recognized for the expected future tax consequences of temporary differences between the carrying amount and the tax basis of assets and liabilities at each year-end based on enacted tax laws and statutory tax rates applicable to the periods in
which the differences are expected to affect taxable income. A valuation allowance is established when necessary to reduce deferred tax assets to the amount expected to be realized.

Revenue Recognition

Revenues from the sale of products are recognized when
shipped, all contractual obligations have been satisfied, and the collection of the resulting receivable is reasonably assured. Revenues from product service contracts, which are based on their relative fair value, are recognized ratably over the
term of the contract. Losses are provided for at the time that management determines that contract costs will exceed related revenues. The portion of product service contracts not complete at the balance sheet date is included in deferred revenue.

Stock-Based Compensation

At September 30, 2010, options for the purchase of 2,932,208 shares of common stock with a weighted average exercise price of $0.25 were outstanding. During the twelve months ended September 30,
2010, options to purchase 1,955,000 shares at a weighted-average exercise price of $.15 per share were granted. During the twelve months ended September 30, 2010, no options were exercised and 30,000 options expired or were forfeited.

We use the Black-Scholes option pricing model to determine the fair value of our awards on the date of grant. The fair value
of each option award is estimated on the date of grant using a Black-Scholes option-pricing formula that uses the assumptions noted in the table and discussion that follows:



|                        |  |                            |  |              
|----------------------- |  | -------------------------- |  | -------------
|                        |  | Period EndingSeptember 30,
|                        |  | 2010                       |  | 2009         
|Dividend yield          |  |                           |  |             
|Expected volatility     |  | 125.86%                    |  | 95%  120%   
|Risk-free interest rate |  | 3.34%                      |  | 1.67%  3.16%
|Expected life in years  |  | 10                         |  | 1.5  10     

We will
reconsider the use of the Black-Scholes model if additional information becomes available in the future that indicates another model would be more appropriate, or if grants issued in future periods have characteristics that cannot be reasonably
estimated under this model.

We incur share-based compensation expense over the requisite service period. We estimate
forfeitures and only record expense on shares we expect to vest.



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##### Table of Contents

Hemagen Diagnostics, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTSCONTINUED

For The Years Ending September 30, 2010 and 2009



As of September 30, 2010, there was approximately $116,049 of unrecognized
compensation cost related to share-based compensation arrangements that will be fully amortized within four years. The Company had 105,000 options issued and exercisable as of September 30, 2010 with an aggregate intrinsic value of $6,300.

Research and Development Costs

All costs incurred to research, design and develop products are considered research and development costs and are charged to expense as incurred.

Fair Value of Financial Instruments

Financial instruments include cash and
cash equivalents, short-term investments, customer receivables, accounts payable, certain other accrued liabilities and long-term debt. The fair value of long-term debt approximates the carrying amount based on the current rate offered to the
Company for debt of similar remaining maturities. The carrying values of all other financial instruments are reasonable estimates of their values.

Advertising Expenses

Costs of advertising, which also include promotional
expenses, are expensed as incurred. Advertising expenses for fiscal 2010 and 2009 were approximately $7,404 and $21,106, respectively.

Shipping and Handling

The cost of shipping products to customers is included in cost of goods sold. Amounts billed to a customer in a sale transaction related
to shipping and handling are classified as revenue.

Recent Accounting Pronouncements

The Subsequent Events Topic of the FASB ASC establishes general standards of accounting for, and disclosure of, events that occur after
the balance sheet date but before financial statements are issued or are available to be issued. This accounting standard sets forth the period after the balance sheet date during which management of a reporting entity should evaluate events or
transactions that may occur for potential recognition or disclosure in the financial statements. This standard also sets forth the circumstances under which an entity should recognize events or transactions occurring after the balance sheet
date in its financial statements and the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. This accounting standard is effective for interim or annual periods ending after June 15,
2009. In February 2010, the FASB issued ASU No. 2010-09 which amended ASC 855. This amendment, which was effective upon issuance, removed the requirement for SEC registrants to disclose the date through which such registrants have
evaluated subsequent events.

