**UNITED STATES**

**SECURITIES AND EXCHANGECOMMISSION**

**Washington,D.C. 20549**

**Form10-QSB**

| x      |   | **QUARTERLY REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|--------|--------|----------------------------------------------------------------------------------------------|
|   |   |                                                                                         |
|   |   | **For the  quarterly period ended September 30, 2007**                                       |
|   |   |                                                                                         |
| o      |   | **TRANSITION REPORT UNDER SECTION  13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**      |

 

**For thetransition period from          to          **

**Commission File Number 000-24541**

**CORGENIX MEDICAL CORPORATION**

(Name of SmallBusiness Issuer in its Charter)

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

 

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

(Address ofprincipal executive offices, including zip code)

**(303)457-4345**

(Issuer’stelephone number, including area code)

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

Check whether theissuer:  (1) filed all reports requiredto be filed by Section 13 or 15(d) of the Exchange Act during the past 12months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements for thepast 90 days.     Yes x   No  o

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

The number ofshares of Common Stock outstanding was 25,005,680 as of November 16, 2007.

Transitional SmallBusiness Disclosure Format.     Yes o   No x

 

 

 

----

 

 

**CORGENIXMEDICAL CORPORATION**

**September30, 2007**

**TABLE OFCONTENTS**
|           | **Part I**                                                      | 3      |
|----------------|-----------------------------------------------------------------|--------|
|           | ** **                                                      |   |
|           | **Financial  Information**                                      | 3      |
|           |                                                            |   |
| Item 1.        | Consolidated Financial Statements                               | 3      |
|           |                                                            |   |
| Item 2.        | Management’s Discussion and Analysis or Plan of  Operation | 15     |
|           |                                                            |   |
| Item 3.        | Controls and Procedures                                         | 20     |
|           |                                                            |   |
|           | **Part II**                                                     | 25     |
|           | ** **                                                      |   |
|           | **Other  Information**                                          | 25     |
|           |                                                            |   |
| Item 1.        | Legal Proceedings                                               | 25     |
|           |                                                            |   |
| Item 2.        | Changes in Securities and Use of Proceeds                       | 25     |
|           |                                                            |   |
| Item 3.        | Defaults Upon Senior Securities                                 | 25     |
|           |                                                            |   |
| Item 4.        | Submission of Matters to a Vote of Security Holders             | 25     |
|           |                                                            |   |
| Item 5.        | Other Information                                               | 25     |
|           |                                                            |   |
| Item 6.        | Exhibits and Reports on Form 8-K                                | 25     |
|           |                                                            |   |
| Certifications |                                                            |

 

 

