<PAGE>

                                  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, 2003
                         Commission file number 1-11700

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

                          Delaware                04-2869857
              -----------------------------------------------------
                  (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.

     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 $8,472,711 in its most recent year. The
aggregate market value of the voting stock held by non-affiliates of the
registrant on December 19, 2003, was $5,961,864. As of December 19, 2003,
10,104,855 shares Common Stock were outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the Registrant's Proxy Statement for its 2004 Annual Meeting
are incorporated by reference into Items 10,11,12 and 14 hereof.





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


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

PART II
Item 5.   Market For Common Equity and Related Stockholder Matters........... 11
Item 6.   Management's Discussion and Analysis or Plan of Operation.......... 12
Item 7.   Financial Statements............................................... 16
Item 8.   Changes in and Disagreements with Accountants on Accounting
             and Financial Disclosures....................................... 16
Item 8A.  Controls and Procedures............................................ 17

PART III
Item 9.   Directors, Executive Officers, etc................................. 17
Item 10.  Executive Compensation............................................. 17
Item 11.  Security Ownership of Certain Beneficial Owners and Management
             and Related Stockholder Meeting................................. 17
Item 12.  Certain Relationships and Related Transactions..................... 17
Item 13.  Exhibits, List and Reports on Form 8-K............................. 17
Item 14.  Principal Accountant Fees and Services............................. 19

Certain statements contained in this report that are not historical facts
constitute forward-looking statements, within the meaning of the Private
Securities Litigation Reform Act of 1995, and are intended to be covered by the
safe harbors created by that Act. Forward looking statements may be identified
by words such as "estimates", "anticipates", "projects", "plans", "expects",
"intends", "believes", "should" and similar expressions and by the context in
which they are used. Such statements are based on current expectations. 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. All forward looking
statements, including those relating to the sufficiency of such charges,
implementation of strategies and the achievement of financial performance are
each subject to numerous conditions, uncertainties, risks and other factors.
Factors which could cause actual performance to differ materially from these
forward-looking statements, include, without 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., is a biotechnology company that develops,
manufactures, and markets more than 150 FDA-cleared proprietary medical
diagnostic test kits used to aid in the diagnosis of certain autoimmune and
infectious diseases. Hemagen also manufactures and markets a complete line of
clinical chemistry reagents through its wholly owned subsidiary RAICHEM. In
addition, Hemagen manufactures and sells the Analyst(R) an FDA-cleared clinical
chemistry analyzer used to measure important constituents in human and animal
blood, and the Endochek, a clinical chemistry analyzer used to measure important
constituents in animal blood. In the United States, the Company sells its
products directly to physicians, veterinarians, clinical laboratories and blood
banks and on a private-label basis through multinational distributors of medical
supplies. Internationally, the Company sells its products primarily through
distributors. The Company sells the Analyst(R) and the Endochek both directly
and through distributors servicing physicians' office laboratories and
veterinarians' offices. Hemagen's products are used in many of the largest
laboratories, hospitals, and blood banks around the world. Hemagen sells its
products to over 1,000 customers worldwide. The company focuses on markets that
offer significant growth opportunities. The Company was incorporated in 1985 and
became a public company in 1993. Hemagen's principal offices are located at 9033
Red Branch Road, Columbia, Maryland 21045 and the telephone number is (443)
367-5500. Hemagen maintains a website at www.hemagen.com. Investors can obtain
copies of our filings with the Securities and Exchange Commission from this site
free of charge as well as from the Securities and Exchange Commission website at
www.sec.gov.

Hemagen's three product lines are as follows:

     -    A clinical chemistry division called Reagents Applications, Inc.(RAI);

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

     -    An autoimmune and infectious disease product line, that sells under
          the trademark "Virgo(R)" and which offers a complete range of assays
          that are compatible with most analyzer equipment.

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 manually, or in small and large automated high volume clinical
chemistry analyzers. In December 1999, RAI signed an exclusive supply agreement
with Roche Diagnostics, Inc., to provide reagents for Roche's Cobas Mira(R)
automated clinical chemistry 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 $1,362,000 and $1,306,000 in the years ending September 30,
2003 and September 30, 2002, respectively. RAI's foreign sales were
approximately 16% of total sales in the year ending September 30, 2003, and
mainly represent sales to foreign OEM's and distributors.

In September 1998, Hemagen acquired the Analyst(R) Clinical Chemistry system
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 a
proprietary consumable rotor that is manufactured by Hemagen at its Columbia,
Maryland facility. The Analyst is cleared by the FDA for marketing in the United
States to physician office laboratories. In addition to offering the Analyst,
Hemagen has been acquiring distribution rights for other complimentary products
for these markets and in December 2002 acquired the Endocheck(TM) veterinary
chemistry analyzer. Today, Hemagen estimates that its customer base for the
Analyst is approximately 65% veterinary practices and 35% physician office
laboratory practices.

Hemagen's Virgo(R) product line division includes autoimmune and infectious
disease diagnostic test kits manufactured for use on a variety of automated
instrument platforms. In 1995, Hemagen completed the acquisition of a line of
diagnostic test kits using immunoflourescence from Schiaparelli Biosystems, Inc.
These assays represent a comprehensive offering of immunoflourescence tests
(called IFA). In addition to the acquired immunoflouresence tests, Hemagen from
its inception in 1985 has developed a comprehensive line




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of diagnostic kits based on hemagglutination (called HA) 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, and universities in the United States. Internationally, there are
over 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 distributes the Virgo autoimmune and infectious
disease line throughout South America on an exclusive basis in Brazil only.

RECENT DEVELOPMENTS

     In July 1999, William P. Hales, Redwood Holdings, Inc. and certain of
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 Hemagen's Bylaws, the removal of its directors and
the election of themselves to the Board of Directors. Following the delivery of
consents, the matter was settled pursuant to a settlement agreement executed on
September 30, 1999, and new management was put in place.

     New management has taken actions over the past four fiscal years to
refinance the business and return it to operating profitability. Many of the
activities over the past four years have focused on consolidating operations,
reducing headcount, cutting costs and increasing sales and marketing efforts.
Specifically, under new management the Company has:

     -    Raised $6,315,000 in May 2000 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, that was in default at September 30, 1999, in May of
          2000 and to provide working capital to Hemagen.

     -    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 December 2002, RAI signed a second four year supply agreement with
          Roche that expires in December 2006. The agreement provides that RAI
          will be the exclusive supplier of reagents for the COBAS MIRA in the
          United States.

     -    As of December 2001, 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.

     -    Reduced headcount by approximately 42%, from 98 employees as of
          September 30, 1999, to 57 as of September 30, 2003. Management
          believes that the reduction in the number of employees has had no
          impact on operations, and has helped the Company become more price
          competitive with its products.

     -    Established an in-house marketing and sales force to manage Raichem,
          Virgo and Analyst sales,

     -    Developed new marketing programs for the Analyst in the veterinary
          market, and grew placements of the Analyst in the veterinary market
          approximately 10% per year over the past three years.

     -    Reduced the manufacturing overhead by better management of expenses,
          and better production scheduling which resulted in lower headcount and
          cost of sales. Cost of sales as a percentage of sales decreased to 65%
          from 69%. As a result, gross margins were 35% for fiscal year 2003 as
          compared to 31% in fiscal year 2002.



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     -    Reduced selling, general and administrative expenses by reducing
          headcount, legal, accounting and other outside services, while
          managing other expenses much tighter. Selling, general and
          administrative expenses for fiscal year 2003 were approximately
          $2,528,000 as compared to approximately $3,203,000 in fiscal year
          2002.

     -    Effective September 27, 2002, established a traditional working
          capital line of credit facility for $1 million dollars. This line of
          credit will provide the company with greater flexibility to pursue new
          growth opportunities and realize efficiencies in its operations. To
          date the Company has not used this line of credit.

