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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                             ----------------------

                                   FORM 10-KSB
                Annual Report Pursuant to Section 13 or 15(d) of

                       the Securities Exchange Act of 1934

                  For the fiscal year ended September 30, 2002
                         Commission file number 1-11700

                            HEMAGEN DIAGNOSTICS, INC.
                            -------------------------
                 (Name of Small Business Issuer in Its Charter)

                   Delaware                                 04-2869857
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           (State or Other Jurisdiction                 (I.R.S. employer
         of Incorporation or Organization)             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 and
Common Stock Warrants expiring April 30, 2003.

         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 60 days. Yes [X] No [ ].

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-B is not contained herein, and will not 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-KSB or any
amendment to this Form 10-KSB.[ ]

         The registrant had revenues of $ 9,499,532 in its most recent year. The
aggregate market value of the voting stock held by non-affiliates of the
registrant on December 24, 2002, was $1,818,874. As of December 24, 2002,
10,104,855 shares Common Stock and 2,601,800 common stock warrants expiring
April 30, 2003 were outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

         Portions of the Registrant's Proxy Statement filed with the Commission
for its 2003 Annual Meeting are incorporated by reference in Parts II & III as
specified.

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                            HEMAGEN DIAGNOSTICS, INC.
                      INDEX TO ANNUAL REPORT ON FORM 10-KSB

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PART I
Item   1.   Description of Business.....................................................................   3
Item   2.   Description of Property.....................................................................  10
Item   3.   Description of Legal Proceedings............................................................  11
Item   4.   Submission of Matters to a Vote of Security Holders.........................................  11

PART II
Item   5.   Market For Registrant's Common Equity and Related Stockholder Matters.......................  11
Item   6.   Management's Discussion and Analysis or Plan of Operation...................................  13
Item   7.   Financial Statements........................................................................  16
Item   8.   Changes in and Disagreements with Accountants on Accounting and Financial Disclosures.......  16

PART III
Item   9.   Directors, Executive Officers, etc..........................................................  16
Item  10.   Executive Compensation......................................................................  16
Item  11.   Security Ownership of Certain Beneficial Owners and Management
            and Related Stockholder Meeting.............................................................  16
Item  12.   Certain Relationships and Related Transactions..............................................  16
Item  13.   Exhibits, List and Reports on Form 8-K......................................................  16
Item  14.   Controls and Procedures.....................................................................  18
</TABLE>

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. 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. Any
forward-looking statement speaks only as of the date made. Hemagen undertakes no
obligation to update any forward-looking statements 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. The sufficiency of
such charges, implementation of strategies and the achievement of financial
performance are each subject to numerous conditions, uncertainties and risk
factors. Factors which could cause actual performance to differ materially from
these forward-looking statements, include, without limitation, management's
analysis of Hemagen's assets, liabilities and operations, the failure to sell
date-sensitive inventory prior to its expiration, competition, new product
development by competitors which could render particular products obsolete, the
inability to develop or acquire and successfully introduce new products or
improvements of existing products and the ability to assimilate successfully
product acquisitions.

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ITEM 1.  DESCRIPTION OF BUSINESS

    Hemagen Diagnostics, Inc. develops, manufactures, and markets propriety
    medical diagnostic kits used to aid in the diagnosis of certain autoimmune
    diseases, infectious diseases, general health assessment and for research
    purposes. Hemagen was established and incorporated in 1985 in Massachusetts
    and in 1992 reincorporated in Delaware. Today, Hemagen offers more than 150
    diagnostic test kits that have been cleared by the United States Food and
    Drug Administration (FDA) for sale in the United States. Hemagen focuses on
    niche market that offers the greatest market potential.

    Hemagen is organized in three product line divisions:

         -   Its clinical chemistry reagent manufacturer division called
             Reagents Applications, Inc.;

         -   A clinical chemistry analyzer division that markets the Analyst(R)
             Benchtop Clinical Chemistry Analyzer and the Endocheck(TM) Plus
             Chemistry Analyzer;

         -   An autoimmune and infectious disease test kit division called
             Virgo(R) that offers a complete range of assays on a variety of
             platforms.

    Hemagen acquired Reagents Applications, Inc. (RAI) from Kone Holdings, Inc.
    in 1996. RAI manufactures and markets a complete line of clinical chemistry
    reagents and diagnostic products for in vitro use in hospitals, clinics,
    physicians' office laboratories, and reference laboratories. These products
    are sold directly under the Raichem(R) label or private label for several
    large domestic and international customers. Most of the reagents
    manufactured by RAI can be used in both small, manual clinical chemistry
    analyzers and large, automated, high volume clinical chemistry analyzers.
    RAI leading reagents are Creatinine Kinase (CK), Cholesterol, CO(2),
    triglycerides, and amylase. In December 1999, RAI signed an exclusive supply
    agreement with Roche Diagnostics, Inc., to provide reagents for Roche's
    Cobas Mira(R) instrument in the United States. This exclusive agreement was
    renewed in December 2002 and has a termination date of December 2006. Sales
    resulting from this exclusive agreement with Roche Diagnostics, Inc. were
    approximately $1,306,000 and $1,700,000 in the years ending September 30,
    2002 and September 30, 2001, respectively. RAI foreign sales were
    approximately $1,476,000 in the year ending September 2002, and mainly
    represent sales to foreign OEM's and distributors.

    In September 1998, Hemagen acquired the Analyst(R), a Clinical Chemistry
    Analyzer business from Dade Behring, Inc. The Analyst is a patent protected,
    low cost, bench top clinical chemistry instrument and reagent system. The
    Analyst instrument runs general chemistry profiles for the human and
    veterinary markets using proprietary consumable rotors that are 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
    addition to offering the Analyst, Hemagen has been seeking out either
    distribution rights or other complimentary products for these markets and in
    December 2002 acquired the Endocheck,(TM) a veterinary chemistry analyzer.
    Today, Hemagen estimates that its customer base for the Analyst is split
    evenly between physician office laboratory practices and veterinary
    practices.

    Hemagen's Virgo(R) product line division includes autoimmune and infectious
    disease diagnostic test kits manufactured for use on a variety of automated
    platforms. In 1995, Hemagen completed the acquisition of a line of
    diagnostic test kits using immunoflourescence from Schiaparelli Biosystems,
    Inc. These assays were sold under the trade name Virgo(R) and represented a
    comprehensive offering of immunoflourescence tests. In addition to the
    acquired immunoflouresence tests, Hemagen from its inception in 1985 has
    developed a comprehensive line of diagnostic kits based on hemagglutination
    and enzyme-linked immunosorbence (called ELISA or EIA) technologies for
    their platforms. The Virgo product-line is marketed directly to the largest
    reference laboratories, hospitals, universities and the like in the United
    States. Internationally, there are approximately 20 distributors that market
    the Virgo(R) product line. Hemagen also markets the Virgo(R) product line in
    South America through its majority owned subsidiary Hemagen Diagnosticos
    Comercio, Importacao Exportacao, Ltd. (HDC), a Brazilian limited liability
    company. HDC completes light assembly of certain products and distributes
    the Virgo autoimmune and infectious disease line throughout South America.

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RECENT DEVELOPMENTS

New management assumed control of Hemagen following the successful conclusion of
a consent the solicitation of shareholder votes to gain control of the Board of
Directors on September 30, 1999. New management has taken the following actions
over the past three fiscal years:

         -   On September 26, 2002, Hemagen put in place a traditional working
             capital line of credit facility for one million dollars. This line
             of credit will provide the company with greater flexibility to
             pursue new growth opportunities and realize efficiencies in its
             operations.

         -   Established an in-house marketing and sales force to manage
             Hemagen, Virgo and Analyst sales. Developed new marketing programs
             for the Analyst in the veterinary market.

         -   In December 2001, Hemagen acquired substantially all of the assets
             of Kalisto Biologicals, Inc. Kalisto manufactured and marketed a
             clinical chemistry analyzer called the Endochek(TM), that is used
             to measure essential constituents in animal blood. The Endochek is
             now marketed by Hemagen as an alternative to the Analyst(R) and is
             used to reach more price sensitive veterinary practices than those
             that would normally purchase the Analyst. During the first half of
             fiscal 2002, the Endochek manufacturing of reagents were
             successfully relocated to Hemagen's Columbia, MD facility with no
             required addition to head count or fixed costs at the facility.

         -   Consolidated operations in fiscal 2001, closing the Waltham,
             Massachusetts facility, moving the administrative operations and
             certain production to Hemagen's Columbia, Maryland facility.
             Certain unprofitable product lines were discontinued.

         -   In May 2000, Hemagen raised $6,315,000 in an offering of units
             consisting of 8% Senior Subordinated Secured Convertible Notes,
             Common Stock and Warrants. Proceeds of this offering were used to
             pay off a revolving line of credit in May of 2000 and to provide
             working capital to Hemagen.

         -   Hemagen has reduced headcount by approximately 37%, from 98
             employees as of September 30, 1999, to 62 as of September 30, 2002.
             Management believes that the reduction in the number of employees
             has had no impact on operations.

TECHNOLOGY

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, either antigens or antibodies, in blood or other body fluids. An
antigen is a substance that reacts with a particular antibody in a manner,
which, in the proper environment, is 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 amplification. Hemagen's blood chemistry and
Analyst system assays are used to aid the monitoring and measurement of health
profiles, such as cholesterol, blood urea nitrogen, triglycerides, glucose and
uric acid.

Hemagen relies upon proprietary technologies in the manufacture of its
diagnostic assay kits. These technologies include a lyophilization (freeze
drying) technique which substantially extends the shelf life of Hemagen's
hemagglutination assays, and proprietary methods to prepare antigens for its
ELISA assays. Hemagen acquired a patent protected rotor based technology for use
in the Analyst in 1998.

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Clinical Chemistries

Hemagen produces a line of general clinical chemistry reagents utilizing
colorimetric, turbidometric and enzymatic procedures. These chemistry reagents
are those most commonly performed in clinical laboratories as general health
screening tests and in the identification of diseases. These tests can be
performed using a broad range of automated and semi-automated instruments that
are typically used by clinical laboratories.

Analyst Instrument System

The Analyst is a bench-top centrifugal clinical chemistry analyzer. The Analyst
uses as 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. Five types of rotors providing a variety of
clinical chemistry tests, all cleared for marketing by the FDA, are currently on
the market. The Analyst instrument has been designated by the FDA as a
moderately complex system, and is therefore suitable for both the physician and
veterinary office laboratories.

Immunofluorescence

Hemagen's immunofluorescence tests utilize a fluorescent microscope. Mammalian
cells grown on microscope slides are treated with disease-producing organisms
(viral or bacterial). Serum from a patient is placed in contact with the
infected cells. If a patient has antibodies to the organism causing the disease,
the antibodies will bind to the organism. A chemical is added to the slide that
binds to the organism and the antibody, if present. When the slide is
illuminated with light at a specific wavelength in the microscope, the
chemically-treated cells will appear fluorescent, indicating a positive test
result. If the patient did not have the appropriate antibody, no fluorescence
will appear producing a negative test result.

ELISA

ELISA or EIA tests employ small plastic vessels coated with particular antigens.
The test process involves introducing the patient's serum into the vessel 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 vessel. After the vessel is
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 are added which will cause a color change in the vessel, the
intensity of which is proportionate to the quantity of the specific antibody
bound. 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 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, than is possible with techniques now commercially available. 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.

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 agglutinate to the foreign antigen when placed in
contact with a specific antibody. 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.

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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

RAI Products

Hemagen's general chemistry products, sold under the trade name RAICHEM(R)
consist of a broad range of assays used on automated and semi-automated clinical
chemistry analysis systems. Many of the RAICHEM assays are used in profiling
general health conditions and as specific indications of possible disease
states. The most widely recognized general chemistry tests made by Hemagen
include those for blood levels of glucose, cholesterol, triglycerides, uric
acid, urea nitrogen and total protein. In all, more than 70 of Hemagen's
clinical chemistry products have been cleared by the FDA for sale in the United
States.

Analyst(R) System Products

Hemagen currently markets four FDA approved 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 a general chemistry rotor
specifically designed for the veterinary marketplace called the VET-16.

