MERIDIAN DIAGNOSTICS INC, 424B1, 1996-05-15

MERIDIAN DIAGNOSTICS INC
424B1, 1996-05-15
IN VITRO & IN VIVO DIAGNOSTIC SUBSTANCES

Previous: MERIDIAN DIAGNOSTICS INC, S-3MEF, 1996-05-15

Next: KIEWIT PETER SONS INC, 10-Q, 1996-05-15

<PAGE> 1
Filed pursuant to Rule 424(b)(1)

1,700,000 SHARES

LOGO

COMMON STOCK

All of the shares of Common Stock offered hereby are being sold by the
Selling Shareholder. See "Principal Shareholders and Selling Shareholder."
Meridian Diagnostics, Inc. (the "Company") will receive no proceeds from the
sale of Common Stock by the Selling Shareholder. The Common Stock of the Company
is quoted on the Nasdaq National Market under the symbol "KITS." On May 14,
1996, the last reported sale price of the Common Stock was $9.8125 per share.
See "Price Range of Common Stock."

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

SEE "RISK FACTORS" ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
-------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
PROCEEDS TO
PRICE TO UNDERWRITING SELLING
PUBLIC DISCOUNT(1) SHAREHOLDER(2)
- ------------------------------------------------------------------------------------------------
Per Share.................................... $9.875 $0.690 $9.185
- ------------------------------------------------------------------------------------------------
Total(3)..................................... $16,787,500 $1,173,000 $15,614,500
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
</TABLE>

(1) The Company and the Selling Shareholder have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933. See "Underwriting."

(2) Before deducting expenses of this Offering, all of which are payable by the
Selling Shareholder, estimated at $350,000.

(3) The Selling Shareholder has granted to the Underwriters a 30-day option to
purchase up to an additional 255,000 shares of Common Stock solely to cover
over-allotments, if any, on the same terms and conditions as set forth
above. If the option is exercised in full, the total Price to Public, total
Underwriting Discount and total Proceeds to Selling Shareholder will be
$19,305,625, $1,348,950 and $17,956,675, respectively. See "Underwriting."

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

The shares of Common Stock are offered by the several Underwriters when, as
and if delivered to and accepted by the Underwriters and subject to various
conditions, including their right to reject orders in whole or in part. It is
expected that the shares of Common Stock will be ready for delivery on or about
May 20, 1996.

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

CLEARY GULL REILAND & MCDEVITT INC.
THE OHIO COMPANY
RONEY & CO.
The date of this Prospectus is May 15, 1996.
<PAGE> 2

The Company's diagnostic test kits are based on multiple core diagnostic
technologies, each of which enable the visualization and identification of
antigen/antibody reactions for specific pathogens. As a result, the Company is
able to develop and manufacture diagnostic test kits in a variety of formats
that satisfy customer needs and preferences. Shown above are various test
formats, including Premier, ImmunoCard and Meritec, for Clostridium difficile, a
serious pathogen of the gastrointestinal tract.

[Photograph of various test formats, including Premier, ImmunoCard and Meritec]

<PAGE> 3

The Company's FiltraCheck-UTI product allows
hospitals, laboratories and alternate site
markets to rapidly screen for the presence
of urinary tract infection. On those tests
that show no presence of active infection,
the need to culture the specimen, a time
intensive and costly procedure, can be
eliminated.

[Photograph of Company's
FiltraCheck-UTI product]

<PAGE> 4

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and in accordance therewith files
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information filed by the Company with the Commission can be inspected and copied
at the public reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Commission's regional offices
located at Northwestern Atrium, 500 West Madison Street, Suite 1400, Chicago,
Illinois, and at 7 World Trade Center, Suite 1300, New York, New York. Copies of
such material can also be obtained, at prescribed rates, by mail from the Public
Reference Section of the Commission at its Washington, D.C. address set forth
above. In addition, material filed by the Company can be obtained and inspected
at the offices of the Nasdaq Stock Market, Inc., 9513 Key West Avenue,
Rockville, Maryland 20850, on which the Common Stock is quoted.

This Prospectus constitutes part of a Registration Statement on Form S-3
filed by the Company with the Commission under the Securities Act of 1933 (the
"Securities Act"). This Prospectus omits certain of the information contained in
the Registration Statement, and reference is hereby made to the Registration
Statement and related exhibits for further information with respect to the
Company and the Common Stock offered hereby. Any statements contained in this
Prospectus as to the terms of any document are not necessarily complete, and in
such instance reference is made to the copy of such document filed as an exhibit
to the Registration Statement or otherwise filed with the Commission. Each such
statement is qualified in its entirety by such reference.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

THIS PROSPECTUS INCORPORATES BY REFERENCE CERTAIN DOCUMENTS RELATING TO THE
COMPANY WHICH ARE NOT DELIVERED HEREWITH. THESE DOCUMENTS (OTHER THAN THE
EXHIBITS TO SUCH DOCUMENTS, UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED
BY REFERENCE INTO SUCH DOCUMENTS) ARE AVAILABLE, WITHOUT CHARGE, ON ORAL OR
WRITTEN REQUEST BY ANY PERSON TO WHOM THIS PROSPECTUS IS DELIVERED. Written or
telephone requests should be directed to Gerard Blain, 3471 River Hills Drive,
Cincinnati, Ohio 45244, telephone (513) 271-3700. The following documents, which
have been filed by the Company with the Commission, are hereby incorporated by
reference in this Prospectus:

(1) The Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1995;

(2) The Company's Quarterly Reports on Form 10-Q for the quarters
ended December 31, 1995 and March 31, 1996; and

(3) The description of the Common Stock contained in the Registration
Statement on Form 8-A filed on August 15, 1986 and amended August 20, 1986.

All documents filed by Meridian Diagnostics, Inc. pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the termination of this
Offering shall be deemed to be incorporated by reference in this Prospectus. Any
statement contained in a document incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.

IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

IN CONNECTION WITH THE OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS (IF ANY) OR THEIR RESPECTIVE AFFILIATES MAY ENGAGE IN PASSIVE MARKET
MAKING TRANSACTIONS IN THE COMMON STOCK ON THE NASDAQ NATIONAL MARKET IN
ACCORDANCE WITH RULE 10b-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934. SEE
"UNDERWRITING."

The Company owns the following trademarks: CALAS(R), FiltraCheck-UTI(R),
ImmunoCard(TM), Merifluor(R), Meritec(TM), MeriStar(R), Macro-Con(R),
MONOLERT(R), MONOSPOT(R), ECOFIX(R), HYDROFLUOR(R) and Para-Pak(R).
<PAGE> 5

[Insert gatefold here]
<PAGE> 6

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements, including the notes thereto,
appearing elsewhere in this Prospectus. Unless otherwise indicated, information
in this Prospectus relating to share data reflects 3-for-2 stock splits
effective March 27, 1992 and October 2, 1995, 3% stock dividends effective
December 23, 1993 and December 8, 1994 and a 5% stock dividend effective
December 14, 1992 and assumes that the Underwriters' over-allotment option is
not exercised. The Company's fiscal year ends on September 30. See "Glossary of
Selected Terms" for definitions of certain terms used herein.

THE COMPANY

Meridian Diagnostics, Inc. develops, manufactures and markets a diverse
line of disposable diagnostic test kits and related diagnostic products used for
the rapid diagnosis of infectious diseases. The Company's products aid in the
diagnosis of such common medical conditions as gastrointestinal infections,
mononucleosis, urinary tract infections and respiratory infections. The
Company's products provide accuracy, simplicity and speed, enabling healthcare
providers to reduce costs while improving quality. All of the Company's products
are used in procedures performed in vitro (outside the body) and require little
or no special instrumentation or equipment.

The global market for infectious disease tests continues to expand as new
disease states are identified, new therapies become available and worldwide
standards of living and access to healthcare improve. Technological advances
permitting accurate diagnostic testing to occur outside the traditional hospital
or laboratory setting have affected this market. These technological advances
have contributed to the emergence of alternate site markets, such as physicians'
offices, outpatient clinics, nursing homes and health maintenance organizations
(HMOs), as important diagnostic product segments. The increasing pressures to
contain global healthcare costs have accelerated this shift to alternate site
markets and also increased the use of diagnostic tests. With rapid and accurate
diagnoses of infectious diseases, physicians can pinpoint therapies quickly,
leading to faster recovery, shorter hospital stays and reduced expense. These
technological advances should also contribute to the development of new markets,
including veterinary laboratories, water treatment facilities and consumer
self-testing in the over-the-counter market.

The Company's product line consists of over 100 diagnostic products
relating to five major disease states. The Company's diagnostic tests, which
generally range from $1 per test to $13 per test, provide rapid results (often
in minutes or hours), are easy to use and require less technical expertise than
conventional tests. Conventional diagnostic testing requires highly skilled
technicians to perform complicated test procedures that generally have
turnaround times of 24 to 48 hours. For many specific diseases, the Company has
the broadest product line or the only alternative to more expensive, time
consuming conventional procedures.

The Company's products are based on multiple core diagnostic technologies,
each of which enables visualization and identification of antigen/antibody
reactions for specific pathogens. As a result, the Company is able to develop
and manufacture diagnostic tests in a variety of formats that satisfy customer
needs and preferences. The Company targets niche diagnostic test markets, which
are characterized by a large number of low volume users. Historically, the
larger diagnostic companies have not concentrated on this segment of the market.

The Company's marketing group utilizes industry contacts and key customer
focus sessions to identify new product opportunities. Through the use of
cross-functional teams that include marketing, research and development and
manufacturing personnel, the marketing group guides the development process to
meet customers' needs with products that are easier to use, require less
technical expertise and yield faster results. The Company believes it is well
positioned to develop partnerships with key customers because it is an
integrated manufacturer, has a broad product line, offers tests in multiple
formats and is willing to invest resources in building relationships and
facilitating open communications with those customers. To illustrate, in January
1996, the Company signed a three-year exclusive agreement, with the Columbia/HCA
Healthcare Corporation, a hospital alliance of approximately 350 hospitals, for
all parasitology transport products and specific infectious disease diagnostic
products. In April 1996, the Company signed a three-year, primary

3
<PAGE> 7

source agreement with Laboratory Corporation of America, consisting of over 35
laboratories, for the supply of certain products for parasitology, virology and
other infectious diseases.

The Company's research and development activities focus on developing
diagnostic solutions. Over the past five years, the Company has developed
internally 19 new products. The Company believes that its ability to bind
various chemicals to various solid phases, including plastics, membranes, latex
beads and immunofluorescent dyes to develop testing formats, gives it a
competitive advantage. The Company estimates that, from the conceptualization of
a product, it takes approximately 18 to 24 months to begin to generate revenues.

The Company markets its products through a direct sales force, in the U.S.
and Italy, supplemented by a network of U.S. and international distributors.
Over the last three years, the Company's international sales have nearly tripled
from $2.1 million in fiscal 1992 to $5.8 million in fiscal 1995 and currently
represent 23% of net sales.

The Company has developed and implemented a strategy for growth consisting
of the following six principal elements:
- Developing New Product Applications from Core Technologies and Formats
- Acquiring and Licensing Products and Technology
- Increasing International Sales
- Developing Partnerships with Consolidated Healthcare Organizations
- Entering New Markets
- Accessing Alternate Site Markets for Diagnostic Testing

Since 1990, the Company has realized substantial growth in net sales and
primary net earnings per share. Net sales increased to $25.1 million in fiscal
1995 from $8.5 million in fiscal 1990, a compound annual growth rate of
approximately 24%. Over the same period, primary earnings per share increased at
a compound annual growth rate of approximately 37%.

The Company is an Ohio corporation, its principal executive offices are
located at 3471 River Hills Drive, Cincinnati, Ohio 45244, and its telephone
number is (513) 271-3700.

THE OFFERING

Common Stock Offered by the Selling
Shareholder............................. 1,700,000 shares

Common Stock to be Outstanding after the
Offering................................ 14,257,006 shares (1)

Use of Proceeds......................... The Company will receive no
proceeds from the sale of Common
Stock offered hereby.

Nasdaq National Market Symbol........... KITS
- ---------------

(1) Does not include 805,933 shares of Common Stock issuable upon the exercise
of stock options outstanding at March 31, 1996.

4
<PAGE> 8

SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
MARCH 31, 1996
--------------
<S> <C>
BALANCE SHEET DATA
Cash and short-term investments.............................................. $ 10,244
Working capital.............................................................. 14,578
Total assets................................................................. 35,915
Long-term debt, including current maturities................................. 5,127
Shareholders' equity......................................................... 27,090
</TABLE>

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

(1) The Company paid a special 5% stock dividend in fiscal 1992 and special 3%
stock dividends in fiscal 1993 and fiscal 1994. See "Dividend Policy."

(2) Reflects the effect of the conversion of the Company's 7 1/4% Convertible
Subordinated Debentures into shares of Common Stock. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."

5
<PAGE> 9

RISK FACTORS

Prospective investors should carefully consider the factors set forth
below, as well as other information included elsewhere herein or incorporated
herein by reference, prior to purchasing the shares of Common Stock offered
hereby.

NEW PRODUCT DEVELOPMENT AND ACQUISITIONS

The diagnostic test industry is characterized by ongoing technological
developments and changing customer requirements. As a result, the Company's
success and continued growth depend, in part, on its ability in a timely manner
to develop or acquire rights to, and successfully introduce into the
marketplace, enhancements of existing products or new products that incorporate
technological advances, meet customer requirements and respond to products
developed by the Company's competition. There can be no assurance that the
Company will be successful in developing or acquiring such rights to products on
a timely basis or that such products will adequately address the changing needs
of the marketplace. See "Business -- Strategy," "-- Products," "-- Marketing and
Sales" and "-- Research and Development."

INTERNATIONAL OPERATIONS

Approximately 23% of the Company's net sales for fiscal 1995 were
attributable to international sales, primarily in Western Europe. Although the
majority of the Company's international sales have been made in U.S. dollars,
the Company is subject to the risks associated with fluctuations in currency
exchange rates. The Company is also subject to other risks associated with
international operations, including tariff regulations, requirements for export
licenses and medical licensing and approval requirements. See "Business --
Strategy."

CHANGING MARKET CONDITIONS

The healthcare industry is in transition with a number of changes that
affect the market for diagnostic test products. Changes in the healthcare
delivery system have resulted in major consolidation among reference
laboratories and in the formation of multi-hospital alliances, reducing the
number of institutional customers for diagnostic test products. There can be no
assurance that the Company will be able to enter into and/or sustain contractual
or other marketing or distribution arrangements on a satisfactory commercial
basis with these institutional customers. See "Business -- Market Trends."

COMPETITION

The market for the Company's products is characterized by substantial
competition and rapid change. Hundreds of companies in the United States supply
immunodiagnostic tests. These companies range from multinational healthcare
entities, for which immunodiagnostics is one line of business, to small start-up
companies. Many of the Company's competitors have significantly greater
financial, technical, manufacturing and marketing resources than the Company.
See "Business -- Competition."

DEPENDENCE ON KEY DISTRIBUTORS

The Company's sales to two of its distributors were approximately $8.6
million, or approximately 34% of total sales, in fiscal 1995. These distributors
resell the Company's products and other laboratory products to end-user
customers. The loss of either of these distributors could have a material
adverse effect on the Company's sales and results of operations. See
"Business -- Marketing and Sales" and "-- Customers."

GOVERNMENT REGULATION

The Company's products generally require governmental clearance before
marketing in the U.S. and in certain foreign countries. The Company may be
required to submit test data from clinical trials to establish "substantial
equivalence" of its products with previously approved products. If so required,
the Company may commence marketing in the U.S. only when the regulatory agency
issues a written order finding such "substantial equivalence," which may take
longer than the 90-to 120-day period estimated for such review. Any product for
which "substantial equivalence" cannot be established must proceed through the
more lengthy pre-market approval procedures. There is no assurance that the
Company will be able to obtain the

6
<PAGE> 10

necessary clearances or timely clearances to market future products. See
"Business -- Government Regulation."

Third party payors (including state and federal governments) are
increasingly concerned about escalating health care costs and can indirectly
affect the pricing or the relative attractiveness of the Company's products by
regulating the maximum amount of reimbursement they will provide for diagnostic
testing services. If reimbursement amounts for diagnostic testing services are
decreased in the future, such decreases may reduce the amount that will be
reimbursed to hospitals or physicians for such services and consequently could
reduce the price the Company can charge for its products.

In recent years, the federal government has been examining the nation's
health care system from numerous standpoints, including the cost of and access
to health care and health insurance. Proposals impacting the health care system
are constantly under consideration and could be adopted at any time. It is
unclear what effect the enactment of such proposals would have on the Company.