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 is recognized by a specific antibody
which will bind to it in the proper environment, making it detectable either by
the naked eye, or with the aid of a laboratory technique, which amplifies the
reaction so that it is rendered visible. Hemagen's hemagglutination, ELISA and
immunofluorescence assays are three examples of such amplification. Some of
these technologies include a lyophilization (freeze drying) technique which
substantially extends the shelf life of Hemagen's hemagglutination assays, and
proprietary methods to prepare reagents and plates for its ELISA assays.

     ELISA

     ELISA or EIA tests employ small plastic wells coated with particular
antigens. The test process involves introducing the patient's serum into the
well to allow a reaction to occur. If the antibody being tested for is present,
it will bind to the antigens on the inner surface of the well. After the wells
are rinsed, the specifically bound antibody will remain while any non-specific
antibodies will be washed away. To detect the quantity of the specific antibody,
other compounds (conjugate, substrate) are added which will cause a color change
in the liquid, the intensity of which is proportionate to the quantity of the
specific antibody 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 and inflammatory risk factors (apolipoproteins) and inflammatory
signals (acute phase reactants), the latter of which are present in a patient's
blood prior to the clinical manifestation of infection or inflammation. If
successful, these technologies could lead to earlier detection and prevention of
cardiovascular disease, the imminent rejection of transplanted organs or the
onset of infections. Such earlier detection could enable physicians to better
plan appropriate treatment of patients with these conditions. Hemagen currently
markets two test kits to detect inflammatory signals.

     Clinical Chemistries

     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 produces a line of general clinical chemistry reagents utilizing
colorimetric, turbidometric and enzymatic procedures. These chemistry reagents
are most commonly used 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 analyzer instruments that are
typically used by clinical laboratories.

     Analyst Instrument System

     Hemagen acquired a patent protected rotor based technology for use in the
Analyst in 1998. The Analyst is a bench-top centrifugal clinical chemistry
analyzer. The Analyst utilizes a consumable a rotor that contains dry



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prepackaged reagents. The Analyst spins the rotor, mixing the patient sample
with the dry reagents, producing a result in approximately ten minutes. Hemagen
currently markets four types of rotors providing a variety of clinical chemistry
tests which are 510K cleared by the FDA for the Human medical market. The
Analyst instrument has been designated by the CLIA as a moderately complex
system, and is therefore suitable for both the physician and veterinary office
laboratories.

     Immunofluorescence

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

     Hemagglutination

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

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


CURRENT PRODUCTS

     ELISA Assays

     Hemagen develops and markets ELISA test kits 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 the prevalence 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:

<TABLE>
<CAPTION>
   <S>                                   <C>                            <C>
   SLE (lupus)                           polymyositis                   toxoplasmosis
   mixed connective tissue disease       dermatomyositis                rubella
   Sjogren's syndrome                    connective tissue diseases     Chung-Strauss Syndrome
   scleroderma (systemic sclerosis)      primary biliary Cirrhosis      HSV 1&2
   cytomegalovirus infections            Chagas' disease                chicken pox (VZV)
   rheumatoid arthritis                  Wegener's disease              Polyarteritis nodosa
   glomerulonephritis                    collagen vascular disease      Bowell disease
</TABLE>



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<PAGE>

     Certain of Hemagen's ELISA tests are also used to detect the acute phase
markers to infection and inflammation in diseases such as lupus and rheumatoid
arthritis. Most of Hemagen's ELISA tests are now available in both lyophilized
and 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.

     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 analyzer 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 510K cleared by the FDA for sale in the
United States.

     Analyst(R) System Products

     Hemagen currently markets four FDA 510K cleared rotor types for use on the
Analyst clinical chemistry analyzer, two general chemistry rotors, a glucose
test and a lipid screen test. In addition, Hemagen sells 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 and several products for autoimmune 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

     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



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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

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 both exclusive and non-exclusive
distributorships, which generally cover limited geographic areas and specific
test kits. Hemagen has relationships with over 20 distributors in various
countries worldwide.

     The RAI division mainly sells it products to OEM ("Original Equipment
Manufactures") 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 four year supply agreement with Roche that expires in
December 2006. The agreement provides that RAI will be the exclusive supplier of
reagents for the COBAS MIRA in the United States. In fiscal 2003 and 2002, sales
to Roche were approximately $1,362,000 and $1,306,000, respectively. Roche
Diagnostics Inc., accounted for approximately 16% and 14% of Hemagen's revenues
for fiscal years ended September 30, 2003 and 2002, respectively.

     Hemagen's primary non-exclusive distributor of the Analyst product line to
physician office laboratories is Medpointe, Inc., which was acquired during
fiscal year 2003 by Iverness Medical Innovations Inc. ("Iverness"). Sales to
Iverness accounted for approximately 6% and 11% of Hemagen's revenue for the
fiscal years ended September 30, 2003 and 2002, respectively.

     Hemagen markets its Virgo product line in South America through HDC on an
exclusive basis in Brazil only. 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 light assembly work, shipping, and technical
support for the products. In fiscal years 2003, and 2002, Hemagen derived
product sales through HDC of $596,000 and $823,000, respectively, which
represents 7% and 9% of Hemagen's total sales, respectively.

PRODUCTS UNDER DEVELOPMENT

     Hemagen spent approximately $220,000 and $407,000 on research and
development for the fiscal years ended September 30, 2003, and 2002,
respectively. Such research and development is focused on:

     -    Continuing to develop additional assays and reagents to fill in its
          clinical chemistry reagent product line sold under the RAICHEM label;

     -    Evaluating and developing complimentary products for Hemagen's Analyst
          product line to distribute to the veterinary market and alternative
          tests utilizing the Analysts' rotor technology; and

     -    Developing new ELISA kits for the autoimmune market, particularly with
          respect to tests for antiphospholipid syndrome and acute phase protein
          detection.

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



                                       8
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Hemagen's facility in San Diego, California. The Analyst and the Endochek
instruments are manufactured by third parties for Hemagen. Hemagen purchases
many of the antigens and other reagents used in its kits from outside vendors.
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. Hemagen does not believe it has any risk associated with securing raw
materials to support its business. The outsourced manufacturing of the Analyst
instrument can be obtained from multiple sources while the manufacturing of the
Endochek is sole sourced. Hemagen does not consider the dependence on a sole
source for the Endochek a material business risk for Hemagen because the Analyst
instrument is a viable alternative to the Endochek.

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 continues to work toward this deadline and believes it will have those
products that are sold in the European Community in conformity by December 2003.
Hemagen received the CE Marking for the Analyst instrument in December 1999.

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 market include
Abaxis Inc., Bio-Rad, Diamedix Corporation, IDEXX, INOVA, Pointe Scientific, and
Trace-America,



                                       9
<PAGE>


among others. Hemagen expects competition within this industry to intensify.

PRODUCT LIABILITY

     The testing, marketing and sale of clinical diagnostic products entail an
inherent risk of allegations of product liability, and there can be no assurance
that product liability claims will not be asserted against Hemagen. Hemagen may
incur product liability due to product failure or improper use of products by
the user. Inaccurate detection may result in the failure to administer necessary
therapeutic drugs or administration of unnecessary and potentially toxic drugs.
Even with proper use of a product, there may be specific instances in 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 a license agreement for the use of 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, which is February 2007.

EMPLOYEES

     As of September 30, 2003, Hemagen had 57 full-time employees, 23 are
employed in sales, marketing, general and administrative activities and 34 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.

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 $143,000 per year in rent. Hemagen also leases 20,160 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 $227,000 in rent during the next fiscal year.

     Hemagen's 51%-owned subsidiary, Hemagen Diagnosticos Comercio, Importacao e
Exportacao, Ltd, leases approximately 6,000 square feet of flexible office space
in Sao Paulo, Brazil pursuant to a lease that expires



                                       10
<PAGE>

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

          None.

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

          None



                                     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 bulletin
board (OTC-BB) market since March 3, 2003. Prior to that date, the Company's
common stock traded on the over-the-counter market through the Nasdaq Smallcap
Market from February 4, 1993 to February 28, 2003. On December 19, 2003 the
closing bid and ask price for the Common Stock as reported by the OTC-BB were
$0.56 and $0.60 per share, respectively.