2

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**PART I**

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

# **CORGENIXMEDICAL CORPORATION**

### **ANDSUBSIDIARIES**

ConsolidatedBalance Sheets
| ** **                                                                                                                                                                                                             | ** ** | **September 30, 2007** | ** ** | **June 30, 2007** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------|------------|-----------------------------|------------|
| ** **                                                                                                                                                                                                             | ** ** | **(Unaudited)**        | ** ** | ** **                  | ** ** |
| **Assets**                                                                                                                                                                                                             | ** ** | ** **             | ** ** | ** **                  | ** ** |
| Current assets:                                                                                                                                                                                                        |       |                   |       |                        |       |
| Cash and cash  equivalents                                                                                                                                                                                             |       | $                      | 1,998,053  |                        | $          | 1,324,072 |   |
| Accounts  receivable, less allowance for doubtful accounts of $94,097                                                                                                                                                  |       | 1,058,672              |       | 1,225,677                   |       |
| Inventories                                                                                                                                                                                                            |       | 2,657,988              |       | 2,558,456                   |       |
| Prepaid expenses                                                                                                                                                                                                       |       | 110,759                |       | 99,767                      |       |
| Total current  assets                                                                                                                                                                                                  |       | 5,825,472              |       | 5,207,972                   |       |
| Equipment:                                                                                                                                                                                                             |       |                   |       |                        |       |
| Capitalized  software costs                                                                                                                                                                                            |       | 255,617                |       | 255,617                     |       |
| Machinery and  laboratory equipment                                                                                                                                                                                    |       | 957,117                |       | 944,663                     |       |
| Furniture,  fixtures, leaseholds & office equipment                                                                                                                                                                |       | 1,666,870              |       | 1,808,698                   |       |
|                                                                                                                                                                                                                   |       | 2,879,604              |       | 3,008,978                   |       |
| Accumulated  depreciation and amortization                                                                                                                                                                             |       | (881,374               | )          | (798,362                    | )          |
| Net equipment                                                                                                                                                                                                          |       | 1,998,230              |       | 2,210,616                   |       |
| Intangible  assets:                                                                                                                                                                                                    |       |                   |       |                        |       |
| License                                                                                                                                                                                                                |       | 356,473                |       | 332,838                     |       |
|                                                                                                                                                                                                                   |       | 356,473                |       | 332,838                     |       |
| Other assets:                                                                                                                                                                                                          |       |                   |       |                        |       |
| Deferred  financing costs net of amortization of $950,580 and $873,729                                                                                                                                                 |       | 666,049                |       | 743,070                     |       |
| Due from officer                                                                                                                                                                                                       |       | 12,000                 |       | 12,000                      |       |
| Due from Biosafe                                                                                                                                                                                                       |       | —                 |       | 125,000                     |       |
| Other assets                                                                                                                                                                                                           |       | 235,745                |       | 257,180                     |       |
| Total assets                                                                                                                                                                                                           |       | $                      | 9,093,969  |                        | $          | 8,888,676 |   |
| **Liabilities and Stockholders’ Equity**                                                                                                                                                                          | ** ** | ** **             | ** ** | ** **                  | ** ** |
| Current  liabilities:                                                                                                                                                                                                  |       |                   |       |                        |       |
| Current portion  of notes payable, net of discount                                                                                                                                                                     |       | $                      | 755,485    |                        | $          | 1,014,437 |   |
| Current portion  of capital lease obligations                                                                                                                                                                          |       | 227,264                |       | 223,127                     |       |
| Accounts payable                                                                                                                                                                                                       |       | 732,614                |       | 844,338                     |       |
| Accrued payroll  and related liabilities                                                                                                                                                                               |       | 286,530                |       | 271,994                     |       |
| Accrued interest                                                                                                                                                                                                       |       | 22,053                 |       | 26,741                      |       |
| Deferred revenue                                                                                                                                                                                                       |       | 320,375                |       | 465,615                     |       |
| Accrued  liabilities                                                                                                                                                                                                   |       | 183,826                |       | 291,491                     |       |
| Total current  liabilities                                                                                                                                                                                             |       | 2,528,147              |       | 3,137,743                   |       |
| Notes payable,  net of discount, less current portion                                                                                                                                                                  |       | 536,175                |       | 1,000,051                   |       |
| Capital lease  obligations, less current portion                                                                                                                                                                       |       | 384,505                |       | 442,775                     |       |
| Deferred  Facility Lease Payable, excluding current portion                                                                                                                                                            |       | 935,715                |       | 1,065,227                   |       |
| Total  liabilities                                                                                                                                                                                                     |       | 4,384,542              |       | 5,645,796                   |       |
| Redeemable  common stock, $0.001 par value 616,202 and 669,019 shares issued and  outstanding, aggregate redemption value of $350,003, and $380,003 net of  unaccreted discount and issue costs of $0 (note 5)         |       | 250,000                |       | 250,000                     |       |
|                                                                                                                                                                                                                   |       |                   |       |                        |       |
| Stockholders’  equity:                                                                                                                                                                                            |       |                   |       |                        |       |
| Convertible  Preferred stock, $0.001 par value. Liquidation preference of $108,569 and  $464,730. Authorized 5,000,000 shares, Issued and outstanding 310,198 and  1,327,800 on September 30 and June 30, respectively |       | 310,198                |       | 1,327,800                   |       |
| Common stock,  $0.001 par value. Authorized 100,000,000 shares; Issued and outstanding  24,725,431 and 14,483,342 September 30 and June 30, respectively                                                               |       | 24,109                 |       | 13,814                      |       |
| Additional  paid-in capital                                                                                                                                                                                            |       | 16,604,295             |       | 13,444,483                  |       |
| Accumulated  deficit                                                                                                                                                                                                   |       | (12,496,258            | )          | (11,808,129                 | )          |
| Accumulated  other comprehensive income                                                                                                                                                                                |       | 17,083                 |       | 14,912                      |       |
| Total  stockholders’ equity                                                                                                                                                                                       |       | 4,459,427              |       | 2,992,880                   |       |
| Total  liabilities and stockholders’ equity                                                                                                                                                                       |       | $                      | 9,093,969  |                        | $          | 8,888,676 |   |