COMMON STOCK OWNERSHIP BY DIRECTORS AND EXECUTIVE OFFICERS

After the Offering, the Company's officers, directors, principal
shareholders and their affiliates will beneficially own approximately 40% of the
Company's outstanding Common Stock, all of which shares are eligible for sale
under Securities and Exchange Commission Rule 144 under the Securities Act of
1933. As a result, these shareholders, if they were to act in concert, would
have the ability to influence significantly most matters requiring approval by
shareholders of the Company, including the election of a majority of the
directors. In addition, the Board of Directors has the authority to issue up to
1,000,000 shares of undesignated preferred stock and to determine the rights,
preferences, privileges and restrictions, including voting rights, of such
shares without any future vote or action by the shareholders. The voting power
of these principal shareholders, officers and directors or the issuance of
preferred stock under certain circumstances could have the effect of delaying or
preventing a change in control of the Company. Ohio corporation law contains
provisions that may discourage takeover bids for the Company that have not been
negotiated with the Board of Directors. Such provisions could limit the price
that investors might be willing to pay in the future for shares of the Common
Stock. In addition, sales of substantial amounts of such shares in the public
market could adversely affect the market price of the Common Stock and the
Company's ability to raise additional capital at a price favorable to the
Company. Agreements with the Selling Shareholder and the Company's other
officers and directors not to offer or otherwise dispose of Common Stock without
the consent of Cleary Gull Reiland & McDevitt Inc. will expire 360 and 90 days,
respectively, after the date of this Prospectus. See "Principal Shareholders and
Selling Shareholder" and "Description of Capital Stock."

7
<PAGE> 11

CAPITALIZATION

The table sets forth the capitalization of the Company at March 31, 1996.
The table should be read in conjunction with the Company's Consolidated
Financial Statements and related notes thereto appearing elsewhere in this
Prospectus or incorporated herein by reference.

<TABLE>
<CAPTION>
MARCH 31, 1996
--------------
(DOLLARS IN
THOUSANDS)
<S> <C>
Long-term debt, including current maturities(1)................................ $ 5,127
--------------
Shareholders' equity:
Preferred stock, without par value; 1,000,000 shares authorized, none
issued.................................................................... --
Common stock, without par value; 50,000,000 shares authorized,
14,257,006 shares outstanding(2).......................................... 2,373
Additional paid-in capital................................................... 20,434
Retained earnings............................................................ 4,500
Foreign currency translation adjustment...................................... (217)
--------------
Total shareholders' equity................................................ 27,090
--------------
Total capitalization................................................. $ 32,217
===========
</TABLE>

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

(1) The Company has an unused $6,000,000 line of credit with a commercial bank.
(2) As of March 31, 1996, options to acquire 805,933 shares of Common Stock were
outstanding.

8
<PAGE> 12

DIVIDEND POLICY

The Company follows a cash dividend policy consisting of regular quarterly
and special year-end dividends. The Board has set a targeted payout ratio of 45%
to 55% of annual net earnings. Approximately 30% to 35% of forecasted annual net
earnings is intended to be paid in regular quarterly dividends with any balance
being paid as a year-end special dividend. All or a portion of the year-end
dividend may be paid in stock. The declaration and amount of dividends are
determined by the Board of Directors in its discretion based upon its evaluation
of earnings, cash flow requirements and future business developments. There is
no assurance that dividends will continue.

On January 25, 1996, the Company increased its quarterly dividend rate to
$0.035 per share. The second of such dividends was paid on May 3, 1996 to
shareholders of record on April 25, 1996.

The Company paid a $0.02 per share cash dividend in the first quarter of
fiscal 1995 and paid $0.0267 per share cash dividends for each other quarter of
fiscal 1995. In addition, the Company declared and paid a three-for-two stock
split payable on October 2, 1995. On December 1, 1995, the Company paid a
special fiscal 1995 year-end dividend of $0.025 per share.

The Company paid a $0.016 per share cash dividend in the first quarter of
fiscal 1994 and $0.02 per share cash dividends for each other quarter of fiscal
1994. In addition, the Company declared and paid a special fiscal 1994 year-end
dividend in the form of a 3% stock dividend effective December 1, 1993.

9
<PAGE> 13

PRICE RANGE OF COMMON STOCK

The Common Stock is traded on the Nasdaq National Market under the symbol
"KITS." The following table sets forth, for the fiscal periods indicated, the
high and low closing sales prices for the Common Stock as reported on the Nasdaq
National Market:

<TABLE>
<CAPTION>
HIGH LOW
---- ----
<S> <C> <C>
FISCAL YEAR ENDED SEPTEMBER 30, 1994
First Quarter.............................................................. $6 1/2 $5 1/4
Second Quarter............................................................. 7 1/8 5 1/2
Third Quarter.............................................................. 6 1/8 5
Fourth Quarter............................................................. 5 1/2 4 3/8
FISCAL YEAR ENDED SEPTEMBER 30, 1995
First Quarter.............................................................. 5 4 3/8
Second Quarter............................................................. 6 1/2 4 5/8
Third Quarter.............................................................. 7 3/8 5 7/8
Fourth Quarter............................................................. 9 1/2 6
FISCAL YEAR ENDED SEPTEMBER 30, 1996
First Quarter.............................................................. 12 1/4 7 3/4
Second Quarter............................................................. 11 3/8 9 1/8
Third Quarter (through May 14)............................................. 10 7/8 8 7/8
</TABLE>

On May 14, 1996, the last reported sales price for the Common Stock on the
Nasdaq National Market was $9 13/16 per share. As of March 31, 1996, there were
approximately 825 holders of record of the Common Stock, which the Company
believes represents a total of approximately 6,000 beneficial shareholders.

10
<PAGE> 14

SELECTED CONSOLIDATED FINANCIAL DATA

The following table sets forth the Company's selected historical
consolidated financial data for the fiscal years 1991 through 1995 and for the
six months ended March 31, 1995 and 1996. The selected consolidated financial
data for the five fiscal years in the period ended September 30, 1995 are
derived from the financial statements of the Company which have been audited by
Arthur Andersen LLP. The selected financial data for the six months ended March
31, 1995 and 1996 are derived from the Company's unaudited quarterly financial
statements. In the opinion of management, the six month financial data reflect
all adjustments necessary for a fair presentation of such data. The results for
the first six months of fiscal 1996 are not necessarily indicative of the
results to be expected for the full year. The information below should be read
in conjunction with the Consolidated Financial Statements and notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" appearing elsewhere in this Prospectus.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED SEPTEMBER 30, MARCH 31,
----------------------------------------------- -----------------
1991 1992 1993 1994 1995 1995 1996
------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS DATA
Net sales..................... $11,085 $14,003 $16,171 $21,877 $25,110 $11,574 $12,776
Cost of sales................. 3,973 4,582 5,098 7,518 8,009 3,822 3,999
------- ------- ------- ------- ------- ------- -------
Gross profit.......... 7,112 9,421 11,073 14,359 17,101 7,752 8,777
------- ------- ------- ------- ------- ------- -------
Research and development...... 1,102 1,157 1,165 1,433 1,432 713 697
Selling and marketing......... 2,564 3,166 3,716 4,747 5,229 2,421 2,815
General and administration.... 2,090 2,482 2,667 3,365 3,864 1,947 1,996
------- ------- ------- ------- ------- ------- -------
Total operating
expenses............ 5,756 6,805 7,548 9,545 10,525 5,081 5,508
------- ------- ------- ------- ------- ------- -------
Operating income...... 1,356 2,616 3,525 4,814 6,576 2,671 3,269
Net interest (expense)
income..................... 135 (39) (122) (839) (699) (366) 7
Other (expense) income........ 27 28 (302) 8 83 71 69
------- ------- ------- ------- ------- ------- -------
Earnings before income
taxes............... 1,518 2,605 3,101 3,983 5,960 2,376 3,345
Income taxes.................. 559 952 1,212 1,542 2,436 1,001 1,361
------- ------- ------- ------- ------- ------- -------
Net earnings.......... $ 959 $ 1,653 $ 1,889 $ 2,441 $ 3,524 $ 1,375 $ 1,984
======= ======= ======= ======= ======= ======= =======
Primary earnings per common
share...................... $ 0.08 $ 0.13 $ 0.15 $ 0.20 $ 0.29 $ 0.11 $ 0.14
Dividends paid per common
share
Regular.................... 0.02 0.04 0.06 0.08 0.10 0.05 0.06
Special.................... 0.02 0.01 -- -- -- -- 0.03
Primary weighted average
number of common shares
outstanding................ 12,129 12,222 12,264 12,277 12,355 12,300 14,072
</TABLE>

<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
----------------------------------------------- -----------------
1991 1992 1993 1994 1995 1995 1996
------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Cash and short-term
investments................ $ 1,590 $ 1,810 $ 9,476 $ 8,832 $ 8,919 $ 8,161 $10,244
Working capital............... 4,046 5,164 13,759 13,000 15,826 14,074 14,578
Total assets.................. 10,997 14,099 26,247 32,329 34,569 32,751 35,915
Long-term debt, including
current maturities......... 99 1,808 12,812 15,051 12,881 15,855 5,127
Shareholders' equity.......... 9,519 10,676 11,617 13,232 18,878 13,905 27,090
</TABLE>

11
<PAGE> 15

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with
the Company's Consolidated Financial Statements and the Notes thereto appearing
elsewhere in this Prospectus or incorporated herein by reference.

GENERAL

Since its founding in 1976, the Company has evolved into a fully integrated
medical diagnostic company with a diverse product line, an established
distribution network and a highly focused product development effort. Since
1991, the Company has realized substantial growth in net sales and net earnings,
primarily as the result of developing, licensing, acquiring or entering into
supply agreements for new products, improving these products, expanding
international sales and realizing operating efficiencies.

The Company utilizes its core technologies to develop and offer products
that aid in the diagnosis of various disease states. The Company's current
product line consists of nearly 100 medical diagnostic products which test for
specific diseases within five major disease states. The product lines which have
the largest impact on Company sales are used for the collection, transportation
and concentration of parasites, and products used to diagnose C. difficile and
certain viral and respiratory diseases. See "Business-Products."

On October 10, 1995, the Company called for the redemption of the
outstanding balance of its 7 1/4% Convertible Subordinated Debentures due in
2001. At that time, approximately $7,400,000 of the principal amount of the
Debentures was outstanding. Of the originally issued $11,500,000 principal
amount, $113,000 was redeemed for cash on November 30, 1995. The balance was
converted into Common Stock at $5.97 per share.

RESULTS OF OPERATIONS

The following table sets forth certain statement of operations data as a
percentage of net sales for the periods indicated.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED SEPTEMBER 30, MARCH 31,
------------------------- -----------------
1993 1994 1995 1995 1996
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net sales........................................ 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales.................................... 31.5 34.4 31.9 33.0 31.3
----- ----- ----- ----- -----
Gross profit........................... 68.5 65.6 68.1 67.0 68.7
----- ----- ----- ----- -----
Research and development......................... 7.2 6.5 5.7 6.2 5.5
Selling and marketing............................ 23.0 21.7 20.8 20.9 22.0
General and administrative....................... 16.5 15.4 15.4 16.8 15.6
----- ----- ----- ----- -----
Total operating expenses............... 46.7 43.6 41.9 43.9 43.1
----- ----- ----- ----- -----
Operating income....................... 21.8 22.0 26.2 23.1 25.6
Net interest (expense) income.................... (0.8) (3.8) (2.8) (3.2) 0.1
Other expense (income)........................... (1.8) -- 0.3 0.6 0.5
----- ----- ----- ----- -----
Earnings before income taxes........... 19.2 18.2 23.7 20.5 26.2
Income taxes..................................... 7.5 7.0 9.7 8.6 10.7
----- ----- ----- ----- -----
Net earnings........................... 11.7% 11.2% 14.0% 11.9% 15.5%
===== ===== ===== ===== =====
</TABLE>

Comparison of Six Months ended March 31, 1996 and 1995

Net sales increased $1,202,000, or 10% over the comparable fiscal 1995
period, to $12,776,000 for the six months ended March 31, 1996. These increases
are attributable primarily to strong unit volume growth in the Premier, Para-Pak
and ImmunoCard lines. In the Premier and ImmunoCard formats, this growth was
attributable to those products used for identification of Toxin A, H. pylori,
EHEC, Mycoplasma and Rotavirus. In Para-Pak, the growth was attributable to the
core parasitology transport format plus Para-Pak

12
<PAGE> 16

Ultra, introduced last fall. In addition, the Inova line of products, first
licensed for sale in Italy in fiscal 1995, added over $170,000 of sales volume
for the six months results.

The increase in sales of $1,202,000 was comprised of volume of $957,000, or
8%, pricing of $186,000, or 2%, and currency of $59,000.

European sales increased from $2,469,000 to $2,970,000, or 20%, for the
six-month period principally from volume growth in the Premier, ImmunoCard and
Para-Pak formats plus the new volume from the Inova line. This increase is
comprised of volume of $389,000, or 16%, price of $53,000, or 2%, and currency
of $59,000, or 2%.

Gross profit increased $1,025,000, or 13%, in the six months ended March
31, 1996, to $8,777,000, from $7,752,000 in the prior year period. As a
percentage of net sales, gross profit improved to 68.7% for the six-month period
from 67.0% in the prior year period. Product mix, driven by growth in excess of
20% for Premier and Para-Pak and 15% for ImmunoCard for the second fiscal
quarter coupled with the positive effect of volume, price and currency and
favorable inventory variances were the basis for this improvement in
profitability.

Total operating expenses increased $427,000, or 8%, to $5,508,000 for the
six months ended March 31, 1996, compared to $5,081,000 in the comparable prior
year period. Total operating expenses were 43.1% of net sales for the six
months, a decrease from 43.9% in the prior year period.

Research and development expenses decreased 2% to $697,000 for the
six-month period compared to $713,000 in the prior year period. Increases in
personnel costs and licensing fees were largely offset by reductions in outside
contract research and casual labor, used more heavily last year, plus reductions
in indirect expenses such as repairs, laboratory supplies and travel. Clinical
trial expense did not vary materially from the prior year periods.

Selling and marketing expenses increased $394,000, or 16%, to $2,815,000
for the six-month period from $2,421,000 in the prior year period. The increase
is attributable to personnel costs in the U.S. associated with the addition of a
third sales region and, in Europe, from added personnel in the sales support and
product management functions. Other increases included higher travel,
promotion/advertising associated with new products (Premier Cryptosporidium,
Premier EHEC, Premier HSV Plus, Para-Pak and the Inova line) plus depreciation
expense associated with the new U.S. headquarters facility.

General and administrative expenses increased approximately 2% to
$1,996,000 for the six-month period from $1,947,000 in the prior year period.
Increased personnel costs, primarily in Europe and a one-time state filing fee
associated with the increase in the number of authorized shares of Common Stock
were the primary reasons for the increase. The overall increase was offset, in
part, by a provision for doubtful accounts recorded in the second fiscal quarter
of last year.

Operating income as a result of the above increased $599,000, or 22%, to
$3,269,000 for the six months from $2,671,000 in the prior year period. As a
percent of sales, operating income improved to 25.6% from 23.1% in the prior
fiscal period.

Other income (net) increased $370,000 for the six month period ended March
31, 1996. Interest income (net) improved $372,000 for the six month period
primarily from the reduction in interest expense as a result of the conversion
of the Convertible Subordinated Debentures as of November 30, 1995.

Comparison of Fiscal Years ended September 30, 1995 and 1994

Net sales increased $3,233,000, or 15%, to $25,110,000 in fiscal 1995 from
$21,877,000 in fiscal 1994. This increase was primarily from unit volume growth
in the Premier, ImmunoCard, Merifluor and mononucleosis lines plus OEM sales of
Epstein-Barr Virus. The major growth areas are in those tests used for
identification of infectious diseases such as C. difficile, Toxin A,
mononucleosis, Mycoplasma and Herpes simplex virus. Of the increase of
$3,233,000, $1,112,000, or 34%, was attributable to the full year sales of the
infectious disease product line acquired in January 1994 from an affiliate of
Ortho Diagnostics Systems, Inc. (ODSI).

13
<PAGE> 17

The increase in sales of $3,233,000 was more than accounted for by volume
of $3,271,000, or 15%, offset marginally by price decreases of $38,000 with no
impact from currency translation. European sales increased $1,175,000, or 30%,
to $5,102,000 from $3,927,000 as a result of continued strong unit growth in the
Premier line, up 45% (Toxin A, H. pylori and EHEC -- introduced during the
second quarter); the mononucleosis line, up 21%; lmmunoCard, which almost
tripled largely from new products (Mycoplasma, mononucleosis, Rotavirus and H.
pylori); and Merifluor, up 81%. The increase in net sales was accounted for by
volume, $951,000, or 24%, and price, $223,000, or 6%. The effect of currency
translations was negligible.

Gross profit increased $2,742,000, or 19%, to $17,101,000 for fiscal 1995
from $14,359,000 in fiscal 1994. As a percentage of sales, gross profit
increased to 68.1% in fiscal 1995 from 65.6% in fiscal 1994. This improvement
was due primarily to the transfer and in-house manufacture of the product lines
acquired from ODSI in June 1993 and January 1994, which prior to October 1994
were purchased under a supply agreement with ODSI. Fiscal 1994 costs also
included integration of the ODSI infectious disease product line into Meridian's
manufacturing facilities in Cincinnati. Other factors contributing to the
improvement included continued favorable efficiency and volume variances from
the sales increase, the new warehouse facilities, and the reduction in factory
overhead including decreased rent expense from the new on-site warehouse, lower
insurance and employee benefit expense, plus a reduction in travel.