     For the periods indicated, the following table sets for the range of high
and low bid prices for the Common Stock as reported by the OTC-BB and the Nasdaq
during Fiscal 2003 and 2002. These prices reflect inter-dealer prices, without
retail mark-up, mark-down or commission, and may not represent actual
transactions.

                                                    HIGH              LOW
                                                    ----              ---
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
FISCAL 2003
First Quarter ....................................  $0.46             $0.10
Second Quarter ...................................  $0.43             $0.10
Third Quarter ....................................  $0.48             $0.15
Fourth Quarter ...................................  $0.33             $0.23

     As of December 15, 2003, there were 461 holders of record of Hemagen's
Common Stock which Hemagen believes represents approximately 2,600 beneficial
owners.

     DIVIDENDS

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

     SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

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



                                       11
<PAGE>

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------
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             future issuance under
                               warrants, and rights         options,warrants and    equity compensation plans
                                                            rights                  (excluding securities
                                                                                    reflected in column (a))
--------------------------------------------------------------------------------------------------------------
<S>                            <C>                          <C>                     <C>
Equity compensation plans
approved by security holders        3,267,014(1)                  $1.27                465,000(2)
-----------------------------------------------------------------------------------------------------------
Equity compensation plans not
approved by security holders               --                        --                     --
-----------------------------------------------------------------------------------------------------------
Total                               3,267,014(1)                  $1.27                465,000(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 535,000 options for the purchase of common stock
     pursuant to the Company's 2001 Stock Option Plan approved by the
     shareholders on February 27, 2001.

(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 as of September 30, 2003.

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 for assessing 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 are 510(K) cleared for sale in the United States by the FDA.

Fiscal year 2003 represents the fourth year of operations under a new management
team. In July 1999, William P. Hales, Redwood Holdings, Inc. and certain of
Redwood Holdings, Inc.'s employees, namely Jerry 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. Following the delivery of
consents, the matter was settled pursuant to a settlement agreement executed on
September 30, 1999. Management has been working over the past four fiscal years
to reorganize the Company to achieve sustained profitability. In order to
achieve those goals management sought to:

     -    Improve Management

     -    Improve the leverage of the Company

     -    Improve sales and marketing by increasing profitable sales and
          eliminate unprofitable product lines.

     -    Reduce expenses; and

     -    Better manage working capital.

There can be no assurance that any of the above 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, 2003 and its traditional line
of credit availability will be sufficient to finance its operations for fiscal
2004. See the list of significant accomplishments management has made in the
section captioned "Recent Developments" on page 4.



                                       12
<PAGE>

RESULTS OF OPERATIONS

Fiscal Year Ended September 30, 2003 Compared to Fiscal Year Ended September 30,
2002

Revenues for fiscal 2003 decreased $1,027,000 (11%) to approximately $8,473,000
from approximately $9,500,000 for fiscal 2002. This reduction in sales mainly
resulted from $364,000 of reduced sales of Hemagen's Virgo division of
autoimmune and infectious disease diagnostic test kits, $309,000 of reduced
sales of the Analyst Clinical Chemistry Analyzer product line, $227,000 of
reduced sales at the Company's 51% owned Brazilian subsidiary and other minor
sales losses resulting from the Endochek product line and the Company's Raichem
division. The $364,000 of reduced sales of Virgo products mainly stemmed from
$130,000 of sales lost due to a terminated blood bank supply agreement, $125,000
of reduced sales to reference labs as a result of consolidation of several of
the major labs in the U.S., and reduced sales to foreign distributors,
particularly in Europe of $95,000.

Sales of the Analyst Clinical Chemistry Analyzer were $309,000 lower than the
prior year as a result of approximately $525,000 of lower sales to physician
office labs ("POL's") and the distributors that support that market offset by an
increase of approximately $220,000 in sales to the veterinary market. The
reduction in sales to the POL marketplace resulted from distributors holding
less inventory and fewer active placements of the Analyst instrument in POL's.
The largest growth in the veterinary market stems from international
distributors of the Analyst. Sales at the Company's 51% owned Brazilian
subsidiary were $227,000 lower than the prior year resulting from the timing of
deliveries from Hemagen's U.S. manufacturing facilities and increased
competition in the Brazilian marketplace.

The Company believes it will be able to increase revenues by adding additional
OEM contracts at the Company's Raichem division, continuing the growth within
the Veterinary market for the Analyst and return the Company's 51% owned
Brazilian subsidiary to the sales levels it maintained two years ago. However,
Hemagen can give no assurances that it will be able to increase revenues in the
future.

Cost of product sales decreased approximately $1,081,000 (16%) to approximately
$5,480,000 from approximately $6,561,000 in fiscal 2002 due to the reduction in
the overall sales volume and better management of labor expense and overhead,
particularly at Hemagen's Raichem division. Cost of product sales as a
percentage of sales was 65% in fiscal year 2003 as compared to 69% in fiscal
year 2002. Despite the overall reduction in sales volume, cost of product sales
were lower as a percentage of total sales as a result of lower spending related
to labor and overhead. Gross margins for fiscal year 2003 were 35% as compared
to 31% in fiscal year 2002.

Research and development expenses for fiscal 2003 decreased approximately
$187,000 (46%) to approximately $220,000. This reduction is attributed to lower
salary expense for research and development. In fiscal year 2003, the Company
eliminated its Senior R&D scientist position and began outsourcing more R & D
projects and paying for these projects only when they are completed.

Selling, general and administrative expenses for fiscal 2003 decreased
approximately $674,000 (21%) to approximately $2,528,000 primarily due to
reduced legal and consulting expenses of approximately $195,000, reduced
spending at the 51% owned Brazilian subsidiary of $174,000 and reduced salary
expense associated with fewer administrative positions at Hemagen's Raichem
Division of approximately $150,000. Legal expenses were approximately $100,000
higher in the year ended September 30, 2002 as a result of the URRMA lawsuit
that was settled in February 2003 (see note Q of the Financial Statement).

For the fiscal year 2003, Hemagen had operating income of $245,000 as compared
to a loss of $671,000 for the previous fiscal year. This improvement resulted
from reduced cost of sales and reduced R & D, and selling, general and
administrative expenditures.

Net other expense increased to approximately $1,510,000 (39%) from approximately
$1,089,000 in fiscal 2002 due to an increase in interest expense. Net interest
expense for fiscal 2003 was $1,520,000 as compared to $1,107,000 in fiscal 2002.
This increase is mainly attributed to the non-cash amortization of the discount
on the senior subordinated secured convertible notes, which was $996,991 for
fiscal 2003, compared to $568,325 for 2002 (see Footnote K of the Financial
Statements). Foreign currency fluctuation did not have an impact on the



                                       13
<PAGE>

operations for 2003.

Net loss for fiscal 2003 decreased to approximately $1,265,000 (28%) or $0.13
per share basic and diluted compared to a net loss of approximately $1,760,000
or $0.18 per share basic and diluted, for the previous year primarily due to the
improved margin on the lower sales, matched with lower spending related to
selling, general and administrative expenses. This reduced spending was
partially offset by the increase in interest expense associated with the
discount on the senior subordinated secured convertible notes.

LIQUIDITY AND CAPITAL RESOURCES

At September 30, 2003, Hemagen had $724,000 of unrestricted cash, working
capital of $3,839,000 and a current ratio of 3.6 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 of the
prime rate plus 3/4%. Maximum borrowings under the loan agreement are subject to
the domestic receivables and inventory of Hemagen. At September 30, 2003 the
effective interest rate on the line of credit was 4.75%. The Company has not yet
borrowed on this line of credit.

In fiscal 2003, Hemagen had capital expenditures of $9,000 and has no
significant capital expenditures planned for fiscal 2004. No commitments for
capital expenditures for fiscal 2004 have been made at this time, although some
capital is anticipated to be used for the improvement and build out of our
facilities. It is uncertain at this time what these expenditures will be.

In fiscal 2003, Hemagen generated cash of approximately $260,000. Cash provided
by operating activities was approximately $459,000 offset by $157,000 of cash
provided for the repayment of the subordinate note payable and $9,000 for
capital expenditures.