Immunofluorescence or "IFA" Products

Hemagen's immunofluorescence products consist primarily of diagnostic assays for
infectious diseases. Immunofluorescence kits are used as primary or confirmatory
tests in many large clinical laboratories in the United States. There are
currently 15 kits sold in the immunofluorescence format.

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

         cytomegalovirus infections           Herpes simplex
         SLE (lupus)                          german measles
         connective tissue diseases           chicken pox
         primary bilary Cirrhosis             infections with Epstein-Barr virus
         toxoplasmosis                        chlamydial infections
         syphilis                             measles
         primary RSV infections               mumps infections
                                              autoimmune diseases

ELISA Assays

Hemagen develops and markets ELISA tests for the detection of disease markers.
As with corresponding hemagglutination tests produced by Hemagen, most of
Hemagen's ELISA assays test for elevated levels of antibodies, which are useful
indicators of certain diseases. ELISA tests are widely used by large
laboratories because these tests adapt easily to automated diagnostic testing
equipment. Hemagen's FDA cleared ELISA test kits aid in the diagnosis of the
following diseases:

         SLE (lupus)                          polymyositis
         mixed connective tissue disease      dermatomyositis
         Sjogren's syndrome                   connective tissue diseases
         scleroderma (systemic sclerosis)     primary biliary Cirrhosis
         cytomegalovirus infections           Chagas' disease
         rheumatoid arthritis                 Wegener's disease

Certain of Hemagen's ELISA tests are also used to monitor the acute phase
response to infection and

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inflammation in diseases such as lupus and rheumatoid arthritis. Several of
Hemagen's ELISA tests are now available in both lyophilized and all liquid
formats.

Hemagen's ELISA and hemagglutination kits (see below) include screening tests in
which up to six different diagnostic indices are monitored at the same time,
which is useful in the rapid initial screening of patients. If the screen test
is positive, individual kits are available to identify which of these six
indices is present.

Hemagglutination Assays

Hemagen believes that it manufactures and markets the only commercially
available hemagglutination kits that test for antibodies to antigens present in
the nucleus of a cell referred to as extractable nuclear antigens, or ENAs,
which are markers of certain autoimmune diseases. Each of Hemagen's
hemagglutination assays is 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 are
attributes previously unavailable using hemagglutination assays. The shelf-life
of the lyophilized RBCs before reconstitution may be up to 24 months. A
technician reconstitutes the powdered cells in a water-based solution prior to
introducing 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
         Sjogren's syndrome                           rheumatoid arthritis
         scleroderma (systemic sclerosis)             Chagas' disease
                                                      cytomegalovirus infections

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DISTRIBUTION AND MARKETING

General

In the United States, Hemagen, excluding the RAI division, sells its products
directly to clinical laboratories, hospitals, veterinary offices, and research
organization. Internationally, Hemagen sells its products primarily through
distributors. Hemagen grants distributorships, which generally cover limited
geographic areas and specific test kits. Hemagen has relationships with
approximately 35 distributors and its products have been sold in over 20
countries.

The RAI division mainly sells it products to OEM suppliers and distributors. In
December 1999, Hemagen's RAI division signed a thirty six month supply agreement
with Roche Diagnostics, Inc. to supply reagents to be used with Roche's COBAS
MIRA(R) instrument. In December 2002, RAI signed a second supply agreement with
Roche that expires in December 2006. The agreement provides that RAI will be the
exclusive supplier of certain reagents for the COBAS MIRA in the United States.
In fiscal 2002 and 2001, sales to Roche were approximately $1,306,000 and
$1,700,000, respectively. Roche Diagnostics Inc., accounted for approximately
14% and 15% of Hemagen's revenues for fiscal years ended September 30, 2002 and
2001, respectively.

In fiscal 2001, Hemagen manufactured products on a private-label basis for
Carter-Wallace, Wampole Laboratories pursuant to a supply agreement and
Carter-Wallace distributed the Analyst product line to physician office
laboratories in the United States. During fiscal year 2002, Carter-Wallace,
Wampole Laboratories was sold and became MedPointe, Inc. All sales to Medpointe,
Inc. in fiscal year 2002 resulted from the non-exclusive distribution of the
Analyst product line to the physician office laboratories in the United States.
MedPointe, Inc. accounted for approximately 11% and 14% of Hemagen's revenue for
the fiscal years ended September 30, 2002 and 2001, respectively. In February
2001, Hemagen and MedPointe Inc. agreed to terminate a private-label supply
agreement. This supply agreement accounted for sales of $435,000 in the fiscal
year ended September 30, 2001. Hemagen terminated the private-label supply
agreement because of the high production costs incurred by Hemagen in producing
this product. At this time, management believes the distribution agreement for
the Analyst which is currently a non-exclusive agreement will continue.

Hemagen markets its Virgo product line in South America through HDC. HDC
maintains an office in Sao Paulo, Brazil that is staffed by full-time sales
administrators who receive and process orders and other employees that handle
the light assembly work, shipping, and technical support for the products. In
fiscal year 2002, and 2001, Hemagen derived product sales through HDC of $
823,000 and $855,000, respectively.

PRODUCTS UNDER DEVELOPMENT

Hemagen is presently developing new products in the areas described below.
Hemagen spent approximately $407,000 and $387,000 on research and development
for the fiscal years ended September 30, 2002, and 2001, respectively.

Clinical Chemistry Reagents

Hemagen continues to develop additional assays and reagents to fill in its
clinical chemistry reagent product line sold under the RAICHEM label. In August
2002, RAI received FDA clearance for a new High Sensitivity CRP reagent.

Analyst

The research and development focus for the Analyst product line has been in the
evaluation of complimentary products for Hemagen to distribute. In fiscal year
2002, research and development efforts were focused on evaluating these
complimentary products and on improving the performance of the reagents that are
used with the Endochek system.

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Autoimmune and Infectious Disease Test Kits

Hemagen's efforts in this area have been focused on developing new ELISA kits
for the autoimmune market; in particular tests for antiphospholipid syndrome
tests.

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. Clinical chemistry products are produced at
Hemagen's facility in San Diego, California. The manufacturing of the Analyst
instrument is outsourced and the Endochek instrument is manufactured by a third
party for Hemagen. Hemagen purchases many of the antigens and other reagents
used in its kits from outside vendors. Some of the 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 using good manufacturing
practices (GMP).

All components used in Hemagen's products are available from multiple sources,
except for an antigen called SSA, which Hemagen uses in two of its ELISA and two
of its hemagglutination test kits. Hemagen believes that the supplier of this
antigen produces this antigen for many customers. Management believes that if
necessary, Hemagen could produce sufficient quantities of this antigen itself.
Therefore, if the supply of this antigen were to cease, Hemagen believes it
would not have a long-term material adverse impact on Hemagen's business taken
as a whole.

GOVERNMENT REGULATION

Hemagen's manufacturing, distribution, and marketing of diagnostic test kits are
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 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
submissions process, either the 510(k) process or the Premarket 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. 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 that
involves a lengthier and more burdensome process.

Hemagen is required to register 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. Finally, the FDA prohibits an approved device from being marketed
for unapproved applications. Hemagen believes it is in conformity with all such
regulations.

The regulatory controls being imposed upon Hemagen with respect to the
international distribution and marketing of in vitro diagnostic devices are
increasing. Specifically, member nations of the European Community are
developing a standardized quality system similar to QSR called EN 29000 that is
anticipated to be effective throughout the European Community once enacted.
Companies will be allowed a grace period to conform to the directive. Hemagen
will be required to conform to the EN 29000 regulations for any product sold in
the European Community. The European Community has adopted the IVD Directive.
All in vitro devices must bear the CE Marking of Conformity by December 2003.
Hemagen received the CE Marking for the Analyst instrument in December 1999 and
expects to achieve CE Mark on its other products for sale in Europe by December
2003.

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COMPETITION

The clinical diagnostic industry is highly competitive. There are many
companies, both public and private, engaged in diagnostics-related research and
development, 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 have marketing and business organizations of substantially greater
size than Hemagen. Many companies have been working on immunodiagnostic reagents
and products, including some products believed to be similar to those currently
marketed or under development by Hemagen, for a longer period of time than has
Hemagen. Hemagen believes that its primary competitors in the diagnostics market
include Abbott Laboratories, Sigma Diagnostics, Trace-America, Inc., Meridian
Bioscience, Inc., INOVA, Sanofi Diagnostics Pasteur, Inc., Diamedix Corporation,
IDEXX and Abaxis, Inc. 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 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 $5,000,000 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.
Hemagen may in the future apply for patent protection for certain of its
technology when 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.

ROYALTY OBLIGATIONS

Hemagen is required to pay royalties to third parties on sales of some of its
products. Hemagen has a license agreement with Dade Behring, Inc. for the
license of technical information relating to the Analyst(R) product line. The
license was signed in conjunction with the Analyst acquisition and terminates on
August 2004. Hemagen also has another license agreement for the use of the
technology involved in the manufacture and sale of the Analyst product line.
This license agreement terminates upon the expiration of the last patent
associated with the applicable technology in 2007.

EMPLOYEES

As of September 30, 2002, Hemagen had 62 full-time employees, 22 are employed in
sales, marketing, general and administrative activities and 40 are involved in
production and research and development.

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 excellent.

                                       10
<PAGE>
ITEM 2.  DESCRIPTION OF PROPERTY

Hemagen maintains its principal administrative office, laboratory and production
operations in a 27,400 square foot leased facility in Columbia, Maryland. Under
the Columbia lease, which extends through July 30, 2007, Hemagen pays
approximately $173,000 per year in rent. Hemagen also leases 20,100 square feet
in San Diego, California, where it manufactures the RAICHEM products. Under the
San Diego lease, which extends through March 31, 2005, Hemagen will pay
approximately $217,000 per year in rent.

Hemagen's 51%-owned subsidiary, Hemagen Diagnosticos Comercio, Importacao
Exportacao, Ltd, leases approximately 1,800 square feet of flexible office space
in Sao Paulo, Brazil pursuant to a lease that expires on June 30, 2006. This
subsidiary pays approximately $32,400 per year in rent for this space.

It is management's opinion that all of the properties are adequately insured.

ITEM 3.  LEGAL PROCEEDINGS

On February 7, 2002, URRMA Biopharma, Inc. filed suit against Hemagen in the
Superior Court, District of Montreal, and Providence of Quebec, Canada. The suit
seeks approximately $20,645,000 for an alleged breach of contract for failure to
provide information called for under an alleged manufacturing agreement and for
publishing misleading information regarding the product. The Company had an
understanding with URRMA Biopharma to manufacture R7V diagnostic test kits and
was in the process of negotiating a comprehensive supply agreement when this
suit was filed. Hemagen responded to the claim and filed a counter suit for
approximately $19,752,000 on June 10, 2002. On December 19, 2002, the Company
agreed to a settlement that is currently being finalized in a written settlement
agreement. The settlement will result in no cost to the Company.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None during the fourth quarter.

                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Hemagen's Common Stock has been traded on the over-the-counter market through
the National Association of Securities Dealers Automated Quotation System
("Nasdaq") since February 4, 1993. On December 17, 2002 the closing bid and ask
price for the Common Stock as reported by Nasdaq were $ 0.22 and $0.27 per
share, respectively.

On June 7, 2002, the National Assocication of Securities Dealers ("NASD")
notified Hemagen that the bid price of its common stock had closed at less than
$1.00 per share over the previous 30 consecutive trading days, and, as a result,
Hemagen did not comply with the NASD's Rule 4310 (c)(4). In accordance with the
NASD's Rule 4310 (c)(4), Hemagen was given 180 calendar days or until December
4, 2002 to regain compliance with the rule. Hemagen was unable to regain
compliance with this rule in the 180 day period ended December 4, 2002.
Accordingly, Hemagen has requested a hearing with the Nasdaq Listing
Qualifications Panel scheduled for January 16, 2003.

For the periods indicated, the following table sets forth the range of high and
low bid prices for the Common Stock as reported by Nasdaq during Fiscal 2001 and
2002. These prices reflect inter-dealer prices, without retail mark-up,
mark-down or commission, and may not represent actual transactions.