Operating expenses increased $980,000, or 10%, to $10,525,000 for fiscal
1995 from $9,545,000 in fiscal 1994, but declined as a percentage of sales from
43.6% in fiscal 1994 to 41.9% in fiscal 1995. Research and development expenses
were marginally lower than the prior year, and decreased from $1,433,000 in
fiscal 1994 to $1,432,000 in fiscal 1995. Selling and marketing expenses
increased $481,000, or 10%, versus fiscal 1994, mainly from higher personnel
costs in the U.S. and Europe, higher convention, meeting, sample and promotion
expenses associated with new product introductions and the full year impact of
the infectious disease product line acquired from ODSI. General and
administrative expenses increased $499,000, or 15%, due to increased personnel
costs in the U.S. and Europe stemming from the higher level of business, an
increase in depreciation from the expanded office facilities plus the full year
impact of depreciation from assets acquired from ODSI and a general increase in
the provision for doubtful accounts to reflect added coverage given the
increasing sales level.

Operating income increased $1,762,000, or 37%, to $6,576,000 in fiscal 1995
from $4,814,000 in fiscal 1994 primarily due to the factors described above. As
a percent of sales, operating income improved to 26.2% in fiscal 1995 compared
to 22.0% in fiscal 1994.

Other expenses decreased $214,000, or 26%, to $616,000 compared to $831,000
in fiscal 1994. This decrease was more than accounted for from higher investment
income stemming from an improvement in interest rates compared to fiscal 1994
plus commission income related to the sale of certain tissue culture products
acquired from ODSI and sold to VAI Diagnostics, Inc. in March 1994. Gains/losses
in foreign exchange were not material in either fiscal year. The cumulative
foreign currency translation adjustment changed by $32,000 during the year as a
result of strengthening of the U.S. dollar against the lira during the period.

The Company's effective tax rate increased for the year as a result of a
higher proportion of income from the Company's European subsidiary in Italy,
which is taxed at a significantly higher rate than the U.S. domestic rate. The
effective tax rate was 40.9% in fiscal 1995 compared to 38.7% for the prior
year.

Comparison of Fiscal Years ended September 30, 1994 and 1993

Net sales increased $5,706,000, or 35%, to $21,877,000 in fiscal 1994 from
$16,171,000 in fiscal 1993. This increase resulted primarily from higher unit
volumes resulting from the June 1993 acquisition of the infectious mononucleosis
product line and the January 1994 acquisition of the infectious disease product
line from ODSI, plus strong unit growth in the lmmunoCard and Merifluor product
lines.

The increase in sales of $5,706,000 was comprised of volume of $5,139,000,
or 32%, price of $899,000, or 5%, offset by currency of ($332,000) or (2%).
European sales increased $1,447,000, or 58%, to $3,927,000 from $2,480,000
largely due to MONOSPOT and MONOLERT products acquired from ODSI in June 1993,
plus unit growth in the Para-Pak, Merifluor and Premier product lines. This
increase in net sales was attributed to volume of $1,114,000, or 45%, price of
$665,000, or 27%, offset by currency of ($332,000), or

14
<PAGE> 18

(14%). The increase from pricing stemmed from the expiration in fiscal 1994 of
contract supply prices in effect at the time of the mononucleosis product line
acquisition in fiscal 1993.

Gross profit increased $3,286,000, or 30%, to $14,359,000 for the year,
from $11,073,000 in fiscal 1993. As a percentage of sales, gross profit declined
to 65.6% in fiscal 1994 from 68.5% in fiscal 1993. This decline is due to
several factors including the impact of the lower margin ODSI product line
acquisitions -- in part provided under a supply agreement -- which ended June
30, 1994, except for MONOSPOT which ended in October 1995. Other factors
impacting gross profit were increased manufacturing costs, higher scrap and
obsolescence costs stemming from product development including validation
batches, minor product discontinuations and additional costs associated with
packaging standardization. Also impacting manufacturing cost was the transfer
and integration of the ODSI infectious disease product line into Meridian's
facilities in Cincinnati.

Operating expenses increased $1,997,000, or 26%, to $9,545,000 for fiscal
1994 from $7,548,000 in fiscal 1993, but declined as a percentage of sales to
43.6% in fiscal 1994 from 46.7% in fiscal 1993. Research and development expense
increased $268,000, or 23%, over fiscal 1993 primarily from higher personnel
costs, increased clinical trial activity and laboratory supplies associated with
new product development and depreciation expense stemming from equipment
acquired during the year from ODSI. Selling and marketing expenses increased
$1,031,000, or 28%, primarily as a result of the amortization of the purchase
price of the ODSI product line acquisitions, higher personnel costs in the U.S.
and Europe from the addition of sales representatives and higher promotional
expenses in the U.S. associated with new products and, in Europe, from the
expansion of the direct sales and distribution to customers in Italy. General
and administrative expenses increased $698,000, or 26%, due to amortization of
the ODSI acquisitions, increased personnel costs in the U.S. and Europe to
support the continued growth in the business, higher depreciation expense
related to equipment acquired from ODSI plus an increase in the provision for
potential doubtful accounts.

Operating income as a result of the above increased $1,289,000, or 37%, to
$4,814,000 in fiscal 1994 from $3,525,000 in fiscal 1993.

Other expense increased in fiscal 1994 by $406,000, which was more than
accounted for by higher interest expense and amortization of debt expenses
attributed to the $11,500,000 of 7 1/4% Convertible Subordinated Debentures
issued in September 1993. These increases in debenture-related expenses were
offset by the one time write-off of $405,000 in fiscal 1993 of expenses
associated with the Company's planned offering of Common Stock, which was
withdrawn on July 29, 1993. The after tax impact on earnings of this withdrawal
cost was $255,000 or $0.02 per share in 1993, as adjusted.

The Company's effective tax rate declined marginally for the year as a
result of a higher proportion of the income in the U.S. which is taxed at a
significantly lower rate than in Italy. The effective tax rate was 38.7% in
fiscal 1994 compared to 39.1% in fiscal 1993. Effective October 1, 1993 the
Company adopted Financial Accounting Standards Statement No. 109, "Accounting
for Income Taxes." Prior period financial statements have not been restated to
reflect the new accounting method since the cumulative effect of this change as
well as the effect of this new standard on income tax expense for Fiscal 1994
was not material.

QUARTERLY RESULTS OF OPERATIONS

The following table presents selected unaudited consolidated quarterly
results of operations of the Company for fiscal 1994, fiscal 1995 and the first
two quarters of fiscal 1996. Historically, the fourth quarter of the fiscal year
has been the strongest. The results of operations for any quarter are not
necessarily indicative of results for any future period. Quarterly earnings per
share do not necessarily total to year-end amounts due to rounding.

<TABLE>
<CAPTION>
FISCAL 1994 FISCAL 1995 FISCAL 1996
-------------------------------------- -------------------------------------- -----------------
DEC. 31 MAR. 31 JUNE 30 SEPT. 30 DEC. 31 MAR. 31 JUNE 30 SEPT. 30 DEC. 31 MAR. 31
------- -------- -------- --------- ------- -------- -------- --------- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales.............. $3,625 $5,891 $5,717 $ 6,644 $5,106 $6,469 $6,782 $ 6,753 $5,522 $7,255
Net earnings........... 200 610 603 1,028 430 945 985 1,164 629 1,355
Primary earnings per
common share......... .01 .05 .05 .09 .04 .08 .08 .09 .05 .10
</TABLE>

15
<PAGE> 19

LIQUIDITY AND CAPITAL RESOURCES

At March 31, 1996, the Company had cash and short-term investments of
$10,244,000 and working capital of $14,578,000. Trade accounts receivable
increased $51,000 or 1% while inventories increased $298,000 or 10% compared to
September 30, 1995. Receivables decreased in the U.S. by $395,000, primarily
from special extended payment terms at September 30, 1995 which have been
remitted. Receivables in Europe increased $446,000 in line with the increase in
sales of 20% for this six month period versus last year. The change in
inventories reflects higher stock levels associated with projected sales.

On October 10, 1995, the Company called for the redemption of the
outstanding balance of its 7 1/4% Convertible Subordinated Debentures due in
2001. At that time approximately $7,400,000 of the principal amount of the
Debentures was outstanding. Of the originally issued $11,500,000 principal
amount, $113,000 was redeemed for cash on November 30, 1995. The balance was
converted into Common Stock at $5.97 per share.

Construction of 19,000 square feet of additional and renovated
manufacturing and administrative space, which began in August 1994, was
completed in September 1995 at a total cost of $1,400,000. This construction was
funded by a construction loan which was repaid on April 16, 1996 and which
reduced long-term debt by $2,418,000. Total capital expenditures for fiscal
1995, including the above mentioned project, were $2,500,000. The Company
commenced renovation of the former administrative offices and laboratory
manufacturing space in October 1995 at an estimated cost of $1,200,000 which
will complete the Company's expansion project begun in late 1993. Completion of
this phase is expected to be June 1996. The Company's anticipated total capital
expenditures for fiscal 1996 are $1,900,000.

Cash flow from operations is expected to continue to fund working capital
requirements for the foreseeable future. Currently, the Company has available a
$6,000,000 line of credit with a commercial bank.

RECENTLY ISSUED ACCOUNTING STANDARDS

In March 1995, the Financial Accounting Standards Board (FASB) issued
Statement No. 121 (Statement 121) on accounting for the impairment of long-lived
assets to be held and used. Statement 121 also establishes accounting standards
for long-lived assets that are to be disposed. Statement 121 is required to be
applied prospectively for assets to be held and used. The initial application of
Statement 121 to assets held for disposal is required to be reported as the
cumulative effect of a change in accounting principle. The Company is required
to adopt Statement 121 no later than fiscal 1997. The Company has not yet
determined when it will adopt Statement 121 and the impact, if any, that the
adoption will have on its financial position or results of operations.

In October 1995, the FASB issued Statement No. 123 (Statement 123)
establishing financial accounting and reporting standards for stock-based
employee compensation plans. Statement 123 encourages the use of the fair value
based method to measure compensation cost for stock-based employee compensation
plans, however, it also continues to allow the intrinsic value based method of
accounting as prescribed by APB Opinion NO. 25, which is currently used by the
Company. If the intrinsic value based method continues to be used, Statement 123
requires pro forma disclosures of net income and earnings per share, as if the
fair value based method of accounting had been applied. The fair value based
method requires that compensation cost be measured at the grant date based upon
the value of the award and recognized over the service period, which is normally
the vesting period. The Company is required to adopt Statement 123 no later than
fiscal 1997. The Company has not yet determined when it will adopt Statement 123
or the valuation method it will use.

16
<PAGE> 20

BUSINESS

GENERAL

The Company develops, manufactures and markets a diverse line of disposable
diagnostic test kits and related diagnostic products used for the rapid
diagnosis of infectious diseases. To meet market demands, the Company's products
provide accuracy, simplicity and speed, leading to opportunities for
improvements in diagnosis and reductions in health care costs. All of the
Company's products are used in procedures performed in vitro (outside the body)
and require little or no special instrumentation or equipment.

The Company's product development strategy is to combine existing
technologies with new product designs both through internal product development
and through product acquisitions, licensing or supply arrangements. Internal
product development activities focus on the development or enhancement of
immunodiagnostic technologies and applications to simplify, accelerate or
increase the accuracy of diagnoses of certain infectious diseases. Since 1991,
the Company has also acquired or obtained rights to distribute a number of
products and technologies.

The Company utilizes its resources to serve each of the strategic domestic
and international medical markets it has targeted: hospital networks and
clinical and hospital laboratories; alternate site markets, including
physicians' offices, outpatient clinics, nursing homes and health maintenance
organizations (HMOs); and new markets, including veterinary laboratories, water
treatment facilities and consumer self-testing. The Company currently markets
approximately 100 products representing five major disease states through a
direct sales force, in the U.S. and Italy, supplemented by a network of national
and international distributors. International sales in approximately 50
countries were approximately 23% of total fiscal 1995 sales, with approximately
88% of international sales originating in Western Europe. The majority of the
remaining international sales were in Canada, Mexico and the Pacific Rim.

IMMUNODIAGNOSTICS OVERVIEW

In vitro diagnostic testing is the process of analyzing constituents of
blood, urine, stool, other bodily fluids or tissue for the presence of specific
infectious diseases. Immunodiagnostic testing, which is the leading method of in
vitro testing for infectious diseases, tests for antigens and antibodies. When
an infectious disease caused by pathogens, such as bacteria, viruses and fungi,
and their related antigens is present, the body responds by producing an
antibody. The antibody binds specifically with the antigen in a lock-and-key
fashion and initiates a biochemical reaction to attempt to neutralize and
ultimately to eliminate the antigen. The ability of an antibody to bind with a
specific antigen provides the basis for immunodiagnostic testing.

Immunodiagnostic testing detects the presence of specific infectious
diseases through the "visualization," such as color changes or the formation of
visible aggregates, of the biochemical reactions caused by the antigen/antibody.
Most immunodiagnostic tests utilize one of two alternative methods to determine
the presence of a specific disease in a patient specimen. In one method, the
test employs the antibody to detect directly the presence of an antigen. When
the antigen is difficult to detect, a test employs the antigen to detect the
presence of an antibody.

MARKET TRENDS

The global market for infectious disease tests continues to expand as new
disease states are identified, new therapies become available and worldwide
standards of living and access to healthcare improve. More importantly, within
this market there is a continuing shift from conventional testing, which
requires highly trained personnel and lengthy turnaround times for test results,
to more technologically advanced testing which can be performed and completed in
minutes or hours by less highly trained personnel.

Technological advances permitting accurate testing to occur outside the
traditional hospital or laboratory setting have also affected the diagnostic
products market. These technological developments have contributed to the
emergence of alternate site markets, such as physicians' offices, outpatient
clinics, nursing homes and HMOs, as important diagnostic market segments. These
technological advances should also contribute to the development of new markets
for the Company's products, including veterinary laboratories, water treatment
facilities and consumer self-testing in the over-the-counter market.

17
<PAGE> 21

The increasing pressures to contain total healthcare costs have accelerated
the increased use of diagnostic testing and the market shift to alternate sites.
With rapid and accurate diagnoses of infectious diseases, physicians can
pinpoint appropriate therapies quickly, leading to faster recovery, shorter
hospital stays and less expense. In addition, these pressures have led to a
major consolidation among reference laboratories and the formation of
multi-hospital alliances that has reduced the number of institutional customers
for diagnostic products and resulted in changes in buying practices.
Specifically, multi-year exclusive or primary source marketing or distribution
contracts with institutional customers have become more common, replacing less
formal distribution arrangements of shorter duration and involving lower product
volumes.

STRATEGY

The Company continues to execute its long-term strategy consisting of the
following elements:

- Developing New Product Applications from Core Technologies and
Formats. The Company employs a market-driven product development strategy
to adapt or enhance diagnostic testing technologies and product formats in
response to newly identified disease states and to customer demands for
improvements in product accuracy, simplicity, speed and cost-efficiency.
The Company accomplishes this by monitoring existing markets, interacting
closely with customers and recognizing emerging diseases and therapies.
Since 1991, the Company has developed and introduced 19 internally
developed products.

- Acquiring and Licensing Products and Technology. The Company intends to
acquire, license or enter into supply arrangements to obtain innovative
diagnostic testing technologies, product formats and products that
complement its existing operations and address the needs of the Company's
existing and targeted customer base. Management regularly identifies and
reviews opportunities through its broad industry contacts and recognized
position in the industry. Since 1991, the Company has acquired, licensed
or entered into supply arrangements relating to 19 products. In fiscal
1996, the Company entered into a supply arrangement to market an
additional 64 products through Baxter Healthcare Corporation.

- Increasing International Sales. The Company has targeted increasing
international sales as an attractive source of growth. The Company has
made recent investments to develop a major presence in Italy through its
Italian subsidiary Meridian Diagnostics Europe srl (MDE), added management
to expand its ability to serve Latin American markets and strengthened its
distribution channels into the European market. Over the last three years,
the Company's international sales have almost tripled from $2.1 million in
fiscal 1992 to $5.8 million in fiscal 1995 and represented 23% of total
consolidated sales in fiscal 1995.

- Developing Partnerships with Consolidated Healthcare Organizations. The
Company seeks to develop strategic partnerships with the major reference
laboratories and other consolidated healthcare providers. The Company
believes it is well positioned to develop partnerships with key customers
because it is an integrated manufacturer, has a broad product line, offers
tests in multiple formats, and is willing to invest resources in building
relationships and facilitating open communications with those customers.
In January 1996, the Company signed a three-year exclusive agreement with
the Columbia/HCA Healthcare Corporation, a hospital alliance of
approximately 350 hospitals, for the Company to provide all parasitology
transport products and specific infectious disease diagnostic products. In
April 1996, the Company signed a three-year, primary source agreement with
Laboratory Corporation of America, consisting of over 35 laboratories, for
the supply of certain products for parasitology, virology and other
infectious diseases.

- Entering New Markets. The Company continues to monitor and identify the
emergence of new immunodiagnostic testing opportunities arising from the
discovery of new pathogens or new linkages between existing pathogens and
new diseases. In April 1995, the Company introduced the first
immunodiagnostic test for toxigenic E. coli, a bacteria found in
inadequately cooked meats. The Company plans to apply for approvals to
test both animals (United States Department of Agriculture (USDA)) and
food products (Association of Analytical Chemists (AOAC)) that may contain
this highly toxic organism. In July 1994, the Company agreed to provide
its Hydrofluor product, the first product that tests for water-borne
parasitic pathogens, specifically Giardia and Cryptosporidium, for

18
<PAGE> 22

distribution through an independent supplier to water treatment
facilities. The Company has entered into an agreement with Johnson &
Johnson to market the Company's rapid diagnostic test for urinary tract
infections to the consumer market, subject to pre-market approval by the
FDA, the timing of which cannot be predicted.