Hemagen believes that cash flow from operations, cash on hand at September 30,
2003, and the availability of the line of credit will be sufficient to finance
its operations and capitol expenditures for fiscal 2004. However Hemagen can
give no assurances that it will have sufficient cash flow to finance its
operations. Hemagen has no off-balance sheet financing arrangements.

In April 2005, the Senior Subordinated Secured Convertible Notes outstanding of
$6,090,000 are due and payable. Hemagen does not believe that it will have
sufficient cash to pay off these notes. Hemagen will look to refinance these
notes or put a new instrument in its place to repay these notes. However,
Hemagen can give no assurances that it will be able to refinance or repay these
notes.

FISCAL 2003 COMPARED TO FISCAL 2002

Hemagen generated $459,000 of cash flow from operating activities during fiscal
2003 compared to using $19,000 in cash from operations in fiscal 2002. This
increase in cash provided is attributed to the reduction in the net loss after
adjusting for non-cash charges of approximately $880,000 offset by changes in
working capital items in fiscal 2003 as compared to fiscal 2002. Such changes in
working capital mainly include a reduction in the cash provided by lower
inventory of $289,000, and a reduction in the cash generated by lower
receivables of approximately $142,000.

Cash used in investing activities totaled $9,000 in fiscal 2003, as compared to
$67,000 of cash used in fiscal 2002. Cash used in both fiscal 2003 and fiscal
2002 was for the acquisition of equipment.

Cash used by financing activities totaled $157,000 in fiscal 2003 as compared to
$116,000 used in fiscal 2002. This increase in cash used in fiscal 2003 is
attributed to the final payment on the subordinated note payable that was paid
in November 2002.

NEW ACCOUNTING PRONOUNCEMENTS

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



                                       14
<PAGE>

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.

In November 2002, FASB issued Interpretation No. 45 "Guarantor's Accounting and
Disclosure Requirements for Guarantees, including Indirect Guarantees of
Indebtedness of Others" which requires the guarantor to recognize at inception
of a guarantee, a liability for the fair value of the obligation undertaken in
issuing a guarantee. The Company has not guaranteed the indebtedness or
obligations of others so that the adoption of this Interpretation will not have
a material impact upon its Consolidated Financial Statements.

In November 2002, Emerging Issues Task Force ("EITF") finalized its consensus on
EITF Issue 00-21 "Revenue Arrangements with Multiple Deliverables", which
provides guidance on the timing of revenue recognition for sales undertaking to
deliver more than one product or service. The Company is required to adopt EITF
Issue 00-21 on transactions occurring after September 2003. The Company does not
expect the adoption of EITF 00-21 will have a material effect on its financial
statements.

In January 2003, FASB issued Interpretation No. 46 "Consolidation of Variable
Interest Entities" which addresses the consolidation and disclosures of these
entities by business enterprises. As the Company does not have any interests in
such types of entities the adoption of this Interpretation will not have a
material impact upon its Consolidated Financial Statements.

CRITICAL ACCOUNTING POLICIES

The preparation of consolidated financial statements requires us to make
estimates and judgments with respect to the selection and application of
accounting policies that affect the reported amounts of assets, liabilities,
revenues and expenses, and the disclosures of contingent assets and liabilities.
We base our estimates on historical experience and on various other assumptions
that are believed to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying values of assets and
liabilities. Actual results may differ from these estimates under different
assumptions or conditions.

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

Revenue Recognition
-------------------

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

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

Revenue under product service contracts, which are generally for one year or
less, is recognized ratably over the term of the contract.


                                       15
<PAGE>

Accounts Receivable
-------------------

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

Inventories
-----------

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


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.



                                       16
<PAGE>

ITEM 8A. CONTROLS AND PROCEDURES

   The Company's Chief Executive Officer, William P. Hales, and Chief Financial
   Officer, Deborah F. Ricci, have reviewed the Company's disclosure controls
   and procedures as of September 30, 2003. Based upon this review, these
   officers believe that the Company's disclosure controls and procedures are
   effective in ensuring that material information related to the Company is
   made known to them by others within the Company.

   There were no changes in the Company's internal control over financial
   reporting that occurred during the last fiscal year that has materially
   affected or is reasonably likely to affect Hemagen's internal control over
   financial reporting.


                                    PART III

     Items 9 through 12 and 14 are incorporated by reference to the Registrant's
Proxy Statement relating to its 2004 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 Items of this form 10-KSB.


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

     None.


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

                                                                           PAGE
                                                                           ----

Report of Independent Certified Public Accountants                          F-2

Consolidated Balance Sheet at September 30, 2003 and 2002                   F-3

Consolidated Statement of Operations for the years ended
September 30, 2003, and 2002                                                F-5

Consolidated Statement of Stockholders' Equity for the
years ended September 30, 2003, and 2002                                    F-6

Consolidated Statement of Cash Flows for the years
ended September 30, 2003, and 2002                                          F-7

Notes to Consolidated Financial Statements                                  F-8


(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

</TABLE>


                                       17
<PAGE>


<TABLE>
<S>     <C>                                                                           <C>

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.                                                             D

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

10.42*  Directors Rule 10(b)5-1 Stock Purchase Plan                                         J

14.0    Code of Ethics Policy                                                               J

14.1    Insider Trading Policy                                                              J

16      BDO Seidman, LLP letter dated March 28, 2001 regarding the Form 8-K                 H
        filed by Hemagen on March 29, 2001 reporting on Item 4, Changes in
        Registrant's Certifying Accountant.

23      Consent of Independent Certified Public Accountants                                 J

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

31.2    Certification of Chief Financial Officer pursuant to Rule 13a-14(a)                 J

32.1    Certification of Chief Executive Officer pursuant to Rule 13a-14(b)                 J

32.2    Certification of Chief Financial Officer pursuant to Rule 13a-14(b)                 J

</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-KSB 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.   Incorporated by reference to Hemagen's Form 10-KSB for the fiscal year
     ended September 30, 2002.

J.   Filed herewith.

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

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.


     Not applicable as the Registrant's fiscal year ended prior to December 15,
2003.


                                       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 22, 2003                       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.


Name                            Capacity                           Date
----                            --------                           ----


/s/ William P. Hales         President and Chief Executive     December 22, 2003
-------------------------    Officer, Director
William P. Hales


/s/ Alan S. Cohen            Director                          December 22, 2003
-------------------------
Alan S. Cohen, M.D.


/s/ Howard F. Curd           Director                          December 22, 2003
-------------------------
Howard F. Curd


/s/ Richard Edwards          Director                          December 22, 2003
-------------------------
2003
Richard W. Edwards


/s/ Edward Lutz              Director                          December 22, 2003
-------------------------
Edward T. Lutz


/s/ Deborah F. Ricci         Principal Financial Officer       December 22, 2003
-------------------------
Deborah F. Ricci



<PAGE>
                                 C O N T E N T S

--------------------------------------------------------------------------------





REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS                         F-2


CONSOLIDATED FINANCIAL STATEMENTS:

   BALANCE SHEET AT SEPTEMBER 30, 2003 AND 2002                            F-3

   STATEMENT OF OPERATIONS FOR THE YEARS ENDED                             F-5
       SEPTEMBER 30, 2003 AND 2002

   STATEMENT OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED                   F-6
       SEPTEMBER 30, 2003 AND 2002

   STATEMENT OF CASH FLOWS FOR THE YEARS ENDED                             F-7
       SEPTEMBER 30, 2003 AND 2002

   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                              F-8






                                      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, 2003 and 2002, 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 financial statements referred to above present fairly, in
all material respects, the financial position of Hemagen Diagnostics, Inc. and
subsidiaries at September 30, 2003 and 2002, and the consolidated 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 20, 2003




                                      F-2
<PAGE>



                    HEMAGEN DIAGNOSTICS INC. AND SUBSIDIARIES


                           CONSOLIDATED BALANCE SHEET

                        AS OF SEPTEMBER 30, 2003 AND 2002
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                           ASSETS                         2003           2002
                                                       ----------     ---------
<S>                                                    <C>            <C>