 

Seeaccompanying notes to consolidated financial statements.

 

 

3

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# **CORGENIXMEDICAL CORPORATION**

#### **ANDSUBSIDIARIES**

## Consolidated Statements of Operations

| ** **                                                       | ** ** | **Three Months Ended** | ** ** |
|------------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                       | ** ** | **September 30,  2007**     | ** ** | **September 30,  2006** | ** ** |
| ** **                                                       | ** ** | **(Unaudited)**                  | ** ** | **(Unaudited)** | ** ** |
| Net sales                                                        |       | $                                | 2,105,188  |   | $ | 1,694,112 |   |
| Cost of sales                                                    |       | 964,137                          |       | 645,109 |   |
|                                                             |       |                             |       |   |   |
| Gross profit                                                     |       | 1,141,051                        |       | 1,049,003 |   |
|                                                             |       |                             |       |   |   |
| Operating  expenses:                                             |       |                             |       |   |   |
| Selling and  marketing                                           |       | 531,605                          |       | 487,986 |   |
| Research and  development                                        |       | 163,693                          |       | 232,687 |   |
| General and  administrative                                      |       | 443,730                          |       | 596,300 |   |
|                                                             |       |                             |       |   |   |
|                                                             |       | 1,139,028                        |       | 1,316,973 |   |
|                                                             |       |                             |       |   |   |
| Operating income  (loss)                                         |       | 2,023                            |       | (267,970 | ) |
|                                                             |       |                             |       |   |   |
| Other income  (expense):                                         |       |                             |       |   |   |
| Other expense                                                    |       | (9,828                           | )          | 41,370 |   |
| Interest expense                                                 |       | (680,324                         | )          | (616,603 | ) |
|                                                             |       |                             |       |   |   |
| Net loss                                                         |       | $                                | (688,129   | ) | $ | (843,203 | ) |
|                                                             |       |                             |       |   |   |
| Net loss per  common share, basic and diluted                    |       | $                                | (0.04      | ) | $ | (0.08 | ) |
|                                                             |       |                             |       |   |   |
| Weighted average  shares outstanding, basic and diluted          |       | 19,340,384                       |       | 11,125,859 |   |
|                                                             |       |                             |       |   |   |
| Net loss                                                         |       | $                                | (688,129   | ) | $ | (843,203 | ) |
|                                                             |       |                             |       |   |   |
| Other  comprehensive gain—foreign currency translation gain |       | 2,171                            |       | 1,702 |   |
|                                                             |       |                             |       |   |   |
| Total comprehensive  loss                                        |       | $                                | (685,958   | ) | $ | (841,501 | ) |

 

See accompanying notes toconsolidated financial statements.

 

 

4

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**CORGENIXMEDICAL CORPORATION**