- Accessing Alternate Site Markets for Diagnostic Testing. The Company
seeks strong licensing/ distribution partners having sales and marketing
strengths to enable it to more effectively promote the Company's products
into alternate site markets. The Company believes that its products are
readily adaptable for use in alternate site markets. In August 1995, the
Company entered into an exclusive licensing agreement with a third party
which through its 90 representatives will distribute the Company's urinary
tract infection product to the physician office market. The Company
continues to evaluate the suitability of certain of its other products for
the consumer market.

PRODUCTS

The Company has expertise in the development and manufacture of products
based on multiple core diagnostic technologies, each of which enables the
visualization and identification of antigen/antibody reactions for specific
pathogens. As a result, the Company is able to develop and manufacture
diagnostic tests in a variety of formats that satisfy customer needs and
preferences, whether in a hospital, commercial or reference laboratory or
alternate site location. These technologies include enzyme immunoassay,
immunofluorescence, particle agglutination, membrane filtration/concentration,
immunodiffusion, complement fixation and chemical stains.

Enzyme Immunoassay (EIA). Products incorporating the EIA technology
achieve extremely high levels of accuracy in detecting disease-related antigens
or antibodies through the use of special color-based enzyme-substrate reactions.
The Company utilizes this technology in its multiple test format -- Premier --
for large volume users, and in its single test formats -- ImmunoCard and
MONOLERT -- for single physician users.

Immunofluorescence. When the microscopic visualization of an
antigen-antibody reaction is necessary or desired, immunofluorescence technology
is frequently utilized. Fluorescing immunochemicals, in the presence of the
target antigen or antibody, can be viewed via a special microscope. The Company
utilizes this technology in its Merifluor products.

Particle Agglutination. This technology utilizes microparticles (e.g.,
latex, red blood cells) coated with specific antigens or antibodies that form
visible aggregates in the presence of a specimen containing the complementary
antigen or antibody. This technology is rapid and economical and is used in the
Company's Meritec, MeriStar and MONOSPOT products.

Membrane Filtration/Concentration. The Company utilizes this technology to
detect infection-causing bacteria present in human urine. These bacteria are
concentrated on a unique filter membrane for detection via the addition of a
special dye solution. This technology is utilized in the Company's proprietary
rapid, single-unit FiltraCheck-UTI test format.

Other Technologies. The Company utilizes other technologies that include
immunodiffusion, complement fixation and chemical stains. The Company also
manufactures and markets specimen collection, transportation, preservation and
concentration products, such as Para-Pak and Macro-Con.

19
<PAGE> 23

The Company's product line consists of nearly 100 medical diagnostic
products representing five major disease states. Currently, the most important
product lines from the perspective of sales are Para-Pak and related products
and products to diagnose C. difficile, viral diseases and respiratory diseases.
The Company's products generally range in list price from $1 per test to $13 per
test. A discussion of the Company's key products and their competitive advantage
is reflected in the table below:
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
INFECTIOUS DISEASE CATEGORY KEY PRODUCT(S) PRODUCT APPLICATION
------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PARASITIC DISEASES
-- Giardiasis Para-Pak, Premier, Meritec Products for the diagnosis and collection,
-- Cryptosporidiosis Para-Pak Ultra preservation, transportation and
-- Amebiasis Macro-Con Ultra concentration of parasites.
- ------------------------------------------------------------------------------------------------------------------
GASTROINTESTINAL DISEASES
-- Stomach Ulcers (H. pylori) Premier, ImmunoCard U.S. patients make 20 million annual
visits to their physicians for gastric
distress. The H. pylori bacteria has been
associated with more than 90% of duodenal
ulcers and may be related to cancer of the
stomach.
-- Toxigenic E. coli Premier E. coli is a potentially lethal bacteria
that infects undercooked food and can
cause kidney failure.
-- Antibiotic-associated Diarrhea Premier, ImmunoCard, Meritec Toxin producing strains of C. difficile
(C. difficile) can cause PMC (pseudomembranous colitis)
that results in rapid colon degeneration.
-- Pediatric Diarrhea (Rotavirus) ImmunoCard, Meritec This viral disease, which causes rapid
dehydration, is transmitted rapidly
through pediatric populations in
hospitals, schools and daycare settings.
- ------------------------------------------------------------------------------------------------------------------
RESPIRATORY DISEASES
-- Pneumonia (Mycoplasma ImmunoCard, MeriStar Pneumonia is the fifth leading cause of
pneumoniae) death worldwide, 20% of which is caused by
Mycoplasma pneumoniae
-- Valley Fever (Coccidioides Premier, Meritec Fungal pathogens can cause flu-like
immitis) illness and/or severe pneumonia, that are
life-threatening in AIDS and other
immuno-compromised patients.
- ------------------------------------------------------------------------------------------------------------------
UROGENITAL DISEASE
-- Urinary Tract Infection FiltraCheck-UTI In the U.S., 65 million cultures are
performed yearly to detect potential
urinary tract infection.
-- Chlamydia Premier, Merifluor Chlamydia is the leading
sexually-transmitted disease.
- ------------------------------------------------------------------------------------------------------------------
VIRAL DISEASES
-- Infectious Mononucleosis ImmunoCard, MONOLERT, Infectious mononucleosis, a viral disease
MONOSPOT common among young adolescents, is
transmitted easily from person-to-person.
-- Herpes simplex Virus (HSVI and Premier Oral Herpes infections affect up to 80% of
HSVII) the population. Genital Herpes can be
life-threatening to newborns.
-- Cytomegalovirus Merifluor Cytomegalovirus infections are potentially
deadly in transplant procedures and among
immuno-compromised blood recipients.
- ------------------------------------------------------------------------------------------------------------------
</TABLE>

20
<PAGE> 24

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

<TABLE>
<CAPTION>
THE COMPANY'S COMPETITIVE ADVANTAGE MARKET
----------------------------------------------------------------------------------------------------
<S> <C>
Leading supplier of parasitology diagnostics. In October 1995, - Hospital Laboratories
introduced two new products that resulted in easier processing, - Reference Laboratories
safer handling and reduced processing time of the specimen and - Veterinary Laboratories
lower cost disposal of the transport container.
- ----------------------------------------------------------------------------------------------------
Historically, a physician-performed endoscopy, an extremely - Hospital Laboratories
uncomfortable and expensive procedure, was employed to diagnose - Reference Laboratories
gastric distress. The Company's tests allow accurate, quick - Veterinary Laboratories
diagnoses utilizing patient blood serum. The Company is the only
manufacturer to provide testing formats which accommodate both
small and large volume users.
In November 1995, introduced the first and only FDA cleared
diagnostic test that rapidly detects all toxigenic strains of E.
coli directly from stool samples. Previous techniques required a
minimum of 24 hours to culture E. coli organisms.
Market leader with a broad range of products.
Offers the clinician rapid results which are critical in
preventing the spread of this highly infectious virus.
- ----------------------------------------------------------------------------------------------------
The Company provides the broadest range of diagnostic reagents - Hospital Laboratories
for detecting respiratory diseases. The product is a rapid test - Reference Laboratories
providing results in only ten minutes. The product provides - State Health Laboratories
increased accuracy over common diagnostic methods, allowing for a - Veterinary Laboratories
safer, more effective treatment.
- ----------------------------------------------------------------------------------------------------
This product allows for rapid screening for the presence of - Hospital Laboratories
urinary tract infection. Therapy can be rapidly administered, - Reference Laboratories
often while the patient is still in the physician's office. - Physicians' Office
Both product formats enable rapid, accurate testing. Laboratories
- Consumer (pending)
- Public Health Laboratories
- ----------------------------------------------------------------------------------------------------
The Company provides a broad range of innovative technologies - Hospital Laboratories
including MONOLERT which use synthetic peptides to detect the - Reference Laboratories
virus which causes mononucleosis. - Physicians' Office
Premier HSV Plus detects both HSVI and HSVII rapidly from a Laboratories
variety of body sites. - Student Health Laboratories
Quickly detects "immediate early antigen" in a rapid, direct
fluorescence format.
- ----------------------------------------------------------------------------------------------------
</TABLE>

21
<PAGE> 25

MARKETING AND SALES

The Company's marketing efforts are focused on a continual process of
seeking ways to assist healthcare providers in improving outcomes for patients
exposed to serious infectious diseases. Rapid, accurate diagnosis can mean
faster recovery, shorter hospital stays and less expense, both for the patient
and the healthcare system.

The Company believes that its marketing goals are best served by forming
partnerships with key customers to develop concepts for future products and
technology applications. These partnerships facilitate close customer
interaction, including product strategy sessions.

Marketing utilizes its strong industry contacts, plus key customer focus
sessions, to identify new product and other opportunities. Through the use of
cross-functional teams that include marketing, research and development and
manufacturing personnel, marketing guides the development process to meet
customers' needs with products that are easier to use, require less technical
expertise, and yield faster results -- often in minutes or hours rather than
days.

Changes in the healthcare delivery system have resulted in major
consolidation among reference laboratories and the formation of multi-hospital
alliances. The Company has structured its marketing, selling and customer
service to anticipate and respond to these changes. This involved the addition
of sales and marketing personnel; the expansion of technical services staff to
support the Company's customers and distribution network through a toll-free
service hotline; and the implementation of major marketing programs to target
key customers.

The Company markets products through direct sales forces, both domestically
and in Italy, and national and international independent distributors. In the
United States, the Company's direct sales force consists of a director of sales,
three regional sales managers, three regional virology specialists and 17
technical sales representatives. Where the Company utilizes distributors, the
Company nonetheless participates in selling efforts involving key customers. In
Italy, the Company's direct sales force consists of a director of sales, a
product specialist and seven technical sales representatives.

The Company's sales and marketing efforts in Europe, North Africa and the
Middle East are managed through MDE's European headquarters in Milan, Italy.
MDE's strategy has been to appoint one or two distributors in each of the
countries in its targeted markets, and to maintain a direct sales organization
within Italy. The Company has approximately 50 independent distributors in
approximately 50 foreign countries. The Company has additional key distributor
relationships in Canada, Latin America and the Pacific Rim.

RESEARCH AND DEVELOPMENT

The Company's research and development activities focus on developing
diagnostic solutions. Working in conjunction with the marketing department, the
Company's research and development department focuses its activities on
enhancements to and new applications for the Company's technologies. Over the
past five years the Company has developed internally 19 new products. The
research and development department has access to a number of diagnostic
technologies, each of which can be applied to satisfy new product specifications
that marketing has established. A critical expertise of the Company's product
development staff is its ability to bind various chemicals to various solid
phases, including plastics, membranes, latex beads and immunofluorescent dyes,
to develop testing formats. The Company believes that it has certain proprietary
know-how in these areas.

The research and development department initiates the Company's quality
process through its technology transfer mechanism which begins the establishment
of manufacturing standards. By working closely with the manufacturing
department, the same standards can be imposed to ensure consistently
high-quality products. The Company estimates that, from the conceptualization of
a product, it takes approximately 18 to 24 months to begin to generate revenues.

The research and development department is comprised of the Vice President
of Research and Development and 15 research scientists. The disciplines
represented in the group include biochemistry, immunology, mycology,
bacteriology, virology and parasitology. In fiscal 1994 and 1995 and the six
months

22
<PAGE> 26

ended March 31, 1996, the Company spent $1,433,000, $1,432,000 and $697,000,
respectively, on its research and development activities.

CUSTOMERS

The principal customers for the Company's products are hospitals,
commercial and reference laboratories and, to an increasing degree, alternate
site markets, such as physicians' offices, outpatient clinics, nursing homes and
HMOs, and new markets, such as veterinary laboratories, water treatment
facilities and consumer self-testing. No end-use customer comprised more than 5%
of the Company's sales in fiscal 1995. Two distributors together accounted for
approximately 34% of the Company's fiscal 1995 sales. However, the Company does
not believe that the loss of either of these distributors would have a long-term
material adverse effect on the Company because of its ability to sell to the
end-use customers served by these distributors through alternative means.

MANUFACTURING

The Company's manufacturing is performed at its Cincinnati facility. All
manufacturing operations are regulated by, and in compliance with, FDA-mandated
Good Manufacturing Practices ("GMPs") for medical devices. To maintain the
highest quality standards, the Company utilizes both external and internal
quality auditors who routinely evaluate the Company's manufacturing processes.
The Company's immunodiagnostic products require the production of highly
specific and sensitive antigens and antibodies. The Company produces
substantially all of its own requirements including: monoclonal antibodies,
polyclonal antibodies, synthetic peptides, plus a variety of fungal, bacterial
and viral antigens. For the majority of its raw materials acquired from third
parties, the Company has developed dual sources. As a result, the Company
believes it has access to sufficient raw materials for its products. Products
are generally produced for inventory and products are sold to customers out of
its finished goods inventory. The Company believes it has sufficient
manufacturing capacity for anticipated growth. Manufacturing backlog is not an
element of the Company's industry. See "-- Properties."

COMPETITION

The market for diagnostic tests is a multi-billion dollar international
industry which is highly competitive. Many of the Company's competitors are
larger with greater financial, research, manufacturing, and marketing resources.
Important competitive factors of the Company's products include product quality,
price, ease of use, customer service and reputation. In a broader sense,
industry competition is based upon scientific and technological capability,
proprietary know-how, access to adequate capital, the ability to develop and
market products and processes, the ability to attract and retain qualified
personnel and the availability of patent protection. To the extent that the
Company's product lines do not reflect technological advances, the Company's
ability to compete in those product lines could be adversely affected.

Companies competing in the diagnostic test industry generally focus on a
limited number of tests or limited segments of the market. As a result, the
diagnostic test industry is highly fragmented and segmented. Hundreds of
companies in the United States alone supply immunodiagnostic tests. These
companies range from multi-national healthcare companies, for which
immunodiagnostics is one line of business, to small start-up companies. Of
central importance in the industry are mid-sized medical diagnostic specialty
companies, like the Company, that offer multiple, broad product lines and have
the ability to deliver high value new products quickly to the marketplace. Among
the companies with which the Company competes in the marketing of one or more of
its products are Abbott Laboratories, Becton, Dickinson and Company, Diagnostic
Products Corporation, QUIDEL Corporation and the Wampole Laboratories Division
of Carter-Wallace, Inc.

INTELLECTUAL PROPERTY, PATENTS AND LICENSES

In general, the Company does not seek patent protection for its products
and instead strives to maintain the confidentiality of its proprietary know-how.
The Company owns or licenses U.S. and foreign patents for 11 of its products.
The patents or licenses thereof for these products were acquired in connection
with the purchase of the products or the licensing of the technology on which
the products are based. In the absence of patent protection, the Company may be
vulnerable to competitors who successfully replicate the Company's

23
<PAGE> 27

production and manufacturing techniques and processes. The Company's laboratory
and research personnel are required to execute confidentiality agreements
designed to protect the Company's proprietary products.

The Company has no reason to believe that its products and proprietary
rights infringe the proprietary rights of any third parties. There can be no
assurance, however, that third parties will not assert infringement claims in
the future.

GOVERNMENT REGULATION

FDA Regulation of Medical Devices. The Company's products are regulated by
the FDA as "devices" pursuant to the Federal Food, Drug and Cosmetic Act (the
"FDCA"). Under the FDCA, medical devices are classified into one of three
classes (i.e., Class I, II or III). Class I and II devices are not expressly
approved by the FDA but, instead, are "cleared" for marketing. Class III devices
generally must receive "pre-market approval" from the FDA as to safety and
effectiveness.

A 510(k) clearance will be granted if the submitted data establishes that
the proposed device is "substantially equivalent" to an existing Class I or
Class II medical device or to a Class III medical device for which the FDA has
not required pre-market approval. The 510(k) clearance process for
"substantially equivalent" devices allows product sales to be made after the
filing of an application and upon acknowledgment by the FDA, typically within 90
to 120 days after submission. If the FDA requests additional information, the
product cannot be sold until the application has been supplemented and upon
acknowledgment by the FDA within 90 to 120 days of the supplemental application.
If there are no existing FDA-approved products or processes comparable to a
diagnostic product or process, approval by the FDA involves the more lengthy
pre-market approval procedures.

Each of the products currently marketed by the Company has been cleared by
the FDA pursuant to the 510(k) clearance process or is exempt from such
requirements. The Company believes that most, but not all, products under
development will be classified as Class I or II medical devices and will be
eligible for 510(k) clearance. One example of a product in development that is
subject to the FDA's more lengthy pre-market approval process is the adaptation
of the Company's rapid diagnostic test for urinary tract infections to the
consumer market.

Other Medical Device Regulation. Sales of the Company's products in
foreign countries are subject to foreign government regulation, the requirements
of which vary substantially from country to country. The time required to obtain
approval by a foreign country may be longer or shorter than that required for
FDA approval, and the requirements may differ.

Other Approvals. The Company intends to seek appropriate certifications
and approvals from the Association of Analytical Chemists (AOAC) and the United
States Department of Agriculture (USDA) to enable the Company to market an
immunodiagnostic test for toxigenic E. coli in both food products and animals.
The Company has no direct experience in obtaining these certifications and
approvals, but the Company believes the time required and applicable procedures
will be similar to those required for FDA approval. However, there is no
assurance that the Company will receive these certifications and approvals.