                                       11
<PAGE>
<TABLE>
<CAPTION>
                                                      HIGH            LOW
                                                      ----            ---
<S>                                                   <C>            <C>
FISCAL 2001
First Quarter...........................              $1.53          $0.38
Second Quarter..........................              $0.97          $0.44
Third Quarter...........................              $1.70          $0.60
Fourth Quarter..........................              $1.24          $0.57
FISCAL 2002
First Quarter...........................              $0.99          $0.73
Second Quarter..........................              $1.19          $0.80
Third Quarter...........................              $1.04          $0.46
Fourth Quarter..........................              $0.79          $0.29
</TABLE>

As of December 23, 2002, there were 163 holders of record of Hemagen's Common
Stock which Hemagen believes represents approximately 3,250 beneficial owners.

For the periods indicated, the following table sets forth the range of high and
low bid prices for the Common Stock Warrants which expired on April 30, 2002,
that were traded under the symbol - HMGNW, as reported by Nasdaq during Fiscal
2001 and up to April 30, 2002. These prices reflect inter-dealer prices, without
retail mark-up, mark-down or commission, and may not represent actual
transactions.

<TABLE>
<CAPTION>
                                                      HIGH            LOW
                                                      ----            ---
<S>                                                   <C>            <C>
FISCAL 2001
First Quarter...........................              $0.22          $0.03
Second Quarter..........................              $0.37          $0.02
Third Quarter...........................              $0.50          $0.10
Fourth Quarter..........................              $0.26          $0.09
FISCAL 2002
First Quarter...........................              $0.22          $0.02
Second Quarter..........................              $0.21          $0.04
Third Quarter through April 30, 2002....              $0.16          $0.01
</TABLE>

                                       12
<PAGE>
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.

         CHART REQUIRED BY S-B ITEM 201(d)

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
                                         (a)                          (b)                            (c)
--------------------------------------------------------------------------------------------------------------------------
<S>                             <C>                           <C>                            <C>
Plan category                   Number of securities to be    Weighted-average               Number of securities
                                issued upon exercise of       exercise price of              remaining available for
                                outstanding options,          outstanding options,           future issuance under
                                warrants, and right           warrants and rights            equity compensation plans
                                                                                             (excluding securities
                                                                                             reflected in column (a))
--------------------------------------------------------------------------------------------------------------------------
Equity compensation plans
approved by security holders        2,809,610(1)                      $1.23                        370,904(2)
--------------------------------------------------------------------------------------------------------------------------
Equity compensation plans not
approved by security holders               --                            --                             --
--------------------------------------------------------------------------------------------------------------------------
Total                               2,809,610                         $1.23                        370,904(2)
--------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) Amount includes 1,000,000 options for the purchase of common stock options
    issued under the Company's 1992 Stock Option Plan, 1,732,014 options for the
    purchase of common stock approved by the shareholders in conjunction with
    the consent solicitation which resulted in the replacement of certain former
    members of the Company's senior management and Board of Directors on
    September 30, 1999, and 629,096 options for the purchase of common stock
    pursuant to the Company's 2001 Stock Option Plan approved by the
    shareholders on February 27, 2001.

(2) Amount represents options for the purchase of common stock approved by the
    shareholders pursuant to the Company's 2001 Stock Option Plan that have not
    been issued as of September 30, 2002.

                                       13
<PAGE>
ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

OVERVIEW

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 the profiling of general health conditions. Hemagen has
concentrated its expansion efforts on synergistic acquisitions of companies,
product lines and assets. Hemagen has approximately 150 different test kits
available that have received FDA clearance for sale in the United States.

Fiscal year 2002 represents the third year of Hemagen operations under a new
management team. On October 1, 1999, a new management team assumed control of
Hemagen as a result of a shareholder consent solicitation. Management has been
working over the past three fiscal years to reorganize the Company to increase
shareholders value and to achieve sustained profitability. In order to achieve
those goals management sought to:

    -    Improve the leverage of the Company

    -    Improve sales and marketing, increase profitable sales and eliminate
         unprofitable product lines.

    -    Reduce expenses; and

    -    Better manage working capital

As a result of these actions, Hemagen has taken the following actions:

    -    OBTAIN TRADITIONAL FINANCING LINE OF CREDIT FACILITY

    On September 26, 2002, Hemagen closed on a traditional line of credit which
    provides maximum borrowings of up to $1,000,000 based on the receivables
    and inventory of Hemagen. This line of credit will provide Hemagen the
    opportunity to finance future growth opportunities, and allow Hemagen to
    take advantage of opportunities that provide further savings to the
    business.

    -    IMPROVEMENT IN SALES AND MARKETING FOCUS

    Over the past three years, Hemagen hired several industry professionals to
    fill various sales and marketing positions. Hemagen signed supply agreements
    with Roche Diagnostics, Inc. and several new foreign distributors.

    In fiscal 2002, Hemagen began to focus its sales and marketing efforts on
    products that could provide the highest profit margin to Hemagen. As a
    result of this focus, some high cost sales were terminated and more
    profitable sales have been added.

    -    ACQUIRED A COMPLIMENTARY BUSINESS

    In December 2001, Hemagen acquired the Endochek product line from Kalisto
    Biologicals, Inc. The Endochek product line allowed Hemagen to expand its
    product line offerings in the veterinary market. In fiscal year 2002,
    Hemagen relocated the Endochek reagent manufacturing to Hemagen's Columbia,
    MD facility without adding any labor or fixed costs to its operations.

    -    REDUCTION OF EXPENSES

Hemagen has instituted an overall plan to reduce expenses and better utilize its
resources. This plan centers on consolidating facilities, reducing duplicative
functions and focusing Research and Development activities. In the second fiscal
quarter of 2001, the Waltham, Massachusetts's facility was closed and all
operations previously carried out in Waltham were relocated to Hemagen's new
headquarters in Columbia, Maryland. Additionally, in April 2001, Hemagen was
released from its lease obligation in Waltham and sold its leasehold
improvements and excess equipment that were located in Waltham. Management
believes these actions resulted in significant reductions in rent, warehouse,
utility, and personnel expenses.

                                       14
<PAGE>
    Hemagen has sought to exercise tighter control over expenditures, including
    Research and Development spending. In fiscal 2002, Hemagen spent
    approximately $401,000 on Research and Development. While our Research and
    Development spending increased slightly in fiscal year 2002 from fiscal year
    2001, Hemagen remains actively engaged in several commercially significant
    Research and Development projects while tightly managing these expenses.
    Management is planning to continue to reduce Hemagen's operating expenses
    throughout the business in the future.

    There can be no assurance that any of the above, and other actions
    management is taking will achieve the desired results. However, management
    believes that as a direct result of these actions, operating efficiency and
    cash flow from operations have improved; and together with this improvement,
    Hemagen believes that cash flow from operations and cash on hand at
    September 30, 2002 and its traditional line of credit availability will be
    sufficient to finance its operations for fiscal 2003.

RESULTS OF OPERATIONS

Fiscal Year Ended September 30, 2002 Compared to Fiscal Year Ended September 30,
2001

Revenues for fiscal 2002 decreased $1,471,000 (13%) to approximately $9,500,000
from approximately $10,971,000 for fiscal 2001. These sales reductions resulted
from a decrease of $822,000 at Hemagen's Raichem division as a result of initial
stocking orders for certain products in the Roche Diagnostics supply agreement
that accounted for $394,000 of the reduction, a $147,000 one time order that was
in the prior fiscal year from a foreign distributor and reductions with other
foreign distributors for Raichem products. The reduction in sales, also resulted
from the termination of the Carter-Wallace supply agreement in February 2001,
that had sales of $435,000 in the prior fiscal year with no sales in the current
fiscal year, lower sales of the Analyst product line of $315,000, and lower
sales of blood banking products of $133,000. Offsetting these sales reductions,
was an increase of approximately $342,000 of sales related to the Endochek
product line in fiscal year 2002

Cost of product sales decreased approximately $996,000 (13%) to approximately
$6,561,000 from approximately $7,557,000 in fiscal 2001 due to the reduction in
the overall sales volume. Cost of product sales as a percentage of sales was 69%
in fiscal years 2002 and 2001. Despite the overall reduction in sales volume,
cost of product sales were maintained as a percentage of total sales as a result
of lower cost, higher margin product making up the sales in fiscal year 2002 as
compared to fiscal 2001.

Research and development expenses for fiscal 2002 increased approximately
$20,000 (5%) to approximately $407,000. Selling, general and administrative
expenses for fiscal 2002 decreased approximately $86,000(3%) to approximately
$3,203,000 primarily due to reduced salary expense, consulting and travel
expenses.

Net other expense increased to approximately $1,089,000 from approximately
$805,000 due to an increase in interest expense. Net interest expense for fiscal
2002 was $1,065,000 as compared to $773,000 in fiscal 2001. This increase is
mainly attributed to the amortization of the discount on the senior subordinated
secured convertible notes (see Footnote 10 of the Financial Statements).

Net loss before the cumulative effect of a change in accounting principle for
fiscal 2002 increased to approximately $1,760,000 compared to a net loss of
approximately $1,068,000 for the previous year primarily due to the lower sales
level and the increase in interest expense.

In the first quarter of fiscal 2001, Hemagen recorded a cumulative effect of a
change in accounting principle that resulted in a one-time non-cash charge of
$1,130,000. This change in accounting principle was recognized as a result of a
new accounting pronouncement regarding the accounting for the senior
subordinated secured convertible notes issues in conjunction with the private
placement offering completed in May 2000.

                                       15
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES

At September 30, 2002, Hemagen had $464,000 of unrestricted cash, working
capital of $3,491,000 and a current ratio of 3.0 to 1. In September 2002,
Hemagen obtained a revolving line of credit with a bank for the purpose of
financing working capital needs as required. The line of credit facility
provides for borrowings up to $1,000,000, at an annual interest rate equal to
the prime rate plus 3/4%. Maximum borrowings under the loan agreement are
subject to the domestic receivables and inventory of Hemagen.

In fiscal 2002, Hemagen had capital expenditures of $67,000 and has capital
expenditures of approximately $75,000 planned for fiscal 2003, although no
commitments for fiscal 2003 have been made.

In fiscal 2002, Hemagen used cash of approximately $208,000. This usage of cash
mainly resulted from $124,000 of cash provided for the repayment of the
subordinated note payable and $67,000 spent on capital expenditures associated
with the Endochek acquisition.

Hemagen believes that cash flow from operations, cash on hand at September 30,
2002, and the availability of the line of credit will be sufficient to finance
its operations and capitol expenditures for fiscal 2003. As of September 30,
2002, Hemagen has unrestricted cash and availability through its line of credit
of approximately $1,282,000. In fiscal year 2002, Hemagen used cash from
operating, and investing activities of approximately $92,000 and in fiscal year
2001 generated cash from operating and investing activities of approximately
$128,000. Hemagen can give no assurances that it will have sufficient cash flow
to finance operations.

FISCAL 2002 COMPARED TO FISCAL 2001

Hemagen used $25,000 in its operating activities during fiscal 2002 compared to
operations providing $60,000 in cash in fiscal 2001. This increase in cash used
is attributed to an increase in the net loss after adjusting for non-cash
charges of approximately $620,000 offset by changes in working capital items in
fiscal 2002 as compared to fiscal 2001. Such changes in working capital include
a reduction in the cash used to fund accounts payable, accrued expenses and
customer deposits of approximately $803,000 offset by a reduction in the cash
generated by lower receivables of approximately $170,000.

Cash used in investing activities totaled $67,000 in fiscal 2002 primarily for
the acquisition of equipment. During fiscal 2001, investing activities provided
$67,000 of cash proceeds from sales of property and equipment.

Cash used by financing activities totaled $116,000 in fiscal 2002 as compared to
$916,000 used in fiscal 2001. This decrease in cash used is attributed to lower
payments required in fiscal year 2002 related to the subordinated note payable.

NEW ACCOUNTING PRONOUNCEMENTS

In October 2001, the FASB issued Statement of Financial Accounting Standards No.
144, "Accounting for the Impairment of Disposal of Long-Lived Assets" ("SFAS
144"). SFAS 144 establishes a single accounting model, based on the framework
established in Statement of Financial Accounting Standard No. 121, " Accounting
for the Impairment of Long-Lived Assets and for Long Lived Assets to Be Disposed
Of" (SFAS 121"), for long-lived assets to be disposed of by sale, and resolves
implementation issues related to SFAS 121. The Company is required to adopt SFAS
144 no later than the first quarter of fiscal 2003. The Company does not expect
the adoption of SFAS 144 to have a material impact on its operating results or
financial position.

