**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**Form 10-Q**

 
| **x** | **QUARTERLY REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|-------|--------------------------------------------------------------------------------------------------------|

 

**For the quarterly period ended March 31, 2010**

 
| **o** | **TRANSITION REPORT UNDER SECTION 13  OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|-------|---------------------------------------------------------------------------------------------------|

 

**For thetransition period from          to           **

 

**CommissionFile Number 000-24541**

** **

**CORGENIXMEDICAL CORPORATION**

(Name of Small Business Issuer in its Charter)

 

| **Nevada**                      | ** ** | **93-1223466**                       |
|---------------------------------|------------|--------------------------------------|
| (State or other jurisdiction of |       | (I.R.S. Employer Identification No.) |
| incorporation or organization)  |       |                                 |

 

**11575 Main Street, Number 400, Broomfield, CO 80020**

(Address of principal executive offices, including zip code)

 

**(303) 457-4345**

(Issuer’s telephone number, including area code)

 

 

(Former name, former address and former fiscal year, if changed sincelast report)

 

Check whether the issuer:  (1) filedall reports required to be filed by Section 13 or 15(d) of theExchange Act during the past 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject tosuch filing guidance for the past 90 days.   Yes x   No  o

 

Indicate by check mark whether the registrant hassubmitted electronically and posted on its corporate Web site, if any, everyInteractive Data File required to be submitted and posted pursuant to Rule 405of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (orfor such shorter period that the registrant was required to submit and postsuch files). Yes o  No o

 

Indicate by check mark whether the registrant is a large acceleratedfiler, an accelerated filer, a non-accelerated filer, or a smaller reportingcompany. See the definitions of “large accelerated filer,” “accelerated filer”and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

| Large accelerated filer o                     |   | Accelerated filer o         |
|-----------------------------------------------|--------|-----------------------------|
|                                          |   |                        |
| Non-accelerated filer o                       |   | Smaller reporting company x |
| (Do not check if a smaller reporting company) |   |                        |

 

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2of the Act) Yes o No x

 

Thenumber of shares of Common Stock outstanding was 31,037,819 as of May 7,2010.

 

 

 

----

 

**CORGENIX MEDICAL CORPORATION**

**March 31, 2010**

 

**TABLE OF CONTENTS**

 
| **Part I**           |                                                                                        |   |
|---------------------------|---------------------------------------------------------------------------------------------|--------|
|                      |                                                                                        |   |
| **Financial Information** |                                                                                        | 3      |
|                      |                                                                                        |   |   |
| Item  1.                  | Consolidated  Financial Statements                                                          |   | 3 |
|                      |                                                                                        |   |   |
| Item  2.                  | Management’s  Discussion and Analysis Of Financial Condition and Results of Operations |   | 20 |
|                      |                                                                                        |   |   |
| Item  3.                  | Quantitative  and Qualitative Disclosures About Market Risk                                 |   | 27 |
|                      |                                                                                        |   |   |
| Item  4.                  | Controls  and Procedures                                                                    |   | 27 |
|                      |                                                                                        |   |   |
| **Part II**          |                                                                                        |   |
|                      |                                                                                        |   |
| **Other Information**     |                                                                                        | 27     |
|                      |                                                                                        |   |
| Item  1.                  | Legal  Proceedings                                                                          |   | 27 |
|                      |                                                                                        |   |   |
| Item  2.                  | Unregistered  Sales of Equity Securities and Use of Proceeds                                |   | 27 |
|                      |                                                                                        |   |   |
| Item  3.                  | Defaults  Upon Senior Securities                                                            |   | 28 |
|                      |                                                                                        |   |   |
| Item  4.                  | Submission  of Matters to a Vote of Security Holders                                        |   | 28 |
|                      |                                                                                        |   |   |
| Item  5.                  | Other  Information                                                                          |   | 28 |
|                      |                                                                                        |   |   |
| Item  6.                  | Exhibits  and Reports on Form 8-K                                                      |   | 28 |
|                      |                                                                                        |   |   |
| Certifications            |                                                                                        |   |
|                      |                                                                                        |   |

 

2

----

 

**PART I**

#### **Item 1.Consolidated Financial Statements**

# **CORGENIX MEDICAL CORPORATION**

### **ANDSUBSIDIARIES**

 

Consolidated Balance Sheets

(Unaudited)

 
| ** **                                                                                                                                                                                                                 | ** ** | **March 31,  2010** | ** ** | **June 30, 2009** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------|------------|-----------------------------|------------|
| **Assets**                                                                                                                                                                                                                 | ** ** | ** **               | ** ** | ** **                  | ** ** |
| Current assets:                                                                                                                                                                                                            |       |                     |       |                        |       |
| Cash and cash equivalents                                                                                                                                                                                                  |       | $                        | 487,654    |                        | $          | 785,466 |   |
| Accounts receivable, less allowance for doubtful  accounts of $30,000 and $103,689 as of March 31, 2010 and  June 30, 2009                                                                        |       | 1,381,836                |       | 1,339,409                   |       |
| Other receivables                                                                                                                                                                                                          |       | 226,631                  |       | —                      |       |
| Inventories                                                                                                                                                                                                                |       | 2,527,781                |       | 2,596,048                   |       |
| Prepaid expenses and other current assets                                                                                                                                                                                  |       | 92,386                   |       | 205,320                     |       |
| Total current assets                                                                                                                                                                                                       |       | 4,716,288                |       | 4,926,243                   |       |
| Equipment                                                                                                                                                                                                                  |       |                     |       |                        |       |
| Capitalized software costs                                                                                                                                                                                                 |       | 258,947                  |       | 255,617                     |       |
| Machinery and laboratory equipment                                                                                                                                                                                         |       | 1,059,312                |       | 1,024,848                   |       |
| Furniture, fixtures, leaseholds & office  equipment                                                                                                                                                               |       | 1,847,719                |       | 1,816,462                   |       |
|                                                                                                                                                                                                                       |       | 3,165,978                |       | 3,096,927                   |       |
| Accumulated depreciation and amortization                                                                                                                                                                                  |       | (1,908,765               | )          | (1,609,361                  | )          |
| Net equipment                                                                                                                                                                                                              |       | 1,257,213                |       | 1,487,566                   |       |
| Intangible assets:                                                                                                                                                                                                         |       |                     |       |                        |       |
| Licenses                                                                                                                                                                                                                   |       | 347,610                  |       | 369,671                     |       |
| Other assets:                                                                                                                                                                                                              |       |                     |       |                        |       |
| Deferred financing costs net of amortization of  $1,957,366 and $1,929,008                                                                                                                                                 |       | 25,267                   |       | 24,595                      |       |
| Other assets                                                                                                                                                                                                               |       | 99,653                   |       | 97,706                      |       |
| Total assets                                                                                                                                                                                                               |       | $                        | 6,446,031  |                        | $          | 6,905,781 |   |
| **Liabilities and Stockholders’  Equity**                                                                                                                                                                             | ** ** | ** **               | ** ** | ** **                  | ** ** |
| Current liabilities:                                                                                                                                                                                                       |       |                     |       |                        |       |
| Current portion of notes payable, net of discount  (Note 7)                                                                                                                                                                |       | $                        | 69,690     |                        | $          | 100,439 |   |
| Current portion of capital lease obligations                                                                                                                                                                               |       | 108,746                  |       | 203,506                     |       |
| Inventory loan payable                                                                                                                                                                                                     |       | 320,000                  |       | —                      |       |
| Due to factor (Note 6)                                                                                                                                                                                                     |       | 837,035                  |       | 1,112,299                   |       |
| Accounts payable                                                                                                                                                                                                           |       | 734,346                  |       | 858,887                     |       |
| Accrued payroll and related liabilities                                                                                                                                                                                    |       | 274,988                  |       | 369,824                     |       |
| Accrued liabilities-other                                                                                                                                                                                                  |       | 280,738                  |       | 268,054                     |       |
| Total current liabilities                                                                                                                                                                                                  |       | 2,625,543                |       | 2,913,009                   |       |
| Notes payable, net of discount, less current  portion (Note 7)                                                                                                                                                             |       | 28,281                   |       | 10,600                      |       |
| Capital lease obligations, less current portion                                                                                                                                                                            |       | 16,922                   |       | 60,008                      |       |
| Deferred facility lease payable, excluding current  portion (Note 2)                                                                                                                                                       |       | 501,706                  |       | 673,315                     |       |
| Total liabilities                                                                                                                                                                                                          |       | 3,172,452                |       | 3,656,932                   |       |
| Redeemable common stock, $0.001 par value. 357,617  and 412,633 shares issued and outstanding, aggregate redemption  value of $203,126,and $264,375 (Note 4)                                                     |       | 114,222                  |       | 89,973                      |       |
|                                                                                                                                                                                                                       |       |                     |       |                        |       |
| Redeemable preferred stock, $0.001 par value.  236,680 and 236,680 shares issued and  outstanding, aggregate redemption value of $59,170, net of  unaccreted dividends of $21,472 and $30,809 (Note 4) |       | 54,266                   |       | 45,863                      |       |
|                                                                                                                                                                                                                       |       |                     |       |                        |       |
| Stockholders’ equity (Note 5):                                                                                                                                                                                        |       |                     |       |                        |       |
| Common stock, $0.001 par value. Authorized  200,000,000 shares; Issued and outstanding 31,036,059 and 30,294,505  March 31 and June 30, respectively                                                        |       | 30,678                   |       | 29,881                      |       |
| Additional paid-in capital                                                                                                                                                                                                 |       | 18,698,183               |       | 18,595,066                  |       |
| Accumulated deficit                                                                                                                                                                                                        |       | (15,567,521              | )          | (15,525,451                 | )          |
| Accumulated other comprehensive income                                                                                                                                                                                     |       | (56,249                  | )          | 13,517                      |       |
| Total stockholders’ equity                                                                                                                                                                                            |       | 3,105,091                |       | 3,113,013                   |       |
| Total liabilities and stockholders’ equity                                                                                                                                                                            |       | $                        | 6,446,031  |                        | $          | 6,905,781 |   |

 

Seeaccompanying notes to consolidated financial statements.

 

3

----

 

**CORGENIX MEDICALCORPORATIONAND SUBSIDIARIES**

## Consolidated Statements ofOperations and Comprehensive Loss

(Unaudited)

 
| ** **                                                              | ** ** | **Three Months Ended** | ** ** | **Nine months Ended** | ** ** |
|-------------------------------------------------------------------------|------------|----------------------------------|------------|----------------------------|------------|
| ** **                                                              | ** ** | **March 31,  2010**         | ** ** | **March 31,  2009**   | ** ** | **March 31,****2010** | ** ** | **March 31,  2009** | ** ** |
| Net sales                                                               |       | $                                | 2,196,010  |                       | $          | 2,032,024 |   | $ | 6,200,429 |   | $ | 6,028,946 |   |
| Cost of sales                                                           |       | 970,076                          |       | 888,357                    |       | 2,783,934 |   | 2,624,590 |   |
|                                                                    |       |                             |       |                       |       |   |   |   |   |
| Gross profit                                                            |       | 1,225,934                        |       | 1,143,667                  |       | 3,416,495 |   | 3,404,356 |   |
|                                                                    |       |                             |       |                       |       |   |   |   |   |
| Operating expenses:                                                     |       |                             |       |                       |       |   |   |   |   |
| Selling and marketing                                                   |       | 375,369                          |       | 468,251                    |       | 1,204,581 |   | 1,404,555 |   |
| Research and development                                                |       | 190,155                          |       | 172,513                    |       | 506,574 |   | 572,210 |   |
| General and administrative                                              |       | 514,183                          |       | 563,963                    |       | 1,462,914 |   | 1,639,007 |   |
| Total expenses                                                          |       | 1,079,707                        |       | 1,204,727                  |       | 3,174,069 |   | 3,615,772 |   |
|                                                                    |       |                             |       |                       |       |   |   |   |   |
| Operating income (loss)                                                 |       | 146,227                          |       | (61,060                    | )          | 242,426 |   | (211,416 | ) |
|                                                                    |       |                             |       |                       |       |   |   |   |   |
| Other income (expense):                                                 |       |                             |       |                       |       |   |   |   |   |
| Other income (net)                                                      |       | 94                               |       | 80,933                     |       | 409 |   | 90,953 |   |
| Loss on early extinguishment of debt                                    |       | —                           |       | —                     |       | (22,000 | ) | — |   |
| Interest expense                                                        |       | (65,146                          | )          | (474,247                   | )          | (230,252 | ) | (942,944 | ) |
| Total other income (expense)                                            |       | (65,052                          | )          | (393,314                   | )          | (251,843 | ) | (851,991 | ) |
|                                                                    |       |                             |       |                       |       |   |   |   |   |
| Net income (loss)                                                       |       | 81,175                           |       | (454,374                   | )          | (9,417 | ) | (1,063,407 | ) |
| Accreted dividends on redeemable preferred and  redeemable common stock |       | 10,884                           |       | 934                        |       | 32,653 |   | 934 |   |
|                                                                    |       |                             |       |                       |       |   |   |   |   |
| Net income (loss) attributable to common  shareholders                  |       | $                                | 70,291     |                       | $          | (455,308 | ) | $ | (42,070 | ) | $ | (1,064,341 | ) |
|                                                                    |       |                             |       |                       |       |   |   |   |   |
| Net income (loss) per share, basic and diluted                          |       | $                                | *0.00      |                       | $          | (0.02 | ) | $ | *(0.00) |   | $ | (0.04 | ) |
|                                                                    |       |                             |       |                       |       |   |   |   |   |
| Weighted average shares outstanding, basic and  diluted (note 2)        |       | 31,035,354                       |       | 30,286,922                 |       | 30,789,725 |   | 30,219,233 |   |
|                                                                    |       |                             |       |                       |       |   |   |   |   |
| Net income (loss)                                                       |       | $                                | 81,175     |                       | $          | (454,374 | ) | $ | (9,417 | ) | $ | (1,063,407 | ) |
|                                                                    |       |                             |       |                       |       |   |   |   |   |
| Other comprehensive(loss-foreign currency  translation                  |       | (26,405                          | )          | (4,039                     | )          | (69,766 | ) | (52,272 | ) |
|                                                                    |       |                             |       |                       |       |   |   |   |   |
| Total comprehensive income (loss)                                       |       | $                                | 54,770     |                       | $          | (458,413 | ) | $ | (79,183 | ) | $ | (1,115,676 | ) |

 

----

*Lessthan $0.01 per share

Seeaccompanying notes to consolidated financial statements.