The Clinical Laboratory Improvement Act of 1988 ("CLIA 88") prohibits
laboratories from performing in vitro tests for the purpose of providing
information for the diagnosis, prevention or treatment of any disease or
impairment of, or the assessment of, the health of human beings unless there is
in effect for such laboratories a certificate issued by the U.S. Department of
Health and Human Services ("HHS") applicable to the category of examination or
procedure performed.

The Company is an exempt small quantity generator of hazardous waste and
has a U.S. Environmental Protection Agency identification number. All hazardous
waste is manifested and disposed of properly. The Company is in compliance with
the applicable portions of the Federal and state hazardous waste regulations and
has never been a party to any environmental proceeding.

24
<PAGE> 28

EMPLOYEES

As of March 31, 1996, the Company had 161 full-time employees, including 40
in sales, marketing and technical support, 74 in manufacturing, 17 in research
and product development and 30 in administration and finance.

None of the Company's employees is represented by a labor organization and
the Company is not a party to any collective bargaining agreement. The Company
has never experienced any strike or work stoppage and considers its relationship
with its employees to be excellent.

PROPERTIES

The Company's corporate offices, manufacturing facility and research and
development facility are located in two buildings totaling 75,000 square feet on
4.1 acres of land in a suburb of Cincinnati. These properties are owned by the
Company. The Company believes these facilities are in good condition, well
maintained and suitable for its long-term needs.

The Company believes its manufacturing and laboratory facilities are in
compliance with all applicable rules and regulations and maintained in a manner
consistent with GMPs.

MDE conducts its operations in a two-story building in the Milan, Italy
area consisting of approximately 18,000 square feet. The Company believes these
facilities are in good condition, well maintained and suitable for MDE's
long-term operations.

25
<PAGE> 29

MANAGEMENT

The following table sets forth certain information with respect to the
directors and executive officers of the Company as of May 1, 1996:

<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
--------------------------------------- --- ---------------------------------------
<S> <C> <C>
William J. Motto....................... 54 Chairman of the Board, Chief Executive
Officer and Director
John A. Kraeutler...................... 47 President and Chief Operating Officer
Gerard Blain........................... 56 Vice President and Chief Financial
Officer
Christine A. Meda...................... 47 Vice President, Marketing
Ching Sui Arthur Yi, Ph.D.............. 49 Vice President, Research and
Development
Antonio A. Interno..................... 46 Vice President
James A. Buzard, Ph.D.(1)(2)........... 68 Director
Gary P. Kreider(1)(2).................. 57 Director
Robert J. Ready(1)(2).................. 56 Director
Jerry L. Ruyan......................... 49 Director
</TABLE>

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

(1) Audit Committee Member
(2) Compensation Committee Member

William J. Motto has more than 25 years experience in the pharmaceutical
and diagnostics products industries, is a founder of the Company and has been
Chairman of the Board since March 1977. From that date until June 1986 Mr. Motto
served as President. He served as Chief Executive Officer from June 1986 until
September 1989, and assumed that title again May 1995. Before forming the
Company, Mr. Motto served in various capacities for Wampole Laboratories, Marion
Laboratories, Inc. and Analytab Products, Inc., a division of American Home
Products Corp.

John A. Kraeutler has more than 20 years of experience in the medical
diagnostics industry and joined the Company as Executive Vice President and
Chief Operating Officer in January 1992. In July 1992, Mr. Kraeutler was named
President of the Company. Mr. Kraeutler most recently served as Vice President,
General Manager for a division of Carter-Wallace, Inc. Prior to that, he held
key marketing and technical positions with Becton, Dickinson and Company and
Organon, Inc.

Gerard Blain joined the Company as Vice President and Chief Financial
Officer on March 1, 1994. Prior to joining the Company, Mr. Blain was Vice
President and Controller of Marion Merrell Dow, Inc. Mr. Blain had been with
Marion Merrell Dow, Inc. and its predecessor companies since 1966.

Christine A. Meda has 15 years of experience in the diagnostics industry
and joined the Company as Senior Director of Marketing in July 1994. In October
1995, she was appointed Vice President of Marketing. Ms. Meda served as Director
of Sales and Marketing of Diagnostic Products Corporation from 1991 until
joining the Company. During the period 1984 to 1991, she held various other
management positions in both sales and marketing at Diagnostic Products
Corporation.

Ching Sui Arthur Yi, Ph.D., has more than 17 years experience in the
diagnostics industry and has been Vice President, Research and Development of
the Company since August 1989. From May 1986 until he joined the Company, he was
Director of Product Development of Cambridge BioScience Corporation. Previously
he was a partner of BioClinical System Inc. from July 1983 to April 1986,
Manager of Research and Development, Terumo Medical Corporation From March 1982
to June 1983 and Senior Scientist of Leeco Diagnostics from August 1979 to
February 1982.

Antonio A. Interno was appointed as a Vice President in August 1991. He has
been Managing Director of MDE since February 1990. Prior to that time, he was
the marketing manager for Diagnostics International Distribution SPA, a major
Italian diagnostics distributor.

James A. Buzard, Ph.D., has been a Director of the Company since May 1990
and serves as Chairman of the Compensation Committee. From March 1981 until
December 1989, he was Executive Vice President of

26
<PAGE> 30

Merrell Dow Pharmaceuticals Inc. From December 1989 until his retirement in
February 1990 he was Vice President of Marion Merrell Dow Inc. He has been a
business consultant since February 1990.

Gary P. Kreider has been a Director since 1991. For over five years Mr.
Kreider has been a Senior Partner of the Cincinnati law firm of Keating,
Muething & Klekamp, counsel to the Company.

Robert J. Ready has been a Director of the Company since May 1986 and
serves as Chairman of the Audit Committee. In 1976, Mr. Ready founded LSI
Industries, Inc., Cincinnati, Ohio, which engineers, manufactures and markets
commercial/industrial lighting and graphics products, and has served as its
President and Chairman of its Board of Directors since that time.

Jerry L. Ruyan has more than 20 years experience in the diagnostics
products and medical industries, is a founder of the Company, has been a
Director of the Company since March 1977 and served as Chief Executive Officer
from July 1992 to May 1995. In May 1995, Mr. Ruyan reduced his day-to-day
involvement in the Company in order to pursue outside interests. He relinquished
the title of Chief Executive Officer at that time and continues to serve as a
Director. Mr. Ruyan served as the President of the Company from June 1986 to
July 1992. From June 1986 through January 1992, Mr. Ruyan served as Chief
Operating Officer, and from March 1977 through June 1986 he served as Vice
President. Before forming the Company, Mr. Ruyan served as a technical
representative for Analytab Products, Inc. and prior to that as a Senior
Microbiologist for Henry Ford Hospital, Detroit, Michigan.

27
<PAGE> 31

PRINCIPAL SHAREHOLDERS AND SELLING SHAREHOLDER

The following table sets forth beneficial ownership of Common Stock at
March 31, 1996, and after this offering by the Selling Shareholder.

<TABLE>
<CAPTION>
PRIOR TO THE OFFERING AFTER THE OFFERING
---------------------------------- ----------------------------------
COMMON STOCK SHARES TO COMMON STOCK
NAME BENEFICIALLY OWNED(1) PERCENTAGE BE SOLD BENEFICIALLY OWNED(1) PERCENTAGE
- ---------------------------- --------------------- ---------- --------- --------------------- ----------
<S> <C> <C> <C> <C> <C>
William J. Motto(2)(3)...... 4,625,918 32.3% -- 4,625,918 32.3%
Jerry L. Ruyan(2)(4)........ 2,503,516 17.5% 1,700,000 803,516 5.6%
John A. Kraeutler........... 63,378 * -- 63,378 *
Gerard Blain................ 11,482 * -- 11,482 *
Christine A. Meda........... 3,225 * -- 3,225 *
Ching Sui Arthur Yi, Ph.D... 21,255 * -- 21,255 *
Antonio A. Interno.......... 351,553 2.4% -- 351,553 2.4%
James A. Buzard, Ph.D....... 14,807 * -- 14,807 *
Gary P. Kreider............. 30,916 * -- 30,916 *
Robert J. Ready............. 16,063 * -- 16,063 *
--------------------- ---------- --------- --------------------- ----------
All Directors and Executive
Officers as a Group (Ten
Persons).................. 7,642,113 52.0% 1,700,000 5,942,113 40.4%
</TABLE>

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

* Less than 1%.

(1) Includes exercisable stock options for Mr. Motto of 44,840 shares, Mr. Ruyan
of 44,840 shares, Mr. Buzard of 13,556 shares, Mr. Ready of 16,063 shares,
Mr. Kreider of 11,050 shares, Mr. Kraeutler of 59,659 shares, Mr. Blain of
9,607 shares, Dr. Yi of 5,642 shares, Mr. Interno of 229,236 shares and Ms.
Meda of 3,225 shares.
(2) Messrs. Motto and Ruyan are parties to an agreement with the Company
pursuant to which they must offer their shares for sale to the Company, and
if it declines to purchase, to the other individual, based on the current
market price, if either of them desires to sell more than 1% of the Common
Stock in any three-month period.
(3) Includes 80,226 shares owned by Mr. Motto's three children in their
individual capacities and 462,873 shares owned as trustees. Mr. Motto
disclaims beneficial ownership of all shares held by his children in their
individual capacities. Also includes 61,146 shares of Common Stock held by
the William J. Motto Charitable Remainder Unitrust.
(4) Includes 125,765 shares prior to the offering and 75,765 shares after the
offering held by Mr. Ruyan as Trustee of the Ruyan Family Charitable
Remainder Unitrust and 4,081 shares held as custodian for his son.

28
<PAGE> 32

DESCRIPTION OF CAPITAL STOCK

The Company's authorized capital stock consists of 50,000,000 shares of
Common Stock, without par value, and 1,000,000 shares of preferred stock,
without par value. The following description of certain matters relating to the
capital stock of the Company is a summary and is qualified in its entirety of
the provisions of the Company's Articles of Incorporation and Code of
Regulations.

COMMON STOCK

The Company had 14,257,006 shares issued and outstanding immediately prior
to the date of this Prospectus. Holders of Common Stock are entitled to one vote
for each share held of record on all matters submitted to a vote of
shareholders. Shareholders have the right to cumulate their votes in the
election of directors.

Subject to preferences which may be granted to holders of preferred stock,
holders of Common Stock are entitled to share in such dividends as the Board of
Directors, in its discretion, may validly declare from funds legally available.
In the event of liquidation, each outstanding share of Common Stock entitles its
holder to participate ratably in the assets remaining after payment of
liabilities and any preferred stock liquidation preferences.

Shareholders have no preemptive or other rights to subscribe for or
purchase additional shares of any class of stock or any other securities of the
Company and there are no redemption or sinking fund provisions with regard to
the Common Stock. All outstanding shares of Common Stock are fully paid, validly
issued, and non-assessable.

The vote of the holders of 66 2/3% of all outstanding shares is required to
amend the Articles of Incorporation and to approve mergers, reorganizations and
similar transactions.

PREFERRED STOCK

Preferred stock may be issued from time to time in series having such
designated preferences and rights, qualifications and limitations as the Board
of Directors may determine without any approval of shareholders. Preferred stock
could be given voting and conversion rights which would adversely affect the
voting power and equity of holders of Common Stock and could have preference to
Common Stock with respect to dividend and liquidation rights. The preferred
stock could have the effect of acting as an anti-takeover device to prevent a
change of control of the Company. None of the preferred stock is outstanding and
the Company has no plans at present to issue any such shares.

PROVISIONS AFFECTING BUSINESS COMBINATIONS

Ohio law governs the rights of shareholders of the Company. Chapter 1704 of
the Ohio Revised Code may be viewed as having an antitakeover effect. This
statute, in general, prohibits an "issuing public corporation" (the definition
of which would include the Company) from entering into a "Chapter 1704
Transaction" with the beneficial owner (or affiliates of such beneficial owner)
of 10% or more of the outstanding shares of the corporation (an "interested
shareholder") for at least three years following the date on which the
interested shareholder attains such 10% ownership, unless the board of directors
of the corporation approves, prior to such person becoming an interested
shareholder, either the transaction or the acquisition of shares resulting in a
10% ownership. A "Chapter 1704 Transaction" is broadly defined to include, among
other things, a merger or consolidation with, sale of substantial assets to, or
the receipt of a loan, guaranty or other financial benefit (which is not
proportionately received by all shareholders) by the interested shareholder.
Following the expiration of such three-year period, a Chapter 1704 Transaction
with the interested shareholder is permitted only if either (i) the transaction
is approved by the holders of at least two-thirds of the voting power of the
corporation (or such different proportion as set forth in the corporation's
articles of incorporation), including a majority of the outstanding shares,
excluding those owned by the interested shareholder, or (ii) the business
combination results in the shareholders other than the interested shareholder
receiving a prescribed "fair price" for their shares. One significant effect of
Chapter 1704 is to cause an interested shareholder to negotiate with the board
of directors of a corporation prior to becoming an interested shareholder.

29
<PAGE> 33

In addition, Section 1707.043 of the Ohio Revised Code requires a person or
entity that makes a proposal to acquire the control of a corporation to repay to
that corporation any profits made from trades in the corporation's stock within
18 months after making the control proposal.

Section 1701.831 of the Ohio Revised Code contains provisions which permit
a "control share acquisition" of an "issuing public corporation" only with the
prior authorization of a majority of the disinterested shareholders, which could
operate as a deterrent to an acquisition of the Company. However, as permitted
by this Section, the Company's Articles of Incorporation contain a provision
exempting the Company from the operation of this Section. As a result, these
provisions of the Ohio Revised Code will not act as a deterrent to an
acquisition of the Company or the accumulation of a large amount of the
Company's Common Shares. However, the Company's Articles of Incorporation could
be amended in the future to make Section 1701.831 applicable to the Company with
the vote of two-thirds of the shares eligible to vote on the proposal.

TRANSFER AGENT AND REGISTRAR

The registrar and transfer agent for the Company's Common Stock is The
Fifth Third Bank, Cincinnati, Ohio.

30
<PAGE> 34

UNDERWRITING

The several Underwriters named below have severally agreed, subject to the
terms and conditions contained in the Underwriting Agreement, to purchase from
the Selling Shareholder the aggregate number of shares of Common Stock (assuming
the Underwriters' over-allotment option is not exercised) set forth below
opposite their respective names.

<TABLE>
<CAPTION>
NUMBER
UNDERWRITERS OF SHARES
-------------------------------------------------------------------------- ---------
<S> <C>
Cleary Gull Reiland & McDevitt Inc. ...................................... 386,668
The Ohio Company.......................................................... 386,666
Roney & Co. .............................................................. 386,666
J.C. Bradford & Co. ...................................................... 30,000
Cowen & Company........................................................... 30,000
Dain Bosworth Incorporated................................................ 30,000
Equitable Securities Corporation.......................................... 30,000
Everen Securities, Inc. .................................................. 30,000
First Analysis Securities Corporation..................................... 30,000
Gerard Klauer Mattison & Co., LLC......................................... 30,000
J.J.B. Hilliard, W.L. Lyons, Inc. ........................................ 30,000
Jefferies & Company....................................................... 30,000
Ladenburg, Thalmann & Co. Inc. ........................................... 30,000
Legg Mason Wood Walker, Incorporated...................................... 30,000
McDonald & Company Securities, Inc. ...................................... 30,000
Needham & Company, Inc. .................................................. 30,000
Piper Jaffray Inc. ....................................................... 30,000
Punk, Ziegel & Knoell..................................................... 30,000
Stifel, Nicolaus & Company, Incorporated.................................. 30,000
Unterberg Harris.......................................................... 30,000
Vector Securities International, Inc. .................................... 30,000
---------
Total........................................................... 1,700,000
========
</TABLE>

The Underwriting Agreement provides that all of the Common Stock being
offered, excluding shares covered by the over-allotment option granted to the
Underwriters, must be purchased if any are purchased.

The Company has been advised that the several Underwriters propose to offer
the Common Stock to the public at the public offering price set forth on the
cover page of this Prospectus and may offer to selected dealers at such price
less a concession of not more than $0.41 per share; that the Underwriters may
allow and such dealers may reallow a concession of $0.10 per share on sales to
certain other dealers; and that the public offering price and concessions and
reallowances to dealers may be changed by the Underwriters.

The Selling Shareholder has granted the Underwriters an option, exercisable
within 30 days after the date of this Prospectus, to purchase up to an
additional 255,000 shares of Common Stock to cover over-allotments, at the same
price per share being paid by the Underwriters for the other shares offered
hereby. If the Underwriters exercise this option in whole or in part, each of
the Underwriters will be committed to purchase such additional shares in
approximately the same proportion as set forth in the above table. The
Underwriters may purchase such shares only to cover over-allotments, if any,
made in connection with the Offering made hereby.

The Company and its present executive officers and directors and the
Selling Shareholder have agreed with the Underwriters that they will not offer
or sell any shares of Common Stock for 90 days and 360 days, respectively, from
the effective date of the Registration Statement without the prior written
consent of Cleary Gull Reiland & McDevitt Inc.

The Underwriting Agreement provides that the Company and the Selling
Shareholder will indemnify the several Underwriters against certain liabilities,
including civil liabilities under the Securities Act, or will contribute to
payments the Underwriters may be required to make in respect thereof.