In July 2002, the FASB issued Statement of Financial Accounting Standards No.
146, "Accounting for Costs Associated with Exit or Disposal Activities ("SFAS
146"). SFAS 146 requires that a liability for costs associated with an exit or
disposal activity be recognized and measured initially at fair value only when
the liability is incurred. SFAS 146 is effective for exit or disposal activities
that are initiated after December 31, 2002. The Company does not expect the
adoption of SFAS 146 to have a material impact on its operating results or
financial position.

                                       16
<PAGE>
ITEM 7.  FINANCIAL STATEMENTS

See Item 13 below and the Index therein for a listing of the financial
statements and supplementary data filed as part of this report.

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE.

"None Applicable."

                                    PART III

         Items 9 through 12 are incorporated by reference to the Registrant's
Proxy Statement relating to its 2003 Annual Shareholders Meeting to be filed
with the Commission pursuant to Regulation 14A. Information required by
Regulation S-B Item 201(d) is contained in Item 5 of this form 10-KSB

ITEM 13. EXHIBITS LIST AND REPORTS ON FORM 8-K

         None

(a)(1) AND (2) FINANCIAL STATEMENTS AND SCHEDULES

<TABLE>
<CAPTION>
                                                                        PAGE
                                                                        ----
<S>                                                                  <C>
Report of Independent Certified Public Accountants                   F-2
Consolidated Balance Sheets at September 30, 2002
   and 2001                                                          F-3 to F-4
Consolidated Statements of Operations for the years
   ended September 30, 2002, and 2001                                F-5
Consolidated Statements of Stockholders' Equity
   for the years ended September 30, 2002, and 2001                  F-6
Consolidated Statements of Cash Flows for the years
   ended September 30, 2002, and 2001                                F-7
Notes to Consolidated Financial Statements                           F-8 to F-29
</TABLE>

                                       17
<PAGE>
(a)(3) EXHIBIT LIST.

<TABLE>
<CAPTION>
Exhibit No.                    Description of Exhibit                                      Filing Status
-----------                    ----------------------                                      -------------
<S>             <C>                                                                        <C>
   3.1          Certificate of Incorporation.                                                     A

   3.2          Bylaws.                                                                           A

   4.1          Specimen Stock Certificate.                                                       A

   4.2          Rights Agreement dated January 27, 1999.                                          A

   4.3          First Amendment to the Rights Agreement dated September 30, 1999.                 B

   10.6*        1992 Stock Option Plan.                                                           A

   10.13*       Revised Employment Agreement between Hemagen and Dr. de Oliveira.                 A

   10.17        Description of the Lease for office space of HDC in Sao Paulo, Brazil.            A

   10.25        Settlement Agreement dated September 30, 1999.                                    C

   10.28        Form of Warrant expiring April 30, 2002, as extended until April 30, 2003         E

   10.29        Form of 8% Senior Subordinated Secured Convertible Note.                          E

   10.30        Second Amendment to the Lease between the Company and 9033                        E
                Red Branch Road, L.L.C. dated June 9,2000.

   10.31        Consulting agreement between the Company and Thomas A. Donelan                    B
                Thomas A. Donelan and Christopher P. Hendy, dated October 1, 1999.

   10.32        Second Restructuring Agreement between the Company and                            D
                Dade Behring, Inc. dated November 9, 2000.

   10.33        Termination Agreement between the Company and Carter-Wallace, Inc.                G
                dated February 26, 2001.

   10.35*       2001 Stock Option Plan.

   10.40        Line of Credit Financing Agreement between Hemagen Diagnostics, Inc.              I
                and Reagents Applications, Inc and Bay National Bank dated
                September 26,2002                                                                 F

   23           Consent of Independent Certified Public Accountants                               I

   99.1         Certification of Chief Executive Officer pursuant to Section 906
                of the Sarbanes Oxley Act of 2002.                                                I

   99.2         Certification of Chief Financial Officer pursuant to Section 906
                of the Sarbanes Oxley Act of 2002.                                                I
</TABLE>

                                       18
<PAGE>


*Management compensatory contracts.

A.  Incorporated by reference to Registration Statement No. 33-52686-B.

B.  Incorporated by reference to Hemagen's Form 10-KSB for the fiscal year ended
    September 30, 2000.

C.  Incorporated by reference to Hemagen's Form 8-K filed on October 7, 1999.

D.  Incorporated by reference to Hemagen's Form 10-SKB for the fiscal year ended
    September 30, 2001.

E.  Incorporated by reference to Hemagen's Form S-3 filed on July 21, 2000.

F.  Incorporated by reference to Hemagen's Form S-8, Registration Statement
    No. 333-57080, filed with the SEC on March 15, 2001.

G.  Incorporated by reference to Hemagen's 10-QSB for the quarter ended March
    31, 2001.

H.  Incorporated by reference to Hemagen's Form 8-K filed on March 23, 2001.

I.  Filed herewith.

(b) Reports on Form 8-K. None during the Forth Quarter.

ITEM 14. CONTROLS AND PROCEDURES

    (a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. Based on their
    evaluation as of a date within 90 days of the filing date of this Annual
    Report on Form 10-K, our principal executive officer and principal financial
    officer have concluded that our disclosure and controls procedures (as
    defined in Rules 13a-14(c) under the Exchange Act) are effective to ensure
    that information required to be disclosed by us in reports that we file or
    submit under the Exchange Act is recorded, processed, summarized and
    reported within the time periods specified in SEC rules and forms.

    (b) CHANGES IN INTERNAL CONTROLS. There were no significant changes in our
    internal controls or in other factors that could significantly affect those
    controls subsequent to the date of the evaluation, including any corrective
    actions with regard to significant deficiencies and material weaknesses.

                                       19
<PAGE>
                                   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.

                                        HEMAGEN DIAGNOSTICS, INC.

Date: December 23, 2002                 By: /s/  William P. Hales
                                            ---------------------
                                            William P. Hales, 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.

<TABLE>
<CAPTION>
          Name                                     Capacity                          Date
          ----                                     --------                          ----
<S>                                      <C>                                   <C>
/s/ William P. Hales                     President and Chief Executive
---------------------------              Officer, Director                     December 23, 2002
William P. Hales

/s/ Ricardo M. de Oliveira               V.P. Research and Development,
---------------------------              Director                              December 23, 2002
Ricardo M. de Oliveira, M.D.

/s/ Alan S. Cohen                        Director                              December 23, 2002
---------------------------
Alan S. Cohen, M.D.

/s/ Howard F. Curd                       Director                              December 23, 2002
---------------------------
Howard F. Curd

/s/ James R. LeRoy                       Chairman of the Board of Directors    December 23, 2002
---------------------------
James R. LeRoy

/s/ Deborah F. Ricci                     Principal Financial Officer           December 23, 2002
---------------------------
Deborah F. Ricci
</TABLE>

                                       20
<PAGE>
                  CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
            PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
             AND SECURITIES AND EXCHANGE COMMISSION RELEASE 34-46427

I, William P. Hales, the principal executive officer of Hemagen Diagnostics Inc,
certify that:

1.  I have reviewed this annual report on Form 10-KSB of Hemagen Diagnostics,
    Inc.

2.  Based on my knowledge, this annual report does not contain any untrue
    statement of a material fact or omit to state a material fact necessary to
    make the statements made, in light of the circumstances under which such
    statements were made, not misleading with respect to the period covered by
    the annual report;

3.  Based on my knowledge, the financial statements, and other financial
    information included in this annual report, fairly present in all material
    respects the financial condition, results of operations and cash flows of
    the registrant as of, and for, the periods presented in this annual report;

4.  The registrant's other certifying officers and I are responsible for
    establishing and maintaining disclosure controls and procedures (as defined
    in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

         a.  designed such disclosure controls and procedures to ensure that
             material information relating to the registrant, including its
             consolidated subsidiaries, is made know to us by others within
             those entities, particularly during the period in which this annual
             report is being prepared;

         b.  evaluated the effectiveness of the registrant's disclosure controls
             and procedures as of the date within 90 days prior to filing date
             of this annual report (the "Evaluation Date"); and

         c.  present in this annual report our conclusions about the
             effectiveness of the disclosure controls and procedures based on
             our evaluation as of the Evaluation Date;

5.  The registrant's other certifying officers and I have disclosed, based on
    our most recent evaluation, to the registrant's auditors and the audit
    committee of registrant's board of directors (or persons performing the
    equivalent functions):

         a.  all significant deficiencies in the design or operation of internal
             controls which could adversely affect the registrant's ability to
             record, process, summarize and report financial data and have
             identified for the registrant's auditors any material weaknesses in
             internal controls; and

         b.  any fraud, whether or not material, that involves management or
             other employees who have a significant role in the registrant's
             internal controls; and

6.  The registrant's other certifying officers and I have indicated in this
    annual report whether or not there were significant changes in internal
    controls or in other factors that could significantly affect internal
    controls subsequent to the date of our most recent evaluation, including any
    corrective actions with regard to significant deficiencies and material
    weaknesses.

    Date: 12/23/02
                                         /s/ William P. Hales
                                         -------------------------------
                                         Principal Executive Officer
<PAGE>
                  CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
            PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
             AND SECURITIES AND EXCHANGE COMMISSION RELEASE 34-46427

I, Deborah F. Ricci, the principal financial officer of Hemagen Diagnostics Inc,
certify that:

1.  I have reviewed this annual report on Form 10-K of Hemagen Diagnostics, Inc.

2.  Based on my knowledge, this annual report does not contain any untrue
    statement of a material fact or omit to state a material fact necessary to
    make the statements made, in light of the circumstances under which such
    statements were made, not misleading with respect to the period covered by
    the annual report;

3.  Based on my knowledge, the financial statements, and other financial
    information included in this annual report, fairly present in all material
    respects the financial condition, results of operations and cash flows of
    the registrant as of, and for, the periods presented in this annual report;

4.  The registrant's other certifying officers and I are responsible for
    establishing and maintaining disclosure controls and procedures (as defined
    in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

         a.  Designed such disclosure controls and procedures to ensure that
             material information relating to the registrant, including its
             consolidated subsidiaries, is made know to us by others within
             those entities, particularly during the period in which this annual
             report is being prepared;

         b.  Evaluated the effectiveness of the registrant's disclosure controls
             and procedures as of the date within 90 days prior to filing date
             of this annual report (the "Evaluation Date"); and

         c.  Present in this annual report our conclusions about the
             effectiveness of the disclosure controls and procedures based on
             our evaluation as of the Evaluation Date;

5.  The registrant's other certifying officers and I have disclosed, based on
    our most recent evaluation, to the registrant's auditors and the audit
    committee of registrant's board of directors (or persons performing the
    equivalent functions):

         a.  All significant deficiencies in the design or operation of internal
             controls which could adversely affect the registrant's ability to
             record, process, summarize and report financial data and have
             identified for the registrant's auditors any material weaknesses in
             internal controls; and

         b.  Any fraud, whether or not material, that involves management or
             other employees who have a significant role in the registrant's
             internal controls; and

6.  The registrant's other certifying officers and I have indicated in this
    annual report whether or not there were significant changes in internal
    controls or in other factors that could significantly affect internal
    controls subsequent to the date of our most recent evaluation, including any
    corrective actions with regard to significant deficiencies and material
    weaknesses.

    Date: 12/23/02
                                         /s/ Deborah F. Ricci
                                         -------------------------------------
                                         Principal Financial Officer
<PAGE>
                                                       HEMAGEN DIAGNOSTICS, INC.
                                                                AND SUBSIDIARIES

                                      INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================

<TABLE>
<S>                                                                  <C>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS                      F-2

CONSOLIDATED FINANCIAL STATEMENTS:

    Balance sheets at September 30, 2002 and 2001                    F-3 to F-4

    Statements of operations for the years ended
              September 30, 2002 and 2001                               F-5

    Statements of stockholders' equity for the years ended
              September 30, 2002 and 2001                               F-6

    Statements of cash flows for the years ended
              September 30, 2002 and 2001                               F-7

    Notes to consolidated financial statements                       F-8 to F-29
</TABLE>

                                      F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

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 as of September 30, 2002 and 2001, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for the years then ended. These 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 auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes 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 financial position of Hemagen Diagnostics,
Inc. and subsidiaries at September 30, 2002 and 2001, and the results of their
operations and their cash flows for the years then ended, in conformity with
accounting principles generally accepted in the United States of America.

