Hemagen Reports Improved Results for Fiscal Year Ended September 30, 2006

  
    
  
  
    
      Hemagen Diagnostics, Inc. (OTC:HMGN.OB) a biotechnology Company that 
      develops, manufactures and markets proprietary medical diagnostic test 
      kits, today reported its operating results for the fiscal year ended 
      September 30, 2006. The net income for the year ended September 30, 2006 
      was $313,000 or $0.02 per share, which included a gain on sale of a 
      building of $865,000, compared to a net loss of ($1,337,000) or ($0.09) 
      per share during the prior fiscal year.
    
    
      Excluding the gain on sale the net loss would have been ($552,000) or 
      ($0.03) cents per share compared to the net loss of ($1,337,000) or 
      ($0.09) per share for the prior fiscal year.
    
    
      Operating Loss for the year ended September 30, 2006 was ($63,000) as 
      compared to an Operating Loss of ($875,000) in the prior fiscal year. 
      This decrease in operating loss is mainly attributed to higher gross 
      margins from the previous year. After adjusting for non-cash charges 
      including depreciation, amortization, non-cash interest, and other 
      non-cash charges, the net income for the year ended September 30, 2006 
      was $413,000 compared to a net loss of ($820,000) for the year ended 
      September 30, 2005.
    
    
      Revenues for the year ended September 30, 2006 decreased 4% to 
      $7,250,000 compared to $7,586,000 during the prior fiscal year ended 
      September 30, 2005. The overall decrease in sales resulted from $286,000 
      of decreased sales in the Company’s Analyst® 
      product line, $278,000 of decreased sales in the Company’s 
      Raichem product line, and was offset by $148,000 of increased sales of 
      the Company’s Virgo autoimmune and infectious 
      disease products line. The Analyst® product 
      line sales declines mainly resulted from lower sales to physician office 
      laboratories and the distributors that support that market. The decrease 
      in the Company’s Raichem division resulted 
      from the loss of sales to certain top customers. The increase in the 
      Virgo product line sales mainly resulted from growth at the Company’s 
      Brazilian subsidiary.
    
    
      Gross Margins for fiscal year 2006 were 36% as compared to 25% in fiscal 
      year 2005. The gross margins for the year increased 11% in the current 
      year 2006 as a result of lower production costs and higher production 
      levels in certain product lines as compared to fiscal 2005.
    
    
      At September 30, 2006, Hemagen had $151,000 of cash on hand, working 
      capital of $2,927,000 and a current ratio of 3.3 to 1.0. At the prior 
      fiscal year end, the Company had $272,000 of cash on hand, working 
      capital of $1,683,000 and a current ratio of 1.65 to 1.0. In the prior 
      year the current ratio was affected by a construction loan for the 
      Company’s new facility that was purchased in 
      June 2005 that was to be used for the company’s 
      new Corporate Headquarters. Therefore, $650,000 of debt was classified 
      as short-term obligations that would have been converted to permanent 
      long term financing once the build out was completed. The current ratio 
      was also negatively affected by the borrowings on the traditional line 
      of credit facility which was mainly used for the acquisition and 
      expenses related to the Corporate facility. In July the building was 
      sold and the Company recognized a gain on sale of $865,000 and all loans 
      related to the building including the working capital line were paid off 
      at that time. In addition, the company has a working capital line of 
      credit for up to $500,000 based on the domestic receivables and 
      inventory of the company and which provides for interest at the rate of 
      the Prime Rate plus 3/4%. At September 30, 2006 the Company had no 
      outstanding borrowings on this line of credit.
    
    
      William P. Hales, President and CEO said, “We 
      are pleased to announce earnings and improved margins. We are 
      optimistic about fiscal year 2007 revenues and certain new 
      product introductions that are set to take place this year."
    
    
      
        
          
            HEMAGEN DIAGNOSTICS, INC AND SUBSIDIARY
          
        
      
      
        
          
            CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
          
        
      
      
        
        
        
           
        
      
      
        
        
        
          Twelve Months Ended
        
      
      
        
        
        
          Sept 30,
        
        
          Sept 30,
        
      
      
        
        
        
          2006 
        
        
          2005 
        
      
      
        
          Revenues
        
        
          7,250,000 
        
        
          $7,586,000 
        
      
      
        
          Costs and Expenses:
        
        
        
        
        
      
      
        
          Cost of Product sales
        
        
          4,671,000 
        
        
          5,677,000 
        
      
      
        
          Research and development
        
        
          317,000 
        
        
          281,000 
        
      
      
        
          Selling, general and administrative
        
        
          2,326,000 
        
        
          2,351,000 
        
      
      
        
          Impairment of goodwill
        
        
          -- 
        
        
          152,000 
        
      
      
        
          Other operating expenses
        
        
          -- 
        
        
          -- 
        
      
      
        
        
        
           
        
        
           
        
      
      
        
          Operating income (loss)
        
        
          (63,000)
        
        
          (875,000)
        
      
      
        
          Other income (expenses), net
        
        
          376,000 
        
        
          (462,000)
        
      
      
        
        
        
        
        
           
        
      
      
        
          Net income (loss)
        
        
          $313,000 
        
        
          ($1,337,000)
        
      
      
        
          Net income (loss) per share

          
            -Basic and Diluted
          
        
        
          
            $0.02 
          
        
        
          
            ($0.09)
          
        
      
    
    
      
        
          
            RECONCILIATION OF EARNINGS BEFORE NON-CASH ITEMS
          
        
      
      
        
        
        
        
        
           
        
      
      
        
        
        
        
        
          Twelve Months Ended
        
      
      
        
        
        
        
        
          Sept 30,
        
        
          Sept 30,
        
      
      
        
        
        
        
        
          2006 
        
        
          2005 
        
      
      
        
          Net income (loss)
        
        
          $313,000 
        
        
          ($1,337,000)
        
      
      
        
          Adjusted for:
        
        
        
        
        
      
      
        
        
        
          Depreciation and Amortization
        
        
          44,000 
        
        
          301,000 
        
      
      
        
        
        
          Non-cash amortization of debt discount
        
        
          56,000 
        
        
          63,000 
        
      
      
        
        
        
          
            Other non cash charges, write off of goodwill
          
        
        
          
            -- 
          
        
        
          
            153,000 
          
        
      
      
        
          Net income (loss) before non cash charges
        
        
          $413,000 
        
        
          ($820,000)
        
      
    
    
      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 has three different product lines. The Virgo® 
      product line consists of diagnostic test kits that are used to aid 
      in the diagnosis of certain autoimmune and infectious diseases, using 
      ELISA, Immunoflourescence, and hemagglutination technology. The Raichem® 
      product line consists of a complete line of clinical chemistry 
      reagents that are sold through Hemagen’s 
      wholly owned subsidiary, Reagents Applications, Inc., under the brand 
      name Raichem, as well as under various OEM arrangements. The Analyst® 
      product line is an FDA-cleared clinical chemistry analyzer system, 
      including consumables, that is used to measure important constituents in 
      human and animal blood. In the United States, the Company sells its 
      products through distributors and directly to physicians, veterinarians, 
      clinical laboratories and blood banks and on a private-label basis 
      through multinational distributors. Internationally, the Company sells 
      its products primarily through distributors. Hemagen’s 
      products are used in many of the largest Laboratories, Hospitals, and 
      Blood Banks around the world. The company focuses on markets that offer 
      significant growth opportunities. The Company was incorporated in 1985 
      and became a public company in 1993.
    
    
      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. 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 upon current expectations of 
      the Company and speak 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, 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 reserves and adjustments, expected 
      performance, implementation of on-going business strategies and possible 
      future action, 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.