In October 2009, the FASB issued ASU 2009-13, Multiple Deliverable Revenue Arrangements,
(ASU 2009-13), which applies to all deliverables in contractual arrangements in which a vendor will perform multiple revenue-generating activities. In April 2010, the FASB issued ASU 2010-17, Revenue RecognitionMilestone
Method, (ASU 2010-17), which defines a milestone and determines when it may be appropriate to apply the milestone method of revenue recognition for research or development transactions. These pronouncements are codified in ASC Topic
605, Revenue Recognition, and will be effective for our fiscal year that begins January 1, 2011. These pronouncements may be applied prospectively or retrospectively, and early adoption is permitted. We are evaluating the impact that adoption
of ASU 2009-13 and ASU 2010-17 may have on our consolidated financial statements.



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Hemagen Diagnostics, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTSCONTINUED

For The Years Ending September 30, 2010 and 2009



ASU 2010-01, Equity (Topic 505)Accounting for Distributions to
Shareholders with Components of Stock and Cash. ASU 2010-01 was issued in January 2010 and clarifies that the stock portion of a distribution to shareholders that allows them to elect to receive cash or stock with a potential limitation on
the total amount of cash that all shareholders can elect to receive in the aggregate is considered a share issuance that is reflected in earnings per share prospectively and is not a stock dividend. ASU 2010-01 is effective for interim and annual
periods ending on or after December 15, 2009, and should be applied on a retrospective basis. ASU 2010-01 had no impact on our consolidated financial statements.

ASU 2010-06, Improving Disclosure about Fair Value Measurements, was issued in January 2010 and requires additional disclosures regarding fair value measurements, amends disclosures
about post-retirement benefit plan assets and provides clarification regarding the level of disaggregation of fair value disclosures by investment class. The ASU is effective for interim and annual reporting periods beginning after December 15,
2009, except for certain Level 3 activity disclosure requirements that will be effective for reporting periods beginning after December 15, 2010. Adoption of ASU 2010-06 had no material impact on our consolidated financial statements.

NOTE 4RELATED PARTY TRANSACTIONS

William P. Hales, the Chairman of the Board of Directors and President and Chief Executive Officer of the Company owns $884,450 face value of the senior subordinated secured convertible notes due
September 30, 2014. Refer to Note 10 for a description of the senior notes.

NOTE 5INVENTORIES

Inventories at September 30, consist of the following:



|                 |  |      |           |   |      |   |           |  
|---------------- |  | ---- | --------- | - | ---- | - | --------- | -
|                 |  | 2010 |           |   | 2009 |  
|Raw materials    |  | $    | 1,171,982 |   |      | $ | 1,350,828 |  
|Work-in-process  |  |      | 137,035   |   |      |   | 164,183   |  
|Finished goods   |  |      | 816,272   |   |      |   | 938,703   |  
|                 |  |      |           |   |      |   |           |  
|                 |  |      | 2,125,289 |   |      |   | 2,453,714 |  
|Less reserves    |  |      | (738,972  | ) |      |   | (750,488  | )
|                 |  |      |           |   |      |   |           |  
|Inventories, net |  | $    | 1,386,317 |   |      | $ | 1,703,226 |  
|                 |  |      |           |   |      |   |           |  

NOTE 6PROPERTY AND EQUIPMENT

Property and equipment at September 30, consists of the following:



|                                               |  |      |            |   |      |   |            |  
|---------------------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | -
|                                               |  | 2010 |            |   | 2009 |  
|Furniture and equipment                        |  | $    | 6,730,072  |   |      | $ | 6,665,360  |  
|Leasehold improvements                         |  |      | 93,492     |   |      |   | 77,004     |  
|                                               |  |      |            |   |      |   |            |  
|                                               |  |      | 6,823,564  |   |      |   | 6,742,364  |  
|Less accumulated depreciation and amortization |  |      | (6,297,906 | ) |      |   | (6,143,356 | )
|                                               |  |      |            |   |      |   |            |  
|Property and equipment, net                    |  | $    | 525,658    |   |      | $ | 599,008    |  
|                                               |  |      |            |   |      |   |            |  

Depreciation and amortization expense relating to property and equipment was $163,943 and $156,736 for the
years ended September 30, 2010 and 2009, respectively.