Grant Thornton LLP
Baltimore, Maryland
November 08, 2002 (except for the second paragraph of note 16, as to which the
date is December 20, 2002)

                                      F-2
<PAGE>
                                                       HEMAGEN DIAGNOSTICS, INC.
                                                                AND SUBSIDIARIES

                                                     CONSOLIDATED BALANCE SHEETS

================================================================================

<TABLE>
<CAPTION>
September 30,                                                           2002                 2001
=====================================================================================================
<S>                                                                <C>                  <C>
ASSETS
CURRENT:
    Cash and cash equivalents                                      $     463,958        $     672,378
    Accounts receivable, less allowance for doubtful accounts
      of $ 532,111 and $611,000 at September 30, 2002 and
      2001, respectively                                               1,178,536            1,299,616
    Inventories, net                                                   3,368,317            3,774,346
    Prepaid expenses and other current assets                            181,262              113,226
-----------------------------------------------------------------------------------------------------

     Total current assets                                              5,192,073            5,859,566

PROPERTY AND EQUIPMENT, net of accumulated
  depreciation and amortization                                        1,624,539            2,226,093

OTHER ASSETS, NET                                                        205,616              297,849
-----------------------------------------------------------------------------------------------------
     Total Assets                                                  $   7,022,228        $   8,383,508
=====================================================================================================
</TABLE>

                    See accompanying notes to consolidated financial statements.

                                      F-3
<PAGE>
                                                       HEMAGEN DIAGNOSTICS, INC.
                                                                AND SUBSIDIARIES

                                                     CONSOLIDATED BALANCE SHEETS

================================================================================

<TABLE>
<CAPTION>
September 30,                                                                   2002               2001
===========================================================================================================
<S>                                                                        <C>                 <C>
LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
    Line of credit                                                         $         --        $         --
    Subordinated note payable, current portion                                  156,839             136,256
    Accounts payable and accrued expenses                                     1,420,340           1,654,430
    Deferred revenue                                                            123,470             132,322
-----------------------------------------------------------------------------------------------------------
      Total current liabilities                                               1,700,649           1,923,008

Subordinated note payable, less current portion                                      --             145,070
Senior subordinated secured convertible notes, net of unamortized
    discount of $ 3,974,051 and $4,542,376 at September 30, 2002 and
    2001, respectively                                                        2,115,949           1,547,624
                                                                              ---------           ---------
      Total subordinated debt                                                 2,115,949           1,692,694
-----------------------------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES                                                        --                  --

STOCKHOLDERS' EQUITY:
    Preferred stock, $0.01 par value - 1,000,000 shares
      authorized; none issued                                                        --                  --
    Common stock, $0.01 par value - 30,000,000 shares authorized; and
      10,168,011 and 9,962,422 shares issued at
      September 30, 2002 and 2001, respectively                                 101,680              99,623
    Additional paid-in capital                                               20,933,517          20,693,055
    Accumulated deficit                                                     (17,614,449)        (15,853,966)
    Accumulated other comprehensive loss - foreign
      currency translation loss                                                (125,481)            (81,269)
    Less treasury stock at cost; 100,000 shares at September 30, 2002
      and 2001, respectively                                                    (89,637)            (89,637)
-----------------------------------------------------------------------------------------------------------
      Total stockholders' equity                                              3,205,630           4,767,806
-----------------------------------------------------------------------------------------------------------
      Total liabilities and stockholders' equity                              7,022,228        $  8,383,508
===========================================================================================================
</TABLE>

                    See accompanying notes to consolidated financial statements.

                                      F-4
<PAGE>
                                                       HEMAGEN DIAGNOSTICS, INC.
                                                                AND SUBSIDIARIES

                                           CONSOLIDATED STATEMENTS OF OPERATIONS

================================================================================

<TABLE>
<CAPTION>
Years ended September 30,                                                  2002                 2001
========================================================================================================
<S>                                                                    <C>                  <C>
NET SALES                                                              $  9,499,532         $ 10,970,558
--------------------------------------------------------------------------------------------------------
COSTS AND EXPENSES:
     Costs of sales                                                       6,560,960            7,557,394
     Research and development                                               406,919              387,345
     Selling, general and administrative                                  3,202,741            3,289,439
--------------------------------------------------------------------------------------------------------
        Total costs and expenses                                         10,170,620           11,234,178
--------------------------------------------------------------------------------------------------------
        Operating loss                                                     (671,088)            (263,620)
--------------------------------------------------------------------------------------------------------
OTHER INCOME (EXPENSES):
     Interest income                                                         42,095               66,067
     Interest expense                                                    (1,107,326)            (839,197)
     Other expense                                                          (24,164)             (31,687)
                                                                       ------------         ------------
        Total other income (expense)                                     (1,089,395)            (804,817)
--------------------------------------------------------------------------------------------------------
Net loss before cumulative effect of a change
  in accounting principle                                                (1,760,483)          (1,068,437)

Cumulative effect of a change in accounting principle for beneficial
  conversion feature of debt                                                     --           (1,130,384)
--------------------------------------------------------------------------------------------------------
NET LOSS                                                               $ (1,760,483)        $ (2,198,821)
========================================================================================================
Net loss per share - Basic and Undiluted

     Loss from continuing operations                                   $      (0.18)        $      (0.11)

     Cumulative effect of change in accounting principle
       for beneficial conversion feature of debt                       $         --         $      (0.12)
                                                                       ------------         ------------
                                                                       $      (0.18)        $      (0.23)
                                                                       ============         ============
     Weighted average common shares used in calculation                  10,044,457            9,751,462
                                                                       ============         ============

========================================================================================================
</TABLE>

                    See accompanying notes to consolidated financial statements.

                                      F-5
<PAGE>
                                                       HEMAGEN DIAGNOSTICS, INC.
                                                                AND SUBSIDIARIES

                                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

================================================================================

<TABLE>
<CAPTION>
                                                                                               Accumulated
                                                Common Stock        Additional                     Other
                                             --------------------     Paid-in    Accumulated   Comprehensive
Years ended September 30, 2002 and 2001      Shares     Par Value     Capital       Deficit        Loss
============================================================================================================
<S>                                        <C>          <C>        <C>           <C>           <C>
Balance at September 30, 2000               9,697,790   $  96,978  $ 19,230,767  $(13,655,145)             -
------------------------------------------------------------------------------------------------------------
Issuance of common stock related to the
   settlement with Dade Behring               100,000       1,000        99,000             -              -
Cumulative effect of a change in
   accounting principle for beneficial
   conversion feature of debt                       -           -     1,130,384             -              -
Issuance of common stock related to the
   conversion of debt                         110,000       1,100        48,948             -              -
Issuance of stock options to employees              -           -       142,501             -              -
Issuance of common stock in lieu
   of cash payments                            54,632         545        41,455             -              -
COMPREHENSIVE LOSS:
     Foreign exchange loss                          -           -             -             -        (81,269)
     Net loss                                       -           -             -    (2,198,821)             -
TOTAL COMPREHENSIVE LOSS:                           -           -             -             -              -
------------------------------------------------------------------------------------------------------------
Balance at September 30, 2001               9,962,422   $  99,623  $  20,693,05  $(15,853,966)       (81,269)
------------------------------------------------------------------------------------------------------------
Issuance of common stock related to the
   exercise of stock options                   13,000         130         7,941             -              -
Issuance of common stock in lieu
   of cash payments                           192,589       1,927       232,521             -              -
COMPREHENSIVE LOSS:
    Foreign exchange loss                           -           -             -             -        (44,212)
    Net loss                                        -           -             -    (1,760,483)             -
TOTAL COMPREHENSIVE LOSS:                           -           -             -             -              -
------------------------------------------------------------------------------------------------------------
BALANCE AT SEPTEMBER 30, 2002              10,168,011   $ 101,680  $ 20,933,517  $(17,614,449)  $   (125,481)
------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
                                                 Treasury Stock        Total
                                                ----------------    Stockholders'
Years ended September 30, 2002 and 2001         Shares      Cost       Equity
=================================================================================
<S>                                            <C>        <C>        <C>
Balance at September 30, 2000                  (100,000)  $(89,637)  $  5,582,963
---------------------------------------------------------------------------------
Issuance of common stock related to the
   settlement with Dade Behring                       -          -        100,000
Cumulative effect of a change in
   accounting principle for beneficial
   conversion feature of debt                         -          -      1,130,384
Issuance of common stock related to the
   conversion of debt                                 -          -         50,048
Issuance of stock options to employees                -          -        142,501
Issuance of common stock in lieu
   of cash payments                                   -          -         42,000
COMPREHENSIVE LOSS:
     Foreign exchange loss                            -          -
     Net loss                                         -          -
TOTAL COMPREHENSIVE LOSS:                             -          -     (2,280,090)
---------------------------------------------------------------------------------
Balance at September 30, 2001                  (100,000)  $(89,637)  $  4,767,806
---------------------------------------------------------------------------------
Issuance of common stock related to the
   exercise of stock options                          -          -          8,071
Issuance of common stock in lieu
   of cash payments                                   -          -        234,448
COMPREHENSIVE LOSS:
    Foreign exchange loss                             -          -              -
    Net loss                                          -          -              -
TOTAL COMPREHENSIVE LOSS:                             -          -     (1,804,695)
---------------------------------------------------------------------------------
BALANCE AT SEPTEMBER 30, 2002                  (100,000)  $(89,637)  $  3,205,630
---------------------------------------------------------------------------------
</TABLE>

                    See accompanying notes to consolidated financial statements

                                      F-6
<PAGE>
                                                       HEMAGEN DIAGNOSTICS, INC.
                                                                AND SUBSIDIARIES

                                           CONSOLIDATED STATEMENTS OF CASH FLOWS

================================================================================

<TABLE>
<CAPTION>
Years ended September 30,                                                   2002               2001
=======================================================================================================
<S>                                                                    <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net loss                                                          $  (1,760,483)      $ (2,198,821)
     Adjustments to reconcile net loss to net cash (used) provided
       by operating activities:
        Depreciation and amortization                                        686,055            853,320
        Amortization of debt discount                                        568,325            329,370
        Cumulative effect of a change in accounting principle                     --          1,130,384
        Loss on sale of property and equipment                                 1,459             13,175
        Changes in operating assets and liabilities
          Accounts receivable                                                177,998            347,947
          Inventories                                                        406,029            413,816
          Prepaid expenses and other current assets                          (52,036)            64,150
          Accounts payable and accrued expenses                                  319           (740,603)
          Customer deposits                                                       --            (81,239)
          Deferred revenue                                                    (8,852)            10,253
-------------------------------------------------------------------------------------------------------
             Net cash provided by (used in) operating activities             (18,814)           141,752
-------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
     Purchase of property and equipment                                      (66,838)           (84,211)
     Proceeds from sales of property and equipment                               192            151,374
-------------------------------------------------------------------------------------------------------
             Net cash provided by (used in) investing activities             (66,646)            67,163
-------------------------------------------------------------------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Net repayments of subordinated note payable                            (124,447)          (915,714)
     Exercise of stock options                                                 8,071                 --
-------------------------------------------------------------------------------------------------------
             Net cash (used in) financing activities                        (116,376)          (915,714)
-------------------------------------------------------------------------------------------------------
EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS                        (44,212)           (81,269)
-------------------------------------------------------------------------------------------------------
NET DECREASE IN CASH AND CASH EQUIVALENTS                                   (208,420)          (788,068)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                                 672,378          1,460,446
-------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF YEAR                                 $     463,958       $    672,378
=======================================================================================================
</TABLE>

                    See accompanying notes to consolidated financial statements.

