Hemagen Reports Net Income for the First Quarter on Increased Sales and Improved Operating Results

Hemagen Diagnostics, Inc. (OTC:HMGN.OB) a biotechnology
company that develops, manufactures, and markets proprietary medical
diagnostic test kits, today reported operating results for the first
fiscal quarter ended December 31, 2005. For the three-month period
ended December 31, 2005, the Company reported net income of $122,000
or $0.01 per share, compared to a net loss of $236,000 or ($0.02) per
share for the quarter ended December 31, 2004. After adjusting for
non-cash charges including depreciation, amortization, and non-cash
interest, the net income for the quarter ended December 31, 2005 was
$145,000 compared to a net loss of $103,000 for the quarter ended
December 31, 2004.
   William P. Hales, President and CEO, said, "This quarter marks the
first time the Company has reported net income since taking over
management of the company. We are pleased with the improvement in
sales levels and continue to strive to make progress in improving our
operations. Our main focus is on increasing revenues through core
growth while continuing to contain costs. We remain focused on our
number one goal of building shareholder value and positioning the
company for sustained profitability. We continue to work to optimize
our manufacturing facilities and improve our operating efficiencies."
   Revenues for the quarter ended December 31, 2005 were $1,965,000
as compared to revenues of $1,778,000 for the quarter ended December
31, 2004, an increase of $187,000 or 10.5%. The increase in sales, for
the three-month period ended December 31, 2005, were mainly due to the
increase in revenue at the Company's Brazilian subsidiary and at
Raichem, the Company's Clinical Chemistry Division.
   Gross Margins for the quarter ended December 31, 2005 were 46% of
sales, as compared to 28% for the quarter ended December 31, 2004.
Margins were higher than the previous period due to improved
manufacturing efficiencies and reduced manufacturing spending.
   At December 31, 2005, Hemagen had working capital of $1,841,000
and a current ratio of 1.8 to 1.0 compared to working capital of
$3,209,000 and a current ratio of 3.3 to 1.0 at December 31, 2004.
This reduction in working capital is mainly due to the classification
of construction financing which was used to purchase the Company's new
headquarters as a current liability. This liability will be
reclassified as a long-term liability once the construction period is
complete. If this financing had been long term at December 31, 2005,
the working capital of the Company would have been $2,498,000 and the
current ratio would have been 2.4 to 1.0 instead of 1.8 to 1.0.
Hemagen had $278,000 of cash on hand at December 31, 2005, as compared
to cash on hand of $307,000 at December 31, 2004.
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HEMAGEN DIAGNOSTICS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)



                                                  Three Months Ended
                                                  Dec 31,    Dec 31,
                                                ----------------------
                                                   2005       2004
                                                ----------------------
Revenues                                        $1,965,000 $1,778,000
Costs and Expenses:
    Cost of Product sales                        1,061,000  1,273,000
    Research and development                        60,000     62,000
    Selling, general and administrative            582,000    572,000
                                                ----------------------

Operating income (loss)                            262,000   (129,000)

Other expenses, net                               (116,000)   (95,000)
Income tax expense                                 (24,000)   (11,000)

Net income (loss)                                 $122,000  ($235,000)
                                                ======================
Net loss per share-Basic and Diluted                 $0.01     ($0.02)
                                                ======================


RECONCILIATION OF EARNINGS BEFORE NON-CASH CHARGES FOR THE THREE-MONTH
PERIODS ENDED DECEMBER 31, 2005 (UNAUDITED)


                                                   Three Months Ended
                                                   Dec 31,    Dec 31,
                                                  --------------------
                                                    2005       2004
                                                  --------------------
Net income (loss)                                 $122,000  ($235,000)
Adjusted for:
    Depreciation and Amortization                   12,000    117,000
    Non-cash amortization of debt discount          15,000     15,000
    Other non-cash charges                          (4,000)        --
                                                  --------------------
Net loss before non cash charges                  $145,000  ($103,000)
                                                  ====================

This reconciliation of Earnings before non-cash charges is presented
because the company believes it is important to see the impact of the
non-cash on the earnings of the company.
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   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.

   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.