 

4

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**CORGENIX MEDICAL CORPORATION****AND SUBSIDIARIES**

# Consolidated Statement ofStockholders’ Equity

For the nine months ended March 31, 2010

(Unaudited)

 
| ** **                                                                   | ** ** | **Common  Stock,  Number  of Shares** | ** ** | **Common  Stock,  $0.001  par** | ** ** | **Additional  Paid-in  Capital** | ** ** | **Accumulated  Deficit** | ** ** | **Accumulated  Other  Comprehensive  Income** | ** **  | **Total  Stockholders’  Equity** | ** ** |
|------------------------------------------------------------------------------|------------|---------------------------------------|------------|---------------------------------|------------|----------------------------------|------------|--------------------------|------------|-----------------------------------------------|-------------|---------------------------------------|------------|
| **Balances at June 30, 2009**                                           |       | 30,294,505                            |       | $                               | 29,881     |                             | $          | 18,595,066               |       | $                                             | (15,525,451 | )                                     | $          | 13,517 |   | $ | 3,113,013 |   |
| Issuance of common stock for services                                   |       | 773,406                               |       | 774                             |       | 72,055                           |       | —                   |       | —                                        |        | 72,829                                |       |
| Compensation expense recorded as a result of  stock options Issued |       | —                                |       | —                          |       | 24,634                           |       | —                   |       | —                                        |        | 24,634                                |       |
| Issuance of common stock for license                                    |       | 23,164                                |       | 23                              |       | 2,525                            |       | —                   |       | —                                        |        | 2,548                                 |       |
| Issuance of warrants for license                                             |       | —                                |       | —                          |       | 3,903                            |       | —                   |       | —                                        |        | 3,903                                 |       |
| Cancellation of redeemable stock upon note pay  down                    |       | (55,016                               | )          | —                          |       | —                           |       | —                   |       | —                                        |        | —                                |       |
| Accreted dividend on redeemable common and redeemable  preferred stock       |       | —                                |       | —                          |       | —                           |       | (32,653                  | )          | —                                        |        | (32,653                               | )          |
| Foreign currency translation                                                 |       | —                                |       | —                          |       | —                           |       | —                   |       | (69,766                                       | )           | (69,766                               | )          |
| Net loss                                                                     |       | —                                |       | —                          |       | —                           |       | (9,417                   | )          | —                                        |        | (9,417                                | )          |
| **Balances at March 31, 2010**                                          |       | 31,036,059                            |       | $                               | 30,678     |                             | $          | 18,698,183               |       | $                                             | (15,567,521 | )                                     | $          | (56,249 | ) | $ | 3,105,091 |   |

 

See accompanying notes to consolidated financial statements.

 

5

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**CORGENIXMEDICAL CORPORATIONAND SUBSIDIARIES**

 

## Consolidated Statements ofCash Flows

(Unaudited)

 
| ** **                                                                                 | ** ** | **Nine  months Ended** | ** ** |
|--------------------------------------------------------------------------------------------|------------|-----------------------------|------------|
| ** **                                                                                 | ** ** | **March 31,  2010**    | ** ** | **March 31,  2009** | ** ** |
| Cash flows from operating activities:                                                      |       |                        |       |   |   |
| Net loss                                                                                   |       | $                           | (9,417     | ) | $ | (1,063,407 | ) |
| Adjustments to reconcile net loss to net cash  provided by (used in) operating activities: |       |                        |       |   |   |
| Depreciation and amortization                                                              |       | 326,302                     |       | 333,989 |   |
| Accretion of discount on note payable                                                      |       | 2,244                       |       | 322,273 |   |
| Common stock issued for services                                                           |       | 2,805                       |       | 56,339 |   |
| Accrued stock-based compensation                                                           |       | —                      |       | 105,037 |   |
| Compensation expense recorded for stock options  issued                                    |       | 24,634                      |       | 81,382 |   |
| Amortization of deferred financing costs                                                   |       | 28,358                      |       | 457,918 |   |
| Changes in operating assets and liabilities:                                               |       |                        |       |   |   |
| Trade and other receivables, net                                                           |       | (206,637                    | )          | (203,081 | ) |
| Inventories                                                                                |       | 60,071                      |       | (277,377 | ) |
| Prepaid expenses and other assets, net                                                     |       | (17,803                     | )          | 53,928 |   |
| Accounts payable                                                                           |       | (127,415                    | )          | (55,288 | ) |
| Accrued payroll and related liabilities                                                    |       | (15,997                     | )          | 1,797 |   |
| Accrued interest and other liabilities                                                     |       | (165,028                    | )          | (195,858 | ) |
|                                                                                       |       |                        |       |   |   |
| Net cash used in operating activities                                                      |       | (97,883                     | )          | (382,348 | ) |
|                                                                                       |       |                        |       |   |   |
| Cash flows used in investing activities:                                                   |       |                        |       |   |   |
| Additions to equipment                                                                     |       | (85,479                     | )          | (37,544 | ) |
|                                                                                       |       |                        |       |   |   |
| Cash flows from financing activities:                                                      |       |                        |       |   |   |
| Increase (decrease) in amount due to factor                                                |       | (275,264                    | )          | 809,920 |   |
| Proceeds from inventory loan                                                               |       | 320,000                     |       | — |   |
| Proceeds from issuance of notes payable                                                    |       | 125,000                     |       | — |   |
| Payments on notes payable                                                                  |       | (140,312                    | )          | (1,038,215 | ) |
| Payments on capital lease obligations                                                      |       | (134,976                    | )          | (187,717 | ) |
| Net cash used in financing activities                                                      |       | (105,552                    | )          | (416,012 | ) |
|                                                                                       |       |                        |       |   |   |
| Net decrease in cash and cash equivalents                                                  |       | (288,914                    | )          | (835,904 | ) |
| Impact of exchange rate changes on cash                                                    |       | (8,898                      | )          | (19,243 | ) |
| Cash and cash equivalents at beginning of period                                           |       | 785,466                     |       | 1,520,099 |   |
| Cash and cash equivalents at end of period                                                 |       | $                           | 487,654    |   | $ | 664,952 |   |
| Supplemental cash flow disclosures:                                                        |       |                        |       |   |   |
| Cash paid for interest                                                                     |       | $                           | 201,776    |   | $ | 151,993 |   |
| Noncash investing and financing activities                                                 |       |                        |       |   |   |
| Issuance of warrants for license                                                           |       | $                           | 3,903      |   | $ | 12,957 |   |
| Issuance of stock for license                                                              |       | $                           | 2,548      |   | $ | — |   |
| Equipment acquired under capital leases                                                    |       | $                           | —     |   | $ | 43,538 |   |
| Conversion of redeemable common stock to note  payable                                     |       | $                           | —     |   | $ | 125,000 |   |
| Common stock issued for accrued stock-based  compensation                                  |       | $                           | 70,024     |   | $ | — |   |
| Warrant extensions as a result of debt  modification                                       |       | $                           | —     |   | $ | 279,527 |   |
| Accreted dividends on redeemable common and  redeemable preferred stock                    |       | $                           | 32,653     |   | $ | 934 |   |

 

Seeaccompanying notes to consolidated financial statements.

 

6

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**CORGENIX MEDICAL CORPORATION ANDSUBSIDIARIES**

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

**1.****                                    ****DESCRIPTION OFBUSINESS AND BASIS OF PRESENTATION**

 

##### ***(a)******                                ******Outlook***

#####  

Infiscal 2010, we continue to be focused on accelerating the market launch of ourAspirinWorks assay, beginning the market launch of our Anti-AtherOx Test Kit,submission of a 510(k) Premarket Notification to the FDA for our AtherOxTest Kit, completing further clinical studies for our Hyaluronic Test Kit, anda Fibromyalgia test kit, and continuing the development and strategiccollaboration towards the development of a group of products to detectpotential bio-terrorism agents.

 

***(b)******                                ******Recent Developments***

 

OnMarch 15, 2010, Corgenix UK Limited, a corporation incorporated in theUnited Kingdom (“Corgenix UK”) and a wholly owned subsidiary of CorgenixMedical Corporation (the “Company”), entered into a financing agreement withFaunus Group International. Inc. ,(“FGI”) (see also Note 6).

 

As previously disclosed, on September 30, 2009,we, along with our wholly owned subsidiary, Corgenix, Inc., entered into aFinancing Agreement, an Addendum to Financing Agreement, a Loan and SecurityAgreement and a Promissory Note (collectively, the “Summit Agreements”) withSummit Financial Resources, L.P., a Hawaii limited partnership (“Summit”).  We are jointly and severally liable for allobligations pursuant to the Summit Agreements. The Summit Agreements provide usand our subsidiary with a maximum credit line of $1,750,000 pursuant to anaccount factoring relationship, coupled with a secured line of credit (see alsoNote 6).

 

***(c)******                                 ******Company Overview***

 

Our business includes theresearch, development, manufacture, and marketing of in vitro (i.e., outsidethe human body) diagnostic products for use in disease detection andprevention.  We currently sell 52diagnostic products on a worldwide basis to hospitals, clinical testinglaboratories, universities, biotechnology and pharmaceutical companies andresearch institutions.  We have developedand we manufacture most of our products at our Colorado facility, and wepurchase what we refer to as OM Products (other manufacturers’ products) fromother healthcare manufacturers for resale by us.  All of these products are used in clinicallaboratories for the diagnosis and/or monitoring of three important areas ofhealth care:

 

·                 Autoimmune disease (diseases in which anindividual creates antibodies to one’s self, for example systemic lupuserythematosus (“SLE”) and rheumatoid arthritis (“RA”);

 

·                 Vascular disease (diseases associatedwith certain types of thrombosis or clot formation, for exampleantiphospholipid syndrome, deep vein thrombosis, stroke and coronaryocclusion); and

 

·                 Liver diseases (fibrosis and cirrhosis).

 

Inaddition to our current products, we are actively developing new laboratorytests in other important diagnostic testing areas.  See “— Other Strategic Relationships.”  We manufacture and market to clinicallaboratories and other testing sites worldwide. Our customers include large and emerging health care companies such asBio Rad Laboratories, Inc., Instrumentation Laboratories, HelenaLaboratories and Diagnostic Grifols, S.A.

 

Mostof our products are based on our patented and proprietary application of EnzymeLinked ImmunoSorbent Assay, or ELISA, technology, a clinical testingmethodology commonly used worldwide. Most of our current products are based on this platform technology in adelivery format convenient for clinical testing laboratories.  The delivery format, which is referred to as “Microplate,”allows the testing of up to 96 samples per plate, and is one of the mostcommonly used formats, employing conventional testing equipment found invirtually all clinical laboratories.  Theavailability and broad acceptance of ELISA Microplate products reduces entrybarriers worldwide for our new products that employ this technology anddelivery format.  Our products are soldas “test kits” that include all of the materials required to perform the test,except for routine laboratory chemicals and instrumentation.  A test using ELISA technology involves aseries of reagent additions into the Microplate, triggering a compleximmunological reaction in 

 

7

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whicha resulting color occurs.  The amount ofcolor developed in the final step of the test is directly proportional to theamount of the specific marker being tested for in the patient or unknownsample.  The amount of color is measuredand the results calculated using routine laboratory instrumentation.  Our technology specifies a process by whichbiological materials are attached to the fixed surface of a diagnostic testplatform.  Products developed using thisunique attachment method typically demonstrate a more uniform and stablemolecular configuration, providing a longer average shelf life, increased accuracyand superior specificity than the products of our competitors.

 

Someof the OM products which we obtain from other manufacturers and sell throughour distribution network utilize technologies other than our patented andproprietary ELISA technology.

 

Ourdiagnostic tests are intended to aid in the identification of the causes ofillness and disease, enabling a physician to select appropriate patienttherapy.

 

Internallyand through collaborative arrangements, we are developing additional productsthat are intended to broaden the range of applications for our existingproducts and to result in the introduction of new products.

 

Since1990, our sales force and distribution partners have sold over 12 million testsworldwide under the REAADS and Corgenix labels, as well as products sold underother manufacturers’ labels, referred to as OEM products.  An integral part of our strategy is to workwith corporate partners to develop market opportunities and access importantresources.  We believe that our relationshipswith current and potential partners will enable us to enhance our menu ofdiagnostic products and accelerate our ability to penetrate the worldwidemarkets for new products.

 

Wecurrently use the REAADS and Corgenix trademarks and trade names in the sale ofthe products which we manufacture.  Theseproducts constitute the majority of our product sales.

 

**(2)****                                ****Summary of Significant Accounting Policies**

 

***(a)******                                ******Application of New Accounting Standards***

 

In June 2009, the Financial AccountingStandards Board (“FASB”) issued FASB ASC 105, *GenerallyAccepted Accounting Principles (“GAAP”),* which establishes the FASBAccounting Standards Codification as the sole source of authoritative generallyaccepted accounting principles. Pursuant to the provisions of FASB ASC 105, wehave updated references to GAAP in our financial statements issued for theperiod ending March 31, 2010. The adoption of FASB ASC 105 did not impactour financial position or our results of operations.

 

***(b)******                                ******Principles of Consolidation***

 

The consolidated financial statements include the accounts of CorgenixMedical Corporation and its wholly-owned subsidiaries, Corgenix, Inc. andCorgenix (UK) Limited (“Corgenix UK”). Corgenix UK was established as a UnitedKingdom company during 1996 to market our products in Europe. Transactions aregenerally denominated in U.S. dollars, but also invoices in Euros and BritishPound Sterline. All amounts are converted into U.S. dollars upon consolidationof our financial statements..

 

***(c)******                                 ******Use of Estimates***

 

The preparation of our financial statements in conformity withaccounting principles generally accepted in the U.S. requires management tomake estimates and assumptions that affect the reported amounts of assets andliabilities and disclosure of contingent assets and liabilities at the date ofthe financial statements and the reported amounts of revenue and expensesduring the reporting period. Actual results could differ significantly fromthose estimates. Certain information and note disclosures normally included infinancial statements prepared in accordance with accounting principlesgenerally accepted in the United States of America (GAAP) have been omittedfrom these unaudited consolidated financial statements. These unauditedconsolidated financial statements should be read in conjunction with thefinancial statements and notes thereto included in our Annual Report on Form 10-Kfor the fiscal year  ended June 30,2009.  The results of operations for thethree and nine months ended March 31, 2010 and March 31, 2009 are notnecessarily indicative of the operating results for the full year. In the opinion of management, alladjustments, consisting only of normal recurring accruals, have been made topresent fairly our financial position at March 31, 2010 and the results ofoperations and our cash flows for the three and nine months ended March 31,2010 and 2009.

 

8

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***(d)******                                ******Cash and Cash Equivalents***

 

We consider all highly liquid debt instruments purchased with originalmaturities of three months or less at purchase to be cash equivalents.