                                      F-7
<PAGE>
                                                       HEMAGEN DIAGNOSTICS, INC.
                                                                AND SUBSIDIARIES

                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

================================================================================

1.   NATURE OF          Hemagen Diagnostics, Inc. (the "Company") is a
     BUSINESS           biotechnology company that develops, manufactures, and
                        markets medical diagnostic test kits used to aid in the
                        diagnosis of certain autoimmune and infectious diseases.
                        In the United States, the Company sells its products
                        directly to physicians, veterinarians, clinical
                        laboratories and blood banks and on a private-label
                        basis through multinational distributors of medical
                        supplies. Internationally, the Company sells its
                        products primarily through distributors. The Company
                        also manufactures and sells an FDA-cleared clinical
                        chemistry analyzer ("The Analyst") used to measure
                        important constituents in human and animal blood.
                        The Company sells The Analyst through distributors
                        servicing both the physician's office laboratory and
                        veterinary markets.

2.     SIGNIFICANT
       ACCOUNTING
       POLICIES

       Estimates and    The preparation of financial statements in conformity
       Assumptions      with accounting principles generally accepted in the
                        United States of America, 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.

       Principles of    The accompanying consolidated financial statements
       Consolidation    include the accounts of the Company, its wholly owned
                        subsidiary, Reagents Applications, Inc. ("RAI") and its
                        majority owned subsidiary, Hemagen Diagnostics
                        Commercio, Importaco & Exporataco, Ltd. ("HDC"). All
                        significant intercompany balances and transactions have
                        been eliminated in consolidation.

                        The Company has a 51% interest in HDC. All losses of HDC
                        in excess of the minority shareholders' investment have
                        been allocated to the Company.

                                      F-8
<PAGE>
                                                       HEMAGEN DIAGNOSTICS, INC.
                                                                AND SUBSIDIARIES

                           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

================================================================================

2.     SIGNIFICANT
       ACCOUNTING
       POLICIES
       (Continued)

       Foreign          The financial position and results of operations of HDC
       Currency         are measured using HDC's local currency as the
       Translation      functional currency. Revenues and expenses of HDC have
                        been translated into U.S. dollars 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 shareholders' equity.

       Cash             The Company considers all investments with original
       Equivalents      maturities of three months or less at the date of
                        purchase to be cash equivalents.

       Inventories      Inventories are stated at the lower of cost, determined
                        on a first-in, first-out basis, or market.

       Long-lived       The Company reviews the carrying values of its
       Assets           long-lived assets for possible impairment whenever
                        events or changes in circumstances indicate that the
                        carrying amount of the assets may not be recoverable.
                        Should the review indicate 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.

       Property and     Property and equipment are stated at cost. Depreciation
       Equipment        is provided on a straight-line basis over the estimated
                        useful lives of the related assets which range from 4 to
                        10 years. Expenditures for repairs and maintenance are
                        expensed as incurred.

                                      F-9
<PAGE>
                                                       HEMAGEN DIAGNOSTICS, INC.
                                                                AND SUBSIDIARIES

                           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

================================================================================

2.     SIGNIFICANT
       ACCOUNTING
       POLICIES
       (Continued)

       Other Assets     Other assets, net consists primarily of goodwill
                        resulting from the acquisition of RAI. In July 2001, the
                        Financial Accounting Standards Board ("FASB") issued
                        Statement of Financial Accounting Standards No. 142
                        Goodwill and Intangible Assets ("SFAS 142"). SFAS No.142
                        requires goodwill to be tested annually for impairment
                        and between annual tests in certain circumstances, and
                        written down when impaired, rather than being amortized
                        as previous accounting standards required.

                        SFAS 142 is effective for fiscal years beginning after
                        December 31, 2001; however the Company elected to
                        early-adopt the accounting standard effective the
                        beginning of fiscal year 2002. In accordance with SFAS
                        142, the company ceased amortizing goodwill with an
                        amortized balance of $101,550 as of the beginning of
                        fiscal 2002. Based on the impairment tests performed,
                        there was no impairment of goodwill in fiscal 2002.

       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.

       Comprehensive    During the year ended September 30, 2001, the Company
       Income           adopted SFAS 130, "Reporting Comprehensive Incomes". The
                        standard establishes guidelines for reporting and
                        display if comprehensive income and its components in
                        financial statements. Comprehensive income includes
                        foreign exchange loss and is included as a component of
                        stockholders' equity.

       Revenue          Revenues from the sale of products are recognized upon
       Recognition      product shipment. Revenues from product service
                        contracts are recognized ratably over the terms of the
                        contracts. Losses are provided for at the time that
                        management determines that contract costs will exceed
                        related revenues. The portion of contract billings
                        received related to research and development and product
                        service contracts not complete at the balance sheet date
                        is included in deferred revenue.

                                      F-10
<PAGE>
                                                       HEMAGEN DIAGNOSTICS, INC.
                                                                AND SUBSIDIARIES

                           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

================================================================================

2.     SIGNIFICANT
       ACCOUNTING
       POLICIES
       (Continued)

       Stock-Based      The Company accounts for stock-based employee
       Compensation     compensation arrangements in accordance
                        with the provisions of Accounting Principles Board
                        Opinion No. 25 (APB 25) Accounting for Stock Issued to
                        Employees, and complies with the disclosure provisions
                        of Statement of Financial Accounting Standard No. 123
                        (SFAS No. 123), "Accounting for Stock-Based
                        Compensation". Under APB 25, compensation expense is
                        based on the difference, if any, on the date of grant,
                        between the market value of the Company's stock and the
                        exercise value of the option granted.

       Net Loss         The Company follows Statement of Financial Accounting
       Per Share of     Standards No. 128 (SFAS No. 128), "Earnings per Share."
       Common Stock     Under SFAS No. 128, basic earnings per share excludes
                        the effect of any dilutive options, warrants or
                        convertible securities and is computed by dividing the
                        net income (loss) available to common shareholders by
                        the weighted average number of common shares outstanding
                        for the period. Diluted earnings per share is computed
                        by dividing the net income (loss) available to common
                        shareholders by the sum of the weighted average number
                        of common shares and common share equivalents computed
                        using the average market price for the period under the
                        treasury stock method.

                        Weighted-average common share equivalents outstanding at
                        September 30, 2002 and 2001 totaling 8,456,410 and
                        10,819,000 shares, respectively for currently
                        outstanding stock options, warrants and convertible debt
                        were not included in the denominator for diluted income
                        per share as their effect was anti-dilutive.

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

       Current          In October 2001, the FASB issued Statement of Financial
       Accounting       Accounting Standards No. 144, "Accounting for the
       Pronouncements   Impairment or Disposal of Long-Lived Assets" ("SFAS
                        144"). SFAS 144 establishes a single accounting model,
                        based on the framework established in Statement of
                        Financial Accounting Standard No. 121, " Accounting for
                        the Impairment of Long-Lived Assets and for Long Lived
                        Assets to Be Disposed Of ("SFAS 121"), for long-lived
                        assets to be disposed of by sale, and resolves
                        implementation issues related to SFAS 121. The Company
                        is required to adopt SFAS 144 no later than the first
                        quarter of

                                      F-11
<PAGE>
                                                       HEMAGEN DIAGNOSTICS, INC.
                                                                AND SUBSIDIARIES

                           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

================================================================================

                        fiscal 2003. The Company does not expect the adoption of
                        SFAS 144 to have a material impact on its operating
                        results or financial position.

                        In July 2002, the FASB issued Statement of Financial
                        Accounting Standards No. 146, "Accounting for Costs
                        Associated with Exit or Disposal Activities" ("SFAS
                        146"). SFAS 146 requires that a liability for costs
                        associated with an exit or disposal activity be
                        recognized and measured initially at fair value only
                        when the liability is incurred. SFAS 146 is effective
                        for exit or disposal activities that are initiated after
                        December 31, 2002. The Company does not expect the
                        adoption of SFAS 146 to have a material impact on its
                        operating results or financial position.

3.     RELATED PARTY    William P. Hales, Redwood Holdings, Inc. and certain of
       TRANSACTIONS     Redwood Holdings, Inc.'s employees, namely Jerry L.
                        Ruyan, Thomas A. Donelan, and Christopher P. Hendy
                        solicited written consents from shareholders of Hemagen
                        seeking several changes to its Bylaws, the removal of
                        its directors and the election of themselves to the
                        Board of Directors in fiscal year 1999. Following the
                        delivery of consents, the matter was settled pursuant to
                        a settlement agreement executed on September 30, 1999.

                        As part of the settlement agreement four of Hemagen's
                        six directors resigned and were replaced by Jerry L.
                        Ruyan, William P. Hales, Thomas A. Donelan, and
                        Christopher P. Hendy. At that time, the four new
                        directors purchased from the previous management all of
                        their common shares totaling 777,801 at a price
                        approximating market.

                        On October 1, 1999, the Company entered into a
                        consulting agreement with two outside directors, Thomas
                        A. Donelan and Christopher P. Hendy, for consulting
                        services to be provided to the Company with respect to
                        general corporate or strategic matters for a period of
                        one year ended September 30, 2000. As of September 30,
                        2000, the Company had incurred $226,500 in consulting
                        fees of which $183,600 was accrued for Thomas A. Donelan
                        and Christopher P. Hendy.

                        On January 25, 2002, outside directors Thomas A. Donelan
                        and Christopher P. Hendy resigned from the Board of
                        Directors. At that time, the directors were paid
                        consulting fees that were previously accrued to them of
                        $ 169,199. The former directors were paid in shares of
                        the Company's stock as provided in their consulting
                        agreement. On February 13, 2002, Thomas A. Donelan and
                        Christopher P. Hendy, each received 57,974 shares of the
                        Company's stock.

                                      F-12
<PAGE>
                                                       HEMAGEN DIAGNOSTICS, INC.
                                                                AND SUBSIDIARIES

                           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

================================================================================

4.     INVENTORIES      Inventories consist of the following:

<TABLE>
<CAPTION>
September 30,                               2002          2001
=================================================================
<S>                                      <C>           <C>
Raw materials                            $2,140,372    $2,404,437
Work-in-process                             205,363       109,351
Finished goods                            1,820,938     2,091,788
-----------------------------------------------------------------
                                          4,166,673     4,605,576
Less reserves                              (798,356)     (831,230)
-----------------------------------------------------------------
                                         $3,368,317    $3,774,346
=================================================================
</TABLE>

5.     PROPERTY AND
       EQUIPMENT        Property and equipment consist of the following:

<TABLE>
<CAPTION>
September 30,                                 2002         2001
==================================================================
<S>                                       <C>           <C>
Furniture and equipment                   $7,516,654    $7,472,998
Leasehold improvements                       158,526       158,404
------------------------------------------------------------------
                                           7,675,180     7,631,402
Less accumulated depreciation
  and amortization                         6,050,641     5,405,309
------------------------------------------------------------------
                                          $1,624,539    $2,226,093
==================================================================
</TABLE>

                        Depreciation and amortization expense relating to
                        property and equipment was approximately $667,000 and
                        $773,000 for the years ended September 30, 2002, and
                        2001, respectively.

                                      F-13
<PAGE>
                                                       HEMAGEN DIAGNOSTICS, INC.
                                                                AND SUBSIDIARIES

                           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

================================================================================

6.     OTHER ASSETS     Included in other assets is $151,550 of goodwill. In
                        accordance with SFAS 142, the Company ceased amortizing
                        goodwill as of the beginning of fiscal 2002. The
                        amortization expense and net income of the Company for
                        the year of initial application and prior year follows:

<TABLE>
<CAPTION>
                                                For the year ended September 30,
                                                    2002               2001
                                                -------------      -------------
<S>                                             <C>                <C>
Reported net loss before
 cumulative effect of change
 in accounting principle                        $ (1,760,483)      $(1,068,437)

Add back: goodwill amortization                            -            50,776
                                                ------------       -----------
                                                $ (1,760,483)      $(1,017,661)
Cumulative effect of change in
 accounting principle                                      -        (1,130,384)
                                                ------------       -----------
Adjusted net loss                               $ (1,760,483)      $(2,148,045)
                                                ============       ===========
BASIC AND DILUTED EARNINGS PER SHARE:

Reported net loss from continuing
 operations                                     $      (0.18)      $     (0.11)

Add back: goodwill amortization                            -              0.01
                                                ------------       -----------
                                                $      (0.18)      $     (0.10)
Cumulative effect of change in
 accounting principle                                      -             (0.12)
                                                ------------       -----------

Adjusted net loss per share-basic & diluted     $      (0.18)      $     (0.22)
                                                ============       ===========
</TABLE>

                                      F-14
<PAGE>
                                                       HEMAGEN DIAGNOSTICS, INC.
                                                                AND SUBSIDIARIES

                           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

================================================================================

7.     ACCOUNTS PAYABLE
       AND ACCRUED
       EXPENSES         Accounts payable and accrued expenses include the
                        following:

<TABLE>
<CAPTION>
September 30,                                           2002                   2001
========================================================================================
<S>                                                  <C>                   <C>
Accounts payable - trade                               604,551             $  528,497
Accrued professional fees                              169,934                296,042
Accrued royalties                                      295,756                252,365
Accrued vacation                                       122,738                134,306
Accrued closure provision                               50,000                146,478
Accrued other                                          177,361                296,742
----------------------------------------------------------------------------------------
                                                     1,420,340             $1,654,430
========================================================================================
</TABLE>

8.     DEVELOPMENT      The Company entered into an agreement under which the
       AND LICENSE      Company obtained exclusive proprietary rights to certain
       AGREEMENTS       patents, licenses and technology to manufacture, market
                        and sell certain products. Under the agreement, the
                        Company is obligated to make quarterly royalty payments
                        based on a percentage of sales of the defined products
                        through August 31, 2004.