CURRENT ASSETS:
   Cash and cash equivalents                           $  724,287     $  463,958
   Accounts receivable, less allowance for
     doubtful accounts of $ 179,251 and $532,111
     at September 30, 2003 and 2002, respectively       1,142,180      1,178,536
Inventories, net                                        3,250,890      3,368,317
   Prepaid expenses and other current assets              172,988        181,262
                                                       ----------     ----------

        Total current assets                            5,290,345      5,192,073

PROPERTY AND EQUIPMENT, net of accumulated
  depreciation and amortization                           997,942      1,624,539

OTHER ASSETS, NET
   Goodwill                                               152,325        152,325
   Other                                                   45,975         53,291
                                                       ----------     ----------
                                                          198,300        205,616

        Total Assets                                   $6,486,587     $7,022,228
                                                       ==========     ==========
</TABLE>




The accompanying notes are an integral part of these financial statements


                                      F-3
<PAGE>



                    HEMAGEN DIAGNOSTICS INC. AND SUBSIDIARIES


                           CONSOLIDATED BALANCE SHEET

                        AS OF SEPTEMBER 30, 2003 AND 2002
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY                                  2003              2002
                                                                  ------------      ------------
<S>                                                              <C>               <C>
CURRENT LIABILITIES
    Subordinated note payable, current liabilities                $         --      $    156,839
    Accounts payable and accrued liabilities                         1,393,875         1,420,340
    Deferred revenue                                                    57,763           123,470
                                                                  ------------      ------------
           Total current liabilities                                 1,451,638         1,700,649

    Senior subordinated secured convertible notes, net of
    unamortized discount of $ 2,977,060 and $3,974,051
    at September 30, 2003 and 2002, respectively                     3,112,940         2,115,949
                                                                  ------------      ------------

              Total liabilities                                      4,564,578         3,816,598
                                                                  ------------      ------------

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;10,204,855 and 10,168,011 shares issued
     outstanding at September 30, 2003 and 2002, respectively          102,048           101,680
   Additional paid-in capital                                       20,947,149        20,933,517
   Accumulated deficit                                             (18,879,718)      (17,614,449)
   Accumulated other comprehensive loss -
      currency translation loss                                       (157,833)         (125,481)
   Less treasury stock at cost; 100,000 shares at
      September 30, 2003 and 2002, respectively                        (89,637)          (89,637)
                                                                  ------------      ------------
     Total stockholders' equity                                      1,922,009         3,205,630
                                                                  ------------      ------------
     Total liabilities and stockholders' equity                   $  6,486,587      $  7,022,228
                                                                  ============      ============

</TABLE>




The accompanying notes are an integral part of these financial statements



                                      F-4
<PAGE>



                    HEMAGEN DIAGNOSTICS INC. AND SUBSIDIARIES


                      CONSOLIDATED STATEMENT OF OPERATIONS

                        AS OF SEPTEMBER 30, 2003 AND 2002
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                2003             2002
                                                             -----------      -----------
<S>                                                          <C>              <C>

NET SALES                                                    $ 8,472,711      $ 9,499,532

COSTS AND EXPENSES
    Costs of sales                                             5,480,109        6,560,960
    Research and development                                     219,644          406,919
    Selling, general and administrative                        2,528,439        3,202,741
                                                             -----------      -----------

          Total cost and expenses                              8,228,192       10,170,620
                                                             -----------      -----------
          Operating income (loss)                                244,519         (671,088)

OTHER INCOME (EXPENSES)
      Interest income                                             33,874           42,095
      Interest expense, including $996,991 and $568,325,
          respectively of debt discount amortization          (1,519,804)      (1,107,326)

      Other expense                                              (23,858)         (24,164)
                                                             -----------      -----------

            Total other income (expense)                      (1,509,788)      (1,089,395)
                                                             -----------      -----------
NET LOSS                                                     $(1,265,269)     $(1,760,483)
                                                             ===========      ===========
Net loss per share - Basic and Diluted                       $     (0.13)     $     (0.18)
                                                             ===========      ===========
Weighted average common shares used in the calculation
   of net loss per share                                      10,104,855       10,044,457
                                                             ===========      ===========

</TABLE>





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




                                      F-5
<PAGE>



                   HEMAGEN DIAGNOSTICS, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

                     YEARS ENDED SEPTEMBER 30, 2003 AND 2002

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
                                                                                 Accumulated
                                   Common Stock       Additional                     Other        Treasury Stock        Total
                                -------------------    Paid-in     Accumulated   Comprehensive    --------------     Stockholders'
                                Shares    Par Value    Capital        Deficit        Loss         Shares     Cost       Equity
=================================================================================================================================
<S>                            <C>        <C>        <C>          <C>             <C>            <C>      <C>         <C>

Balance at October 1, 2001     9,962,422  $ 99,623   $20,693,055  $(15,853,966)   $ (81,269)     100,000  $(89,637)   $4,767,806
---------------------------------------------------------------------------------------------------------------------------------
Net Loss                              --        --            --    (1,760,483)          --           --        --    (1,760,483)

Foreign exchange loss                 --        --            --            --      (44,212)          --        --       (44,212)
                                                                                                                      ----------
Total Comprehensive loss                                                                                              (1,804,695)

Issuance of common stock
   related to the
   exercise of stock
   options                        13,000       130         7,941            --           --           --        --         8,071

Issuance of common stock
  in lieu of cash payments       192,589     1,927       232,521            --           --           --        --       234,448
---------------------------------------------------------------------------------------------------------------------------------
Balance at
   September 30, 2002         10,168,011   101,680    20,933,517   (17,614,449)    (125,481)     100,000   (89,637)    3,205,630

Net loss                              --        --            --    (1,265,269)          --           --        --    (1,265,269)

Foreign exchange loss                 --        --            --            --      (32,352)          --        --       (32,352)
                                                                                                                      ----------
Total Comprehensive loss                                                                                              (1,297,621)

Issuance of common stock
  in lieu of cash payments        36,844       368        13,632            --           --           --        --        14,000

---------------------------------------------------------------------------------------------------------------------------------
Balance at
  September 30, 2003          10,204,855  $102,048   $20,947,149  $(18,879,718)   $(157,833)     100,000  $(89,637)   $1,922,009
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

The accompanying notes are an integral part of these financial statements



                                      F-6
<PAGE>


                    HEMAGEN DIAGNOSTICS, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENT OF CASH FLOWS

                     YEARS ENDED SEPTEMBER 30, 2003 AND 2002
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                             2003               2002
                                                                          -----------       -----------
<S>                                                                       <C>               <C>

CASH FLOWS FROM OPERATING ACTIVITIES
    Net loss                                                              $(1,265,269)      $(1,760,483)
    Adjustments to reconcile net loss to net cash provided by
    (used by) operating activities
        Depreciation and amortization                                         643,803           686,055
        Amortization of debt discount                                         996,991           568,325
        Provision for bad debts                                                14,368            78,889
        Provision for inventories                                              98,158            32,874
        Loss on sales of property and equipment                                  (585)            1,459
        Changes in operating assets and liabilities:
          Accounts receivable                                                  21,988            99,109
          Inventories                                                          19,269           373,155
          Prepaid expenses and other current assets                             8,274           (52,036)
          Accounts payable and accrued expenses                               (12,465)              319
          Deferred revenue                                                    (65,707)           (8,852)
                                                                          -----------       -----------
                 Net cash provided by (used in) operating activities          458,825            18,814
                                                                          -----------       -----------
 CASH FLOWS FROM INVESTING ACTIVITIES
         Purchase of property and equipment                                    (9,305)          (66,838)
         Proceeds from sales of property and equipment                             --               192
                                                                          -----------       -----------
                 Net cash (used in) provided by investing activities           (9,305)          (66,646)
                                                                          -----------       -----------
 CASH FLOWS FROM FINANCING ACTIVITIES
         Net repayments of note payable                                      (156,839)         (124,447)
         Exercise of stock options                                                 --             8,071
                                                                          -----------       -----------
                  Net cash (used in) financing activities                    (156,839)         (116,376)
                                                                          -----------       -----------
 EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS                        (32,352)          (44,212)
                                                                          -----------       -----------
 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                         260,329          (208,420)
                                                                          -----------       -----------
 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                                 463,958           672,378
                                                                          -----------       -----------
 CASH AND CASH EQUIVALENTS, END OF YEAR                                   $   724,287       $   463,958
                                                                          ===========       ===========

</TABLE>





The accompanying notes are an integral part of these financial statements



                                      F-7
<PAGE>


                    HEMAGEN DIAGNOSTICS, INC.AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           SEPTEMBER 30, 2003 AND 2002

--------------------------------------------------------------------------------

NOTE A - NATURE OF BUSINESS

     Hemagen Diagnostics, Inc. (the "Company") is a biotechnology company that
     develops, manufactures and markets medical diagnostic test kits used to aid
     in the diagnosis of certain autoimmune and infectious diseases and general
     chemistry assessment. The Company was incorporated on May 1, 1992 under the
     laws of the State of Delaware. 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 benchtop clinical chemistry analyzer system ( called "The
     Analyst") used to measure important constituents in human and animal blood.
     The Company sells The Analyst both directly and through distributors
     servicing both the physician's office laboratory and veterinary markets.

