Hemagen Reports Significantly Improved Fiscal Year 2001 Results.

Business Editors/Health & Medical Writers

COLUMBIA, Md.--(BW HealthWire)--Jan. 3, 2002

Hemagen Diagnostics, Inc. (NASDAQ: HMGN, HMGNW) a biotechnology company that develops, manufactures and markets proprietary medical diagnostic test kits, today reported significantly improved operating results for the fiscal year ended September 30, 2001.

The net loss for the period, before the "cumulative effect of a change in accounting principle", was $1,068,000 or $(0.11) per share compared to a net loss of $5,130,000 or $(0.53) per share during last fiscal year. After adjusting for non-cash charges including depreciation, amortization, non-cash interest and the cumulative effect of the change in accounting principle, the earnings for the period were $114,000 compared to a loss in the same prior fiscal period of $3,793,000.

Revenues for the year were $10,971,000 compared to $10,996,000 during the prior fiscal year, a decrease of $25,000. In fiscal 2001, the Company began to focus its sales and marketing efforts on products that could provide the highest profit margin. As a result of this focus, some low margin product sales were terminated. In February 2001, the Company terminated a contract manufacturing agreement because of its high cost of production. Revenues under this agreement for the five months in fiscal 2001 were approximately $435,000, as compared to $932,000 in the previous full year.

Offsetting the reduction in revenues from this agreement were the increased sales to Roche Diagnostics, Inc., pursuant to the December 1999 supply agreement. With several new product introductions to this customer during the year, revenues increased to $1,700,000 from $838,000 in the previous year. The Company expects to continue to expand the current product offering to this customer by introducing several products previously agreed to under the supply agreement.

Gross Margins improved in fiscal 2001 to 31% compared to 13% in fiscal 2000. Much of the improvement the Company experienced in its gross margins resulted from the consolidation of operations, and better utilization of inventory. In April 2001, the Company completed the closure of its Waltham, Massachusetts's facility and the relocation of its Waltham-based product lines to the Company's Columbia, Maryland headquarters. Margins in fiscal year 2000 were burdened with the costs of relocating the Company's Analyst(R) product line to Columbia, Maryland and excess inventory levels.

At September 30, 2001, Hemagen had $672,000 of cash on hand, working capital of $3,937,000 and a current ratio of 3.0 to 1.0. At the prior fiscal year end, the Company had working capital of $3,451,000 and a current ratio of 1.8 to 1.

In the first quarter of fiscal 2001 in accordance with a FASB Emerging Issues Task Force (EITF) consensus requiring the remeasurement of original issue discount on certain debt securities, the Company recognized a one-time, non-cash charge of $1,130,000 associated with the convertible notes issued in the Company's May 2000 private placement offering. In accordance with the consensus, an additional $1,130,000 of original issue discount was expensed in the current period and recognized as the cumulative effect of a change in accounting principle in the income statement. This charge resulted in a non-cash loss of $(0.12) per share being recognized in the current fiscal year. The Net Loss including the cumulative effect of the change in accounting principle was $2,199,000 or $0.23 per share.

Jerry L. Ruyan, Chairman and CEO said, "As we embark on a new year, management remains committed to executing our growth plans by continuing to pursue product and product line acquisitions, and developing products internally through our own research and development."

William P. Hales, President and COO said, "We are pleased to report that the company generated positive earnings before non-cash charges compared to a $3,793,000 loss in the same prior fiscal period despite many one-time cash expenditures related to severance and the consolidation of our Waltham facility. We remain focused on increasing sales volumes and reducing expenses. We continue to focus on building shareholder value and positioning the company for sustained profitability."

HEMAGEN DIAGNOSTICS, INC AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

                                             Twelve Months Ended
                                                 September 30,
                                           --------------------------
                                              2001           2000
                                           -----------    -----------
Revenues:
Product sales                              $10,971,000    $10,996,000
                                           -----------    -----------
Costs and expenses:
Cost of product sales                        7,557,000      9,619,000
Research and development                       387,000        526,000
Selling, General & Admin.                    3,829,000      4,220,000
Other operating costs                             --          879,000
                                           -----------    -----------
                                            11,234,000     15,244,000
                                           -----------    -----------
Operating income (loss)                       (263,000)    (4,248,000)

Other expenses, net                           (805,000)      (882,000)
                                           -----------    -----------
Net loss before cumulative
Effect of a change in accounting
principle                                   (1,068,000)    (5,130,000)

Cumulative effect of a change in
Accounting principle                        (1,130,000)          --
                                           -----------    -----------
Net income (loss)                          $(2,198,000)   $(5,130,000)
                                           ===========    ===========
Net loss per share before Cumulative
Effect of a change in accounting
Principle                                       $(0.11)        $(0.53)
                                           ===========    ===========
Net income (loss) per share - basic and
assuming dilution                               $(0.23)        $(0.53)
                                           ===========    ===========


RECONCILIATION OF EARNINGS BEFORE
 NON-CASH ITEMS

Net income (loss)                          $(2,198,000)   $(5,130,000)

Adjusted for:
Depreciation and Amortization                  853,000      1,112,000
Non-cash Amortization of discount              329,000        225,000
Non-cash Cumulative effect of a
change in accounting principle               1,130,000           --
                                           -----------    -----------
Earnings before non-cash charges
and Cumulative effect                         $114,000    $(3,793,000)
                                           ===========    ===========

Hemagen Diagnostics, Inc., is a biotechnology company that develops, manufactures and, markets more than 148 FDA-cleared proprietary medical diagnostic test kits used to aid in the diagnosis of certain autoimmune and infectious diseases. In the United States, the Company sells its products directly to physicians, veterinarians, clinical laboratories and blood banks and on a private-label basis through multinational distributors of medical supplies.

Internationally, the Company sells its products primarily through distributors. Hemagen also manufactures and sells the "Analyst(R)" an FDA-cleared Clinical Chemistry Analyzer used to measure important constituents in human and animal blood. The Company sells the Analyst(R) both directly and through distributors servicing both physicians' office laboratories and veterinarians offices. The company focuses on markets that offer significant growth opportunities. The company was incorporated in the Commonwealth of Massachusetts in 1985 and reincorporated in the State of Delaware in 1992.

Except for any historical information contained herein, the matters discussed in this press release contain forward-looking statements that involve risks and uncertainties, including those described in the Company's Securities and Exchange Commission reports and filings.

Certain Statements contained in this News Bulletin that are not historical facts constitute forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, and are intended to be covered by the safe harbors created by that Act.

Reliance should not be placed on forward looking statements because they involve 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. The Company 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, write-offs of goodwill, relocation expenses, expected financial performance, on-going business strategies and possible future action which Hemagen intends to pursue to achieve strategic objectives constitute forward-looking information.

The sufficiency of such charges, implementation of strategies and the achievement of financial performance are each subject to numerous conditions, uncertainties and risk factors. Factors which could cause actual performance to differ materially from these forward looking statements, include without limitation, management's analysis of Hemagen's assets, liabilities and operations, the failure to sell date sensitive inventory prior to its expiration, the inability of particular products to support goodwill allocated to them, 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 product costs and difficulties in complying with laws and regulations administered by the U. S. Food and Drug Administration and the ability to assimilate successfully product acquisitions.