                        In addition, the Company entered into a sublicense
                        agreement whereby two license agreements related to
                        certain Analyst(R) products were transferred to the
                        Company. One of which expired in March 2000. The
                        remaining license agreement, which contains provisions
                        for royalty obligations based on production and net
                        sales of certain products, expires in May 2005. Royalty
                        expense recorded under the royalty agreement and the
                        sublicense agreement amounted to approximately $130,000
                        and $48,000 during years ended September 30, 2002 and
                        2001, respectively.

                                      F-15
<PAGE>
                                                       HEMAGEN DIAGNOSTICS, INC.
                                                                AND SUBSIDIARIES

                           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

================================================================================

9.     LINE OF CREDIT   In September 2002, the Company obtained a revolving line
                        of credit with a bank for the purpose of financing
                        working capital needs as required. The line of credit
                        facility provides for borrowing up to $1,000,000 at an
                        interest rate of Prime Rate plus3/4%. Maximum borrowings
                        under the loan are based on the domestic receivables and
                        inventory of the Company. At September 30, 2002 there
                        was no outstanding balance on the line of credit and the
                        effective interest rate on the line of credit was 5.5%.

10.    SUBORDINATED     On November 9, 2000, the Company reached an agreement
       NOTE PAYABLE     with Dade Behring, Inc. that provided for the
                        settlement of a $1,250,000 note payable. The $1,250,000
                        note payable originated from the September 1, 1998
                        acquisition of the Analyst(R) product line from Dade
                        Behring. This settlement agreement called for a payment
                        of $800,000 in cash, a reduction of the outstanding
                        balance by $200,000, a new note for $397,000 and 100,000
                        shares of Hemagen common stock. The note for $397,000
                        provides for interest to accrue at the rate of 10% per
                        annum, with 24 monthly payments of $12,810 and a final
                        payment due on November 15, 2002. The common shares were
                        estimated to have a value of $100,000 based on the
                        market price on November 9, 2000. Under this agreement,
                        Dade Behring continues to provide production services to
                        the Company. The balance outstanding of the note at
                        September 30, 2002 and 2001 is $156,839, and $281,326,
                        respectively.

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

                        The senior subordinated secured convertible notes mature
                        on April 17, 2005, with no principal payments required
                        until maturity. The notes provide for quarterly interest
                        payments at the annual rate of 8%. The effective
                        interest rate on these notes was calculated to be
                        approximately 58% and an original issue discount of
                        approximately $5,185,000 is being amortized over the
                        term of the notes. The face value of the notes
                        outstanding at September 30, 2002, is $6,090,000. The
                        unamortized discount on these notes equals $3,974,000
                        and $4,542,000 at September 30, 2002 and 2001,
                        respectively.

                                      F-16
<PAGE>
                                                       HEMAGEN DIAGNOSTICS, INC.
                                                                AND SUBSIDIARIES

                           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

================================================================================

11.    PRIVATE          The Company adopted Emerging Issues Task Force ("EITF")
       PLACEMENT        Issue 00-27, "Application of EITF 98-5, Convertible
       OFFERING         Securities with Beneficial Conversion Features or
       (Continued)      Contingently Adjustable Conversion Ratios to Certain
                        Convertible Instruments" during the fourth quarter of
                        2000. EITF 00-27 requires that a convertible
                        instrument's beneficial conversion feature be measured
                        using an effective conversion price. As a result, the
                        value assigned to the original issue discount on the
                        convertible debt securities issued by the Company in the
                        private placement completed in May 2000, was increased
                        by $1,130,384 in December 2000. In accordance with the
                        EITF, this additional original discount was expensed in
                        the current period and recognized as the cumulative
                        effect of a change in accounting principle.

                        The senior subordinated secured convertible notes are
                        convertible into shares of the Company's common stock at
                        a conversion price of $2.00 per share. The Company may
                        force the notes to be converted at any time after the
                        common stock has traded above $4.50 for ten consecutive
                        business days. Additionally, the Company may prepay the
                        notes at any time at the full face value of the notes
                        plus accrued and unpaid interest. During the year ended
                        September 30, 2001, the Company issued 110,000 shares of
                        common stock in connection with the conversion of
                        $225,000 of notes payable.

                        In conjunction with the sale of the units, 2,526,000
                        warrants were issued. The warrants issued allow the
                        holder to purchase one share of common stock at an
                        exercise price of $2.75 at any time on or after April
                        30, 2001, through April 30, 2002. The expiration of the
                        warrants was extended to April 30, 2003. The Company may
                        call the warrants for $0.10 per warrant at any time
                        after April 30, 2001, provided that the closing bid
                        price of the Company's common stock has exceeded $4.25
                        for ten consecutive business days. At issuance the
                        Company determined the estimated fair value of the
                        warrants to be approximately $1.34 each or $3,384,840 in
                        aggregate. An additional 75,800 warrants were issued to
                        the placement agent of the offering at the estimated
                        value of $101,572. The offering provided for the issue
                        of 1,184,072 shares of common stock to the unit holders.
                        These shares were valued at approximately $1.52 per
                        share for a total value of $1,799,789. The placement
                        agent for the offering was also issued 75,800 shares at
                        a value of $115,216. The cost of the offering was
                        allocated between debt and equity.

12.    STOCKHOLDER'S

                                      F-17
<PAGE>
                                                       HEMAGEN DIAGNOSTICS, INC.
                                                                AND SUBSIDIARIES

                           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

================================================================================

       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.

       Accumulated      In 1999, the Company adopted Statement of Financial
       Comprehensive    Accounting Standards No. 130, "Reporting Comprehensive
       Income           Income" (SFAS No. 130). SFAS No. 130 establishes new
                        rules for the reporting and display of comprehensive
                        income and its components, however, until this year,
                        the adoption of this statement had no impact on the
                        Company's net income or shareholders' equity.
                        Accumulated other comprehensive loss consists of foreign
                        currency translation adjustments totaling $125,481 and
                        $81,269 at September 30, 2002 and 2001, respectively.

       Common Stock     At September 30, 2002, 2,601,800 warrants at an exercise
       Purchase         price of $2.75 expiring at April 30,2003, were
       Warrants         outstanding. On April 30, 2002, warrants for the
                        purchase of 2,595,755 shares of common stock at an
                        exercise price of $2.75 expired. No stock purchase
                        warrants were issued, expired, cancelled or exercised in
                        fiscal 2001.

       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. The
                        Compensation Committee of the Board of Directors is
                        responsible for the administration of the Plan. 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. The Company may not grant an employee
                        incentive stock options with a fair market value in
                        excess of $100,000 that is exercisable during any one
                        calendar year. The term of incentive stock options
                        granted cannot exceed ten years (five years for options
                        granted to holders of more than 10% of the voting stock
                        of the Company). The exercise price for incentive stock
                        options granted may not be less than 100% of the fair
                        market value per share of the underlying common stock
                        (110% for options granted to holders of more than 10% of
                        the voting stock of the Company).

12.    STOCKHOLDERS'

                                      F-18
<PAGE>
                                                       HEMAGEN DIAGNOSTICS, INC.
                                                                AND SUBSIDIARIES

                           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

================================================================================

       EQUITY

       Stock Options    Prior to the establishment of the 2001 Stock Option
       (Continued)      Plan, the Company granted certain stock options in
                        accordance with the terms of the 1992 Stock Option Plan.
                        The 1992 Stock Option Plan, as amended, 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. The Board of Directors is
                        responsible for the administration of the Plan. The
                        terms of the 1992 Stock Option Plan are generally the
                        same as the 2001 Stock Option Plan as described above.

                        On September 30, 1999, the Company's Board of Directors
                        awarded options to the Company's President and Chief
                        Executive Officer and certain directors at that date to
                        purchase an aggregate of 1,732,014 shares of the
                        Company's common stock at an exercise price of $1.36 per
                        share, which represented the fair value of the common
                        stock at that date. The director's options were granted
                        to William P. Hales and Redwood Holdings, Inc. each
                        party receiving 866,007 options. Redwood Holdings, Inc.,
                        which is a 100% owned subsidiary of an employee stock
                        ownership plan, the beneficial owners of which are Jerry
                        Ruyan (49.9%), Thomas A. Donelan (24.9%), and
                        Christopher P. Hendy (24.9%); all of which were
                        directors of the Company at September 30, 1999. The
                        options were granted pursuant to stockholder
                        authorization received during a consent solicitation
                        which resulted in the replacement of certain former
                        members of the Company's senior management and Board of
                        Directors. The options, which were not issued under the
                        Plan, expire on September 30, 2009, and became
                        exercisable on March 31, 2001.

                                      F-19
<PAGE>
                                                       HEMAGEN DIAGNOSTICS, INC.
                                                                AND SUBSIDIARIES

                           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

================================================================================

12.    STOCKHOLDERS'
       EQUITY
       (Continued)

       Stock Options    Changes in all options outstanding are summarized as
       (Continued)      follows:

<TABLE>
<CAPTION>
                                                                         Weighted -
                                                                          Average
                                                                         Exercise
                                                      Shares               Price
===================================================================================
<S>                                                 <C>                  <C>
BALANCE, September 30, 2000                         2,287,164               1.44
   Granted                                            425,000               0.74
   Exercised                                               --                 --
   Cancelled or expired                              (135,304)              1.52
===================================================================================
BALANCE, September 30, 2001                         2,576,860              $1.31
   Granted                                            451,500               0.85
   Exercised                                          (13,000)             (0.63)
   Cancelled or expired                              (205,750)              1.33
-----------------------------------------------------------------------------------

BALANCE, September 30, 2002                         2,809,610              $1.23
===================================================================================
</TABLE>

                                      F-20
<PAGE>
                                                       HEMAGEN DIAGNOSTICS, INC.
                                                                AND SUBSIDIARIES

                           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

================================================================================

12.    STOCKHOLDERS'    The following table summarizes information about stock
       EQUITY           options outstanding at September 30, 2002:
       (Continued)

       Stock Options
       (Continued)

<TABLE>
<CAPTION>
                                  Options Outstanding
                                  -------------------
                                              Weighted-Average
                               Number            Remaining
Range of Exercise          Outstanding at       Contractual        Weighted Average
     Prices              September 30, 2002     Life (years)        Exercise Price
=====================================================================================
<S>                      <C>                  <C>                  <C>
       2.19                     3,600              2.2                  $2.19
       2.00                   224,996              1.6                   2.00
       1.36                 1,732,014              7.0                   1.36
       1.25                    15,000              3.0                   1.25
       1.20                    34,500              1.0                   1.20
       1.15                     5,000              4.3                   1.15
       1.06                    75,000              4.3                   1.06
       1.00                    13,000              4.3                   1.00
       0.98                    10,000              4.5                   0.98
       0.97                    50,000              2.3                   0.97
       0.85                    30,000              7.8                   0.85
       0.83                    10,000              4.0                   0.83
       0.81                    20,000              8.4                   0.81
       0.80                   `38,500              4.0                   0.80
       0.78                   275,000              4.2                   0.78
       0.64                    30,000              3.6                   0.64
       0.63                   243,000              3.2                   0.63
-------------------------------------------------------------------------------------
   $0.63 to $2.19           2,809,610              4.9                  $1.23
=====================================================================================
</TABLE>