 

***(e)******                                 ******Trade Accounts Receivable***

 

Trade accounts receivable are recorded at the invoiced amount and donot bear interest. The allowance for doubtful accounts is our best estimate ofthe amount of probable credit losses in our existing accounts receivable. Wedetermine the allowance based on historical write-off experience. We review ourallowance for doubtful accounts monthly. Past due balances over 90 daysand over a specified amount are reviewed individually for collectability.Account balances are charged off against the allowance after all means ofcollection have been exhausted and the potential for recovery is consideredremote. We do not have any off-balance sheet credit exposure related tocustomers.

 

Wehave adhered to the guidance set forth in the *Sale ofAccounts Receivable* Topic of the Financial Accounting StandardsBoard Accounting Standards Codification (“FASB ASC”), which provides standardsfor distinguishing transfers of financial assets that are sales from transfersthat are secured borrowings.

 

OnMarch 15, 2010, Corgenix UK entered into a financing agreement withFGI.  Under the Agreement, Corgenix UKagrees to sell all of Corgenix UK’s right, title and interest in and to specifiedaccounts receivable and all merchandise represented by those accounts.  In exchange, FGI will advance funds to theCompany. The Company will use the funds for working capital purposes and tocontinue to fund the operations of Corgenix UK. The Company, and Corgenix, Inc., a wholly owned subsidiary of theCompany, have guaranteed Corgenix UK’s obligations to FGI.

 

Thepurchase price for each account sold to FGI is 85% of the face amount of theaccount, less certain fees set forth in the Agreement.  An administrative fee of 1.15% of the averagemonthly balance of the purchased accounts (the “Administrative Fee”) will bepayable monthly.  The Company will payFGI a one-time facility fee of US$10,000 upon funding, and has already paid aUS$10,000 deposit to reimburse FGI for actual expenses incurredin connection with FGI’s review and approval process as well as auditor fees,attorneys’ fees and expenses incurred in documenting the financing agreement.

 

OnSeptember 30, 2009, we established a $1,750,000 credit facility, whichincludes an accounts receivable factoring line, with Summit, secured by ourdomestic accounts receivable, inventory, and all of our other assets. Thiscredit facility enables us to sell selected accounts receivable invoices toSummit with full recourse against us. Due to the full recourse provisions inboth the FGI and the Summit Financing Agreements, and pursuant to the guidanceas set forth in this Topic, these transactions do not qualify as a true sale ofassets, and thus are treated as secured borrowings. During the third fiscalquarter and initial nine months of fiscal 2010, we sold $1,354,029 and$3,289,472 respectively, of our accounts receivable invoices to FGI and Summit(“the Lenders”) for approximately $1,167,099 and $2,908,933, respectively. Aspreviously mentioned, pursuant to the provisions of this Topic, we reflectedthe transactions with the Lenders as secured borrowings, as we have previouslydone with the sales of accounts receivable to Benefactor Funding Corporation. Wehave also established an accounts receivable from the Lenders for the retainedamounts, less the costs of the transactions, less any anticipated future lossin the value of the retained asset. The retained amounts are equal to 15% ofthe total accounts receivable invoice sold to the Lenders. The periodicinterest expense and administrative fees assessed by the Lenders on the amountsowing, are charged to interest expense, and will be credited against theaccounts receivable due from them. As of March 31, 2010, we have anoutstanding retained receivable of $226,631 due from the Lenders.

 

***(f)******                                   ******Inventories***

 

Inventories consist of raw materials, work in process and finishedgoods and are recorded at the lower of average cost or market, using thefirst-in, first-out method. A provision is recorded to reduce excess andobsolete inventories to their estimated net realizable value, when necessary.No such provision was recorded as of March 31, 2010 or March 31,2009. Components of inventories as of March 31 and June 30 are asfollows:

 

| ** **      | ** ** | **March 31,** | ** ** | **June 30,** | ** ** |
|-----------------|------------|--------------------|------------|-------------------|------------|
| ** **      | ** ** | **2010**           | ** ** | **2009**          | ** ** |
| Raw materials   |       | $                  | 469,875    |              | $          | 589,025 |   |
| Work-in-process |       | 1,023,746          |       | 700,658           |       |
| Finished goods  |       | 1,034,160          |       | 1,306,365         |       |
|            |       | $                  | 2,527,781  |              | $          | 2,596,048 |   |

 

9

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***(g)******                                ******Equipment and Software***

 

Equipment and software are recorded at cost. Equipment under capitalleases is recorded initially at the present value of the minimum leasepayments. There was no equipment acquired under capital leases for the quartersended March 31, 2010 and there was $16,398 worth of equipment acquiredunder capital leases for the quarter ended March 31, 2009. For the ninemonths ended March 31, 2010 there was no equipment acquired under capitalleases and for the nine months ended March 31, 2009, there was$43,538              worth of equipmentacquired under capital leases. Depreciation and amortization expense, whichtotaled $111,102 and $111,949 for the quarters ended March 31, 2010 and March 31,2009, respectively, and $326,302 and $333,989 for the nine months ended March 31,2010 and March 31, 2009, respectively, is calculated primarily using thestraight-line method over the estimated useful lives of the respective assetswhich range from 3 to 7 years. Capitalized software costs are related toour web site development, our R & D statistical software, which wereand are both amortized over three years, and our accounting software, which isbeing amortized over five years, beginning in March 2008.

 

***(h)******                                ******Intangible Assets***

 

Intangible assets consist of purchased licenses. Purchased licenses areamortized using the straight-line method over the shorter of 15 years orthe remaining life of the license. We have adopted the provisions of the *Goodwill and Other Intangible Assets* Topic of the FASB ASC.Pursuant to these provisions, goodwill and intangible assets acquired in apurchase business combination and determined to have indefinite lives andlicenses acquired with no definite term are not amortized, but instead aretested for impairment at least annually in accordance with the provisions ofthis statement. Identifiable intangibles with estimated useful lives continueto be amortized over their respective estimated useful lives and reviewed forimpairment in accordance with the Accounting for Impairment or *Disposal of Long Lived Assets* Topic as set forth in the FASBASC.

 

On March 1, 2007, we executed an exclusive license agreement (the “LicenseAgreement”) with Creative Clinical Concepts, Inc. (“CCC”). The LicenseAgreement provides that CCC license to us certain products and assets relatedto determining the effectiveness of aspirin and / or anti-platelet therapy(collectively, “Aspirin Effectiveness Technology,” or the “Licensed Products”).The Aspirin Effectiveness Technology includes US trademark registrationnumber 2,688,842, which includes the term “AspirinWorks”® and related designs.

 

The License Agreement imposes caps on the total amount of cash, commonstock, and warrant payments from us to CCC from the date of execution throughto and including the third anniversary payment. Under that cap limitation, thetotal of all anniversary payments will not exceed $200,000 in cash, with eachanniversary cash payment determined by multiplying $50,000 by an anniversaryratio which is the ratio of cumulative revenue at the respective anniversarydate divided by the cumulative sales target for the same period of time.Likewise, the total of all anniversary common stock payments will not exceed$300,000 in value of shares of common stock (as valued on the date of issue),with the number of shares for each anniversary stock issuance determined bydividing 75,000 by the closing stock price as of the respective anniversarydate and multiplying that result by the anniversary ratio noted above. Finally,the total of all anniversary warrant payments will not exceed 300,000 warrants,with the value of each anniversary warrant issuance determined by multiplying75,000 (the number of warrants to be issued) by a newly calculated BlackScholes value per warrant as of the fiscal year end. As of March 31, 2010,we had accrued $2,646 with respect to the cumulative amount due to CCC. For thequarter and nine month periods ended March 31, 2010, we issued to CCC23,164 shares of our common stock and 75,000 warrants with an exercise price of$0.35, pursuant to this license agreement.

 

The License Agreement also requires that, for all sales of the LicensedProducts subsequent to the execution of the agreement, we pay CCC a quarterlyroyalty fee equal to seven percent of net sales of the Licensed Products duringthe immediately preceding quarter. The License Agreement’s caps on paymentsfrom us to CCC do not apply to royalty payments.

 

***(i)******                                   ******Advertising Costs***

 

Advertising costs are expensed when incurred, and are included in Sellingand Marketing expenses. Advertising costs, which totaled $14,602 and $21,158for the quarters ended March 31, 2010 and March 31, 2009,respectively, and $37,451 and $87,896 for the nine month periods ended March 31,2010 and March 31, 2009, respectively.

 

***(j)******                                   ******Income Taxes***

 

Income taxes are accounted for under the asset and liability method.Deferred tax assets and liabilities are recognized for net operating loss andother credit carry forwards and the future tax consequences attributable todifferences between the financial statement carrying amounts of existing assetsand liabilities and their respective tax bases. Deferred tax assets andliabilities are measured using enacted tax rates expected to apply to taxableincome in the years in which the tax effect of transactions are expected 

 

10

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tobe realized. The effect on deferred tax assets and liabilities of a change intax rates is recognized in the consolidated statements of operations in theperiod that includes the enactment date.

 

Deferred tax assets are reduced by a valuation allowance for theportion of such assets for which it is more likely than not that the amountwill not be realized. Deferred tax assets and liabilities are classified ascurrent or noncurrent based on the classification of the underlying asset orliability giving rise to the temporary difference or the expected date ofutilization of the carry forwards.

 

***(k)******                                ******Revenue Recognition***

 

Revenue is recognized upon shipment of products. Sales discounts andallowances are recorded at the time product sales are recognized and are offsetagainst sales revenue. When revenue is received by a customer in advance ofshipment of products, in exchange for a discount, it is credited to deferredrevenue and taken into revenue upon eventual shipment of the products. We alsohave arrangements in which we manufacture products for other companies. Revenueunder these arrangements is recognized when the manufacturing process iscomplete and risk of ownership has passed.

 

***(l)******                                   ******Research and Development***

 

Research and development costs and any costs associated with internallydeveloped patents, formulas or other proprietary technology are expensed asincurred. Research and development expense totaled $190,155 and $172,513 forthe quarters ended March 31, 2010 and March 31, 2009, respectively,and $506,574 and $572,210 for the nine month periods ended March 31, 2010and March 31, 2009, respectively. Revenue from research and developmentcontracts represents amounts earned pursuant to agreements to perform researchand development activities for third parties and is recognized as earned underthe respective agreement. Because research and development services areprovided evenly over the contract period, revenue is recognized ratably overthe contract period. Research and development agreements in effect in 2010 and2009 provided for fees to us based on time and materials in exchange forperforming specified research and development functions. Contract research and developmentrevenues totaled $248,183 and $36,183 for the quarters ended March 31,2010 and March 31, 2009, respectively, and $426,213 and $169,989 for thenine month periods ended March 31, 2010 and March 31, 2009,respectively. Research and development contracts are generally short term withoptions to extend, and can be cancelled under specific circumstances.

 

***(m)******                             ******Long-Lived Assets***

 

We review long-lived assets, including intangibles, for impairmentwhenever events or changes in circumstances indicate that the carrying amountof such assets may not be recoverable. Events relating to recoverability mayinclude significant unfavorable changes in business conditions, recurringlosses, or a forecasted inability to achieve break-even operating results overan extended period. We evaluate the recoverability of long-lived assets basedupon forecasted undiscounted cash flows. Should an impairment in value beindicated, the carrying value of intangible assets will be adjusted based onestimates of future discounted cash flows resulting from the use and ultimatedisposition of the asset.

 

***(n)******                                ******Deferred Facility Lease Payable***

 

Priorto occupying our headquarters facility in Broomfield, Colorado, the landlordexpended a total of $1,052,140 for the tenant improvements. This amount wasrecorded as a charge to leasehold improvements and a credit to deferredfacility lease payable, which is being amortized against rent expense over the84 month period of the lease.

 

***(o)******                                ******Stock-Based Compensation***

 

In accordance with the guidance of the *Share-BasedPayment* Topic of the FASB ASC, we account for share-based paymentsby measuring and recognizing the amount of compensation expense for allshare-based payment awards made to employees, officers, directors, andconsultants, including employee stock options based on estimated fair values.Pursuant to this guidance, we estimate the fair value of share-based paymentawards on the date of grant using an option-pricing model. The value of theportion of the award that is ultimately expected to vest is recognized asexpense over the required service period in our Statements of Operations.Stock-based compensation is based on awards ultimately expected to vest and isreduced for estimated forfeitures. In further adherence to this guidance, we estimateany future forfeiture at the time of grant and revise these estimates, asnecessary, in subsequent periods if actual forfeitures differ from thoseestimates.

 

For purposes of determining the estimated fair value of share-basedpayment awards on the date of grant, and as allowed by the guidance of the *Share-Based Payment* Topic in the FASB ASC, we use theBlack-Scholes option-pricing model (Black Scholes Model). The Black ScholesModel requires the input of highly subjective assumptions. Because our employeestock options may have characteristics significantly different from those oftraded options, and because changes in the subjective input assumptions can 

 

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materiallyaffect the fair value estimate, in management’s opinion, the existing modelsmay not provide a reliable single measure of the fair value of our employeestock options. Management will continue to assess the assumptions andmethodologies used to calculate estimated fair value of share-basedcompensation. Circumstances may change and additional data may become availableover time, which result in changes to these assumptions and methodologies,which could materially impact our fair value determination.

 

The application of the accounting principles set forth in the guidanceof the *Share-Based Payment* Topic of the FASBASC may be subject to further interpretation and refinement over time. Thereare significant differences among option valuation models, and this may resultin a lack of comparability with other companies that use different models,methods and assumptions. If factors change and we employ different assumptionsin the application of these accounting principles in future periods, or if wedecide to use a different valuation model, the compensation expense that werecord in the future under these principles may differ significantly from whatwe have recorded in the current period and could materially affect our lossfrom operations, net loss and net loss per share.