#### **AND SUBSIDIARIES**

# ConsolidatedStatement of Stockholders’ Equity

For the three months ended September 30, 2007

(Unaudited)
| ** **                                                                      | ** ** | **Preferred  Stock,  Number  of Shares** | ** ** | **Preferred  Stock,  $0.001 par** | ** ** | **Common  Stock,  Number of  Shares** | ** ** | **Common  Stock,  $0.001  par** | ** ** | **Additional  Paid-in  Capital** | ** ** | **Accumulated  Deficit** | ** ** | **Accumulated  other  comprehensive  income (loss)** | ** ** | **Total  stockholders’  equity** | ** ** |
|---------------------------------------------------------------------------------|------------|-----------------------------------------------|------------|----------------------------------------|------------|--------------------------------------------|------------|---------------------------------|------------|----------------------------------|------------|--------------------------|------------|-----------------------------------------------------------|------------|---------------------------------------|------------|
| Balance at June  30, 2007                                                       |       | 1,327,800                                     |       | $                                      | 1,327,800  |                                       | 14,483,342 |                            | $          | 13,814                           |       | $                        | 13,444,483 |                                                      | $          | (11,808,129                           | )          | $ | 14,912 |   | $ | 2,992,880 |   |
|                                                                            |       |                                          |       |                                   |       |                                       |       |                            |       |                             |       |                     |       |                                                      |       |                                  |       |
| Issuance of  common stock for cash                                              |       | —                                        |       | —                                 |       | 3,956,000                                  |       | 3,956                           |       | 985,044                          |       | —                   |       | —                                                    |       | 989,000                               |       |
| Issuance cost for  common stock offering                                        |       | —                                        |       | —                                 |       |                                       |       |                            |       | (121,259                         | )     | —                   |       | —                                                    |       | (121,259                              | )     |
| Issuance of  common stock for services                                          |       | —                                        |       | —                                 |       | 10,000                                     |       | 10                              |       | 4,390                            |       | —                   |       | —                                                    |       | 4,400                                 |       |
| Issuance of  common stock in exchange for debt and interest                     |       | —                                        |       | —                                 |       | 2,746,501                                  |       | 2,746                           |       | 683,879                          |       | —                   |       | —                                                    |       | 686,625                               |       |
| Addition of  discount on convertible notes due to contingent conversion feature |       | —                                        |       | —                                 |       | —                                     |       | —                          |       | 536,874                          |       | —                   |       | —                                                    |       | 536,874                               |       |
| Conversion of preferred  stock into common stock                                |       | (1,017,602                                    | )          | (1,017,602                             | )          | 3,129,591                                  |       | 3,130                           |       | 1,014,472                        |       | —                   |       | —                                                    |       | —                                |       |
| Compensation  expense recorded as a result of stock options issued              |       | —                                        |       | —                                 |       | —                                     |       | —                          |       | 40,065                           |       | —                   |       | —                                                    |       | 40,065                                |       |
| Exercise of  warrants                                                           |       | —                                        |       | —                                 |       | 452,813                                    |       | 453                             |       | (453                             | )          | —                   |       | —                                                    |       | —                                |       |
| Issuance of  warrants for license                                               |       | —                                        |       | —                                 |       | —                                     |       | —                          |       | 16,800                           |       | —                   |       | —                                                    |       | 16,800                                |       |
| Cancellation of  redeemable stock upon note paydown                             |       | —                                        |       | —                                 |       | (52,816                                    | )          | —                          |       | —                           |       | —                   |       | —                                                    |       | —                                |       |
| Foreign currency  translation                                                   |       | —                                        |       | —                                 |       | —                                     |       | —                          |       | —                           |       | —                   |       | 2,171                                                     |       | 2,171                                 |       |
| Net loss                                                                        |       |                                          |       |                                   |       |                                       |       |                            |       |                             |       | (688,129                 | )     |                                                      |       | (688,129                              | )     |
|                                                                            |       |                                          |       |                                   |       |                                       |       |                            |       |                             |       |                     |       |                                                      |       |                                  |       |
| Balance at  September 30, 2007                                                  |       | 310,198                                       |       | $                                      | 310,198    |                                       | 24,725,431 |                            | $          | 24,109                           |       | $                        | 16,604,295 |                                                      | $          | (12,496,258                           | )          | $ | 17,083 |   | $ | 4,459,427 |   |

 

See accompanying notes to consolidated financialstatements.