                                      F-21
<PAGE>
                                                       HEMAGEN DIAGNOSTICS, INC.
                                                                AND SUBSIDIARIES

                           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

================================================================================

12.    STOCKHOLDERS'    As of September 30, 2002, options for 2,506,443 shares
       EQUITY           were exercisable at prices ranging from $0.63 to $2.19
       (Continued)      per share as follows:

       Stock Options
       (Continued)

<TABLE>
<CAPTION>
                                 Options Exercisable
                                 -------------------
Range of Exercise Prices        Number Exercisable at      Weighted Average Exercise
                                 September 30, 2002                  Price
=====================================================================================
<S>                             <C>                        <C>
        $2.19                            3,600                      $2.19
         2.00                          224,996                       2.00
         1.36                        1,732,014                       1.36
         1.25                            7,500                       1.25
         1.20                           34,500                       1.20
         0.97                           50,000                       0.97
         0.83                            5,000                       0.83
         0.81                           20,000                       0.81
         0.78                          275,000                       0.78
         0.64                           15,000                       0.64
         0.63                          138,833                       0.63
-------------------------------------------------------------------------------------
   $0.63 to $2.19                    2,506,443                      $1.29
=====================================================================================
</TABLE>

                                      F-22
<PAGE>
                                                       HEMAGEN DIAGNOSTICS, INC.
                                                                AND SUBSIDIARIES

                           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

================================================================================

12.    STOCKHOLDERS'
       EQUITY
       (Continued)

       Stock Options    The Company accounts for its stock-based compensation
       (Continued)      plan using the intrinsic value method as prescribed in
                        APB 25. Since all amounts of options have been at
                        exercise prices equal to the market value of the
                        Company's stock on such date, no compensation cost has
                        been recognized for its stock option plan. Had
                        compensation costs for the Company's stock option plan
                        been determined based on the fair value at the grant
                        dates for awards under the plan consistent with the
                        method of SFAS No. 123, the Company's net loss and loss
                        per common share would have been adjusted to the pro
                        forma amounts indicated below:

<TABLE>
<CAPTION>
Years ended September 30,                                2002               2001
======================================================================================
<S>                          <C>                     <C>                <C>
Net loss                     As reported             $(1,760,483)       $(2,198,821)
                             Pro forma               $(2,082,525)       $(2,388,878)

Loss per
  common share:              As reported:
                               Basic                       (0.18)              (.23)
                               Diluted                     (0.18)              (.23)
                             Pro forma:
                               Basic                       (0.21)              (.24)
                               Diluted                     (0.21)              (.24)
</TABLE>

                        In determining the pro forma amounts above, the Company
                        estimated the fair value of each option granted using
                        the Black-Scholes option pricing model with the
                        following weighted-average assumptions used for grants
                        in 2002 and 2001: dividend yield of 0% for both years
                        and expected volatility of 121 % for 2002 and 91% for
                        2001, risk free rates of 4 % in 2002 and 5.4% in 2001,
                        and expected lives of 5 years for both 2002 and 2001.
                        The weighted average fair value of options granted
                        during the years ended September 30, 2002 and 2001 was
                        $0.85 and $0.50 per share, respectively.

                                      F-23
<PAGE>
                                                       HEMAGEN DIAGNOSTICS, INC.
                                                                AND SUBSIDIARIES

                           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

================================================================================

12.    STOCKHOLDERS'
       EQUITY
       (Continued)

       Stock Rights     In fiscal year 1999, the Company's Board of Directors
       Purchase         implemented a Stock Purchase Rights Agreement (the
       Agreement        "Agreement"). Under the Agreement, as amended, the
                        Company declared a dividend of one common share purchase
                        right (a "Right") for each share of the Company's
                        outstanding common stock as of February 10, 1999. Each
                        Right entitles the holder to purchase from the Company
                        $4.00 worth of Company common stock at a per-share price
                        equal to 50 percent of the current market price. The
                        Rights become exercisable only if a person or group, as
                        defined, acquires beneficial ownership of 15 percent or
                        more of the Company's outstanding common stock or
                        announces a tender offer that would result in beneficial
                        ownership of 15 percent or more of the Company's
                        outstanding common stock. Pursuant to a Board of
                        Directors Resolution dated September 30, 1999, William
                        P. Hales, Jerry L. Ruyan, Thomas A. Donelan, Christopher
                        P. Hendy and Redwood Holdings, Inc. are exempt under the
                        Agreement. The Rights, which expire on January 27, 2009,
                        are redeemable in whole, but not in part, at the
                        Company's option at $0.001 per Right at any time prior
                        to the earlier of ten days after public announcement
                        that a person or group has acquired beneficial ownership
                        of 15% or more of the Company's outstanding common stock
                        or the expiration date of the Rights.

       Reserved Shares  At September 30, 2002, the Company has reserved
                        9,896,741 shares of common stock for issuance upon
                        exercise of outstanding common stock options, warrants
                        and rights.

                                      F-24
<PAGE>
                                                       HEMAGEN DIAGNOSTICS, INC.
                                                                AND SUBSIDIARIES

                           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

================================================================================

13.    INCOME TAXES
                        Domestic and foreign loss before income taxes in net
                        income (loss) of consolidated subsidiary are as follows:

<TABLE>
<CAPTION>
Years ended September 30,                              2002                  2001
====================================================================================
<S>                                                <C>                   <C>
Domestic                                           $(1,621,738)          $(1,996,456)
Foreign                                               (138,745)             (206,577)
------------------------------------------------------------------------------------

                                                   $(1,760,483)          $(2,203,033)
====================================================================================
</TABLE>

                        The difference between income taxes provided at the
                        Company's effective tax rate and the Federal statutory
                        rate is as follows:

<TABLE>
<CAPTION>
Years ended September 30,                               2002                 2001
===================================================================================
<S>                                                  <C>                  <C>
Federal tax (credit) at statutory rate               $(676,035)           $(749,031)
Operating loss generating no
  current tax benefit                                  676,035              749,031
-----------------------------------------------------------------------------------

                                                     $       -            $       -
===================================================================================
</TABLE>

                                      F-25
<PAGE>
                                                       HEMAGEN DIAGNOSTICS, INC.
                                                                AND SUBSIDIARIES

                           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

================================================================================

13.    INCOME TAXES
       (Continued)      Deferred tax assets (liabilities) are comprised of the
                        following:

<TABLE>
<CAPTION>
September 30,                                           2002                2001
======================================================================================
<S>                                                 <C>                  <C>
Net operating loss carryforwards                    $ 4,857,000          $ 4,310,000
Inventory reserve                                       313,700              332,000
Accounts receivable reserve                             212,800              244,000
Closure provision                                        20,000               59,000
Other                                                   252,900              202,000
--------------------------------------------------------------------------------------

Total deferred tax assets                           $ 5,656,400            5,147,000
Basis difference in fixed assets                       (193,300)            (251,000)
--------------------------------------------------------------------------------------

Net deferred tax assets                             $ 5,463,100          $ 4,896,000
Deferred tax asset valuation
  allowance                                         $(5,463,100)          (4,896,000)
--------------------------------------------------------------------------------------

Net deferred tax assets                             $         -          $         -
======================================================================================
</TABLE>

The Company has provided a valuation allowance equal to 100% of the total 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, 2002, the Company has approximately $4,857,000 and $12,329,802
of federal and state net operating loss carry-forwards, respectively, available
to offset future taxable income, which expire on various dates through 2021.
Ownership changes as defined in the Internal Revenue Code may limit the amount
of net operating loss and tax credit carryforwards that may be utilized
annually.

                                      F-26
<PAGE>
                                                       HEMAGEN DIAGNOSTICS, INC.
                                                                AND SUBSIDIARIES

                           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

================================================================================

14.    SIGNIFICANT      During the year ended September 30, 2002, the Company
       SALES AND        derived revenues from two significant customers;
       CONCENTRATION    $1,306,000 from one customer and $1,092,000 from the
       OF CREDIT RISK   other customer, representing 14% and 11% of total sales,
                        respectively. In fiscal 2001, the Company derived
                        revenues from two significant customers; $ 1,700,000
                        from one customer and $1,482,000 from another customer
                        representing 15% and 14% of total sales, respectively.
                        Revenues derived from export sales amounted to
                        approximately $2,962,000, or 31% of total sales in 2002
                        and $3,537,000, or 32% of total sales in 2001. Export
                        sales to Europe were approximately $1,569,000, or 17% of
                        total sales in 2002 and $1,991,000, or 18% of total
                        sales in 2001. Export sales to South America were
                        approximately $915,000, or 10% of total sales in 2002
                        and $1,013,000, or 9% of total sales in 2001.

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

                        The following table sets forth revenue and assets by
                        geographic location.

<TABLE>
<CAPTION>
                                       United*
Origin of revenues                     States             Brazil       Consolidated
====================================================================================
<S>                                 <C>                  <C>           <C>
SEPTEMBER 30, 2002:
   Revenues                         $ 8,632,566          $866,966       $ 9,499,532
   Long-lived assets                  1,704,153            72,712         1,776,865
====================================================================================

SEPTEMBER 30, 2001:
   Revenues                         $10,067,897          $902,661       $10,970,558
   Long-lived assets                  2,379,947            87,077         2,467,024
====================================================================================
</TABLE>

*  Includes export sales to Europe of approximately $1,569,000 and $1,991,000
   in 2002 and 2001, respectively.

                                      F-27
<PAGE>
                                                       HEMAGEN DIAGNOSTICS, INC.
                                                                AND SUBSIDIARIES

                           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

================================================================================

16.    COMMITMENTS      The Company leases certain office and manufacturing
                        facilities under non-cancelable operating leases
                        expiring through 2007. Future minimum lease commitments
                        under the non-cancelable operating leases are as
                        follows:

       Leases

<TABLE>
<CAPTION>
Years ending September 30,                             2002
=============================================================
<S>                                                <C>
2003                                                  519,519
2004                                                  501,232
2005                                                  375,481
2006                                                  252,353
2007                                                  171,648
                                                      -------
-------------------------------------------------------------
TOTAL                                              $1,820,233
</TABLE>

                        Rent expense approximated $530,000 and $564,000 in 2002
                        and 2001, respectively.

       Retirement Plan  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 Plan
                        agreement. The Company's contributions to the Plan
                        amounted to approximately $50,000 and $56,000 in fiscal
                        2002 and 2001, respectively.

                                      F-28
<PAGE>
                                                       HEMAGEN DIAGNOSTICS, INC.
                                                                AND SUBSIDIARIES

                           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

================================================================================

16.    CONTINGENCIES    On February 7, 2002, URRMA Biopharma, Inc. filed suit
                        against the Company in the Superior Court, District of
                        Montreal, Providence of Quebec, Canada. The suit seeks
                        approximately $20,645,000 for an alleged breach of
                        contract for failure to provide information called for
                        under an alleged manufacturing agreement and for
                        publishing misleading information regarding the product.
                        The company had an understanding with URRMA Biopharma to
                        manufacture R7V diagnostic kits and was in the process
                        of negotiating a comprehensive supply agreement. The
                        company responded to the claim and filed a counter claim
                        for approximately $19,752,000 on June 10, 2002.

                        On December 19, 2002, the Company agreed to a
                        settlement that is currently being finalized in a
                        written settlement agreement. This settlement will
                        result in no cost to the Company.

17.    SUPPLEMENTAL
       DISCLOSURE OF CASH
       FLOWS INFORMATION

<TABLE>
<CAPTION>
September 30,                                             2002                2001
=====================================================================================
<S>                                                     <C>                 <C>
Cash paid for interest                                  $502,145            $522,124
Disclosure of non-cash investing
  and financing activities:
  Issuance of 192,589 and 54,632,
    respectively shares of
    common stock in lieu of cash
    payments                                             242,500              42,000
  Issuance of stock options to
    employees in satisfaction of
    amounts previously accrued                                --             142,501
  Issuance of 100,000 shares of
    common stock in satisfaction of
    debt due to Dade Behring                                  --             100,000
  Issuance of 110,000 shares of
    common stock on the conversion
    of debt                                                   --              50,048
  Fair value of warrants issued
    to non-employees
</TABLE>

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