 

***(p)******                                ******Earnings (loss) per Share***

 

Basic earnings (loss) per share is computed by dividing net lossattributable to common stockholders by the weighted average number of commonshares outstanding. Diluted earnings (loss) per share is computed by dividingnet loss attributable to common stockholders by the weighted average number ofcommon shares outstanding increased for potentially dilutive common sharesoutstanding during the period. The dilutive effect of stock options and theirequivalents is calculated using the treasury stock method. Options and warrantsto purchase common stock, totaling 36,168,177 and 37,703,968 shares as of March 31,2010 and March 31, 2009, respectively, are not included in the calculationof weighted average common shares-diluted below, as their effect would be tolower the net loss per share and thus be anti-dilutive. Redeemable common stockis included in the common shares outstanding for purposes of calculating netincome (loss) per share.

 
| ** **                                                          | ** ** | **3 Months ended  March 31,  2010** | ** ** | **3 Months ended  March 31,  2009** | ** ** | **9 months ended  March 31,  2010** | ** ** | **9 months ended  March 31,  2009** | ** ** |
|---------------------------------------------------------------------|------------|----------------------------------------------------|------------|----------------------------------------------------|------------|------------------------------------------|------------|------------------------------------------|------------|
| Net income (loss)                                                   |       | $                                                  | 81,175     |                                               | $          | (454,374                                 | )          | (9,417                                   | )          | $ | (1,063,407 | ) |
|                                                                |       |                                               |       |                                               |       |                                     |       |                                     |       |
| Common and common equivalent shares outstanding:                    |       |                                               |       |                                               |       |                                     |       |                                     |       |
| Historical common shares outstanding at beginning  of period        |       | 31,034,299                                         |       | 30,263,246                                         |       | 30,294,505                               |       | 30,021,935                               |       |
| Weighted average common equivalent shares issued  during the period |       | 1,154                                              |       | 23,676                                             |       | 495,220                                  |       | 197,298                                  |       |
|                                                                |       |                                               |       |                                               |       |                                     |       |                                     |       |
| Weighted average common shares — basic and diluted             |       | 31,035,453                                         |       | 30,286,922                                         |       | 30,789,725                               |       | 30,219,233                               |       |
|                                                                |       |                                               |       |                                               |       |                                     |       |                                     |       |
| Net income (loss) per share — basic and diluted                |       | $                                                  | *0.00      |                                               | $          | (0.02                                    | )          | $                                        | *(0.00     | ) | $ | (0.04 | ) |
|                                                                     |            |                                                    |            |                                                    |            |                                          |            |                                          |            |  |  |  |  |

 

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*Less than $0.01 pershare

 

***(q)******                                ******Foreign Currency Transactions and Comprehensive Income(Loss)***

 

Theaccounts of our foreign subsidiary are generally measured using the localcurrency as the functional currency. For those operations, assets andliabilities are translated into U.S. dollars at period-end exchange rates.Income and expense accounts are translated at average monthly exchange rates.Adjustments resulting from such translation are accumulated in othercomprehensive income as a separate component of stockholders’ equity.

 

We adhere to the guidance set forth in the *ReportingComprehensive Income* Topic of the FASB ASC, which establishesstandards for reporting and displaying comprehensive income (loss) and itscomponents. Comprehensive income (loss) includes all changes in equity during aperiod from non-owner sources.

 

***(r)******                                  ******Costof Sales and Operating Expenses***

 

*Cost of sales* includes costs associated withmanufacturing, including labor, raw materials, freight-in, manufacturingadministration, quality assurance and quality control, repairs and maintenance,scrap and other indirect costs.

 

*Selling and marketing expenses* consist primarily ofshipping and handling costs, wages and benefits for sales and marketing supportpersonnel, travel, sales commissions, business insurance, promotional costs, aswell as other indirect cots.

 

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*Research and development expenses* consist primarily of thelabor-related costs, the cost of clinical studies and travel expenses,laboratory supplies and product-testing expenses related to the research anddevelopment of new and existing diagnostic products.

 

*General and administrative expenses* consist primarily of wagesand benefits associated with management and administrative support departments,business insurance costs, professional fees, outside services, office facilityrelated expense, and other general support costs.

 

***(s)******                                  ******Liquidity***

 

We have incurred operating losses and negative cashflow from operations for most of our history. Losses incurred since ourinception, net of dividends on convertible preferred stock, have aggregated$13,220,253, and there can be no assurance that we will be able to generatepositive cash flows to fund our operations in the future or to pursue ourstrategic objectives.  Historically, wehave financed our operations primarily through long-term debt, factoring ofaccounts receivables, and the sales of common stock, redeemable common stock,and preferred stock.  We have alsofinanced operations through sales of diagnostic products and agreements withstrategic partners.  At March 31,2010, trade and other receivables were $1,608,467 versus $1,339,409 at June 30,2009.

 

Wehave developed and are continuing to modify an operating plan intended toeventually achieve sustainable profitability, positive cash flow fromoperations, and an adequate level of financial liquidity.  Key components of this plan include doubledigit revenue growth and the cash to be derived from such growth, as well asthe expansion of our strategic alliances with other biotechnology anddiagnostic companies, securing diagnostic-related government contracts andgrants, improving operating efficiencies to reduce our cost of sales as apercentage of sales, thereby improving gross margins, and lowering our overalloperating expenses.  Towards theseefforts, although we have been able to better control our operating expenses,we have not yet managed to generate continuously increasing sales at a ratesufficient to meet our plan, nor have we been successful in reducing our costof sales to a percentage closer to that which we normally achieved prior to2008.  As a result, even though ouroperating losses have been significantly reduced over the prior 18 months, ifour sales continue to decline, are flat, or achieve very slow growth, we wouldundoubtedly incur operating losses and a decreasing level of liquidity for thatperiod of time. In view of this, and in order to improve our liquidity andoperating results, we are also continuing to assess alternative financingscenarios, while at the same time striving to increase our revenues and furtherreduce, where possible, our operating expenses. Given the current lack of a resumption of former sales growth rates,there are significant short- term and potentially intermediate-term risksassociated with the operating plan. Thus, we will undoubtedly be forced tosecure either an equity placement or an additional debt financing, ifavailable, while at the same time, further modify the plan, in order tomaintain liquidity and achieve the goals of sustained profitability andpositive cash flow from operations.

 

In order to further supplement our corporate liquidity and completelypay off our former convertible debt, on March 15, 2010 and September 30,2009, we were able to secure both a $750,000 and a $1,750,000 credit facilityfrom FGI and Summit respectively. Our current intention is to eventually be ina position to replace said financings with traditional commercial bank and/orequity financing, if either or both should be made available to us. Althoughthe recent debt financings in conjunction with our current revised forecastsshow that we should have adequate resources to continue operations for longerthan 12 months, management believes that a further cash infusion eithervia an additional debt financing or an equity placement would give us betterassurance that this will be the case.

 

As can clearly be seen from the above, our dependence on operating cashflow means that risks involved in our business can significantly affect ourliquidity. Any loss of a significant customer, any new competitive products orpricing pressures affecting sales levels of our core products, or anysignificant expenses not anticipated nor included in our internal operatingbudget, could further result in the need to raise additional cash. The Summitand FGI financings are expected to provide working capital which will benecessary to help meet our needs over the next 12 months via the sale of ourhigh quality trade accounts receivable. Although we currently have noarrangement for any additional external financing of debt or equity, wecontinue to seriously explore all such possibilities, with the near-termintention of executing one or more of them.

 

***(t)******                               ******Recently Issued Accounting Pronouncements***

 

With respect to the guidance set forth in the *Disclosures  of Derivative Instruments and HedgingActivities*Topic of the FASB ASC, which enhances requireddisclosures regarding derivatives and hedging activities, including enhanceddisclosures regarding how: a) an entity uses derivative instruments;b) derivative instruments and related hedged items are accounted for*;* and c) derivative instruments andrelated hedged items affect an entity’s financial position, financialperformance and cash flows, we do not expect that the application of theprinciples set forth under this Topic will be applicable to our financial statements.

 

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As of July 1, 2008, we adopted the guidance set forth in the *Fair Value Measurements* Topic of the FASB ASC. This guidanceestablished a framework for measuring fair value in GAAP and clarified thedefinition of fair value within that framework. The guidance does not requireany new fair value measurements in GAAP. The guidance further introduced, orreiterated a number of key concepts which form the foundation of the fair valuemeasurement approach to be utilized for financial reporting purposes. The fairvalue of our financial instruments reflect the amounts that would be receivedupon sale of an asset or paid to transfer a liability in an orderly transactionbetween market participants at the measurement date (exit price). The guidancealso established a fair value hierarchy that prioritizes the use of inputs usedin valuation techniques into the following three levels:

 

Level 1—quoted prices in active markets for identical assets andliabilities.

 

Level 2—observable inputs other than quoted prices in activemarkets for identical assets and liabilities.

 

Level 3—unobservable inputs.

 

The adoption of these provisions did not have a material effect on ourfinancial condition and results of operations, but introduced new disclosuresabout how we value certain assets and liabilities. Much of the disclosurerequirement is focused on the inputs used to measure fair value, particularlyin instances where the measurement uses significant unobservable (Level 3)inputs. Our financial instruments are valued using quoted prices in activemarkets or based upon other observable inputs. The following table sets forththe fair value of our financial assets that were measured on a recurring basisas of March 31, 2010:

 
| ** **         | ** ** | **Level 1** | ** ** | **Level 2** | ** ** | **Level 3** | ** ** | **Total** | ** ** |
|--------------------|------------|------------------|------------|------------------|------------|------------------|------------|-----------|------------|
| Money market funds |       | $                | 200,757    |             |       |             |       |      | $          | 200,757 |   |
| Total              |       | $                | 200,757    |             |       |             |       |      | $          | 200,757 |   |

 

We have adopted the guidance set forth in the *Fair ValueOption for Financial Assets and Financial Liabilities* Topic of theFASB ASC. Pursuant to the guidance of this Topic, we are allowed theirrevocable option to elect fair value for the initial and subsequentmeasurements for specified financial assets and liabilities on acontract-by-contract basis. We did not elect to adopt the fair value optionincluded in this Topic. The provisions of the *Non-controllingInterests in Consolidated Financial Statements* Topic of the FASB ASCchange how business acquisitions are accounted for and will impact financialstatements both on the acquisition date and in subsequent periods. Theseprovisions will change the accounting and reporting for minority interests,which will be recharacterized as non-controlling interests and classified as acomponent of equity. These provisions are effective for both public and privatecompanies for fiscal years beginning on or after December 15, 2008 (thefiscal year ended June 30, 2010 for our company). The provisions will beapplied prospectively. The provisions also require retroactive adoption of thepresentation and disclosure guidance for existing minority interests. All otherguidance under this Topic will be applied prospectively. Early adoption isprohibited for both standards. Management has evaluated the guidance under thisTopic and has determined that there is no impact on our financial statements.

 

The provisions of the *Interim Disclosures aboutFair Value of Financial Instruments* Topic of the FASB ASC, which iseffective for interim periods ending after June 15, 2009, require thedisclosures of fair value of financial instruments in interim financialstatements as well as in annual financial statements. We have adopted theseprovisions and believe that they do not have a significant impact on ourfinancial position, cash flows, or disclosures.

 

The *Subsequent Events* Topic of the FASB ASCestablished general standards of accounting for and disclosure of events thatoccur after the balance sheet date but before financial statements are issuedor are available to be issued. Recognized subsequent events should berecognized in the financial statements since the condition existed at the dateof the balance sheet. Non recognized subsequent events are not recognized inthe financial statements since the conditions arose after the balance sheetdate but before the financial statements are issued or are available to beissued. The guidance in this Topic, is effective for interim or annual periodsending after June 15, 2009. In connection with the preparation of ourconsolidated financial statements, we have evaluated subsequent events afterthe balance sheet date of March 31, 2010, through the filing of thisreport.

 

**3.****                                     ****SEGMENT INFORMATION**

 

Our diagnostic medical products are sold in North America (the U.S.,Canada and Mexico) directly and through independent sales representatives, tohospital laboratories, laboratory chains, independent laboratories, universitylaboratories and reference laboratories. Internationally, our diagnosticmedical products are sold wholesale through distributors, except in the UK,where they are sold direct.  Managementhas chosen to organize our business around the two geographic segments ofbusiness: North American and International operations. The following table setsforth selected financial data for these segments for the three and nine monthperiods 

 

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ended March 31, 2010 and 2009.

 
| ** **            | ** ** | ** ** | ** ** | **Three Months Ended March 31,** | ** ** | **Nine months Ended March 31,** | ** ** |
|-----------------------|------------|------------|------------|------------------------------------------------------|------------|------------------------------------------------|------------|
| ** **            | ** ** | ** ** | ** ** | **North America**                                    | ** ** | **International**                              | ** ** | **Total** | ** ** | **North America** | ** ** | **International** | ** ** | **Total** | ** ** |
| Net sales             |       | 2010       |       | $                                                    | 1,579,818  |                                           | $          | 616,192 |   | $ | 2,196,010 |   | $ | 4,494,277 |   | $ | 1,706,152 |   | $ | 6,200,429 |   |
|                  |       | 2009       |       | $                                                    | 1,440,751  |                                           | $          | 591,273 |   | $ | 2,032,024 |   | $ | 4,300,270 |   | $ | 1,728,676 |   | $ | 6,028,946 |   |
|                  |       |       |       |                                                 |       |                                           |       |   |   |   |   |   |   |   |   |
| Net income (loss)     |       | 2010       |       | $                                                    | (109,812   | )                                              | $          | 190,987 |   | $ | 81,175 |   | $ | (458,068 | ) | $ | 448,651 |   | $ | (9,417 | ) |
|                  |       | 2009       |       | $                                                    | (652,599   | )                                              | $          | 198,225 |   | $ | (454,374 | ) | $ | (1,586,102 | ) | $ | 522,695 |   | $ | (1,063,407 | ) |
|                  |       |       |       |                                                 |       |                                           |       |   |   |   |   |   |   |   |   |
| Depreciation and      |       | 2010       |       | $                                                    | 102,807    |                                           | $          | 8,295 |   | $ | 111,102 |   | $ | 306,652 |   | $ | 19,650 |   | $ | 326,302 |   |
| Amortization          |       | 2009       |       | $                                                    | 106,859    |                                           | $          | 5,090 |   | $ | 111,949 |   | $ | 320,149 |   | $ | 13,840 |   | $ | 333,989 |   |
|                  |       |       |       |                                                 |       |                                           |       |   |   |   |   |   |   |   |   |
| Interest expense, net |       | 2010       |       | $                                                    | (63,454    | )                                              | $          | (1,692 | ) | $ | (65,146 | ) | $ | (225,311 | ) | $ | (4,941 | ) | $ | (230,252 | ) |
|                  |       | 2009       |       | $                                                    | (473,871   | )                                              | $          | (376 | ) | $ | (474,247 | ) | $ | (941,267 | ) | $ | (1,677 | ) | $ | (942,944 | ) |
|                  |       |       |       |                                                 |       |                                           |       |   |   |   |   |   |   |   |   |
| Segment assets:       |       |       |       |                                                 |       |                                           |       |   |   |   |   |   |   |   |   |
| March 31,        |       | 2010       |       | $                                                    | 5,677,178  |                                           | $          | 768,853 |   | $ | 6,446,031 |   | $ | 5,677,178 |   | $ | 768,853 |   | $ | 6,446,031 |   |
| June 30,         |       | 2009       |       | $                                                    | 6,121,049  |                                           | $          | 784,732 |   | $ | 6,905,781 |   | $ | 6,121,049 |   | $ | 784,732 |   | $ | 6,905,781 |   |

 

**4.****                                     ****REDEEMABLECOMMON STOCK AND REDEEMABLE CONVERTIBLE PREFERRED STOCK**

 

***(a)******                                ******Redeemable Common Stock and Warrants***

 

On July 1,2002, as part of the Medical & BiologicalLaboratories Co., Ltd. (MBL) Agreement, MBL purchased shares of ourcommon stock for $500,000. Under the MBL agreement, MBL could require us torepurchase at the same price in the event that a previously existingdistribution agreement with RhiGene, Inc. was terminated. For noadditional consideration, MBL was also issued warrants to purchase anadditional 880,282 shares of Common Stock at a price of $.568 per share, whichwas equal to an aggregate amount of $500,000. These warrants were originallydue to expire on July 3, 2008. The estimated fair value of the warrantsupon issuance was calculated at $401,809 using the Black-Scholes option-pricingmodel with the following assumptions: no expected dividend yield, 143%volatility, risk free interest rate of 4.2% and an expected life of five years.The gross proceeds of $500,000 were allocated $277,221 to redeemable commonstock and $222,779 to the related warrants based on the relative fair value ofthe respective instruments to the fair value of the aggregate transaction.  Issuance costs and the discount attributed tothe redeemable common stock upon issuance were accreted over the 33-monthperiod prior to the first date whereupon the put option could have beenexercised, which was the expiration date of the distribution agreement betweenus and RhiGene (March 31, 2009). Furthermore, pursuant to the agreementwith MBL, as long as MBL held at least 50% of the common stock purchased underthe MBL agreement, MBL must give its written consent with respect to thepayment of any dividend, the repurchase of any of our equity securities, theliquidation or dissolution of the Company or the amendment of any provision ofour Articles of Incorporation or Bylaws which would adversely affect the rightsof MBL under the stock purchase transaction documents. MBL was granted standardanti-dilution rights with respect to stock issuances not registered under theSecurities Act. MBL also received standard piggyback registration rights alongwith certain demand registration rights.