31
<PAGE> 35

In connection with this offering, the Underwriters and selling group
members (if any) may engage in passive market making transactions in the Common
Stock on the Nasdaq National Market immediately prior to the commencement of
sales in this offering, in accordance with Rule 10b-6A under the Exchange Act.
Passive market making consists of displaying bids on the Nasdaq National Market
limited by the bid prices of independent market makers and purchases limited by
such prices and effected in response to order flow. Net purchases by a passive
market maker on each day are limited to a specific percentage of the passive
market maker's average daily trading volume in the Common Stock during a
specified prior period and must be discontinued when such limit is reached.
Passive market making may stabilize the market price of the Common Stock at a
level above that which might otherwise prevail and, if commenced, may be
discontinued at any time.

LEGAL MATTERS

Certain legal matters in connection with the Common Stock offered hereby
will be passed upon for the Company by Keating, Muething & Klekamp, Cincinnati,
Ohio. Gary P. Kreider, a partner in Keating, Muething & Klekamp, serves as a
director of the Company. Members of that firm beneficially own 34,357 shares of
Common Stock. Certain legal matters in connection with the Offering will be
passed upon for the Underwriters by Foley & Lardner, Milwaukee, Wisconsin.

EXPERTS

The audited financial statements and schedules included or incorporated by
reference in this Prospectus have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said reports.

32
<PAGE> 36

GLOSSARY OF SELECTED TERMS

The following glossary defines terms used to describe the Company's
business.

ANTIBODY. Highly specific proteins that bind with and counteract antigens.
Immunoassays make use of the specific binding properties of antibodies with
antigens in diagnostic tests.

ANTIGEN. A foreign substance, generally produced by a bacterium, virus or
fungus which immunoassays measure, that induces the formation of antibodies.

ASPERGILLUS. A fungus which is an opportunistic pathogen and may produce a
severe and persistent infection.

ASSAY. Any test procedure used to detect or measure a specific substance
in body fluids.

BLASTOMYCES. A fungus which causes infection due to inhalation through the
pulmonary route. Infection is marked by tumors in the skin or by lesions in the
lungs, bones, tissues, liver, spleen and kidneys.

C. DIFFICILE. A bacteria (Clostridium difficile) which causes a series
diarrheal disease affecting the digestive system. Toxigenic strains of C.
difficile produce two toxins having pathogenic effects in humans. Toxin A causes
enteric fluid accumulation, diarrhea and intestinal hemorrhaging. It has been
hypothesized that, once the colon is damaged by toxin A, toxin B can enter the
circulatory system and cause widespread tissue deterioration.

COCCIDIOIDES. A fungus which causes infection due to the inhalation of
spores. The primary form of the disease is an acute respiratory infection. It is
primarily endemic in arid areas such as southern Arizona and Southern California
and is commonly known as "Valley Fever".

CRYPTOCOCCUS. An opportunistic yeastlike organism which infects humans,
causing an infection involving the skin, lungs, brain and spinal column,
commonly associated with immunocompromised patients, such as those suffering
from AIDS and cancer.

CRYPTOSPORIDIUM. A severe parasitic infection of the gastrointestinal
tract causing severe diarrhea, abdominal pain and electrolyte imbalance.

CYTOMEGALOVIRUS. One of a group of herpes viruses that infect humans. This
virus can cause a variety of symptoms, but the majority of infections are very
mild or subclinical.

ENZYME. Protein which accelerates reactions between substances; used to
produce a color in enzyme immunoassays.

ENZYME IMMUNOASSAY ("EIA"). Immunoassay using an enzyme conjugated to the
antigen or a specific antibody which is used to detect its homologous antibody
or antigen.

FUNGAL SEROLOGY. Diagnosis of fungus-related systemic and respiratory
infections.

GIARDIA. The most common single-celled parasite which is spread via
contaminated food and water and direct person-to-person contact. Representing
the most common parasitic disease, it infects the small intestine, producing
diarrhea, gastrointestinal discomfort, electrolyte imbalance, nausea and weight
loss.

H. PYLORI. Helicobacter pylori is the most common and important cause of
gastritis and has been linked to the cause of chronic recurrent duodenal ulcers.
Treatments that eradicate H. pylori have produced dramatic reductions in ulcer
recurrence.

HERPES SIMPLEX VIRUS. A herpes virus which is characterized by the
formation of clusters of small vesicles and causes an inflammatory skin disease.

HISTOPLASMA. A fungus which causes infection due to the inhalation or
ingestion of spores. The infection is usually asymptomatic, but may cause acute
pneumonia.

IMMUNOASSAY. Procedure using antigens and antibodies to detect and measure
minute concentrations of biological materials; includes radioimmunoassay and
nonisotopic assays, which do not use radioactive materials, such as enzyme
immunoassay.

IMMUNODIAGNOSTIC. Diagnosis based on blood serum reactions to antigens.

33
<PAGE> 37

IMMUNODIFFUSION. A technique of study of antigen-antibody reactions by
observing precipitates formed by the combination of specific antigens and
antibodies which have diffused in a gel in which they had been separately
placed.

IMMUNOFLUORESCENCE. The use of fluorescence-labeled antibodies to identify
bacterial, viral or other antigenic material specific to the labeled antibody.

IN VITRO. Outside the living body, for example, in a test tube.

MONONUCLEOSIS. A common, acute, self-limited disease caused by the
Epstein-Barr virus.

MONOCLONAL ANTIBODY. An antibody produced from a single clone of a plasma
cell against a single antigenic epitope.

PARASITOLOGY. The study of the diseased condition resulting from parasitic
infection.

PARTICLE AGGLUTINATION. A test format in which antigens or antibodies bind
to solid particles enabling visualization of test result.

PATHOGEN. An agent that causes disease such as a bacterium, virus or
fungi.

PNEUMOCYSTIS. A microorganism which is the causative agent of a highly
contagious, epidemic pneumonia.

POLYCLONAL ANTIBODY. Antibodies produced from a series of plasma cells
against a variety of antigenic epitopes.

REAGENTS. Biological chemicals required to perform immunoassays; includes
antibodies and antigens.

STREP A. A classification of streptococci based upon cell-wall
carbohydrate antigens. Streptococci Group A are bacteria which cause conditions
such as septic sore throat, scarlet fever, and rheumatic fever.

34
<PAGE> 38

MERIDIAN DIAGNOSTICS, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Report of Independent Public Accountants............................................ F-2
Consolidated Balance Sheets as of September 30, 1995 and 1994....................... F-3
Consolidated Statements of Earnings for the Years Ended September 30, 1995, 1994 and
1993.............................................................................. F-4
Consolidated Statements of Shareholders' Equity for the Years Ended September 30,
1995, 1994 and 1993............................................................... F-5
Consolidated Statements of Cash Flows for the Years Ended September 30, 1995, 1994
and 1993.......................................................................... F-6
Notes to Consolidated Financial Statements.......................................... F-7
Consolidated Balance Sheets as of March 31, 1996 (unaudited) and September 30,
1995.............................................................................. F-16
Consolidated Statements of Earnings for the Six Months Ended March 31, 1996 and 1995
(unaudited)....................................................................... F-18
Consolidated Statements of Shareholders' Equity for the Six Months Ended March 31,
1996 (unaudited).................................................................. F-19
Consolidated Statements of Cash Flows for the Six Months Ended March 31, 1996 and
1995 (unaudited).................................................................. F-20
Notes to Consolidated Financial Statements (unaudited).............................. F-21
</TABLE>

F-1
<PAGE> 39

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Meridian Diagnostics, Inc.:

We have audited the accompanying consolidated balance sheets of MERIDIAN
DIAGNOSTICS, INC. and subsidiaries as of September 30, 1995 and 1994, and the
related consolidated statements of earnings, shareholders' equity, and cash
flows for each of the three years in the period ended September 30, 1995. 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 generally accepted auditing
standards. 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 Meridian Diagnostics, Inc.
and subsidiaries as of September 30, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period ended
September 30, 1995, in conformity with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Cincinnati, Ohio,
November 10, 1995

F-2
<PAGE> 40

MERIDIAN DIAGNOSTICS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
---------------------------
1995 1994
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and short-term investments (Note 2).................................. $ 8,918,637 $ 8,831,983
Accounts receivable, less allowance of $164,136 in 1995 and $113,183 in
1994 for doubtful accounts.............................................. 6,482,999 5,169,989
Inventories (Note 3)...................................................... 3,032,655 3,020,071
Prepaid expenses and other................................................ 321,775 108,423
Deferred tax assets....................................................... 324,910 282,929
------- -------
Total current assets............................................... 19,080,976 17,413,395
------- -------
Property, Plant and Equipment:
Land...................................................................... 269,217 273,688
Buildings and improvements................................................ 6,162,668 3,716,649
Machinery, equipment and furniture........................................ 5,525,455 4,595,550
Construction in progress.................................................. -- 1,063,702
------- -------
11,957,340 9,649,589
Less -- accumulated depreciation and amortization......................... 4,816,905 4,248,561
------- -------
Net property, plant and equipment.................................. 7,140,435 5,401,028
------- -------
Other Assets (Notes 1 and 4):
Long-term receivable...................................................... 12,670 --
Deferred tax assets....................................................... 87,879 59,841
Deferred debenture offering costs, net of accumulated amortization of
$133,357 in 1995 and $96,876 in 1994.................................... 395,731 665,595
Covenants not to compete, net of accumulated amortization of $1,827,718 in
1995 and $1,337,375 in 1994............................................. 2,432,876 2,923,219
License agreements, net of accumulated amortization of $772,433 in 1995
and $714,878 in 1994.................................................... 362,680 420,235
Patent, tradenames and distributorships, net of accumulated amortization
of $475,762 in 1995 and $267,365 in 1994................................ 1,837,238 2,045,635
Other intangible assets, net of accumulated amortization of $85,570 in
1995 and $43,503 in 1994................................................ 620,192 685,218
Cost in excess of net assets acquired, net of accumulated amortization of
$458,482 in 1995 and $255,753 in 1994................................... 2,598,511 2,714,964
------- -------
Total other assets................................................. 8,347,777 9,514,707
------- -------
Total assets....................................................... $34,569,188 $32,329,130
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term obligations (Note 5)......................... $ 381,932 $ 367,969
Current portion of capital lease obligations (Note 5)..................... 63,561 --
Accounts payable.......................................................... 689,869 1,843,489
Accrued payroll and payroll taxes......................................... 723,946 650,530
Other accrued expenses.................................................... 937,348 649,732
Income taxes payable...................................................... 458,707 902,069
------- -------
Total current liabilities.......................................... 3,255,363 4,413,789
------- -------
Long-Term Obligations (Note 5).............................................. 12,285,668 14,683,369
------- -------
Capital Lease Obligations (Note 5).......................................... 149,925 --
------- -------
Shareholders' Equity (Note 7):
Preferred stock, no par value, 1,000,000 shares authorized; none issued... -- --
Common stock, no par value, 25,000,000 shares authorized; 12,924,814 and
12,292,935 shares issued and outstanding, respectively, stated at....... 1,487,159 1,179,583
Additional paid-in capital................................................ 13,895,901 10,824,012
Retained earnings......................................................... 3,747,930 1,448,736
Cumulative foreign currency translation adjustment........................ (252,758) (220,359)
------- -------
Total shareholders' equity......................................... 18,878,232 13,231,972
------- -------
Total liabilities and shareholders' equity......................... $34,569,188 $32,329,130
======= =======
</TABLE>

The accompanying notes to consolidated financial statements are an integral part
of these balance sheets.

F-3
<PAGE> 41

MERIDIAN DIAGNOSTICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

<TABLE>
<CAPTION>
FOR THE YEARS ENDED SEPTEMBER 30,
-------------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Net Sales........................................... $25,109,711 $21,876,773 $16,170,990
Cost of Sales....................................... 8,008,529 7,518,179 5,097,988
----------- ----------- -----------
Gross profit.............................. 17,101,182 14,358,594 11,073,002
----------- ----------- -----------
Operating Expenses:
Research and development.......................... 1,432,315 1,432,928 1,165,210
Selling and marketing............................. 5,228,717 4,747,398 3,715,517
General and administrative........................ 3,864,294 3,364,584 2,667,172
----------- ----------- -----------
Total operating expenses.................. 10,525,326 9,544,910 7,547,899
----------- ----------- -----------
Operating income.......................... 6,575,856 4,813,684 3,525,103
Other Income (Expense):
Licensing and related fees........................ 102,698 -- 55,000
Interest income................................... 435,686 253,644 56,551
Interest expense.................................. (1,134,844) (1,092,345) (178,950)
Cost of withdrawn stock offering.................. -- -- (404,499)
Other, net........................................ (19,470) 8,420 48,153
----------- ----------- -----------
Total other income (expense).............. (615,930) (830,281) (423,745)
----------- ----------- -----------
Earnings before income taxes.............. 5,959,926 3,983,403 3,101,358
Income Taxes (Note 6)............................... 2,435,815 1,542,282 1,211,904
----------- ----------- -----------
Net earnings.............................. $ 3,524,111 $ 2,441,121 $ 1,889,454
=========== =========== ===========
Primary Weighted Average Number of Common Shares
Outstanding....................................... 12,354,752 12,277,392 12,263,791
=========== =========== ===========
Primary Earnings Per Common Share................... $ .29 $ .20 $ .15
=========== =========== ===========
Fully Diluted Weighted Average Number of Common
Shares Outstanding................................ 14,541,603 NA NA
=========== =========== ===========
Fully Diluted Earnings Per Common Share............. $ .28 NA NA
=========== =========== ===========
</TABLE>

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

F-4
<PAGE> 42

MERIDIAN DIAGNOSTICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
NUMBER OF CUMULATIVE
COMMON FOREIGN
SHARES ADDITIONAL CURRENCY
ISSUED AND COMMON PAID-IN RETAINED TRANSLATION
OUTSTANDING STOCK CAPITAL EARNINGS ADJUSTMENT TOTAL
----------- ---------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1992... 7,705,453 $ 851,975 $ 7,563,763 $ 2,258,187 $ 2,560 $10,676,485
Net earnings.................... -- -- -- 1,889,454 -- 1,889,454
Cash dividends paid -- $.06 per
share as adjusted............. -- -- -- (702,325) -- (702,325)
Exercise of stock options....... 1,249 900 4,839 -- -- 5,739
3% stock dividend............... 231,201 154,142 1,811,067 (1,965,209) -- --
Foreign currency translation
adjustment.................... -- -- -- -- (252,341) (252,341)
----------- ---------- ----------- ---------- --------- -----------
Balance at September 30, 1993... 7,937,903 1,007,017 9,379,669 1,480,107 (249,781) 11,617,012
Net earnings.................... -- -- -- 2,441,121 -- 2,441,121
Cash dividends paid -- $.08 per
share as adjusted............. -- -- -- (908,209) -- (908,209)
Exercise of stock options....... 18,689 12,638 39,988 -- -- 52,626
3% stock dividend............... 238,698 159,928 1,404,355 (1,564,283) -- --
Foreign currency translation
adjustment.................... -- -- -- -- 29,422 29,422
----------- ---------- ----------- ---------- --------- -----------
Balance at September 30, 1994... 8,195,290 1,179,583 10,824,012 1,448,736 (220,359) 13,231,972
Net earnings.................... -- -- -- 3,524,111 -- 3,524,111
Fractional shares............... (570) (293) (3,049) -- -- (3,342)
Cash dividends paid -- $.10 per
share as adjusted............. -- -- -- (1,224,917) -- (1,224,917)
Exercise of stock options....... 42,849 14,961 34,131 -- -- 49,092
3 for 2 stock split............. 4,097,645 -- -- -- -- --
Debenture Conversions (Note
5)............................ 589,600 292,908 3,040,807 -- -- 3,333,715
Foreign currency translation
adjustment.................... -- -- -- -- (32,399) (32,399)
----------- ---------- ----------- ---------- --------- -----------
Balance at September 30, 1995... 12,924,814 $1,487,159 $13,895,901 $ 3,747,930 $(252,758) $18,878,232
=========== ========== =========== ========== ========= ===========
</TABLE>

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

F-5
<PAGE> 43

MERIDIAN DIAGNOSTICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
FOR THE YEARS ENDED SEPTEMBER 30,
-------------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net earnings............................................... $ 3,524,111 $ 2,441,121 $ 1,889,454
Non-cash items --
Depreciation and amortization of property, plant and
equipment............................................. 863,436 703,190 580,979
Amortization of intangible assets....................... 1,147,987 1,009,950 471,045
Deferred interest expense............................... 154,950 94,978 --
Revenues received in advance recorded in income......... -- -- (55,000)
Deferred income taxes................................... (70,019) (263,977) 28,079
Changes in current assets excluding cash and short-term
investments............................................. (1,611,612) (1,865,471) (1,328,516)
Changes in current liabilities excluding current portion of
long-term obligations................................... (1,150,277) 2,305,066 516,355
Long-term receivable and payable........................... (2,470) -- --
----------- ----------- -----------
Net cash provided by operating activities.......... 2,856,106 4,424,857 2,102,396
----------- ----------- -----------
Cash Flows from Investing Activities:
Property, plant, and equipment acquired, net............... (2,472,177) (1,426,485) (718,135)
Product line acquisition --
Inventory and equipment................................. -- (571,446) (262,972)
Covenants not to compete................................ -- (1,100,000) (1,500,000)
Patent, tradenames, customer lists and other............ -- (1,375,000) (1,394,000)
Cost in excess of net assets acquired................... -- (346,434) (297,722)
Proceeds from sale of product line......................... -- 500,000 --
Acquisition of license agreements.......................... -- (55,898) (80,000)
Advance royalties paid..................................... -- (25,000) --
----------- ----------- -----------
Net cash used for investing activities............. (2,472,177) (4,400,263) (4,252,829)
----------- ----------- -----------
Cash Flows from Financing Activities:
Proceeds from subordinated debentures, net of offering
costs................................................... -- -- 10,737,530
Proceeds from other long-term obligations.................. 1,284,005 634,970 --
Repayment of long-term obligations......................... (388,246) (462,339) (219,145)
Dividends paid............................................. (1,224,917) (908,209) (702,325)
Proceeds from issuance of common stock..................... 45,750 52,626 5,739
Effect of exchange rate changes on cash.................... (13,867) 14,749 (6,229)
----------- ----------- -----------
Net cash provided by (used for) financing
activities....................................... (297,275) (668,203) 9,815,570
----------- ----------- -----------
Net Increase (Decrease) in Cash and Short-Term Investments... 86,654 (643,609) 7,665,137
Cash and Short-Term Investments at Beginning of Period....... 8,831,983 9,475,592 1,810,455
----------- ----------- -----------
Cash and Short-Term Investments at End of Period............. $ 8,918,637 $ 8,831,983 $ 9,475,592
=========== =========== ===========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for --
Income taxes............................................ $ 2,882,336 $ 1,034,000 $ 1,195,000
Interest................................................ 883,356 852,265 160,062
Capitalized lease obligations.............................. 259,240 -- --
Estimated contingent consideration related to product line
acquisitions (Note 5)................................... -- 1,972,000 --
Conversion of debentures to common stock, net of
amortization of deferred debenture offering costs of
$186,285 (Note 5)....................................... 3,333,715 -- --
</TABLE>

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

F-6
<PAGE> 44

MERIDIAN DIAGNOSTICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) PRINCIPLES OF CONSOLIDATION -- The consolidated financial statements
include the accounts of Meridian Diagnostics, Inc. and its subsidiaries, Omega
Technologies, Inc., Meridian Diagnostics Europe s.r.1. ("MDE") and Meridian
Diagnostics International, Inc. (collectively, "Meridian" or the "Company"). All
significant intercompany accounts and transactions have been eliminated in
consolidation.