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##### Table of Contents

Hemagen Diagnostics, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTSCONTINUED

For The Years Ending September 30, 2010 and 2009



NOTE 7ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities include the following at September 30:



|                                         |  |      |         |  |      |   |         | 
|---------------------------------------- |  | ---- | ------- |  | ---- | - | ------- | 
|                                         |  | 2010 |         |  | 2009 |  
|Accounts payabletrade                   |  | $    | 308,601 |  |      | $ | 560,113 | 
|Accrued professional fees                |  |      | 21,050  |  |      |   | 47,111  | 
|Accrued vacation                         |  |      | 86,758  |  |      |   | 81,375  | 
|Accrued taxes                            |  |      | 142,638 |  |      |   | 99,081  | 
|Accrued interest                         |  |      | 38,335  |  |      |   | 38,355  | 
|Accrued other                            |  |      | 145,788 |  |      |   | 143,100 | 
|                                         |  |      |         |  |      |   |         | 
|Accounts payable and accrued liabilities |  | $    | 743,170 |  |      | $ | 969,135 | 
|                                         |  |      |         |  |      |   |         | 

NOTE 8LINE OF CREDIT

The Company has a revolving line of credit with a bank for the purpose of financing working capital needs as required which pursuant to its original terms was scheduled to expire annually on April 1,
2010.

On February 6, 2009, the Companys bank, formerly known as Bay National Bank (now known as Bay Bank),
voluntarily entered into a Consent Order (the Consent Order) with its primary regulator, the Office of the Comptroller of Currency (the OCC). As a result, the Bank informed Hemagen that it can no longer maintain the line of
credit, and had granted Hemagen a three month extension until August 1, 2010 to relocate the line of credit.

On Friday,
July 9, 2010 Bay National Bank, Baltimore MD was closed by the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation (FDIC) was named Receiver. Simultaneously, all deposit accounts were transferred to Bay
Bank, FSB Lutherville, Maryland and the former Bay National Bank locations reopened the next business day as Bay Bank, FSB. Depositors of Bay National Bank automatically became depositors of Bay Bank, FSB.

Hemagen has maintained its relationship with Bay Bank, FSB, who granted an additional extension through December 31, 2010. At that
point, the Bank will review the Companys financial statements and determine whether or not they will extend the line. We can give no assurances that our efforts will be successful. The line of credit facility provides for borrowings up to
$500,000 at an interest rate of Prime Rate plus .75%, with an interest rate floor of 5.5%. Maximum borrowings under the loan are based on the domestic receivables and inventory of the Company. The line of credit facility has a first lien on all
assets of the Company. As of September 30, 2010, the outstanding balance on the line of credit was $398,000 with an effective interest rate of 5.50%. As of September 30, 2010, the Company was in compliance with its debt covenants.

NOTE 9NOTE PAYABLE

Hemagen Diagnostics Commercio, Importaco & Exporataco, Ltd. (HDC) had obtained notes used to finance the purchase of automated equipment that was placed into key customer accounts. As
of September 30, 2010 these notes were paid in full. The notes bore interest at 1.45% per month or 17.4% annual interest, and were to be repaid in 24 equal monthly installments. These capital notes were secured by HDC receivables at the
ratio of 50% receivable to loan value.



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##### Table of Contents

Hemagen Diagnostics, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTSCONTINUED

For The Years Ending September 30, 2010 and 2009



NOTE 10EXCHANGE OFFER

During September 2009, the Company completed an Exchange Offer of its senior subordinated secured convertible notes due on
September 30, 2009. The Company offered to exchange new, modified 8% Senior Subordinated Convertible Notes due 2014 for the outstanding 8% Senior Subordinated Secured Convertible Notes due 2009. The principal features of the Exchange Offer
included $4,049,858 principal amount of Senior Subordinated Secured Convertible Notes, due September 30, 2014, which bear interest at the rate of 8% per annum, paid quarterly, convertible by holders into Common Stock at $.35 per share. The
Company can require the conversion of these Modified Notes to Common Stock at any time after the Common Stock trades at or above $0.70 for fifteen consecutive trading days.

The Company has accounted for the Exchange Offer as though the exchange of the entire amount of $4,049,858 of the outstanding notes was effective as of September 30, 2009, because at
September 30, 2009 all of the terms and conditions for the consummation of the exchange offer had been satisfied.