 

On March 31,2005, our distribution agreement with RhiGene expired, and we signed a newdistribution and OEM Supply Agreement with MBL International, Inc. (“MBLI”),a wholly owned subsidiary of MBL, which granted us non-exclusive rights todistribute MBL’s complete diagnostic line of autoimmune testing products in theU.S. and exclusive distribution rights to the OEM label products worldwideexcluding the U.S., Japan, Korea and Taiwan. In addition, on August 1,2005 we executed an Amendment to the 2002 Common Stock Purchase Agreement andCommon Stock Purchase Warrant wherein one-half, or 440,141, of the originalredeemable shares were exchanged for a three-year promissory note payable withinterest at prime (3.25% as of March 31, 2010) plus two percent, withpayments having commenced in September, 2005. The shares exchangedfor the promissory note were returned to us quarterly on a pro rata basis aspayments were made on the promissory note. The remaining 440,121 sharesnot covered by the promissory note were originally due to be redeemed by us at$0.568 per share on August 1, 2008 for any shares still owned at thattime by MBL but only to the extent that MBL had not realized at least $250,000in gross proceeds upon the sales of its redeemable shares in the openmarket for the time period August 1, 2007 through August 1, 2008.Finally, the warrants originally 

 

15

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issued to MBL to purchase880,282 shares were initially extended to August 31, 2008 andre-priced from $0.568 per share to $0.40 per share.

 

On  July 15, 2008, wereached agreement with MBL to amend certain provisions of our February 1,2005 Exclusive Distribution Agreement, in addition to entering into aMemorandum of Understanding Regarding Aspirin Works Distribution Rights inJapan, and to execute a Second Amendment to Common Stock Purchase Agreement andWarrant. These new agreements and amendments added certain products andtransfer prices, called for the discussion of terms whereby MBL would begranted a worldwide OEM agreement for certain of the products in a designatedterritory, called for the payment by us of royalties on certain proprietaryproducts, which included proprietary technology of MBL, and called for thenegotiation of terms of an exclusive distribution agreement for sales ofAspirinWorks in Japan. In addition, pursuant to the Second Amendment to CommonStock Purchase Agreement and Warrant, we agreed with MBL that the warrant termwould be extended to August 1, 2010 and that one-half, or 220,086, of theremaining 440,171 redeemable shares will be exchanged for a two-year promissorynote payable with interest at prime (3.25% as of March 31, 2010) plus twopercent with payments commencing September 1, 2009. As a result of thewarrant extension, additional unaccreted dividends on the redeemable commonstock were created, which are being accreted over the period of the warrantextension, and are deducted in calculating net loss attributable to commonstockholders on our statements of operations and comprehensive loss. The sharesexchanged for the promissory note will be returned to us quarterly on a prorata basis as payments are made on the promissory note. As of March 31,2010, a total of 495,157 shares have been returned to us pursuant to the notespayable. The companies further agreed that beginning September 1, 2008,and continuing through August 1, 2010 (the maturity date of the SecondPromissory Note), MBL will attempt to sell on the open market, the remaining220,101 shares not subject to the Second Promissory Note, at a price of $0.62or greater. At the close of business on August 1, 2010, MBL will then havethe right to sell, and we will have the obligation to purchase, any remainingstock then held by MBL, at a price of $0.568 per share.

 

***(b)******                                ******Redeemable Convertible Preferred Stock***

 

On February 3, 2009, we entered into two agreements (the “RestructuringAgreements”) to restructure the debt evidenced by convertible term notes thatTruk Opportunity Fund, LLC, a Delaware company; Truk InternationalFund, LP, a Cayman Islands company (collectively, “Truk”); and CAMOFIMaster LDC, a Cayman Islands company, formerly named DCOFI Master LDC, (“CAMOFI”)purchased on May 19, 2005 and December 28, 2005. The RestructuringAgreements suspended all amortizing principal amount payments otherwise dueunder each note, beginning November 1, 2008 and ending on the earlier of (i) thefirst day of the month next succeeding the closing of any new financingtransaction or (ii) May 1, 2009 (the “Repayment Date”), at which timepayments would again have become due and payable on the first day of eachsubsequent month until March 31, 2010 (the “Maturity Date”). Paymentswould be equal to the amount of principal outstanding divided by the number ofmonths from the Repayment Date until the Maturity Date. On the Maturity Date,the amortizing principal amount for each of the term notes and all otheramounts due and owing must be repaid in full, whether by payment of cash, or atTruk’s or CAMOFI’s option, by the conversion into common stock.

 

Underthe Restructuring Agreements, Truk and CAMOFI agreed that their securityinterest in our accounts receivable and inventory would only be subordinated tothat of the lenders in any new financing, but that their security interest inall of our other assets will remain a perfected first security interest. Thisprovision was effective upon completion of the Financing Agreement withBenefactor, summarized below. In addition, upon the closing of the FinancingAgreement with Benefactor, the remaining principal balance of each outstandingterm note held by Truk was increased by five percent (5%), and was accountedfor as additional interest expense.

 

Simultaneously with the execution of the Restructuring Agreements:

 

(1)                                  We paid $22,466to Truk and CAMOFI for accrued and unpaid interest from November 1, 2008to February 3, 2009 with respect to term notes held by each;

 

(2)                                  We extended theexpiry dates of common stock purchase warrants held by the note-holders(warrants dated May 19, 2005 were extended to expire May 19, 2017,rather than May 19, 2012, and common stock purchase warrants dated December 28,2005 were extended to expire December 28, 2015, rather than December 28,2010);

 

(3)                                  We issued toCAMOFI 200,000 shares of our Series B Convertible Preferred Stock (“Series B”),with a liquidation preference of $50,000, which is convertible into 800,000shares of our common stock at the rate of $0.25 per share; and

 

(4)                                  We issued toTruk 36,680 shares of Series B, with a liquidation preference of $9,170,which is convertible into 146,720 shares of our common stock at the rate of$0.25 per share. The calculated cost of items (2) through (4) above,were charged to deferred finance costs and is being amortized over nine monthsthrough December 2009.

 

16

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**5.****                                    ****STOCKHOLDERS’****EQUITY**

 

***(a)******                                ******EmployeeStock Purchase Plan***

 

Effective January 1,1999, we adopted an Employee Stock Purchase Plan to provide eligible employeesan opportunity to purchase shares of our common stock through payrolldeductions, up to 10% of eligible compensation. On April 26, 2007,Shareholders approved our Second Amended and Restated Employee Stock PurchasePlan. These plans fully comply with Section 423 of the Internal RevenueCode of 1986. Each quarter, participant account balances are used to purchaseshares of stock at the lesser of 85% of the fair value of shares on the firstbusiness day (grant date) and last business day (exercise date) of eachquarter. No right to purchase shares shall be granted if, immediately after thegrant, the employee would own stock aggregating 5% or more of the totalcombined voting power or value of all classes of stock. A total of600,000 common shares have been registered with the Securities andExchange Commission (SEC) for purchase under the two plans. In the quarter andnine months ended March 31, 2010, 1,760           and 36,307 shares, respectively,were issued under the plans. In the quarter and nine months ended March 31,2009, 27,673 and 52,725 shares, respectively, were issued under the plans.

 

***(b)******                                ******IncentiveStock Option Plan***

 

*StockOptions as of March 31, 2010*

 

Our Amended andRestated 1999 Incentive Stock Plan and the 2007 Incentive Compensation Plan(the “Plan”) provides for two separate components. The Stock Option GrantProgram, administered by the Compensation Committee (the “Committee”) appointedby our Board of Directors, provides for the grant of incentive andnon-statutory stock options to purchase common stock to employees, directors orother independent advisors designated by the Committee. The Restricted StockProgram administered by the Committee, provides for the issuance of RestrictedStock Awards to employees, directors or other independent advisors designatedby the Committee. The following table summarizes stock options outstanding asof March 31, 2010, and changes during the nine months then ended:

 
| ** **                                 | ** ** | **Outstanding Options** | ** ** |
|--------------------------------------------|------------|------------------------------|------------|
| ** **                                 | ** ** | **Number of  Shares**   | ** ** | **Weighted  Average  Exercise  Price** | ** ** | **Weighted  Average  Remaining  Contractual  Term (in  months)** | ** ** | **Aggregate  Intrinsic  Value** | ** ** |
| Options outstanding at June 30, 2009  |       | 2,507,600                    |       | $ | 0.16 |   | 43.9 |   | $ | — |   |
| Granted                                    |       | 240,000                      |       | $ | 0.099 |   | 83.5 |   |   |   |
| Exercised                                  |       | —                       |       | $ | — |   | — |   |   |   |
| Cancelled, expired or forfeited            |       | (307,600                     | )          | $ | 0.45 |   | 0.0 |   |   |   |
| Options outstanding at March 31, 2010 |       | 2,440,000                    |       | $ | 0.32 |   | 44.3 |   | $ | — |   |
| Options exercisable at March 31, 2010 |       | 2,440,000                    |       | $ | 0.32 |   | 37.2 |   | $ | — |   |

 

The totalintrinsic value as of March 31, 2010 measures the difference between themarket price as of March 31, 2010 and the exercise price. No options wereexercised during the nine months ended March 31, 2010. Consequently, nocash was received, nor did we realize any tax deductions related to exercise ofstock options during the period.

 

Total estimatedunrecognized compensation cost from unvested stock options as of March 31,2010, was approximately $4,399, which is expected to be recognized over aweighted average period of 36.0 months.

 

The weightedaverage per share fair value range of stock options granted during the ninemonth periods ending March 31, 2010 was $0.099. There were no optionsgranted during the nine months ended March 31, 2009. The fair value wasestimated as of the grant date using the Black-Scholes option pricing modelwith the following assumptions:

 

17

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| ** **                  | ** ** | **Quarters Ended** | ** ** | **Nine Months Ended** | ** ** |
|-----------------------------|------------|--------------------|------------|-----------------------|------------|
| ** **                  | ** ** | **March 31,** | ** ** | **March 31,**    | ** ** |
| **Valuation  Assumptions**  | ** ** | **2010**           | ** ** | **2009**              | ** ** | **2010** | ** ** | **2009** | ** ** |
|                        |       |               |       |                  |       |   |   |   |   |
| **Expected life**           | ** ** | **7years**         | ** ** | **7 years**           | ** ** | **7years** | ** ** | **7 years** | ** ** |
| **Risk-free interest rate** | ** ** | **2.69**           | **%**      | **2.69**              | **%**      | **2.69** | **%** | **2.69** | **%** |
| **Expected volatility**     | ** ** | **84.7**           | **%**      | **84.7**              | **%**      | **84.7** | **%** | **84.7** | **%** |
| **Expected dividend yield** | ** ** | **0**              | **%**      | **0**                 | **%**      | **0** | **%** | **0** | **%** |

 

In addition to thestock options discussed above, we recognized no share-based compensationexpense related to Restricted Stock awards in the current quarter or nine monthperiod and recognized $3,333 and $9,999 in related share-based compensationexpense for the three and nine month periods ended March 31, 2009.

 

As of March 31,2010, there were also 33,799,537 warrants outstanding which have beenissued to institutional investors, consultants, and employees, with exercise pricesranging in prices from $.23 to $.50 per share with a weighted average exerciseprice of $.35 per share. Of these warrants, none were newly or incrementallyissued in the current quarter. However, 75,000 warrants were issued in the ninemonths ended March 31, 2010 pursuant to the License Agreement with CCC, asnoted above. Similarly, no warrants were issued in the quarter ended March 31,2009, with 75,000 warrants newly or incrementally issued in the nine monthsended March 31, 2009.

 

On September 8,2008, the Board of Directors granted an equity award of 206,000 shares ofcommon stock to our five officers in recognition of our achievements for theprior two years, as no stock options had been granted since August, 2006.The closing price of our stock on September 8, 2008 was $0.20 and thevalue of the stock awards amounted to $41,200.

 

Effective September 8,2008, we adopted a One Year Short-term Incentive Compensation Plan to providethe executive officers an opportunity to earn shares of our common stock as abonus and in lieu of cash compensation upon the achievement by us of certainstipulated and targeted EBITDA amounts. The shares of common stock to be issuedunder this plan were based upon the closing stock price of our common stock asof June 30, 2009, which was $0.095. Based upon the reported EBITDA figuresfor the fiscal year ended June 30, 2009, 737,099 shares of our commonstock were earned by the Executive Officers and were issued to the corporateofficers at the end of September 2009. Under both issuances, the sharesimmediately vested upon issuance.

 

**6.****                                    ****DUE TO FACTOR**

 

OnMarch 15, 2010, Corgenix UK entered into a financing agreement withFGI.  Under the Agreement, Corgenix UKagrees to sell all of Corgenix UK’s right, title and interest in and tospecified accounts receivable and all merchandise represented by thoseaccounts.  In exchange, FGI will advancefunds to the Company. The Company will use the funds for working capitalpurposes and to continue to fund the operations of Corgenix UK.  The Company, and Corgenix, Inc., a whollyowned subsidiary of the Company, have guaranteed Corgenix UK’s obligations toFGI.