 

 

5

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**CORGENIXMEDICAL CORPORATION**

# **AND SUBSIDIARIES**

## **Consolidated Statements of Cash Flows**

| ** **                                                                              | ** ** | **Three Months Ended** | ** ** |
|-----------------------------------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                                              | ** ** | **September 30,  2007**     | ** ** | **September 30,  2006** | ** ** |
| ** **                                                                              | ** ** | **(Unaudited)**                  | ** ** | **(Unaudited)** | ** ** |
| Cash flows from  operating activities:                                                  |       |                             |       |   |   |
| Net loss                                                                                |       | $                                | (688,129   | ) | $ | (843,203 | ) |
| Adjustments to  reconcile net loss to net cash provided (used) in operating activities: |       |                             |       |   |   |
| Depreciation and  amortization                                                          |       | 82,460                           |       | 77,406 |   |
| Accretion of  discount on note payable                                                  |       | 499,357                          |       | 336,075 |   |
| Common stock issued  for services                                                       |       | 4,400                            |       | 19,488 |   |
| Common stock  issued for interest                                                       |       | 27,314                           |       | 37,554 |   |
| Compensation  expense recorded for stock options issued                                 |       | 40,065                           |       | 40,375 |   |
| Amortization of  deferred financing costs                                               |       | 76,851                           |       | 135,206 |   |
| Changes in  operating assets and liabilities:                                           |       |                             |       |   |   |
| Accounts  receivable, net                                                               |       | 173,898                          |       | (79,334 | ) |
| Inventories                                                                             |       | (97,261                          | )          | (355,320 | ) |
| Prepaid expenses  and other assets, net                                                 |       | 130,181                          |       | (72,434 | ) |
| Accounts payable                                                                        |       | (125,678                         | )          | 13,805 | ) |
| Accrued payroll  and related liabilities                                                |       | 12,602                           |       | 102,086 |   |
| Accrued interest  and other liabilities                                                 |       | (230,126                         | )          | (5,853 | ) |
|                                                                                    |       |                             |       |   |   |
| Net cash  provided (used) in operating activities                                       |       | (94,066                          | )          | (594,149 | ) |
|                                                                                    |       |                             |       |   |   |
| Cash flows used  in investing activities:                                               |       |                             |       |   |   |
| Additions to  equipment                                                                 |       | (25,304                          | )          | (192,733 | ) |
|                                                                                    |       |                             |       |   |   |
| Cash flows from  financing activities:                                                  |       |                             |       |   |   |
| Proceeds from  issuance of common stock, net of financing costs                         |       | 867,741                          |       | — |   |
| Payments on  notes payable                                                              |       | (26,000                          | )          | (218,282 | ) |
| Payments on  capital lease obligations                                                  |       | (54,133                          | )          | (40,297 | ) |
|                                                                                    |       |                             |       |   |   |
| Net cash  provided by (used in) financing activities                                    |       | 787,608                          |       | (258,579 | ) |
|                                                                                    |       |                             |       |   |   |
| Net increase  (decrease) in cash and cash equivalents                                   |       | 668,238                          |       | (1,045,461 | ) |
|                                                                                    |       |                             |       |   |   |
| Impact of  exchange rate changes on cash                                                |       | 5,743                            |       | 2,869 |   |
|                                                                                    |       |                             |       |   |   |
| Cash and cash  equivalents at beginning of period                                       |       | 1,324,072                        |       | 3,118,494 |   |
| Cash and cash  equivalents at end of period                                             |       | $                                | 1,998,053  |   | $ | 2,075,902 |   |
|                                                                                    |       |                             |       |   |   |
| Supplemental  cash flow disclosures:                                                    |       |                             |       |   |   |
| Cash paid for  interest                                                                 |       | $                                | 85,569     |   | $ | 119,479 |   |
| Noncash  investing and financing activities-                                            |       |                             |       |   |   |
| Equipment  acquired under capital leases                                                |       | $                                | —     |   | $ | 589,116 |   |
| Issuance of  warrants for license                                                       |       | $                                | 16,800     |   | $ | — |   |
| Issuance of  stock for debt                                                             |       | $                                | 659,311    |   | $ | 118,719 |   |
| Conversion of  preferred stock into common stock                                        |       | $                                | 1,017,602  |   | $ | — |   |
| Conversion of  redeemable common stock to note payable                                  |       | $                                | —     |   | $ | 180,000 |   |
| Landlord  buildout of new facility                                                      |       | $                                | —     |   | $ | 1,207,705 |   |
| Restricted asset  applied to note                                                       |       | $                                | —     |   | $ | 250,000 |   |
| Addition of  discount on convertible notes due to contingent conversion feature         |       | $                                |       | 536,874 |   | $ |   | — |   |
|                                                                                         |            |                                  |            |  |  |  |  |  |  |

 

See accompanyingnotes to consolidated financial statements.