The
Modified Notes are secured by a first lien on all real, tangible and intangible property except that the terms of the Modified Notes provide that the following are subordinate to (i) a credit facility that is equal to or less than Three Million
Dollars ($3,000,000), (ii) any secured financing that is greater than Two Million Dollars ($2,000,000), provided that (A) the Company provides the Holder twenty (20) business days written notice of such secured financing, and
(B) all of the funds raised in connection with such secured financing shall be used to reduce, on a pro rata basis, the Principal Amount and accrued and unpaid interest owed on the Notes, (iii) real estate financing that the Company may
incur for the purchase of a corporate facility provided that the annual mortgage payments are less than the rent expense that the Company pays in the year of such purchase for its leased facilities, and (iv) secured financing not to exceed Four
Million Dollars ($4,000,000) at any one time for the purpose of financing an acquisition by the Company of the business of another person or entity.

NOTE 11STOCKHOLDERS EQUITY

Preferred Stock

The Company is authorized to issue up to 1,000,000 shares of preferred stock, $.01 par value per share. The preferred stock may be issued
in one or more series, the terms of which may be determined at the time of issuance by the Board of Directors and may include voting rights, preferences as to dividends and liquidation, conversion and redemption rights and sinking fund provisions.
No shares of preferred stock have been issued.

Accumulated Other Comprehensive Loss

Accumulated other comprehensive income (loss) consists solely of foreign currency translation adjustments totaling $17,914 of income and
$30,972 of loss at September 30, 2010 and 2009, respectively.

Stock Options

On February 27, 2001, the shareholders voted to approve the 2001 Stock Option Plan. The 2001 Stock Option Plan provides for the grant
of incentive and nonqualified stock options for the purchase of an aggregate of 1,000,000 shares of the Companys common stock by employees, directors and consultants of the Company.

On April 25, 2007, the shareholders voted to approve the 2007 Stock Incentive Plan. Under this plan, the Board has reserved a
maximum of 1,500,000 shares for issuance pursuant to stock options, stock appreciation rights, restricted stock awards, restricted stock units and stock awards.



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##### Table of Contents

Hemagen Diagnostics, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTSCONTINUED

For The Years Ending September 30, 2010 and 2009



On April 30, 2009, the shareholders voted to amend the 2007 Stock Incentive Plan
to increase the number of shares authorized to be issued under the plan from 1,500,000 to 3,000,000.

The Compensation
Committee of the Board of Directors is responsible for the administration of both Plans. The Compensation Committee determines the term of each option, the number of shares for which each option is granted and the rate at which each option is
exercisable.

Changes in options outstanding are summarized as follows:



|                                  |  |        |            |   |                               |   |      | 
|--------------------------------- |  | ------ | ---------- | - | ----------------------------- | - | ---- | 
|                                  |  | Shares |            |   | Weighted-AverageExercisePrice |  
|Balance, October 1, 2008          |  |        | 2,464,014  |   |                               | $ | 1.11 | 
|Granted                           |  |        | 441,208    |   |                               |   | 0.18 | 
|Exercised                         |  |        |           |   |                               |   |     | 
|Cancelled or expired              |  |        | (1,898,014 | ) |                               |   | 1.28 | 
|                                  |  |        |            |   |                               |   |      | 
|Balance, September 30, 2009       |  |        | 1,007,208  |   |                               | $ | 0.24 | 
|Granted                           |  |        | 1,955,000  |   |                               |   | 0.11 | 
|Exercised                         |  |        |           |   |                               |   |     | 
|Cancelled or expired              |  |        | 30,000     |   |                               |   | 0.32 | 
|                                  |  |        |            |   |                               |   |      | 
|Balance, September 30, 2010       |  |        | 2,932,208  |   |                               |   | 0.15 | 
|                                  |  |        |            |   |                               |   |      | 
|Exercisable at September 30, 2010 |  |        | 1,031,208  |   |                               |   | 0.22 | 
|                                  |  |        |            |   |                               |   |      | 