 

Thepurchase price for each sold account is 85% of the face amount of the account,less certain fees set forth in the Agreement.  An administrative fee of 1.15% of the averagemonthly balance of the purchased accounts (the “Administrative Fee”) will bepayable monthly.  The Company will payFGI a one-time facility fee of $10,000 upon funding, and has already paid anadditional $10,000 deposit to reimburse FGI for actual expenses incurredin connection with FGI’s review and approval process as well as auditor fees,attorneys’ fees and expenses incurred in documenting the financing agreement.

 

Corgenix UK must maintain an average monthlynet balance of funds advanced of no less than $200,000 during the term of theagreement.  If Corgenix UK does not sellat least $200,000 of account debt to FGI each month, then interest and feeswill be applied to the difference between $200,000 and the amount of debtactually sold.  Interest willbe charged on each advance at the greater of 8.5% per annum or 1.5% above theU.S. Prime Rate.  The maximum amountavailable for advance to the Company is $750,000. On March 31, 2010, the initial advance to us fromFGI on eligible international accounts receivable amounted to $114,459 whichrepresented  approximately 85% ofinternational accounts receivable sold to them totaling $134,658.

 

TheAgreement term is 36 months; however Corgenix UK may terminate the Agreement atany time after two years by giving FGI not less than ninety days prior writtennotice and paying a termination fee of $25,000. FGI may terminate the Agreement at any time by giving Corgenix UK notless than thirty days prior written notice or without notice if any event ofdefault or recourse event occurs.

 

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On September 30, 2009, we, along with our whollyowned subsidiary, Corgenix, Inc., entered into a Financing Agreement, anAddendum to Financing Agreement, a Loan and Security Agreement and a PromissoryNote (collectively, the “Summit Agreements”) with Summit.  We are jointly and severally liable for allobligations pursuant to the Summit Agreements. The Agreements with Summitprovide us and our subsidiary with a maximum credit line of $1,750,000 pursuantto an account factoring relationship, coupled with a secured line of credit.

 

Under the Financing Agreement, we agree to sell all ofour right, title and interest in and to accounts identified for purchase bySummit from time to time. The purchase price for each sold account equals theface amount of each account multiplied by the applicable advance rate, minusall interest and fees and charges as described in the Financing Agreement. Inaddition, interest will accrue on advances made by way of purchased accounts atthe rate of prime plus 1.5% per annum until Summit receives payment in full oneach account. If Summit does not receive full payment on a purchased account bythe due date specified in the Financing Agreement, then we or our subsidiary(as applicable) must repurchase that account, and pay Summit the defaultinterest rate until it is repaid.

 

During the initial funding period (which is theearlier of 120 days after the date of the Agreements, or the date of the secondterm loan advance), the advance rate on eligible accounts receivable will be90%, and 85% thereafter, unless Summit elects in its discretion to apply adifferent percentage. On September 30, 2009, the initial advance to usfrom Summit on eligible accounts receivable amounted to $632,553, whichrepresented 90% of eligible accounts receivable of $702,908.

 

As stated in Note 2 (e) above, the accounts receivable sold to FGIand Summit (‘the Lenders”) are treated as a secured borrowing and  in the same manner as set forth above forBenefactor Funding Corporation. During the third quarter and initial ninemonths of fiscal 2010, we sold $1,354,029 and $3,289,472, respectively, of ouraccounts receivable invoices to the Lenders for approximately $1,167,098 and$2,908,933. Fees paid to the Lenders for interest and other services for thequarter and nine months ended March 31, 2010 totaled $57,566 and $134,132,respectively.

 

Pursuant to the Addendum to Financing Agreement,Summit may, in its sole discretion and without any duty to do so, elect fromtime to time to make advances based upon Acceptable Inventory, which is definedin the addendum to mean inventory approved for intended use by the Food andDrug Administration, among other criteria.

 

Advances based upon Acceptable Inventory may be madeupon request so long as the aggregate amount of all advances based uponAcceptable Inventory outstanding and unpaid does not exceed the lesser of (a) FiftyPercent (50%) of the lower of book value, as determined in accordance withgenerally accepted accounting principles, of the Acceptable Inventory, (b) FourHundred Fifty Thousand Dollars ($450,000), (c) Fifty Percent (50%) ofClient’s outstanding Acceptable Accounts, and (d) together with the aggregateamount of all other outstanding Advances, the Maximum Credit Line. On September 30,2009, the initial advance to us from Summit on Acceptable Inventory amounted to$351,454.

 

Summit may decline to make advances based uponAcceptable Inventory for any reason or for no reason, without notice,regardless of any course of conduct or past advances based upon AcceptableInventory by Summit.

 

We used a portion of the initial advance to retire thedebt evidenced by the Factoring and Security Agreement to Benefactor FundingCorp, a Colorado corporation. The payoff to Benefactor amounted $580,786.

 

**7.****                                    ****NOTES PAYABLE**

 

Notes payable consist of thefollowing at March 31, 2010 and June 30, 2009:

 
| ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | ** ** | **March 31,  2009** | ** ** | **June 30, 2009** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------|------------|-----------------------------|------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |       |                     |       |                        |       |
| Note payable, unsecured, to redeemable common  stockholders, with interest at prime plus 2.0% (5.25% as of  March 31, 2010 and June 30, 2009) due in monthly installments with  principal payments of $5,200 plus interest through August 2010                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |       | $                        | 52,200     |                        | $          | 73,000 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |       |                     |       |                        |       |
| Convertible term note payable to institutional  investors, net of discount of $0 with interest at the greater of  12%, as adjusted by a stock trading formula, or prime plus 3% (6.25% as  of  March 31, 2010 and June 30, 2009), interest only from December 28,  2005 through June, 2006 and, via a note modification dated  November 30, 2006, December 1,  2006 through November 1, 2007 and then due in monthly  installments of $42,546 plus interest from December 1, 2007  through March 16, 2009, and via note modification dated  February 3, 2009, due in monthly installments of $6,714 plus  interest, collateralized by all assets of the company and  a partial guarantee by an officer of the Company |       | —                   |       | 38,039                      |       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |       |                     |       |                        |       |
| Note payable, payable to Summit Financial  Resources, with interest at prime rate plus 2.75% (6% as of  March 31, 2010) due in monthly installments with principal  payments of $3,803.67 plus interest through November 2009 plus  interest, and via a note modification dated November 30, 2009, weekly  principal payments of $12,500 plus interest, on December 7, 2009 and  December 14, 2009, and $21,835 plus interest on December 28, 2009,  and then in monthly installments with principal and interest of $1,647,  commencing January 31, 2010 through September 30, 2010, collateralized  by all assets of Corgenix                                                                                                                                    |       | 45,771                   |       | —                      |       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |       | 97,971                   |       | 111,039                     |       |
| Current portion, net of current portion of  discount                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |       | (69,690                  | )          | (100,439                    | )          |
| Notes payable, excluding current portion and net  of long-term portion of discount                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |       | $                        | 28,281     |                        | $          | 10,600 |   |

 

19

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The convertible notes payablerestrict the payment of dividends on our common stock.

 

**Item 2.**

** **

**Management’s Discussion andAnalysis ofFinancial Condition and Results of Operations**

 

The following discussion should be read inconjunction with the consolidated financial statements and accompanying notesincluded elsewhere herein.

 

**(a)****                                 ****Forward-LookingStatements**

 

This 10-Q includes statements that are not purelyhistorical and are “forward-looking statements” within the meaning of Section 21Eof the Securities Act of 1934, as amended, including statements regarding ourexpectations, beliefs, intentions or strategies regarding the future.  All statements other than historical factcontained in this 10-Q, including, without limitation, statements regardingfuture capital guidance, acquisition strategies, strategic partnershipexpectations, technological developments, the development, the availability ofnecessary components, research and development programs and distribution plans,are forward-looking statements.  Allforward-looking statements included in this 10-Q are based on informationavailable to us on the date hereof, and we assume no obligation to update suchforward-looking statements.  Although webelieve that the assumptions and expectations reflected in such forward-lookingstatements are reasonable, we can give no assurance that such expectations willprove to have been correct or that we will take any actions that may presentlybe planned.

 

**(b)****                                 ****General**

 

Since our inception, we have been primarily involvedin the research, development, manufacturing and marketing/distribution ofdiagnostic tests for sale to clinical laboratories. We currently market 52products covering autoimmune disorders, vascular diseases, infectious diseasesand liver disease. Our products are sold in the United States, the UK and othercountries through our marketing and sales organization that includes directsales representatives, contract sales representatives, internationally throughan extensive distributor network, and to several significant OEM partners.

 

We manufacture products for inventory based uponexpected sales demand, shipping products to customers, usually within 24 hoursof receipt of orders if in stock. Accordingly, we do not operate with a significant customer orderbacklog.

 

Except for the fiscal years ending June 30,1997 and 2009, we have experienced revenue growth since our inception,primarily from sales of products and contract revenues from strategic partners.Contract revenues consist of service fees from research and developmentagreements with strategic partners.

 

Beginning in fiscal year 1996, we began addingthird-party OM licensed products to our diagnostic product line. Currently wesell 128 products licensed from or manufactured by third party manufacturers.We expect to expand our relationships with other companies in the future togain access to additional products.

 

Although, as previously stated, we have experiencedgrowth in revenues every year since 1990, except for 2009 and 1997, there canbe no assurance that, in the future, we will sustain revenue growth, currentrevenue levels, or achieve or maintain profitability. Our results of operationsmay fluctuate significantly from period-to-period as the result of severalfactors, including: (i) whether and when new products are successfullydeveloped and introduced, (ii) market acceptance of current or newproducts, (iii) seasonal customer demand, (iv) whether and when wereceive research and development payments from strategic partners, 

 

20

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(v) changesin reimbursement policies for the products that we sell, (vi) competitivepressures on average selling prices for the products that we sell, and (vii) changesin the mix of products that we sell.

 

**(c)****                                 ****FASBCodification**

 

The FASB recognized the complexity of itsstandard-setting process and embarked on a revised process in 2004 thatculminated in the release on July 1, 2009, of the *FASBAccounting Standards Codification,*sometimes referred to as theCodification or ASC. The Codification does not change how we account for ourtransactions or the nature of related disclosures made in our financialstatements. However, when referring to guidance issued by the FASB, we refer totopics in the ASC rather than the numbers of specific Standards, Statements,Interpretations, Positions, etc. Consequently, we have updated references toGAAP in this Quarterly Report on Form 10-Q, to reflect the guidance in theCodification.

 

**(d)****                                 ****Resultsof Operations**

 

***Threemonths ended March 31, 2010************compared to three monthsended March 31, 2009***

 

*Net sales.*Net sales forthe quarter ended March 31, 2010 were $2,196,010 an 8.1% increase versus$2,032,024 in the same quarter of the prior fiscal year. Total North Americansales increased $139,067 or 9.7% to $1,579,818 versus $1,440,751 in the prioryear’s third quarter, while total sales to international distributors increased$24,919 or 4.2% to $616,192 versus $591,273 in the prior year’s third quarter.With respect to our major revenue categories and product lines, total worldwideCorgenix labeled product sales increased $49,505 or 3.3% to $1,559,988 versus$1,510,483 in the prior year’s third quarter. North American Corgenix labeledproduct sales decreased $43,906 or 4.0% to $1,065,273 versus $1,109,178 in theprior year’s third quarter, whereas international Corgenix labeled productsales increased $93,411 or 23.3% to $494,716 versus $401,305 in the prior year’sthird quarter. Worldwide category results were as follows: Phospholipids kitsales (including OEM) decreased $8,913 or less than 1% to $957,484 versus$966,397 in the prior year’s third quarter. Coagulation kit sales decreased$16,620 or 4.3% to $371,778 versus $388,398 in the prior year’s third quarter.HA kit sales increased $37,292 or 15.9% to $271,689 versus $234,397 in theprior year’s third quarter, while autoimmune kit sales decreased $3,171 or 5.8%to $51,230 versus $54,401 in the prior year’s third quarter. Additionally,worldwide OEM revenues decreased $19,583 or 11.1% to $156,364 versus $175,947in the prior year’s third quarter, and contract manufacturing revenue increased$2,027 or 2.2% to $95,577 versus $93,550 in the prior year’s third quarter. R &D contract revenue increased $211,839 or 582.9% to $248,183 versus $36,344 inthe prior year’s third quarter. Finally, Aspirin Works sales increased $8,403or 23.0% to $44,951 versus $36,548 in the prior year’s third quarter.

 

*Cost of sales*.  Cost of sales, as a percentage of sales,increased to 44.2% for the quarter ended March 31, 2010 from 43.7% in theprior year’s comparable quarter. The increase was primarily attributable to adifferentiation in the product sales mix for the quarter.

 

*Selling and marketing expenses. *For the quarter ended March 31,2010, selling and marketing expenses decreased $92,882 or 19.8% to $375,369from $468,251 for the quarter ended March 31, 2009. The $92,882 decreaseversus the prior year resulted primarily from decreases of $6,556 inadvertising expense, $44,348 in labor-related expenses, $30,700 in consultingexpenses, and $14,293 in travel related expenses, partially offset by a netincrease of $3,015 in other selling and marketing expenses.

 

*Research and developmentExpenses.* Research anddevelopment expenses increased $17,642 or 10.2% to $190,155 for the quarterended March 31, 2010, from $172,513 for the quarter ended March 31,2009. The $17,642 increase versus the prior year resulted primarily fromincreases of $13,275 in convention related expenses, $4,770 in consulting expenses,and $11,632 in travel an entertainment expenses, partially offset by a netdecrease of $12,035 in other research and development expenses.

 

*General and administrative expenses.* For thequarter ended March 31, 2010, general and administrative expenses decreased8.8% or $49,780 to $514,183 from $563,963 for the quarter ended March 31,2009. The $49,780 decrease versus the prior year resulted primarily fromdecreases of $4,212 in Corgenix-UK general and administrative expenses, $72,973in labor-related expenses, $18,846 in outside services expenses, and $10,306 inpatent renewal costs, partially offset by a net increase of $52,345 in othergeneral and administrative expenses.

 

*Interest expense.* Interestexpense decreased $409,101, or 86.3% to $65,146 for the quarter ended March 31,2010, from $474,247 for the quarter ended March 31, 2009. The $409,101reduction in interest expense was due primarily to the accelerated write off inMarch 31, 2009 of 92.3% of the unaccreted discount and unamortizeddeferred financing costs to interest expense as a result of the payoff of theconvertible notes as part of the Benefactor financing.