(b) SHORT-TERM INVESTMENTS -- The Company adopted Statement of Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" (FAS 115), in 1995. In accordance with FAS 115, prior years'
financial statements have not been restated to reflect the change in accounting
method. There was no cumulative effect as a result of adopting FAS 115 in 1995.

Debt securities for which the Company does not have the intent or ability
to hold to maturity are classified as available for sale, along with any equity
securities. At September 30, 1995, the Company's investments in debt and equity
securities were classified as cash and short-term investments due to their
short-term nature. These investments are diversified among high credit quality
securities. The estimated fair value of cash investments approximates cost, and
therefore, there are no unrealized gains or losses as of September 30, 1995.

(d) PROPERTY, PLANT AND EQUIPMENT -- Property, plant and equipment are
stated at cost. Upon retirement or other disposition of property, plant and
equipment, the cost and related accumulated depreciation and amortization are
removed from the accounts and the resulting gain or loss is reflected in
earnings. Maintenance and repairs are expensed as incurred. Depreciation and
amortization are computed on the straight-line method in amounts sufficient to
writeoff the cost over the estimated useful lives as follows:

Buildings and improvements -- 5 to 33 years

Machinery, equipment and furniture -- 3 to 10 years

(e) OTHER ASSETS -- Other assets are stated at cost less accumulated
amortization and are being amortized on a straight line basis over their
estimated useful lives:

Covenants not to compete -- 7 to 10 years

License agreements -- 3 to 10 years

Patents, tradenames and distributorships -- 10 to 15 years

Cost in excess of net assets acquired and other intangible
assets -- 15 years

Deferred debenture offering costs -- 8 years

Subsequent to their acquisition, the Company continually evaluates whether
subsequent events and circumstances have occurred that indicate the remaining
estimated useful lives of intangible assets may warrant revision or that the
remaining balances of these assets may not be recoverable. When factors indicate
that an intangible asset should be evaluated for possible impairment, the
Company uses an estimate of the related product line's cash flow over the
remaining life of the asset in measuring whether the asset is recoverable.

(f) INCOME TAXES -- The provision for income taxes includes federal,
foreign, state and local income taxes currently payable and those deferred
because of temporary differences between income for financial reporting and
income for tax purposes. Research and experimentation credits are reflected as a
reduction in income taxes when realized.

F-7
<PAGE> 45

MERIDIAN DIAGNOSTICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Effective October 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes". Prior period
financial statements have not been restated to reflect the new accounting
method. The cumulative effect of this change, as well as the effect of this new
standard on income tax expense for the year ended September 30, 1994, and for
each of the quarters in the period then ended, is not material.

(g) EARNINGS PER COMMON SHARE -- Primary earnings per common share are
based on the weighted average number of common shares outstanding during the
year. No material dilution results from outstanding stock options which are the
only common stock equivalent. Fully diluted earnings per share are dilutive for
fiscal 1995 only and include the impact of assuming the convertible subordinated
debentures are converted, net of the impact of pro forma interest expense.

On September 12, 1995, the Company's Board of Directors declared a
three-for-two stock split to shareholders of record on September 22, 1995. On
November 16, 1994, the Company's Board of Directors declared a 3% stock
dividend. On December 1, 1993, the Company's Board of Directors declared a 3%
stock dividend. On November 23, 1992, the Company's Board of Directors declared
a 5% stock dividend, and in March 1992, the Company's Board of Directors
declared a three-for-two stock split. All data with respect to earnings per
share, dividends per share and weighted average number of shares outstanding has
been retroactively adjusted to reflect the stock splits and stock dividends.

(h) RESEARCH AND DEVELOPMENT COSTS -- Research and development costs are
charged to earnings as incurred.

(i) REVENUE RECOGNITION -- Revenue is recognized from sales when a product
is shipped. Income from licensing agreements is recognized as earned and as
stipulated by the respective agreements.

(j) TRANSLATION OF FOREIGN CURRENCY -- Assets and liabilities of foreign
operations are translated using year-end exchange rates and revenues and
expenses are translated using exchange rates prevailing during the year, with
gains or losses resulting from translation included in a separate component of
shareholders' equity. Gains and losses resulting from transactions in foreign
currencies were immaterial.

(k) SEGMENT DATA AND MAJOR CUSTOMERS -- The Company was formed in June 1976
and functions as a research, development, manufacturing, marketing and sales
organization with primary emphasis in the field of diagnostic tests for
infectious diseases. The Company grants credit under normal terms to its
customers, primarily to hospitals, commercial laboratories and distributors in
the United States and Europe.

A summary of the Company's international operations is as follows:

<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Net sales...................................... $5,811,000 $4,609,000 $2,930,000
Operating profit............................... 1,233,000 801,000 462,000
Pre-tax income................................. 979,000 579,000 446,000
Identifiable assets............................ 4,583,000 3,904,000 2,657,000
Accounts receivable............................ 2,538,000 2,052,000 1,313,000
</TABLE>

Consolidated sales in thousands of dollars to individual customers
constituting 10% or more of net sales were as follows:

<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
-------------------------------------------------
1995 1994 1993
------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Customer A............................ $6,033 (24%) $5,042 (23%) $4,254 (26%)
Customer B............................ 2,569 (10%) 2,073 (9%) 1,823 (11%)
</TABLE>

F-8
<PAGE> 46

MERIDIAN DIAGNOSTICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(2) CASH AND SHORT-TERM INVESTMENTS

Cash and short-term investments (with maturities of less than 4 months) are
comprised of the following:

<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------------
1995 1994
---------- ----------
<S> <C> <C>
Cash and money market funds................................. $1,562,795 $2,865,966
Commercial paper............................................ 3,655,842 3,996,017
Corporate and municipal put bonds........................... 3,700,000 1,970,000
---------- ----------
$8,918,637 $8,831,983
========== ==========
</TABLE>

At September 30, 1995 and 1994, the market value of the Company's
investments approximated cost. The municipal put bonds are putable every seven
days and the principal balance is secured by a bank letter of credit.

(3) INVENTORIES

Inventories are comprised of the following:

<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------------
1995 1994
---------- ----------
<S> <C> <C>
Raw materials............................................... $1,165,319 $1,354,412
Work-in-process............................................. 626,077 649,205
Finished goods.............................................. 1,241,259 1,016,454
---------- ----------
$3,032,655 $3,020,071
========== ==========
</TABLE>

(4) PRODUCT AND LICENSE AGREEMENT ACQUISITIONS

(a) PRODUCT LINES -- In January 1994, the Company acquired a product line
from an affiliate of Ortho Diagnostic Systems, Inc. ("ODSI"), a subsidiary of
Johnson & Johnson, comprised of products used primarily for the detection of
certain infectious diseases including Chlamydia, Herpes and various viral
respiratory infections. The Company also acquired inventory, equipment, certain
license rights, a trademark, customer lists, a noncompetition agreement and
technical information for the manufacture of the products.

The purchase included $3,300,000 in cash paid to ODSI and $82,000 of
expenses. As additional consideration, Meridian will pay ODSI up to 6% of
product sales made during the nine-year period beginning in January 1995. The
Company has recorded the estimated present value of this additional
consideration (Note 5).

In a separate agreement dated March 14, 1994, the Company sold to VAI
Diagnostics, Inc. certain tissue culture products and assets acquired in January
1994 from the affiliate of ODSI mentioned above. The $650,000 proceeds consisted
of cash of $500,000, which was paid upon execution of the agreement, and
$150,000 in an unsecured promissory note due in mid-1997. No gain or loss was
recognized on this transaction.

Also, in June 1993, the Company acquired a product line from ODSI which
consisted of the branded products MONOSPOT and MONOLERT, which are rapid tests
for infectious mononucleosis. The acquisition included certain patent and
trademark rights, customer lists, inventory, technical information for the
manufacture of the products, certain equipment and a noncompetition agreement.

The purchase included $3,100,000 in cash paid to ODSI at the acquisition
date, inventory purchased at unit prices specified in the agreement which
aggregated approximately $233,000 and $122,000 of expenses. As

F-9
<PAGE> 47

MERIDIAN DIAGNOSTICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

additional consideration, Meridian will pay ODSI 6% of product sales made during
the three-year period beginning July 1, 1996. The Company has recorded the
estimated present value of this additional consideration (Note 5). The Company
also assumed ODSI's royalty obligations (equal to 4.25% of MONOLERT sales) to
The Scripps Research Institute ("Scripps"). The obligation to pay royalties to
Scripps expires in 2009.

(b) LICENSE AGREEMENTS -- The Company has entered various license
agreements as follows:

<TABLE>
<CAPTION>
DATE ACQUIRED LICENSOR/PRODUCT TERM COST
- -------------- ----------------------- -------------------------- -----------------------
<S> <C> <C> <C>
October 1993 New England Medical fifteen years $81,000 of which
Center Hospital/E. coli $25,000 to be offset
Test against future
royalties
January 1993 Tacoma Trading ten years $80,000
Company/parasitology
concentration and
transport system
July 1991 Texas BioResource five years, option to $100,000 to be offset
Corp./bacterial urinary extend for two additional against future
tract infection test five-year terms royalties, option to
purchase 25,062 shares
of common stock which
vests at the end of the
agreement
April 1991 Disease Detection ten years, option to $442,000
International, extend for two additional
Inc./rapid tests for ten-year terms
the detection of strep
throat, pregnancy,
Toxoplasma, Rubella,
Cytomegalovirus and
Herpes
</TABLE>

F-10
<PAGE> 48

MERIDIAN DIAGNOSTICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(5) LONG-TERM OBLIGATIONS, BANK CREDIT ARRANGEMENTS AND COMMITMENTS

(a) LONG-TERM OBLIGATIONS -- Long-term obligations is comprised of the
following at:

<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------------
1995 1994
----------- -----------
<S> <C> <C>
Convertible Subordinated Debentures, unsecured, 7 1/4%
annual interest payable semi-annually on March 1 and
September 1, principal due September 1, 2001............ $ 7,980,000 $11,500,000
Domestic bank notes payable, secured by real estate and
accounts receivable:
Interest at 5.5%, payable in monthly installments of
$16,276 with a balloon payment of $32,552 in March
1996................................................. 113,932 292,969
Interest at prime + 1/2% (9.25% at September 30, 1995),
payable in monthly installments of $6,250 with a
balloon payment of $375,000 in March 1997............ 481,250 556,250
Construction loan, interest at 7% to be converted to a 7%,
twenty-year amortization mortgage note, payable in
monthly installments of $14,878 beginning August 1996
and a balloon payment of $1,478,357 due July 2003....... 1,918,975 634,970
Estimated contingent consideration payable to ODSI,
discounted at 7.25%, payable in quarterly variable
installments, based on a percent of certain product
sales, from 1995 to 2004 (Note 4)....................... 2,163,244 2,067,149
Other..................................................... 10,199 --
----------- -----------
12,667,600 15,051,338
Less -- Current portion................................... 381,932 367,969
----------- -----------
$12,285,668 $14,683,369
=========== ===========
</TABLE>

The Convertible Debentures were called for redemption on October 10, 1995.
Holders of the Debentures have the option of converting their Debentures into
shares of Meridian Diagnostics' common stock prior to the redemption date of
November 30, 1995, at a conversion price of $5.97 per share or, upon delivery of
the Debentures, receiving cash. The Debentures will be redeemed at 105% of their
face amount plus accrued interest. The conversion price of $5.97 per share is
equivalent to a conversion rate of 167.5 shares per each $1,000 principal amount
of Debentures. Through September 30, 1995, $3,520,000 of Debentures were
converted to common stock net of $186,000 of deferred debenture offering costs,
which were charged to additional paid-in capital. As of November 10, 1995,
$1,074,000 of Debentures were outstanding.

On a pro forma basis, assuming full conversion of the Debentures as of
October 1, 1994, primary earnings per share for the year ended September 30,
1995 would have been reduced by $0.01 per share from $0.29 per share to $0.28
per share.

The domestic bank notes payable are part of a bank credit arrangement which
also includes a $6,000,000 line of credit which calls for interest at the prime
rate and is part of the same security agreement. There were no borrowings
outstanding on the line of credit at September 30, 1995. In connection with the
bank credit arrangement, the Company has agreed, among other things, to meet
certain financial ratio requirements and to limit additional indebtedness.

F-11
<PAGE> 49

MERIDIAN DIAGNOSTICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Maturities on the above long-term obligations are as follows:

<TABLE>
<S> <C>
1996............................................................ $ 381,932
1997............................................................ 771,672
1998............................................................ 379,451
1999............................................................ 372,479
2000............................................................ 285,985
Thereafter...................................................... 10,476,081
-----------
$12,667,600
===========
</TABLE>

(b) CAPITAL LEASE OBLIGATIONS -- The Company leases equipment with cost and
related accumulated depreciation of $259,240 and $56,953, respectively, under
capital leases expiring in various years through 2002. Amortization of assets
under capital leases is included in depreciation expense.

The future minimum annual rentals under the capital leases at September 30,
1995 are as follows:

<TABLE>
<S> <C>
1996............................................................ $ 73,623
1997............................................................ 75,325
1998............................................................ 22,851
1999............................................................ 22,851
2000............................................................ 21,791
Thereafter...................................................... 34,148
--------
Subtotal........................................................ $250,589
Less portion of payments representing interest.................. (37,103)
--------
Present value of lease payments................................. $213,486
========
</TABLE>

(c) COMMITMENTS -- The Company has royalty agreements with various parties
which require the Company to pay a specified percentage of the sales of certain
products (1% to 10%). Royalty expenses for the years ended September 30, 1995,
1994 and 1993 were approximately $408,000, $357,000 and $280,000 respectively.