The following table summarizes information about stock options outstanding at September 30,
2010:



|                        |  |                                        |           |  |                                                   |  |     |                                |  |  |      | 
|----------------------- |  | -------------------------------------- | --------- |  | ------------------------------------------------- |  | --- | ------------------------------ |  |  | ---- | 
|Options Outstanding     | 
|Range of ExercisePrices |  | NumberOutstanding atSeptember 30, 2010 |           |  | Weighted-AverageRemaining ContractualLife (years) |  |     | Weighted AverageExercise Price | 
|0.07  0.15             |  |                                        | 2,035,000 |  |                                                   |  | 9.6 |                                |  |  | 0.11 | 
|0.16  0.24             |  |                                        | 747,208   |  |                                                   |  | 6.5 |                                |  |  | 0.19 | 
|0.25  0.34             |  |                                        | 55,000    |  |                                                   |  | 4.3 |                                |  |  | 0.28 | 
|0.35  0.59             |  |                                        | 50,000    |  |                                                   |  | 7.6 |                                |  |  | 0.35 | 
|0.60  0.70             |  |                                        | 25,000    |  |                                                   |  | 3.4 |                                |  |  | 0.70 | 
|0.71  0.97             |  |                                        | 20,000    |  |                                                   |  | 1.4 |                                |  |  | 0.97 | 
|                        |  |                                        |           |  |                                                   |  |     |                                |  |  |      | 
|0.09  0.97             |  |                                        | 2,932,208 |  |                                                   |  | 8.6 |                                |  |  | 0.15 | 

The fair value of
each option grant was determined on the date of the grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants in 2010 and 2009:



|                        |  |         |  |              
|----------------------- |  | ------- |  | -------------
|                        |  | 2010    |  | 2009         
|Dividend yield          |  |        |  |             
|Expected volatility     |  | 125.86% |  | 95%  120%   
|Risk-free interest rate |  | 3.34%   |  | 1.67%  3.16%
|Expected life in years  |  | 10      |  | 1.5  10     



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##### Table of Contents

Hemagen Diagnostics, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTSCONTINUED

For The Years Ending September 30, 2010 and 2009



The weighted-average grant date fair value of options granted during 2010 and 2009 was
$130,177 and $40,349, respectively.

Stockholder Rights Agreement

In April 2010, the Companys Board of Directors approved a Stockholder Rights Agreement (the Agreement). Under the
Agreement the Company declared a dividend of one common stock purchase right (a Right) for each share of the Companys outstanding common stock as of April 29, 2010. Each Right entitles the holder to purchase from the Company
one share of Common Stock of the Company at a cash exercise price of $0.15 per share (the Exercise Price), subject to adjustment, under certain conditions provided in the Agreement.

The Rights become exercisable only if a person or group, as defined in Section 13(d)(3) of Securities Exchange Act of 1934, as
amended, acquires beneficial ownership of 10 percent or more of the Companys outstanding common stock or announces a tender offer that would result in beneficial ownership of 10 percent or more of the Companys outstanding common stock.

William P. Hales, the Companys Chief Executive Officer, who is a stockholder and a debt holder of the Company, is
exempt under the Agreement. The Rights, which are scheduled to Expire on April 29, 2020, are redeemable in whole at the Companys option at $0.0000001 per Right at the times and under the circumstances set forth in the Agreement. No Rights
have yet been exercised under the Agreement.

NOTE 12INCOME TAXES

For the years ended September 30, 2010 and 2009, domestic and foreign (losses) or income before income taxes from continuing
operations are as follows:



|                                                                  |  |      |          |   |      |   |          |  
|----------------------------------------------------------------- |  | ---- | -------- | - | ---- | - | -------- | -
|Years ended September 30,                                         |  | 2010 |          |   | 2009 |  
|Domestic                                                          |  | $    | (393,896 | ) |      | $ | (856,046 | )
|Foreign                                                           |  |      | 327,161  |   |      |   | 146,918  |  
|                                                                  |  |      |          |   |      |   |          |  
|Net income (loss) from continuing operations, before income taxes |  | $    | (66,735  | ) |      | $ | (709,128 | )
|                                                                  |  |      |          |   |      |   |          |  