 

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***Ninemonths ended March 31, 2010************compared to nine monthsended March 31, 2009***

 

*Net sales.*Net sales forthe nine month period ended March 31, 2010 were $6,200,429, a 2.8%increase versus $6,028,946 for the comparable nine month period of the priorfiscal year. Total North American sales increased $194,007 or 4.5% to$4,494,277 versus $4,300,270 for the prior year’s comparable nine month period,while total sales to international distributors decreased $22,524 or 1.3% to$1,706,152 versus $1,728,676 for the prior year’s comparable nine month period.With respect to our major revenue categories and product lines, total worldwideCorgenix labeled product sales decreased $171,783 or 3.8% to $4,333,988 versus$4,505,771 for the prior year’s comparable nine month period. North AmericanCorgenix labeled product sales decreased $156,168 or 4.9% to $3,027,618 versus$3,183,786 for the prior year’s comparable nine month period, whereasinternational Corgenix labeled product sales decreased $15,615 or 1.2% to$1,306,370 versus $1,321,985 for the prior year’s comparable nine month period.Worldwide category results were as follows: Phospholipids kit sales (includingOEM) decreased $72,107 or 2.6% to $2,733,909 versus $2,806,016 for the prioryear’s comparable nine month period. Coagulation kit sales decreased $35,442 or2.9% to $1,175,416 versus $1,210,858 for the prior year’s comparable nine monthperiod. HA kit sales decreased $87,974 or 11.3% to $689,414 versus $777,388 forthe prior year’s comparable nine month period, while autoimmune kit salesincreased $90,966 or 35.7% to $345,916 versus $254,950 for the prior year’scomparable nine month period. Additionally, worldwide OEM revenues increased$32,730 or 5.5% to $624,327 versus $591,597 for the prior year’s comparablenine month period, and contract manufacturing revenue increased $128,914 or59.4% to $345,916 versus $217,002 for the prior year’s comparable nine monthperiod. R & D contract revenue increased $256,224 or 150.7% to$426,213 versus $169,989 for the prior year’s comparable nine month period.Finally, Aspirin Works sales increased $32,676 or 30.7% to $138,992 versus$106,316 for the prior year’s comparable nine month period.

 

*Cost of sales*.  Cost of sales, as a percentage of sales, wasessentially the same for the nine month period, at 44.9% for the nine monthperiod ended March 31, 2010 from 43.5% for the prior year’s comparablenine month period. The increase was primarily attributable to a differentiationin the product sales mix for the period.

 

*Selling and marketing expenses. *For the nine month periodended March 31, 2010, selling and marketing expenses decreased $199,974 or14.2% to $1,204,581 from $1,404,555 for the comparable nine month period ended March 31,2009. The $199,974 decrease versus the prior year resulted primarily fromdecreases of $50,445 in advertising expense, $70,560 in labor-related expenses,$62,017 in consulting expenses, and $46,468 in trade show and travel andentertainment expenses, partially offset by a net increase of $29,516 in otherselling and marketing expenses.

 

*Research and developmentExpenses.* Research anddevelopment expenses decreased $65,636 or 11.5% to $506,574 for the nine monthperiod ended March 31, 2010, from $572,210 for the comparable nine monthperiod ended March 31, 2009. The $65,636 decrease versus the prior yearresulted primarily from decreases of $44,932 in clinical studies expense and$64,727 in labor-related expenses, partially offset by a net increase of$44,023 in other research and development expenses.

 

*General and administrative expenses.* For the ninemonth period ended March 31, 2010, general and administrative expensesdecreased $176,093 or 10.7% to $1,462,914 from $1,639,007 for the comparablenine month period ended March 31, 2009. The $176,093 decrease versus theprior year resulted primarily from decreases of $118,580 in labor-relatedexpenses, $81,537 in outside services expenses, and $20,097 in patent renewalfees, partially offset by a net increase of $44,121 in other general andadministrative expenses.

 

*Interest expense.* Interestexpense decreased $712,692, or 75.6% to $230,252 for the nine month periodended March 31, 2010, from $942,944 for the comparable nine month periodended March 31, 2009. This substantial reduction in interest expense wasdue primarily to the accelerated write off in March 31, 2009 of 92.3% ofthe unaccreted discount and unamortized deferred financing costs to interestexpense as a result of the payoff of the convertible notes as part of theBenefactor financing.

 

**(e)****                                 ****EBITDA**

 

Our earnings before interest, taxes, depreciation,amortization and non cash expense associated with stock-based compensation (“AdjustedEBITDA”) decreased $71 or less than 1% to $266,308 for the three months ended March 31,2010 compared with $266,379 for the corresponding three month period in fiscal2009, but increased $128,836 or 28.9% to $574,167 for the nine months ended March 31,2010, compared with $445,331 for the corresponding nine month period in fiscal2009. Although adjusted EBITDA is not a GAAP measure of performance orliquidity, we believe that it may be useful to an investor in evaluating ourability to meet future debt service, capital expenditures and working capitalguidance. However, investors should not consider these measures in isolation oras a substitute for operating income, cash flows from operating activities orany other measure for determining our operating performance or liquidity thatis calculated in accordance with GAAP. In addition, because adjusted EBITDA isnot calculated in accordance with GAAP, it may not necessarily be comparable tosimilarly titled measures employed by other companies. 

 

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Areconciliation of Adjusted EBITDA to net earnings (loss) can be made by addingdepreciation and amortization expense, corporate stock-based compensationexpense, interest expense, and income tax expense to net income (loss) as inthe following table:

 
| ** **                               | ** ** | **3 Months ended  March 31,  2010** | ** ** | **3 Months ended  March 31,  2009** | ** ** | **9 months ended  March 31,  2010** | ** ** | **9 months ended  March 31,  2009** | ** ** |
|------------------------------------------|------------|----------------------------------------------------|------------|---------------------------------------------------------|------------|-----------------------------------------------|------------|------------------------------------------|------------|
| **RECONCILIATION OF ADJUSTED EBITDA:**   |       |                                               |       |                                                    |       |                                          |       |                                     |       |
| Net income (loss)                        |       | $                                                  | 81,175     |                                                    | $          | (454,374                                      | )          | (9,417                                   | )          | $ | (1,063,407 | ) |
|                                     |       |                                               |       |                                                    |       |                                          |       |                                     |       |
| Add back:                                |       |                                               |       |                                                    |       |                                          |       |                                     |       |
| Depreciation and amortization            |       | 111,102                                            |       | 111,949                                                 |       | 326,302                                       |       | 333,989                                  |       |
| Stock-based compensation expense         |       | 8,979                                              |       | 135,490                                                 |       | 27,439                                        |       | 242,758                                  |       |
| Interest expense, net of interest income |       | 65,052                                             |       | 473,314                                                 |       | 229,843                                       |       | 931,991                                  |       |
| Adjusted EBITDA                          |       | 266,308                                            |       | 266,379                                                 |       | 574,167                                       |       | 445,331                                  |       |
|                                          |            |                                                    |            |                                                         |            |                                               |            |                                          |            |  |  |  |

 

**(f)****                                   ****Financing Agreements**

 

OnMarch 15, 2010, Corgenix UK Limited, a corporation incorporated in theUnited Kingdom (“Corgenix UK”) and a wholly owned subsidiary of CorgenixMedical Corporation (the “Company”), entered into a financing agreement withFaunus Group International. Inc. (“FGI”). Under the Agreement, Corgenix UK agrees to sell all of Corgenix UK’sright, title and interest in and to specified accounts receivable and allmerchandise represented by those accounts. In exchange, FGI will advance funds to the Company. The Company will usethe funds for working capital purposes and to continue to fund the operationsof Corgenix UK.  The Company, andCorgenix, Inc., a wholly owned subsidiary of the Company, have guaranteedCorgenix UK’s obligations to FGI.

 

Thepurchase price for each sold account is 85% of the face amount of the account,less certain fees set forth in the Agreement. An administrative fee of 1.15% of the average monthly balance of thepurchased accounts (the “Administrative Fee”) will be payable monthly.  The Company will pay FGI a one-time facilityfee of US$10,000 upon funding, and has already paid an additional US$10,000deposit to reimburse FGI for actual expenses incurred in connectionwith FGI’s review and approval process as well as auditor fees, attorneys’ feesand expenses incurred in documenting the financing agreement.

 

CorgenixUK must maintain an average monthly net balance of funds advanced of no lessthan US$200,000 during the term of theagreement.  If Corgenix UK does not sellat least $200,000 of account debt to FGI each month, then interest and feeswill be applied to the difference between $200,000 and the amount of debtactually sold.  Interest willbe charged on each advance at the greater of 8.5% per annum or 1.5% above theU.S. Prime Rate.  The maximum amountavailable for advance to the Company is US$750,000.

 

Certainrecourse events and events of default will trigger early payment obligations ofCorgenix UK under the Agreement, and FGI has certain rights as a secured partyin case of any default or recourse event.

 

CorgenixUK makes certain covenants, representations and warranties typical of a securedfinancing arrangement, and has agreed to report certain information to FGI.

 

CorgenixUK has granted to FGI a security interest in all of Corgenix UK’s assets.  The Company and Corgenix, Inc. willguarantee all of Corgenix UK’s obligations to FGI, and have each granted to FGIa security interest in their assets to support the guarantee.  All liens created against the Company andCorgenix, Inc. are subordinate to the prior security interests of SummitFinancial Resources, LP pursuant to the terms of an intercreditor agreement.

 

TheAgreement term is 36 months; however Corgenix UK may terminate the Agreement atany time after two years by giving FGI not less than ninety days prior writtennotice and paying a termination fee of $25,000. FGI may terminate the Agreement at any time by giving Corgenix UK notless than thirty days prior written notice or without notice if any event ofdefault or recourse event occurs.

 

On September 30, 2009, we, along with our whollyowned subsidiary, Corgenix, Inc., entered into a Financing Agreement, anAddendum to Financing Agreement, a Loan and Security Agreement and a PromissoryNote (collectively, the “Summit Agreements”) with Summit Financial Resources, LP, a Hawaii limited partnership (“Summit”). We are jointly and severally liable for all obligations pursuant to theSummit Agreements. The Agreements with Summit provide us and our subsidiarywith a maximum credit line of $1,750,000 pursuant to an account factoringrelationship, coupled with a secured line of credit.

 

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Under the Financing Agreement, we agree to sell all ofour right, title and interest in and to accounts identified for purchase bySummit from time to time. The purchase price for each sold account equals theface amount of each account multiplied by the applicable advance rate, minusall interest and fees and charges as described in the Financing Agreement. Inaddition, interest will accrue on advances made by way of purchased accounts atthe rate of prime plus 1.5% per annum until Summit receives payment in full oneach account. If Summit does not receive full payment on a purchased account bythe due date specified in the Financing Agreement, then we or our subsidiary(as applicable) must repurchase that account, and pay Summit the defaultinterest rate until it is repaid.

 

During the initial funding period (which is theearlier of 120 days after the date of the Agreements, or the date of the secondterm loan advance), the advance rate on eligible accounts receivable will be90%, and 85% thereafter, unless Summit elects in its discretion to apply adifferent percentage. On September 30, 2009, the initial advance to usfrom Summit on eligible accounts receivable amounted to $632,553, whichrepresented 90% of eligible accounts receivable of $702,908.

 

The Financing Agreement is for a term of three years,renewable for additional one year terms unless we or Summit provide writtennotice of non-renewal at least 60 days prior to the end of the currentfinancing period.  Except as otherwiseprovided in the Financing Agreement, we may also elect to terminate a financingperiod earlier and pay Summit a supplemental fee of 1% of the maximum creditline of $1,750,000. Among other fees and charges, we will also pay Summit amonthly administration fee equal to 1.45% of the average monthly balance ofoutstanding advances for each calendar month.

 

Pursuant to the Addendum to Financing Agreement,Summit may, in its sole discretion and without any duty to do so, elect fromtime to time to make advances based upon Acceptable Inventory, which is definedin the addendum to mean inventory approved for intended use by the Food andDrug Administration, among other criteria.

 

Advances based upon Acceptable Inventory may be madeupon request so long as the aggregate amount of all advances based uponAcceptable Inventory outstanding and unpaid does not exceed the lesser of (a) FiftyPercent (50%) of the lower of book value, as determined in accordance withgenerally accepted accounting principles, of the Acceptable Inventory, (b) FourHundred Fifty Thousand Dollars ($450,000), (c) Fifty Percent (50%) ofClient’s outstanding Acceptable Accounts, and (d) together with theaggregate amount of all other outstanding Advances, the Maximum Credit Line. OnSeptember 30, 2009, the initial advance to us from Summit on AcceptableInventory amounted to $351,454.

 

Advances based upon Acceptable Inventory are subjectto the interest, fees and charges, and all terms and conditions applicable toan Advance under the Financing Agreement, including the administrative fee,except that the prime plus 1.5% advance interest rate on outstanding advancesbased upon Acceptable Inventory means the prime rate 2.75% per annum, asadjusted from time to time as of the date of any change in the prime rate.  All interest accrued on outstanding advancesbased upon Acceptable Inventory is due and payable monthly in arrears.

 

Summit may decline to make advances based uponAcceptable Inventory for any reason or for no reason, without notice,regardless of any course of conduct or past advances based upon AcceptableInventory by Summit.

 

The Original Promissory Note, payable to Summit, iffunded in full, provided up to $250,000 in the form of a term loan, due on September 30,2012, payable in monthly installments. Pursuant to this aspect of the Summitfinancing, we received Summit’s initial advance of $125,000 at the closing ofthe Summit Agreements on September 30, 2009. Further pursuant to the termsof this Promissory Note, when an equipment appraisal is completed, we would beeligible for a second advance equal to the lesser of one hundred twenty fivethousand dollars ($125,000), or sixty percent (60%) of the net orderlyliquidation value of Eligible Equipment, less the $125,000 already advanced. Ifthe liquidation value of the equipment did not exceed $208,333, then we wouldnot be eligible for a second advance, and would have to repay Summit for anycalculated over-advance. Based upon the completed independent appraisal of theEligible Equipment, the maximum amount of this term loan, based on theappraised net orderly liquidation value of the Eligible Equipment wasdetermined to be $50,000. Thus, effective November 30, 2009, we executedan amended and restated promissory note, payable to Summit, in the amount of$96,835, which required us to repay to Summit $46,835 of the $96,835 in themonth of December 2009, with the remaining $50,000 to the paid via monthlyinstallments of principal and interest totaling $1,647 commencing January 31,2010 through September of 2012.

 

The Promissory Note bears interest at an initial rateof prime plus 2.75% per annum, and adjusts with and as of the date of anychange in the prime rate as reported in the Wall Street Journal. In addition,under the Loan and Security Agreement, we will pay Summit a monthlyadministration fee equal to 1.45% of the average outstanding monthly principalbalance on the Promissory Note each month. The penalty default rate on thePromissory Note is prime plus 10% per annum.

 

Under the Loan and Security Agreement, we paid Summita fee equal to $2,250 for each month, or portion thereof, until the equipmentappraisal was completed.