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     PRINCIPLES OF CONSOLIDATION
     ---------------------------

     The accompanying consolidated financial statements 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.

     USE OF ESTIMATES
     ----------------

     The preparation of financial statements in conformity 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.






                                      F-8
<PAGE>


                    HEMAGEN DIAGNOSTICS, INC. AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

                           SEPTEMBER 30, 2003 AND 2002

--------------------------------------------------------------------------------

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-CONTINUED

     FOREIGN CURRENCY TRANSLATION
     ----------------------------

     The financial position and results of operations of HDC are measured using
     HDC's local currency as the 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
     stockholders' equity.

     CASH EQUIVALENTS
     ----------------

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

     ACCOUNTS RECEIVABLE
     -------------------

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

     INVENTORIES
     -----------

     Inventories are stated at the lower of cost or market, determined on a
     first-in, first-out basis. Inventory reserves are established based on the
     obsolescence, and expiration dating of perishable products in addition to
     excess levels of inventory on hand.



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

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

                           SEPTEMBER 30, 2003 AND 2002

--------------------------------------------------------------------------------

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-CONTINUED

     LONG-LIVED ASSETS
     -----------------

     The Company reviews the carrying values of its 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),
     this carrying amount would be reduced to fair value.

     PROPERTY AND EQUIPMENT
     ----------------------

     Property and equipment are stated at cost. Depreciation 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.

     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.

     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 of $152,325 as of the beginning of fiscal 2002,
     therefore, there was no amortization in fiscal year 2003 or 2002. Based on
     the impairment tests performed, there was no impairment of goodwill in
     fiscal 2003.

     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.



                                      F-10
<PAGE>

                    HEMAGEN DIAGNOSTICS, INC. AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

                           SEPTEMBER 30, 2003 AND 2002

--------------------------------------------------------------------------------

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-CONTINUED

     REVENUE RECOGNITION
     -------------------

     Revenues from the sale of products are recognized when shipped and all
     contractual obligations have been satisfied and the collection of the
     resulting receivable is reasonably assured. 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 product service contracts not
     complete at the balance sheet date is included in deferred revenue.

     STOCK- BASED COMPENSATION
     -------------------------

     The Company accounts for stock-based employee compensation arrangements
     using the intrinsic-value method 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. 148 (SFAS No. 148),
     "Accounting for Stock-Based Compensation Transition and Disclosure".

     Had the Company applied the fair value recognition provisions of Financial
     Accounting Standards Board ("FASB") Statement No. 123 "Accounting for
     Stock-Based Compensation" to stock based employee compensation, the
     Company's net loss for the years ended September 30, 2003 and 2002 would
     have increased as shown in the table below.

<TABLE>
<CAPTION>
                                                       2003              2002
                                                    -----------       -----------
     <S>                                           <C>               <C>
     Net Loss                                       $(1,265,269)      $(1,760,483)

     Deduct: Total stock-based employee
        compensation expense determined under
        fair value based method for all awards          (39,192)         (256,599)
                                                    -----------       -----------
     Proforma Net Loss                              $(1,304,461)      $(2,017,082)
                                                    ===========       ===========
     Basic and Diluted Net Loss per
         share as reported                          $     (0.13)      $     (0.18)
                                                    ===========       ===========
     Proforma Basic and Diluted
         Net loss per share                         $     (0.13)      $     (0.20)
                                                    ===========       ===========
</TABLE>




                                      F-11
<PAGE>


                    HEMAGEN DIAGNOSTICS, INC. AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

                           SEPTEMBER 30, 2003 AND 2002
--------------------------------------------------------------------------------

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-CONTINUED

     NET LOSS PER SHARE OF COMMON STOCK
     ----------------------------------

     Basic "Earnings per Share" excludes the effect of any dilutive options,
     warrants or convertible securities and is computed by dividing the net
     income (loss) by the weighted average number of common shares outstanding
     for the period. Diluted earnings per share is computed by dividing the net
     income (loss) 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.

     Common share equivalents outstanding at September 30, 2003 and 2002 totaled
     5,556,110 and 8,456,410 shares, respectively including currently
     outstanding stock options and convertible debt. These shares were not
     included in the denominator for diluted income per share as their effect
     was anti-dilutive.

     RESEARCH AND DEVELOPMENT COSTS
     ------------------------------

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



                                      F-12
<PAGE>

                    HEMAGEN DIAGNOSTICS, INC. AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

                           SEPTEMBER 30, 2003 AND 2002
--------------------------------------------------------------------------------

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-CONTINUED

     CURRENT ACCOUNTING PRONOUNCEMENTS
     ---------------------------------

     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
     adoption of SFAS 146 has not had any impact on the Company's Consolidated
     Financial Statements.

     In November 2002, FASB issued Interpretation No. 45 "Guarantor's Accounting
     and Disclosure Requirements for Guarantees, including Indirect Guarantees
     of Indebtedness of Others" which requires the guarantor to recognize at
     inception of a guarantee, a liability for the fair value of the obligation
     undertaken in issuing a guarantee. The Company has not guaranteed the
     indebtedness or obligations of others so that the adoption of this
     Interpretation has not had a material impact upon its Consolidated
     Financial Statements.

     In November 2002, Emerging Issues Task Force ("EITF") finalized its
     consensus on EITF Issue 00-21 "Revenue Arrangements with Multiple
     Deliverables", which provides guidance on the timing of revenue recognition
     for sales undertaking to deliver more than one product or service. The
     Company is required to adopt EITF Issue 00-21 on transactions occurring
     after September 2003. The Company does not expect the adoption of EITF
     00-21 will have a material effect on its financial statements.

     In January 2003, FASB issued Interpretation No. 46 "Consolidation of
     Variable Interest Entities" which addresses the consolidation and
     disclosures of these entities by business enterprises. As the Company does
     not have any interests in such types of entities the adoption of this
     Interpretation has not had a material impact upon its Consolidated
     Financial Statements.

     In May 2003, the FASB issued Statement No. 150 "Accounting for Certain
     Financial Instruments with Characteristics of both Liabilities and
     Equity"("SFAS 150"), which addresses how a company classifies and measures
     certain financial instruments. The adoption of this statement did not have
     an impact on the proper recording of the Company's current financial
     statements, the Company accounts for its Senior Subordinated Secured
     Convertible Notes as a liability of the Company.




                                      F-13
<PAGE>


                    HEMAGEN DIAGNOSTICS, INC. AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

                           SEPTEMBER 30, 2003 AND 2002
--------------------------------------------------------------------------------

NOTE C - RELATED PARTY TRANSACTIONS

     William P. Hales, Redwood Holdings, Inc. and certain of 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 the current market value at that time.

     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 agreements. On February 13, 2002, Thomas A. Donelan and
     Christopher P. Hendy, each received 57,974 shares of the Company's common
     stock. As of September 30, 2003, the Company is no longer affiliated with
     Redwood Holdings, Inc. or any of its employees.