For the fiscal years ended September 30, 2010 and 2009, the Company had current income tax expense of
approximately $89,579 and $20,821 respectively which related to foreign income tax expenses from its Brazilian subsidiary. The difference between income taxes on continuing operations provided at the Companys effective tax rate and the Federal
statutory rate is as follows:



|                                     |  |      |      |   |      |  |     |  
|------------------------------------ |  | ---- | ---- | - | ---- |  | --- | -
|Years ended September 30,            |  | 2010 |      |   | 2009 | 
|Federal tax at statutory rate        |  |      | 34   | % |      |  | 34  | %
|Valuation Allowance                  |  |      | (34  | ) |      |  | (34 | )
|Current tax expense on international |  |      |     |   |      |  |    |  
|operations                           |  |      | 31.3 |   |      |  | 8.6 |  
|                                     |  |      |      |   |      |  |     |  
|                                     |  |      | 31.3 | % |      |  | 8.6 | %
|                                     |  |      |      |   |      |  |     |  



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##### Table of Contents

Hemagen Diagnostics, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTSCONTINUED

For The Years Ending September 30, 2010 and 2009



Deferred tax assets (liabilities) are comprised of the following at September 30,
2009 and 2008:



|                                   |  |      |            |   |      |   |            |  
|---------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | -
|                                   |  | 2010 |            |   | 2009 |  
|Net operating loss carry forwards  |  | $    | 7,389,000  |   |      | $ | 7,198,000  |  
|Inventory reserve                  |  |      | 295,000    |   |      |   | 300,000    |  
|Accounts receivable reserve        |  |      | 4,000      |   |      |   | 9,000      |  
|Other                              |  |      | 89,000     |   |      |   | 68,000     |  
|                                   |  |      |            |   |      |   |            |  
|Total deferred tax assets          |  |      | 7,777,000  |   |      |   | 7,575,000  |  
|                                   |  |      |            |   |      |   |            |  
|Basis difference in fixed assets   |  |      | (32,000    | ) |      |   | (38,000    | )
|                                   |  |      |            |   |      |   |            |  
|Net deferred tax assets            |  |      | 7,745,000  |   |      |   | 7,537,000  |  
|Valuation allowance                |  |      | (7,745,000 | ) |      |   | (7,537,000 | )
|                                   |  |      |            |   |      |   |            |  
|Total reported deferred tax assets |  | $    |           |   |      | $ |           |  
|                                   |  |      |            |   |      |   |            |  

The Company has provided a valuation allowance equal to 100% of the net deferred tax asset in recognition of
the uncertainty regarding the ultimate amount of the net deferred tax asset that will be realized.

At September 30, 2010
the Company had approximately $21,731,000 of federal operating loss carry-forwards, respectively, available to offset future taxable income, which expires on various dates through 2030. Ownership changes as defined in the Internal Revenue Code may
limit the amount of net operating loss and tax credit carry-forwards that may be utilized annually. The Company also had Brazilian net operating loss carry-forwards of approximately $655,000 available to offset future Brazilian taxable income.

NOTE 13SIGNIFICANT SALES AND CONCENTRATION OF CREDIT RISK

Revenues derived from export sales, excluding sales to the companys subsidiary in Brazil, from continuing operations, amounted to
approximately $1,157,000 or 22% of total sales in 2010 and $1,378,000, or 24% of total sales in 2009. Export sales to Europe were approximately $759,000 or 14% of total sales in 2010 and $992,000 or 18% of total sales in 2009. Sales to the
Companys Brazilian subsidiary, which are eliminated in the consolidated financial statements, were approximately $1,206,000 and $1,062,000 in 2010 and 2009, respectively.

At September 30, 2010 and 2009, the Company had approximately $107,723 and $125,900 of cash in foreign bank accounts.

NOTE 14GEOGRAPHICAL INFORMATION

The Company considers its manufactured kits, tests and instruments as one operating segment, as defined under Statement of Financial Accounting Standards No. 131 Disclosures about Segments of
an Enterprise and Related Information.