F-12
<PAGE> 50

MERIDIAN DIAGNOSTICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(6) INCOME TAXES

The provision for income taxes includes the following components:

<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
----------------------------------------
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Federal:
Currently payable............................ $1,866,090 $1,337,356 $ 884,296
Temporary differences --
Revenue received in advance............... -- -- 18,700
Tax depreciation greater (less) than book
depreciation............................ (26,842) (6,800) (6,561)
State franchise taxes..................... (14,335) (26,520) 2,959
Currently nondeductible expenses.......... (13,720) (42,745) 8,809
Intangible asset amortization............. (155,693) (134,627) --
Other, net................................ 117,224 (5,100) 598
---------- ---------- ----------
1,772,724 1,121,564 908,801
State and local................................ 240,662 201,000 104,116
Foreign........................................ 422,429 219,718 198,987
---------- ---------- ----------
Total provision for income taxes..... $2,435,815 $1,542,282 $1,211,904
========== ========== ==========
</TABLE>

The following is a reconciliation between the statutory federal income tax
rate and the effective rate derived by dividing the provision for income taxes
by earnings before income taxes:

<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
-------------------------------------------------------------
1995 1994 1993
----------------- ----------------- -----------------
AMOUNT RATE AMOUNT RATE AMOUNT RATE
---------- ---- ---------- ---- ---------- ----
<S> <C> <C> <C> <C> <C> <C>
Computed provision for income
taxes at statutory rate..... $2,026,375 34.0% $1,354,357 34.0% $1,054,462 34.0%
Increase/(decrease) in taxes
resulting from --
State and local income
taxes, net of federal
income tax effect........ 158,837 2.7 132,660 3.3 68,684 2.2
Foreign taxes............... 154,399 2.6 64,703 1.6 69,453 2.2
Research and experimentation
tax credits.............. -- -- -- -- (4,000) (.1)
Amortization of cost in
excess of net assets
acquired................. 8,033 .1 8,033 .2 8,033 .3
Tax exempt income........... (38,003) (.6) (14,022) (.4) (2,608) (.1)
Foreign Sales Corporation
benefit.................. (34,250) (.6) (18,333) (.4) (2,000) (.1)
Officers Life Insurance..... 22,384 .4 -- -- -- --
Other, net.................. 138,040 2.3 14,884 .4 19,880 .7
---------- ---- ---------- ---- ---------- ----
Actual provision for
income taxes...... $2,435,815 40.9% $1,542,282 38.7% $1,211,904 39.1%
========== ==== ========== ==== ========== ====
</TABLE>

F-13
<PAGE> 51

MERIDIAN DIAGNOSTICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The components of the net deferred tax assets were as follows at:

<TABLE>
<CAPTION>
SEPTEMBER 30,
-----------------------
1995 1994
--------- ---------
<S> <C> <C>
Deferred tax assets:
State income taxes......................................... $ 67,966 $ 60,573
Currently nondeductible expenses........................... 126,663 104,073
Intangible asset amortization.............................. 321,843 173,686
Other...................................................... 135,455 118,283
--------- ---------
Total.............................................. $ 651,927 $ 456,615
--------- ---------
Deferred tax liabilities:
Depreciation............................................... (27,295) (113,845)
Other...................................................... (211,843) --
--------- ---------
Total.............................................. $(239,138) $(113,845)
--------- ---------
Net deferred tax assets............................ $ 412,789 $ 342,770
========= =========
</TABLE>

No valuation allowances are recorded against deferred tax assets or
deferred tax liabilities at September 30, 1995 or 1994.

(7) EMPLOYEE BENEFITS

(a) SAVINGS AND INVESTMENT PLAN -- The Company has a profit sharing and
retirement savings plan covering substantially all full-time employees. Profit
sharing contributions to the plan, which are discretionary, are determined by
the Board of Directors. The plan permits participants to contribute to the plan
through salary reduction. Under terms of the plan, the Company will match up to
3% of the employee contributions. Discretionary and matching contributions by
the Company to the plan amounted to approximately $273,000, $270,000, and
$219,000, during 1995, 1994 and 1993, respectively.

(b) STOCK OPTIONS -- At September 30, 1995, 1,431,235 of the authorized but
unissued common shares of the Company were reserved for issuance to directors,
executives, key employees and consultants for stock options. Of the reserved
shares, 773,663 were subject to options outstanding at September 30, 1995.
Options may be granted at exercise prices from 95% to 110% of the market value
of the underlying common stock on the date of grant and become exercisable on
vesting schedules established at the time of grant. All options contain
provisions restricting their transferability and limiting their exercise in the
event of termination of employment or the disability or death of the optionee.
Options may be granted both as Incentive Stock Options designed to provide
certain tax benefits under the Internal Revenue Code and as Nonqualified Options
without such tax benefits.

F-14
<PAGE> 52

MERIDIAN DIAGNOSTICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Transactions involving the stock options are shown in the table below:

<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
-------------------------------
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Outstanding at beginning of period (from $1.05 to
$7.57 per share).................................... 659,715 518,580 395,671
Granted (from $4.69 to $6.42 per share)............... 189,188 185,422 125,413
Expired or canceled................................... (17,817) (8,950) (517)
Exercised*............................................ (57,423) (35,337) (1,987)
------- ------- -------
Outstanding at end of period (from $1.05 to $7.57 per
share).............................................. 773,663 659,715 518,580
======= ======= =======
Exercisable at end of period (from $1.05 to $7.57 per
share).............................................. 353,541 227,136 135,477
======= ======= =======
</TABLE>

- ---------------
* Includes 14,574 shares surrendered in conjunction with the exercise of stock
options.

(8) QUARTERLY FINANCIAL DATA -- UNAUDITED (Amounts in thousands, except for per
share data)

<TABLE>
<CAPTION>
FOR THE QUARTER ENDED IN FISCAL 1995
-----------------------------------------------------
DECEMBER 31 MARCH 31 JUNE 30 SEPTEMBER 30
----------- -------- ------- ------------
<S> <C> <C> <C> <C>
Net sales...................................... $ 5,106 $6,469 $ 6,782 $6,753
Gross profit................................... 3,397 4,355 4,525 4,824
Net earnings................................... 430 945 985 1,164
Primary earnings per common share.............. .04 .08 .08 .09
Cash dividends per common share................ .02 .02 .03 .03
</TABLE>

<TABLE>
<CAPTION>
FOR THE QUARTER ENDED IN FISCAL 1994
-----------------------------------------------------
DECEMBER 31 MARCH 31 JUNE 30 SEPTEMBER 30
----------- -------- ------- ------------
<S> <C> <C> <C> <C>
Net sales...................................... $ 3,625 $5,891 $ 5,717 $6,644
Gross profit................................... 2,486 3,557 3,685 4,631
Net earnings................................... 200 610 603 1,028
Primary earnings per common share.............. .01 .05 .05 .09
Cash dividends per common share................ .02 .02 .02 .02
</TABLE>

F-15
<PAGE> 53

MERIDIAN DIAGNOSTICS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
1996 1995
----------- -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and short-term investments................................. $10,244,476 $ 8,918,637
Accounts receivable, less allowance of $150,755 and $164,136
for doubtful accounts........................................ 6,534,178 6,482,999
Inventories..................................................... 3,330,673 3,032,655
Prepaid expenses and other...................................... 588,299 165,553
Deferred tax assets............................................. 409,605 324,910
----------- -------------
Total current assets......................................... 21,107,231 18,924,754
----------- -------------
PROPERTY, PLANT AND EQUIPMENT:
Land............................................................ 273,822 269,217
Building improvements........................................... 5,968,729 6,162,668
Machinery, equipment and furniture.............................. 5,727,552 5,525,455
Construction in progress........................................ 77,280 --
----------- -------------
12,047,383 11,957,340
Less -- Accumulated depreciation and amortization............... 4,975,620 4,816,905
----------- -------------
Net property, plant and equipment............................ 7,071,763 7,140,435
----------- -------------
OTHER ASSETS:
Long-term receivables, including cash surrender value of
insurance policies........................................... 184,804 168,892
Deferred royalties.............................................. 97,946 74,762
Deferred tax assets............................................. 177,879 87,879
Deferred debenture offering costs, net of accumulated
amortization of $133,357..................................... -- 395,731
Covenants not to compete, net of accumulated amortization
of $2,072,892 and $1,827,718................................. 2,187,702 2,432,876
License agreements, net of accumulated amortization of
$801,210 and $772,433........................................ 333,903 362,680
Patents, trade names, customer lists and distributorships, net
of accumulated amortization of $579,960 and $475,762......... 1,733,040 1,837,238
Other intangible assets, net of accumulated amortization of
$106,603 and $85,570......................................... 524,397 545,430
Costs in excess of net assets acquired, net of accumulated
amortization
of $560,630 and $458,482..................................... 2,496,363 2,598,511
----------- -------------
Total other assets........................................... 7,736,034 8,503,999
----------- -------------
Total assets................................................. $35,915,028 $ 34,569,188
========== ==========
</TABLE>

F-16
<PAGE> 54

MERIDIAN DIAGNOSTICS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
1996 1995
----------- -------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term obligations........................ $ 2,723,000 $ 381,932
Current portion of capital lease obligations.................... 108,649 63,561
Accounts payable................................................ 786,117 689,869
Accrued payroll and payroll taxes............................... 505,387 723,946
Other accrued expenses.......................................... 1,109,513 937,348
Income taxes payable............................................ 1,296,820 458,707
----------- -------------
Total current liabilities.................................. 6,529,486 3,255,363
----------- -------------
LONG-TERM OBLIGATIONS............................................. 1,907,959 12,285,668
----------- -------------
CAPITAL LEASE OBLIGATIONS......................................... 387,438 149,925
----------- -------------
SHAREHOLDERS' EQUITY:
Preferred stock, no par value, 1,000,000 shares authorized; none
issued
Common stock, no par value, 50,000,000 shares authorized;
14,257,006 and 12,924,814 shares issued and outstanding
respectively, stated at...................................... 2,372,646 1,487,159
Additional paid-in capital...................................... 20,434,464 13,895,901
Retained earnings............................................... 4,500,496 3,747,930
Foreign currency translation adjustment......................... (217,461) (252,758)
----------- -------------
Total shareholders' equity................................. 27,090,145 18,878,232
----------- -------------
Total liabilities and shareholders' equity................. $35,915,028 $ 34,569,188
========== ==========
</TABLE>

F-17
<PAGE> 55

MERIDIAN DIAGNOSTICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
MARCH 31,
-----------------------------
1996 1995
----------- -------------
<S> <C> <C>
NET SALES......................................................... $12,776,481 $ 11,574,417
COST OF SALES..................................................... 3,999,094 3,821,956
----------- -------------
Gross Profit............................................... 8,777,387 7,752,461
----------- -------------
OPERATING EXPENSES:
Research and development........................................ 696,639 713,223
Selling and marketing........................................... 2,814,787 2,420,944
General and administrative...................................... 1,996,180 1,947,312
----------- -------------
Total operating expenses................................... 5,507,606 5,081,479
----------- -------------
Operating income........................................... 3,269,781 2,670,982
----------- -------------
OTHER INCOME (EXPENSE):
Licensing and commission fees................................... 32,938 66,403
Investment income............................................... 242,632 195,940
Interest expense and amortization of debt expenses.............. (236,018) (561,483)
Other, net...................................................... 12,076 874
Currency gains/(losses)......................................... 23,631 3,506
----------- -------------
Total other income (expense)............................... 75,259 (294,760)
----------- -------------
Earnings before income taxes............................... 3,345,040 2,376,222
INCOME TAXES...................................................... 1,360,910 1,000,886
----------- -------------
Net earnings............................................... $ 1,984,130 $ 1,375,336
========== ==========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING..................... 14,071,922 12,299,598
========== ==========
EARNINGS PER COMMON SHARE......................................... $ .14 $ .11
========== ==========
</TABLE>

F-18
<PAGE> 56

MERIDIAN DIAGNOSTICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(UNAUDITED)

F-19
<PAGE> 57

MERIDIAN DIAGNOSTICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
MARCH 31,
-----------------------------
1996 1995
----------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings.................................................... $ 1,984,130 $ 1,375,336
Noncash items --
Loss on disposal of fixed assets............................. 5,869 --
Amortization of royalties.................................... 14,316 --
Depreciation of property, plant and equipment................ 495,255 456,464
Amortization of intangible assets............................ 517,214 468,833
Deferred interest expense.................................... 82,097 77,475
Deferred income taxes........................................ (174,695) (206,530)
Long term receivables........................................ (15,912) --
Changes in other current assets and current liabilities --
Accounts receivable, net..................................... (51,179) (600,667)
Inventories.................................................. (298,018) (114,718)
Prepaid expenses and other................................... (422,746) (188,143)
Accounts payable............................................. 96,248 (1,246,015)
Accrued expenses............................................. (46,394) 377,174
Income taxes payable......................................... 838,113 (44,440)
----------- -------------
Net cash provided by operating activities.................. 3,024,298 354,769
----------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property, plant and equipment acquired, net..................... (361,858) (1,185,438)
Royalty advanced................................................ (37,500) --
----------- -------------
Net cash used for investing activities..................... (399,358) (1,185,438)
----------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term obligations.............................. (364,713) (166,417)
Proceeds from long-term obligations............................. 395,576 907,317
Dividends paid.................................................. (1,231,564) (566,571)
Proceeds from issuance of common stock, net..................... (63,103) 22,646
Effect of exchange rate changes on cash......................... (35,297) (36,895)
----------- -------------
Net cash provided by (used for) financing activities....... (1,299,101) 160,080
----------- -------------
NET INCREASE (DECREASE) IN CASH AND SHORT-TERM INVESTMENTS........ 1,325,839 (670,589)
CASH AND SHORT-TERM INVESTMENTS AT BEGINNING OF PERIOD............ 8,918,637 8,831,983
----------- -------------
CASH AND SHORT-TERM INVESTMENTS AT END OF PERIOD.................. $10,244,476 $ 8,161,394
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for --
Income taxes................................................. $ 916,625 $ 1,193,950
========== ==========
Interest..................................................... $ 78,515 $ 447,071
========== ==========
Non-cash activities --
Common stock issued from conversion of subordinated
debentures, net of amortization of deferred debenture
offering cost of $379,847 and net conversion costs of
$77,649..................................................... $ 7,409,504 $ --
========== ==========
</TABLE>

F-20
<PAGE> 58

MERIDIAN DIAGNOSTICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(1) BASIS OF PRESENTATION

The consolidated financial statements included herein have not been
examined by independent public accountants, but include all adjustments
(consisting of normal recurring entries) which are, in the opinion of
management, necessary for a fair presentation of the results for such periods.

Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted pursuant to the requirements of the Securities and Exchange
Commission, although the Company believes that the disclosures included in these
financial statements are adequate to make the information not misleading.

It is suggested that these consolidated financial statements be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's latest annual report on Form 10-K.

The results of operations for the interim periods are not necessarily
indicative of the results to be expected for the year.

(2) INVENTORIES

Inventories are comprised of the following:

<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
1996 1995
---------- -------------
<S> <C> <C>
Raw materials.............................................. $1,086,710 $ 1,165,319
Work-in-process............................................ 909,404 626,077
Finished goods............................................. 1,334,559 1,241,259
---------- -------------
$3,330,673 $ 3,032,655
========= ==========
</TABLE>

(3) INCOME TAXES

The provisions for income taxes were computed at the estimated annualized
effective tax rates utilizing current tax law in effect, after giving effect to
research and experimentation credits.

(4) EARNINGS PER COMMON SHARE

Net earnings per share has been computed based upon the weighted average
number of shares outstanding during the periods including the effect of the
conversion of the subordinated debentures into common stock. No material
dilution results from outstanding stock options, the only common stock
equivalent. All share and per share information has been adjusted to reflect the
3 for 2 stock split in October 1995. Additionally, all share and per share
information has been adjusted for a 3% stock dividend in November 1994.

(5) TRANSLATION OF FOREIGN CURRENCY

Assets and liabilities of foreign operations are translated using
quarter-end exchange rates, and revenues and expenses are translated using
exchange rates prevailing during the year with gains or losses resulting from
translation included in a separate component of shareholders' equity. Gains and
losses resulting from transactions in foreign currencies were immaterial.

(6) RECLASSIFICATIONS

Certain reclassifications have been made to the accompanying financial
statements to conform to the March 31, 1996 presentation.

F-21
<PAGE> 59

Cryptosporidium and Giardia, common intestinal parasites, can infect the
gastrointestinal tract causing severe diarrhea, abdominal pain, nausea and
weight loss. The Company's Merifluor C/G utilizes fluorescent dyes to illuminate
the organisms making them easy
to identify, thereby reducing [Photograph depicts Fluorescing
processing time. This test is the Cryptosporidium and Giardia in
only test in the marketplace which a patient's specimen]
allows the simultaneous detection of
both Cryptosporidium and Giardia.

The Company is a leading supplier of
parasitology diagnostic tests and
related products. The Company's broad
product offering includes the Premier [Photograph of Premier product]
Giardia lamblia targeted to large
volume users such as large hospitals
and reference laboratories.

In October 1995, the Company introduced
the Para-Pak ECOFIX and Para-Pak Ultra
ECOFIX. These products result in easier,
safer and faster specimen processing and
lower-cost disposal of the transport
container.

[Photograph of Para-Pak ECOFIX and
Para-Pak Ultra ECOFIX products]
<PAGE> 60

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

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY, THE SELLING SHAREHOLDER OR ANY OF THE UNDERWRITERS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY OF THE SECURITIES OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH
SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH
OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO ITS DATE.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary............................ 3
Risk Factors.................................. 6
Capitalization................................ 8
Dividend Policy............................... 9
Price Range of Common Stock................... 10
Selected Consolidated Financial
Data........................................ 11
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................. 12
Business...................................... 17
Management.................................... 26
Principal Shareholders and Selling
Shareholder................................. 28
Description of Capital Stock.................. 29
Underwriting.................................. 31
Legal Matters................................. 32
Experts....................................... 32
Glossary of Selected Terms.................... 33
Index to Consolidated Financial Statements.... F-1
</TABLE>

---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
1,700,000 SHARES
LOGO
COMMON STOCK
------------------------

PROSPECTUS
-------------------------
CLEARY GULL REILAND & MCDEVITT INC.

THE OHIO COMPANY

RONEY & CO.
MAY 15, 1996
---------------------------------------------------------------
---------------------------------------------------------------