     In October 2003, the Company issued 36,844 shares of its common stock to
     four outside directors with an aggregate market value of $14,000 for
     services these directors performed in the year ended September 30, 2003.





                                      F-14
<PAGE>

                    HEMAGEN DIAGNOSTICS, INC. AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

                           SEPTEMBER 30, 2003 AND 2002
--------------------------------------------------------------------------------

NOTE D - INVENTORIES

     Inventories at September 30, consist of the following:

<TABLE>
<CAPTION>
                                                  2003              2002
                                                ----------       ----------
          <S>                                   <C>              <C>

          Raw materials                         $2,167,046       $2,140,372
          Work-in-process                          144,080          205,363
          Finished goods                         1,639,962        1,820,938
                                                ----------       ----------
                                                 3,951,088        4,166,673
          Less reserves                           (700,198)        (798,356)
                                                ----------       ----------
          Net inventories                       $3,250,890       $3,368,317
                                                ==========       ==========
</TABLE>

NOTE E - PROPERTY AND EQUIPMENT

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

<TABLE>
<CAPTION>
                                                  2003              2002
                                                ----------       ----------
          <S>                                 <C>                <C>

          Furniture and equipment              $ 7,525,979       $7,516,654
          Leasehold improvements                   119,495          158,526
                                               -----------       ----------
                                                 7,645,474        7,675,180
          Less accumulated depreciation
            and amortization                    (6,647,532)      (6,050,641)

                                               $  997,942        $1,624,539
                                               ==========        ==========
</TABLE>

     Depreciation and amortization expense relating to property and equipment
     was approximately $637,000 and $667,000 for the years ended September 30,
     2003, and 2002, respectively.

NOTE F - OTHER ASSETS

     Included in other assets is net goodwill of $152,325 related to the
     Company's acquisition of it RAI division. There has been no impairment of
     the value of the goodwill as of September 30, 2003. The Company did not
     amortize goodwill in 2003 or 2002.




                                      F-15
<PAGE>

                    HEMAGEN DIAGNOSTICS, INC. AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

                           SEPTEMBER 30, 2003 AND 2002
--------------------------------------------------------------------------------

NOTE G - ACCOUNTS PAYABLE AND ACCRUED EXPENSES

     Accounts payable and accrued expenses include the following at
     September 30,

<TABLE>
<CAPTION>
                                                      2003            2002
                                                   ----------      ----------
       <S>                                         <C>             <C>

       Accounts payable - trade                    $  623,042      $  604,551
       Accrued professional fees                      136,316         169,934
       Accrued royalties                              327,544         295,756
       Accrued vacation                                94,507         122,738
       Accrued other                                  212,466         227,361
                                                   ----------      ----------
                                                   $1,393,875      $1,420,340
                                                   ==========      ==========
</TABLE>

NOTE H - DEVELOPMENT AND LICENSE AGREEMENTS

     The Company entered into an agreement under which the Company obtained
     exclusive proprietary rights to certain 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, one of which expired in March 2000, related to certain
     Analyst(R) products were transferred to the Company. The remaining license
     agreement, which contains provisions for royalty obligations based on
     production and net sales of certain products, expires in February 2007.
     Royalty expense recorded under the royalty agreement and the sublicense
     agreement amounted to approximately $87,000 and $130,000 during years ended
     September 30, 2003 and 2002, respectively.

NOTE I - LINE OF CREDIT

     In September 2002, the Company obtained a revolving line of credit from a
     bank to finance working capital needs as required. The line of credit
     facility provides for borrowing up to $1,000,000 at an interest rate equal
     to the prime rate plus 3/4%. Maximum borrowings under the loan are based on
     the domestic receivables and inventory of the Company. The Company has not
     borrowed on this line of credit to date. At September 30, 2003 the
     effective interest rate on the line of credit was 4.75%.



                                      F-16
<PAGE>

                    HEMAGEN DIAGNOSTICS, INC. AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

                           SEPTEMBER 30, 2003 AND 2002
--------------------------------------------------------------------------------

NOTE J - SUBORDINATED NOTE PAYABLE

     The Company was obligated on a note which had an original balance of
     $397,000, interest bearing 10% per annum, with 24 monthly payments of
     $12,810 and a final payment due on November 15, 2002. The balance
     outstanding of the note at September 30, 2002 was $156,839, and as of
     September 30, 2003 the note was paid in full.

NOTE K - SENIOR SUBORDINATED SECURED CONVERTIBLE NOTES

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

     The senior subordinated secured convertible notes mature on April 17, 2005,
     with no principal payments required until maturity. The notes provide for
     quarterly interest payments at the annual rate of 8%. The effective
     interest rate on these notes was calculated to be approximately 58% and an
     original issue discount of approximately $5,185,000 is being amortized over
     the term of the notes. The face value of the notes outstanding at September
     30, 2003 and 2002 is $6,090,000. The unamortized discount on these notes
     equals $2,977,000 and $3,974,000 at September 30, 2003 and 2002,
     respectively.

     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 has the right to 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.


                                      F-17
<PAGE>

                    HEMAGEN DIAGNOSTICS, INC. AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

                           SEPTEMBER 30, 2003 AND 2002
--------------------------------------------------------------------------------

NOTE K - SENIOR SUBORDINATED SECURED CONVERTIBLE NOTES, CONTINUED.

     In conjunction with the sale of the units, 2,526,000 warrants were issued.
     Each warrant issued allows 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 and expired on that date. The Company would have been able
     to 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. The Company determined
     the estimated fair value of the warrants to be approximately $1.34 each or
     $3,384,840 in aggregate when they were issued based on the Black Scholes
     Valuation Market. 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.

     On April 30, 2003, the warrants issued in connection with this private
     placement offering expired.

NOTE L - STOCKHOLDERS' EQUITY

     PREFERRED STOCK
     ---------------

     The Company is authorized to issue up to 1,000,000 shares of preferred
     stock, $.01 par value per share. The preferred stock may be issued in one
     or more series, the terms of which may be determined at the time of
     issuance by the Board of Directors and may include voting rights,
     preferences as to dividends and liquidation, conversion and redemption
     rights and sinking fund provisions.

     ACCUMULATED OTHER COMPREHENSIVE LOSS
     ------------------------------------

     Accumulated other comprehensive loss consists solely of foreign currency
     translation adjustments totaling $157,833 and $125,481 at September 30,
     2003 and 2002, respectively.




                                      F-18
<PAGE>

                    HEMAGEN DIAGNOSTICS, INC. AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

                           SEPTEMBER 30, 2003 AND 2002
--------------------------------------------------------------------------------

NOTE L - STOCKHOLDERS' EQUITY-CONTINUED

     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.

     Prior to the establishment of the 2001 Stock Option 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 those of 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. 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 are transferable and became exercisable on March 31,
     2001.






                                      F-19
<PAGE>

                    HEMAGEN DIAGNOSTICS, INC. AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

                           SEPTEMBER 30, 2003 AND 2002
--------------------------------------------------------------------------------

NOTE L - STOCKHOLDERS' EQUITY

     Changes in options outstanding are summarized as follows:

<TABLE>
<CAPTION>
                                                                Weighted-
                                                                Average
                                                                Exercise
                                                  Shares         Price
                                                ----------      --------
     <S>                                        <C>             <C>

     BALANCE, OCTOBER 1, 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
        Granted                                    123,500         0.46
        Exercised                                       --           --
        Cancelled or expired                      (458,100)        0.87
                                                ----------       ------
     BALANCE, SEPTEMBER 30, 2003                 2,475,010       $ 1.27
                                                ----------       ------
</TABLE>

     The following table summarizes information about stock options outstanding
     at September 30, 2003