 

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We used a portion of the initial advance to retire thedebt evidenced by the Factoring and Security Agreement to Benefactor FundingCorp, a Colorado corporation. The payoff to Benefactor amounted $580,786.

 

Under the Summit Agreements, we made certaincovenants, representations and warranties typical of a secured financingarrangement, and have agreed to report certain information to Summit.  Pursuant to the Summit Agreements, certainrecourse events and events of default will trigger early payment obligationsfor us, and Summit has certain rights as a secured party in case of any defaultor recourse event.

 

Under the Summit Agreements, we granted to Summit asecurity interest in, among other things, all inventory, accounts, equipment,goods and motor vehicles, all general intangibles, all chattel paper, any andall financial obligations payable to, owing to or in favor of us or held by usand all balances, deposits, debts or any other amounts or obligations of Summitowing to us, whether or not due.  Inaddition, our obligations under the Summit Agreements is also secured by the “Reserve,”which is cash collateral that Summit may fund by withholding amounts owing tous, or deducting amounts from collected payments on purchased accounts. Theamount of the Reserve is set in Summit’s discretion.

 

We are required at all times to maintain eligible equipmentso that the total, outstanding balance owing under the Promissory Note equalsor is less than 60% of the net orderly liquidation value of the eligibleequipment as set forth in the equipment appraisal.

 

The Loan and SecurityAgreement will continue in full force and effect for three years; however wemay terminate early at any time by giving Summit not less than sixty days priornotice.

 

**(g)****                                ****Liquidity and Capital Resources**

 

At March 31, 2010, our working capital increased by $77,511, to$2,090,745 from $2,013,234 at June 30, 2009, and concomitantly, ourcurrent ratio (current assets divided by current liabilities) increased from1.69 to 1 at June 30, 2009 to 1.80 at March 31, 2010. This increasein working capital is primarily attributable to a reduced net loss for the ninemonths ended March 31, 2010, complimented by the incremental proceeds ofthe Summit financing at September 30.

 

At March 31, 2010, trade and other receivables were $1,608,467versus $1,339,409 at June 30, 2009. Accounts payable, accrued payroll andother accrued expenses decreased by a combined $308,440 from the end of fiscal2009 corresponding with the FGI and Summit financings. At March 31, 2010,inventories were $2,527,781, a slight decrease versus the $2,596,048 at June 30,2009.

 

For the nine months ended March 31, 2010, cash used by operatingactivities amounted to $97,883, versus cash used by operating activities of$382,348 for the nine months ended March 31, 2009. The reduction in thecash used by operations for the current nine month period resulted primarilyfrom the substantial reduction in the net loss for the period.

 

Net cash used in investing activities, the purchase of laboratoryequipment, leasehold improvements and computer equipment was $85,479 for thenine months ended March 31, 2010, compared to $37,544 for the nine monthsended March 31, 2009.

 

Net cash used by financing activities amounted to $105,552 for the ninemonths ended March 31, 2010 compared to $416,012 for the nine months endedMarch 31, 2009. This significant decrease versus the comparable prior year’snine month period was primarily due to the proceeds from the FGI and Summitfinancings, which was partially offset by the payoff of the amount owed toBenefactor, which resulted in a large reduction in the amount due to factor, inaddition to the payments made on notes payable and capital lease obligations.

 

We have incurred operating losses and negative cashflow from operations for most of our history. Losses incurred since ourinception, net of dividends on convertible preferred stock, have aggregated$13,220,253 and there can be no assurance that we will be able to generatepositive cash flows to fund our operations in the future or to pursue ourstrategic objectives.  Historically, wehave financed our operations primarily through long-term debt, factoring ofaccounts receivables, and the sales of common stock, redeemable common stock,and preferred stock.  We have alsofinanced operations through sales of diagnostic products and agreements withstrategic partners.  At March 31,2010, trade and other receivables amounted to $1,608,467 versus $1,339,409 at June 30,2009.

 

Wehave developed and are continuing to modify an operating plan intended toeventually achieve sustainable profitability, positive cash flow fromoperations, and an adequate level of financial liquidity.  Key components of this plan include doubledigit revenue growth and the cash to be derived from such growth, as well asthe expansion of our strategic alliances with other biotechnology anddiagnostic companies, securing diagnostic-related government contracts andgrants, improving operating 

 

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efficienciesto reduce our cost of sales as a percentage of sales, thereby improving gross margins,and lowering our overall operating expenses. Towards these efforts, although we have been able to better control ouroperating expenses, we have not yet managed to generate continuously increasingsales at a rate sufficient to meet our plan, nor have we been successful inreducing our cost of sales to a percentage closer to that which we normallyachieved prior to 2008.  As a result,even though our operating losses have been significantly reduced over the prior18 months, if our sales continue to decline, are flat, or achieve very slowgrowth, we would undoubtedly incur operating losses and a decreasing level ofliquidity for that period of time. In view of this, and in order to improve ourliquidity and operating results, we are also continuing to assess alternativefinancing scenarios, while at the same time striving to increase our revenuesand further reduce, where possible, our operating expenses.  Given the current lack of a resumption offormer sales growth rates, there are significant short- term and potentiallyintermediate-term risks associated with the operating plan. Thus, we willundoubtedly be forced to secure either an equity placement or an additionaldebt financing, if available, while at the same time, further modify the plan,in order to maintain liquidity and achieve the goals of sustained profitabilityand positive cash flow from operations.

 

In order to further supplement our corporate liquidity and completelypay off our former convertible debt, on March 15, 2010 and September 30,2009, we were able to secure both a $750,000 and a $1,750,000 credit facilityfrom FGI and Summit respectively. Our current intention is to eventually be ina position to replace said financings with traditional commercial bank and/orequity financing, if either or both should be made available to us. Althoughthe recent debt financings in conjunction with our current revised forecastsshow that we should have adequate resources to continue operations for longerthan 12 months, management believes that a further cash infusion eithervia an additional debt financing or an equity placement would give us betterassurance that this will be the case.

 

As can clearly be seen from the above, our dependence on operating cashflow means that risks involved in our business can significantly affect ourliquidity. Any loss of a significant customer, any new competitive products orpricing pressures affecting sales levels of our core products, or anysignificant expenses not anticipated nor included in our internal operatingbudget, could further result in the need to raise additional cash. The Summitand FGI financings are expected to provide working capital which will benecessary to help meet our needs over the next 12 months via the sale of ourhigh quality trade accounts receivable. Although we currently have noarrangement for any additional external financing of debt or equity, wecontinue to seriously explore all such possibilities, with the near-termintention of executing one or more of them.

 

**(h)****                                ****Off-Balance Sheet Arrangements**

 

None.

 

**(i)****                                   ****Contractual Obligations and Commitments**

 

On February 8,2006, we entered into a Lease Agreement (the “Lease”) with York County, LLC, aCalifornia limited liability company (“Landlord”) pursuant to which we leasedapproximately 32,000 rentable square feet (the “Property”) of Landlord’sapproximately 102,400 square foot building, commonly known as Broomfield Oneand located at 11575 Main Street, Broomfield, Colorado 80020.  In 2008, the Property was sold to The KrauszCompanies, Inc. a California corporation, and is part of Landlord’smulti-tenant real property development known as the Broomfield CorporateCenter.  We use the Property for ourheadquarters, laboratory research and development facilities and productionfacilities.

 

On the following dates, we executed the following amendments to theLease:

 

·                 December 1, 2006- The Second Amendment to theLease Agreement (the “Second Amendment”) established July 6, 2006 as thedate of the commencement of the Lease

 

·                 June 19, 2007- The Second Amendment to the LeaseAgreement (the “Second Amendment”) redefined the amount of available rentalspace from 32,480 to 32,000 square feet and recalculated the lease rates persquare foot, and

 

·                 July 19, 2007- The Third Amendment to the LeaseAgreement (the “Third Amendment”) established the base rent matrix for theperiod 11/28/2013 to 12/05/2013 which was inadvertently omitted in the SecondAmendment.

 

The term of the Lease (the “Term”) is seven yearsand five months and commenced on July 6, 2006 with tenant options toextend the Term for up to two five-year periods.  We have a one time right of second refusal tolease contiguous premises.

 

Initially therewas no base lease rate payable on 25,600 square feet of the Property, plusestimated operating expenses of $1.61 per square foot.

 

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The base leaserate payable on 25,600 square feet of the Property increased to $4.00 persquare foot on January 28, 2007, plus amortization of tenant improvementsof $5.24 per square foot, plus estimated operating expenses of $1.61 per squarefoot.  The base lease rate on 25,600square feet of the Property increases to $5.64 per square foot on January 28,2008, with fixed annual increases each January 28 thereafter during theinitial Term, plus the amortization of tenant improvements of $5.24 per squarefoot, and estimated operating expenses of $1.61 per square foot.

 

Initially, therewas no base lease rate payable on 6,400 square feet of the Property, plusestimated operating expenses of $1.61 per square foot.  The base lease rate on 6,400 square feet ofthe Property increases to $3.00 per square foot commencing on August 28,2007, and increases to $3.09 on January 28, 2008, with fixed annualincreases each January 28 thereafter during the initial Term, plusestimated operating expenses of $1.61 per square foot.

 

Thus, theestimated total rent (this is dependent upon the actual operating expenses) onthe entire 32,000 square feet of the Property is initially $1.61 per squarefoot, then increased to approximately $9.00 per square foot on January 28,2007, then increased to approximately $9.60 per square foot on August 282007, then increases to approximately $10.93 per square foot on January 28,2008, with annual increases in the base lease rate each January 28thereafter during the initial Term, up to an estimated total rent of $13.18 persquare foot during the final year of the initial Term.

 

The base leaserate for an extension period is 100% of the then prevailing market rental rate(but in no event less than the rent for the last month of the then currentTerm) and shall thereafter increase annually by 3% for the remainder of theapplicable extension period.

 

We have notinvested in any real estate or real estate mortgages.

 

**Item 3.**

 

**Quantitative and Qualitative Disclosures aboutMarket Risk**

 

Not required forsmaller reporting companies.

 

**Item 4.**

 

**Controlsand Procedures**

 

Underthe supervision and with the participation of our President and Chief FinancialOfficer, our management has evaluated the effectiveness of our disclosurecontrols and procedures as of the end of the period covered by this report asdefined in Rule 13a-15(b) or Rule 15(d)-15(e) under theSecurities Exchange Act of 1934 (the “Exchange Act”). Based on that evaluation,the President and Chief Financial Officer have concluded that, as of the end of the period covered by thisreport, our disclosure controls and procedures are effective and ensure thatinformation required to be disclosed in our Exchange Act reports is (1) recorded,processed, summarized and reported in a timely manner, and (2) accumulatedand communicated to management, including the President and our Chief FinancialOfficer, as appropriate, to allow timely decisions regarding required disclosure.

 

There were no changes in our internal control overfinancial reporting as of the end of the period covered by this report thatmaterially affected, or are reasonably likely to materially affect, ourinternal control over financial reporting.

 

**PART II**

 

**Other Information**

 
| **Item 1.** | ** ** | **Legal Proceedings**                                            |
|-------------|------------|------------------------------------------------------------------|
|        |       |                                                             |
|        |       | None                                                             |
|        |       |                                                             |
| **Item 2.** | ** ** | **Unregistered Sales of Equity Securities and Use  of Proceeds** |
|        |       |                                                             |
|        |       | None                                                             |

 

27

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| **Item 3.** | ** ** | **Defaults Upon Senior Securities**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|-------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|        |       | None                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| ** **  | ** ** | ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| **Item 4.** | ** ** | **Submission of Matters to a Vote of Security  Holders**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|        |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|        |       | Annual  Shareholders Meeting held December 15, 2009 

 

***Proposal Number 1 — Election of Directors***

 

Dr. Luis Lopez:  22,858,066 votes for; 954,161 votes withheld

Douglass T. Simpson:  22,856,066 votes for; 956,161 votes withheld

Robert Tutag:  22,910,408 votes for; 901,819 votes withheld

Dennis Walczewski:  22,077,680 votes for; 1,734,547 votes withheld

Larry G. Rau:  22,910,408 votes for; 901,819 votes withheld

C. David Kikumoto: 22,028,339  votes for; 1,783,888 votes withheld

Stephen P Gouze:  22,910,408 votes for; 901,819 votes withheld

 

***Proposal Number 2 — Ratification of Hein & Associates***

 

Approval: 21,906,982  votes for; 743,356 votes against; 161,889 votes abstain; 0 not voted. |
| ** **  | ** ** | ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| **Item 5.** | ** ** | **Other Information**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|        |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|        |       | None                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|        |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| I**tem 6.** | ** ** | **Exhibits and Reports on Form 8-K.**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| ** **  | ** ** | ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| ** **  | ** ** | **a. Index to and Description of Exhibits***.*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |

 
| **Exhibit  Number** | ** ** | **Description of Exhibit**                                                                                                                                                                  |
|---------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                |       |                                                                                                                                                                                        |
| 31.1*               |       | Certification  of Chief Executive Officer pursuant to section 302 of the Sarbanes-Oxley  Act of 2002.                                                                                  |
|                |       |                                                                                                                                                                                        |
| 31.2*               |       | Certification  of Chief Financial Officers pursuant to section 302 of the  Sarbanes-Oxley Act of 2002.                                                                                 |
|                |       |                                                                                                                                                                                        |
| 32.1*               |       | Certification  by Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C.  Section 1350, or adopted pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002. |

 

----

*                 Filed herewith.

 
| ** ** | **(b)** | **Reports on Form 8-K.** |
|------------|---------|-------------------------------|
|       |    |                          |
|       |    | 1.                            | Form 8-K  filed October 6, 2009*. Entry into a Material Definitive Agreement,  Termination of a Material Definitive Agreement.* |
|       |    |                          |   |
|       |    | 2.                            | Form 8-K  filed December 16, 2009. *Other Evens.* |
|       |    |                          |   |
|       |    | 3.                            | Form 8-K filed March 15, 2010. *Entry into a Material Definitive Agreement.* |

 

28

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**SIGNATURES**

 

In accordance with the guidance of the Securities Exchange Act of 1934,the registrant caused this report to be signed on its behalf by theundersigned, thereunto duly authorized.

 
|                     | CORGENIX  MEDICAL CORPORATION |
|--------------------------|-------------------------------|
|                     |                          |   |
|                     |                          |   |
| May  13,  2010 | By:                           | /s/  Douglass T. Simpson |
|                     |                          | Douglass  T. Simpson |
|                     |                          | President  and Chief Executive Officer |
| ** **               | ** **                    | **(Principal  Executive Officer)** |
|                     |                          |   |
|                     |                          |   |
|                     | By:                           | /s/  William H. Critchfield |
|                     |                          | Chief  Financial Officer |
| ** **               | ** **                    | **(Principal  Financial and Accounting Officer)** |

 

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