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##### Table of Contents

Hemagen Diagnostics, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTSCONTINUED

For The Years Ending September 30, 2010 and 2009



The following table sets forth revenue and assets, for continuing operations, by
geographic location.



|                    |  |                |           |  |        |   |           |              |  |   |           | 
|------------------- |  | -------------- | --------- |  | ------ | - | --------- | ------------ |  | - | --------- | 
|                    |  | United States* |           |  | Brazil |   |           | Consolidated | 
|September 30, 2010: |  |                |           |  |        |   |           |              |  |   |           | 
|Revenues            |  | $              | 2,626,939 |  |        | $ | 2,593,231 |              |  | $ | 5,220,170 | 
|Long-lived assets   |  |                | 239,607   |  |        |   | 361,301   |              |  |   | 600,908   | 
|September 30, 2009: |  |                |           |  |        |   |           |              |  |   |           | 
|Revenues            |  | $              | 3,228,975 |  |        | $ | 2,189,953 |              |  | $ | 5,418,928 | 
|Long-lived assets   |  |                | 454,467   |  |        |   | 443,841   |              |  |   | 898,308   | 



|* | Includes export sales to countries other than Brazil of approximately $1,157,000 and $1,358,000 in 2010 and 2009, respectively.
|- | -------------------------------------------------------------------------------------------------------------------------------

The long-lived assets include property and equipment, intangibles, and long-term notes receivable, net of any depreciation and
amortization.

NOTE 15COMMITMENTS

The Company leases certain facilities and equipment under non-cancelable operating leases lasting through 2012. Future minimum lease commitments under the non-cancelable operating leases are as follows:



|                           |  |  |         | 
|-------------------------- |  |  | ------- | 
|Years ending September 30, |  |  |        
|2011                       |  |  | 238,889 | 
|2012                       |  |  | 181,814 | 
|2013                       |  |  |        | 
|2014                       |  |  |        | 
|2015                       |  |  |        | 

Rent expense from
continuing operations was approximately $389,000 and $357,000 for 2010 and 2009, respectively.

Employee Benefit Plans

The Company maintains a defined contribution retirement plan, which qualifies under Section 401(k) of the Internal Revenue Code,
covering substantially all employees. Participant contributions and employer matching contributions are made as defined in the 401(k) Plan agreement. The Companys policy is to contribute to the ESOP plan rather than to match 401K
contributions. As such, effective October 1, 2003, the Company created an Employee Stock Ownership Plan (ESOP) for the benefit of its employees, which has been determined by the Internal Revenue Service to be a qualified retirement plan subject
to section 4975(E)7 of the Code. The Employer has no obligations to contribute any amount under this plan except as so determined at its sole discretion. Employees are eligible to participate in the ESOP after 90 days of active employment and fully
vest in the benefits after five years of service. The Companys contributions to the ESOP were $10,000 in cash during fiscal year 2010 and 200,000 shares of common stock for fiscal year 2009. The compensation committee of the Board of Directors
approves all contributions to the ESOP plan. At September 30, 2010 and 2009, the ESOP owned approximately 792,880 shares and 485,478 shares of Hemagen common stock, respectively, that were either purchased in the open market by the ESOP, or
contributed by the company to the ESOP. As of September 30, 2010 the ESOP plan had $5,158 of cash available to purchase additional shares in the open market. The shares owned by the ESOP, approximately 792,880, represent approximately 5% of the
shares outstanding.



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##### Table of Contents

Hemagen Diagnostics, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTSCONTINUED

For The Years Ending September 30, 2010 and 2009



Directors Plan

The Company maintains a Rule 10b5-1 Stock Purchase Plan (the 10b5-1 Plan) for its Non-employee Directors for which the company deposited cash as part of the directors compensation plan. Effective
October 1, 2008, the director compensation plan changed and the Non-employee Directors now receive a $2,500 cash payment and 2,500 shares of the Companys common stock each quarter. The 10b5-1 Plan will continue to purchase shares in the
open market until the cash balance is depleted.

NOTE 16NET LOSS PER SHARE OF COMMON STOCK

Basic earnings per share excludes the effect of any dilutive options or convertible securities and is computed by dividing the net income
(loss) by the weighted average number of common shares outstanding for the period. Diluted earnings per share are computed by dividing the net income (loss) by the sum of the weighted average number of common shares and common share equivalents
outstanding, unless the impact of those equivalents is antidilutive. The computation of weighted average shares outstanding for fiscal years 2010 and 2009 is as follows:



|                                                                                           |  |      |            |  |      |  |            | 
|------------------------------------------------------------------------------------------ |  | ---- | ---------- |  | ---- |  | ---------- | 
|                                                                                           |  | 2010 |            |  | 2009 | 
|Common shares outstanding for basic EPS                                                    |  |      | 15,454,103 |  |      |  | 15,234,651 | 
|Shares issued upon assumed exercise of outstanding stock options                           |  |      |           |  |      |  |           | 
|                                                                                           |  |      |            |  |      |  |            | 
|Weighted average number of common and common equivalent shares outstanding for diluted EPS |  |      | 15,454,103 |  |      |  | 15,234,651 | 
|                                                                                           |  |      |            |  |      |  |            | 