<TABLE>
<CAPTION>
                            Options Outstanding
                            -------------------
                                                    Weighted-Average
                                     Number            Remaining         Weighted Average
                                 Outstanding at     Contractual Life      Exercise Price
     Range of Exercise Prices  September 30, 2003       (years)
     ------------------------  ------------------   ----------------     ----------------
     <S>                       <C>                  <C>                  <C>
            2.00                      209,996            0.5                   2.00
            1.36                    1,732,014            6.0                   1.36
            1.25                       10,000            2.0                   1.25
            1.15                        5,000            3.3                   1.15
            1.00                       10,000            3.3                   1.00
            0.98                       10,000            3.5                   0.98
            0.97                       70,000            3.3                   0.97
            0.83                       10,000            3.0                   0.83
            0.80                       23,500            3.0                   0.80
            0.78                      150,000            3.2                   0.78
            0.64                       30,000            2.6                   0.64
            0.63                      119,000            2.1                   0.63
            0.41                       60,500            4.0                   0.41
            0.29                       35,000            9.4                   0.29
     ------------------------  ------------------   ----------------     ----------------
        $0.29 to $2.00              2,475,010            5.0                  $1.27
     ========================  ==================   ================     ================
</TABLE>


                                      F-20
<PAGE>

                    HEMAGEN DIAGNOSTICS, INC. AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

                           SEPTEMBER 30, 2003 AND 2002
--------------------------------------------------------------------------------

NOTE L - STOCKHOLDERS' EQUITY-CONTINUED

     STOCK OPTIONS CONTINUED
     -----------------------

     As of September 30, 2003, options for 2,458,260 shares were exercisable at
     prices ranging from $0.29 to $2.00 per share. At September 30, 2003,
     11,750 options with an exercise price of $0.80 per share were not
     exercisable.

     The fair value of each option grant was determined on the date of the grant
     using the Black-Scholes option-pricing model with the following
     weighed-average assumptions used for grants in 2003 and 2002; dividend
     yield of 0%; expected volatility rates from 130-196% and 89-121% for 2003
     and 2002, respectively; risk-free interest rate of 4% for both years; and
     expected lives ranging from 3.0 to 10.0 years.

     The weighted average grant date fair value of options granted during 2003
     and 2002 was $39,192 and $256,599, respectively.

     STOCK RIGHTS PURCHASE AGREEMENT
     -------------------------------

     In fiscal year 1999, the Company's Board of Directors implemented a Stock
     Purchase Rights Agreement (the "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 January 9, 2003, William P. Hales, is 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.





                                      F-21
<PAGE>

                    HEMAGEN DIAGNOSTICS, INC. AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

                           SEPTEMBER 30, 2003 AND 2002
--------------------------------------------------------------------------------

NOTE M - INCOME TAXES

     For the years ended September 30, 2003 and 2002, domestic and foreign
     losses before income taxes are as follows:

<TABLE>
<CAPTION>
                                           2003              2002
                                        -----------       -----------
     <S>                                <C>               <C>

     Domestic                           $(1,260,694)      $(1,621,738)
     Foreign                                 (4,375)         (138,745)
                                        -----------       -----------
                                        $(1,265,069)      $(1,760,483)
                                        ===========       ===========
</TABLE>


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

     Years ended September 30,                           2003       2002
                                                         ----       ----

     Federal tax (credit) at statutory rate                34%        34%
     Current tax benefit of
       operating losses
                                                          (34)       (34)
                                                         ----       ----
                                                            0%         0%
                                                         ====       ====



                                      F-22
<PAGE>

                    HEMAGEN DIAGNOSTICS, INC. AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

                           SEPTEMBER 30, 2003 AND 2002
--------------------------------------------------------------------------------

NOTE M - INCOME TAXES-CONTINUED

     Deferred tax assets (liabilities) are comprised of the following at
     September 30, 2003 and 2002:


<TABLE>
<CAPTION>
                                               2003              2002
                                           -----------       -----------
     <S>                                   <C>               <C>

     Net operating loss carryforwards        5,369,000         4,857,000
     Inventory reserve                         280,000           313,700
     Accounts receivable reserve                71,700           212,800
     Other                                     220,000           272,900

     Total deferred tax assets               5,940,700         5,656,400
     Basis difference in fixed assets         (103,100)         (193,300)

     Net deferred tax assets               $ 5,837,600       $ 5,463,100
     Valuation allowance                   $(5,837,600)       (5,463,100)
                                           -----------       -----------
     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, 2003, the Company has approximately $5,369,000 and
     $13,185,908 of federal and state net operating loss carry-forwards,
     respectively, available to offset future taxable income, which expire on
     various dates through 2023. 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-23
<PAGE>

                    HEMAGEN DIAGNOSTICS, INC. AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

                           SEPTEMBER 30, 2003 AND 2002
--------------------------------------------------------------------------------

NOTE N - SIGNIFICANT SALES AND CONCENTRATION OF CREDIT RISK

     During the year ended September 30, 2003, the Company derived $1,343,000 in
     revenues from one significant customer representing 16% of total sales.
     These sales were in conjunction with a supply agreement that extends to
     December 2006. In fiscal 2002, the Company derived revenues from two
     significant customers, $1,306,000 from one customer and $1,092,000 from
     another customer representing 14% and 11% of total sales, respectively.
     Revenues derived from export sales amounted to approximately $2,969,000, or
     35% of total sales in 2003 and $2,962,000, or 31% of total sales in 2002.
     Export sales to Europe were approximately $1,608,000 or 19% of total sales
     in 2003 and $1,569,000, or 17% of total sales in 2002. Export sales to
     South America were approximately $682,000, or 8% of total sales in 2003 and
     $915,000, or 10% of total sales in 2002.

NOTE O - GEOGRAPHICAL INFORMATION

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

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

<TABLE>
<CAPTION>
                                        United*
                                        States         Brazil      Consolidated
                                      ----------      --------     ------------
          <S>                         <C>             <C>           <C>

          SEPTEMBER 30, 2003:
             Revenues                 $7,852,072      $620,639      $8,472,711
             Long-lived assets         1,135,917        60,325       1,196,242

          SEPTEMBER 30, 2002:
             Revenues                  8,632,566       866,965      $9,499,531
             Long-lived assets         1,704,153        72,712       1,776,865

</TABLE>

     * Includes export sales to countries other than Brazil of approximately
       $2,349,000 and $2,095,000 in 2003 and 2002, respectively.



                                      F-24
<PAGE>

                    HEMAGEN DIAGNOSTICS, INC. AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

                           SEPTEMBER 30, 2003 AND 2002
--------------------------------------------------------------------------------

NOTE P - COMMITMENTS

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


      Years ending September 30,                             2003
                                                            -------
      2004                                                  512,000
      2005                                                  397,000
      2006                                                  277,000
      2007                                                  196,000
      2008                                                   12,000
      THEREAFTER                                                 --

     Rent expense approximated $532,000 and $530,000 in 2003 and 2002,
     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 $40,000 and
     $50,000 in fiscal 2003 and 2002, respectively.



                                      F-25
<PAGE>

                    HEMAGEN DIAGNOSTICS, INC. AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

                           SEPTEMBER 30, 2003 AND 2002
--------------------------------------------------------------------------------

NOTE Q - CONTINGENCIES

     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 sought approximately $20,645,000 in damages 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 and URRMA. Hemagen responded to the claim and filed a counter
     suit for approximately $19,752,000 on June 10, 2002. On January 16, 2003,
     the Company agreed to settle the matter. Under the terms of the settlement
     agreement URRMA agreed to pay the Company cash of approximately $100,000,
     $50,000 of which was paid in February 2003 and $50,000 is due in February
     2004, and royalties of 3% of revenues of URRMA's R7V test kit beginning on
     the date of the first commercial sale of the kit until the total royalties
     equal $250,000. No royalties have been paid as of September 30, 2003.

NOTE R - SUPPLEMENTAL DISCLOSURE OF CASH

<TABLE>
<CAPTION>
     September 30,                                  2003                2002
                                                  --------            --------
     <S>                                          <C>                 <C>

     Cash paid for interest                       $504,480            $502,145
                                                  ========            ========
     Disclosure of non-cash investing
       and financing activities:
       Issuance of 36,844 and 192,589,
       respectively shares of
       common stock in lieu of cash
       payments, respectively                       14,000             242,500
                                                  ========            ========

</TABLE>







                                      F-26