Common share equivalents outstanding at September 30, 2010 and 2009 totaling 14,503,208 and 12,578,208
shares, respectively, including currently outstanding stock options and convertible debt, were not included in the denominator for diluted income per share as their effect was anti-dilutive.

NOTE 17DISCONTINUED OPERATIONS

During fiscal 2008 the Company sold
the assets of its wholly-owed subsidiary Reagents Applications, Inc. The results of the operations for this division have been presented as discontinued operations in the accompanying financial statements for the periods ending September 30,
2010 and September 30, 2009.



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##### Table of Contents

Hemagen Diagnostics, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTSCONTINUED

For The Years Ending September 30, 2010 and 2009



Results from discontinued operations, net of income tax, for the periods ending
September 30, 2009 and 2008 are as follows:



|                                               |  |      |   |  |      |   |         |  
|---------------------------------------------- |  | ---- | - |  | ---- | - | ------- | -
|                                               |  | 2010 |   |  | 2009 |  
|Net sales                                      |  |      |  |  |      | $ | 129,695 |  
|Costs of sales                                 |  |      |  |  |      |   | 207,894 |  
|                                               |  |      |   |  |      |   |         |  
|Gross Profit                                   |  |      |  |  |      |   | (78,199 | )
|                                               |  |     
|Operating expenses:                            |  |      |   |  |      |   |         |  
|Selling, general and administrative            |  |      |  |  |      |   |        |  
|Research and development                       |  |      |  |  |      |   |        |  
|                                               |  |      |   |  |      |   |         |  
|Total operating costs and expenses             |  |      |  |  |      |   |        |  
|                                               |  |      |   |  |      |   |         |  
|Operating loss                                 |  |      |  |  |      |   | (78,199 | )
|Other income (expenses):                       |  |      |   |  |      |   |         |  
|Interest Income (net)                          |  |      |  |  |      |   |        |  
|Other Income (expense)                         |  |      |  |  |      |   |        |  
|                                               |  |      |   |  |      |   |         |  
|Total other income (expense)                   |  |      |  |  |      |   |        |  
|                                               |  |      |   |  |      |   |         |  
|Net income (loss) before income taxes          |  |      |  |  |      |   | (78,199 | )
|Income Tax                                     |  |      |  |  |      |   |        |  
|                                               |  |      |   |  |      |   |         |  
|Net (loss) income from discontinued operations |  |      |  |  |      | $ | (78,199 | )
|                                               |  |      |   |  |      |   |         |  

Cost of sales during 2009 includes approximately $78,000 of additional reserves recorded for remaining
Raichem inventory being sold under an Inventory Purchase Agreement. In the Inventory Purchase Agreement the Company agreed to sell the inventory from this division to the purchaser at cost, less any overhead charges.

NOTE 18SUPPLEMENTAL DISCLOSURE OF CASH



|                                        |  |      |         |  |      |   |         | 
|--------------------------------------- |  | ---- | ------- |  | ---- | - | ------- | 
|September 30,                           |  | 2010 |         |  | 2009 |  
|Cash paid for interest                  |  | $    | 365,325 |  |      | $ | 379,938 | 
|                                        |  |      |         |  |      |   |         | 
|Cash paid for income taxes (Brazil)     |  | $    | 89,579  |  |      | $ | 20,821  | 
|                                        |  |      |         |  |      |   |         | 
|Total PP&E purchases                    |  | $    | 74,142  |  |      | $ | 114,888 | 
|Financed portion of equipment purchases |  |      |        |  |      |   |        | 
|                                        |  |      |         |  |      |   |         | 
|Cash paid for PP&E purchases            |  | $    | 74,142  |  |      | $ | 114,888 | 
|                                        |  |      |         |  |      |   |         | 



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