 

6

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**CORGENIX MEDICAL CORPORATION AND SUBSIDIARIES**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

**1.****             ****DESCRIPTION OF BUSINESS AND BASISOF PRESENTATION**

##### *Outlook*

                In fiscal 2008, weare focused on accelerating the market launch of our AspirinWorks assay,continuing to seek clearance by the FDA of our Anti-AtherOx Test Kit,submission of a 510(k) Premarket Notification to the FDA for the Company’sAtherox Test Kit, completing further clinical studies for our Hyaluronic TestKit and our Fibromyalgia Test Kit and continuing the development and strategiccollaboration towards the development of a group of products to detectpotential bio-terrorism agents.

 

                Our balance sheet,cash flow and liquidity positions have continued to improve and hopefully willallow us to take advantage of opportunities, as we focus primarily on theorganic growth of our business.

 

##### *Company Overview*

Corgenix MedicalCorporation, which we refer to as Corgenix or the Company, is engaged in theresearch, development, manufacture, and marketing of in vitro (outside thebody) diagnostic products for use in disease detection and prevention. Wecurrently sell 52 diagnostic products on a worldwide basis to hospitals,clinical testing laboratories, universities, biotechnology and pharmaceuticalcompanies and research institutions.  Inthe United States and the United Kingdom, we sell directly to these customers.  Elsewhere in the world, we primarily sell toindependent distributors that in turn sell to the laboratories.

Our corporate headquarters is located in Broomfield,Colorado. We have two wholly owned operating subsidiaries:

•                  Corgenix, Inc. (formerly REAADS Medical Products, Inc.), established in1990 and located in Broomfield, Colorado. Corgenix, Inc. is responsible forsales and marketing activities for North America, and also executes productdevelopment, product support, clinical and regulatory affairs, and productmanufacturing.

•                  Corgenix (UK) Ltd, incorporated in the United Kingdom in 1996 (formerlyREAADS Bio-Medical Products (UK) Limited) and located in Peterborough, England.Corgenix UK manages our international sales and marketing activities except fordistribution in North America, which is the responsibility of Corgenix, Inc.

We continue to use the REAADS trademark and trade namein the sale of products that we manufacture.

***Recent Developments***

OnJuly 25, 2007 and September 17, 2007, we entered into subscription and otheragreements to complete a private placement with certain institutional and otheraccredited investors.

Ouroffering consisted of common stock in the Company (the “Shares”) at the priceof $0.25 per share.  For each Sharepurchased, every investor received an equal number of common stock purchasewarrants (the “Warrants”).  One-third ofthe Warrants issued to each investor are exercisable at $0.34 per share with aone-year term, one-third are exercisable at $0.375 per share with a two-yearterm, and the remaining third are exercisable at $0.40 per share with a  five-year term.

TheShares and Warrants were offered and sold in reliance on exemptions fromregistration pursuant to Section 4(2) of the Securities Act of 1933, and Rule506 of Regulation D there under.  Eachinvestor is an “accredited investor” as defined in Rule 501 of the same.

Thesale of the Shares and Warrants also included a Registration Rights Agreementwhereby we provided the purchasers with “piggy back” registration rights if wepropose to register securities under the 1933 Act.

As of September 17, 2007,we had sold the maximum amount plus over allotment amounting to $989,000 inShares and Warrants.

 

 

7

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Terra Nova Financial,LLC, an Illinois limited liability company (“Terra Nova”), acted as a placementagent for the Company. Iliad Advisors, LLC, an Illinois limited liabilitycompany (“Iliad Advisors”), provided advisory services to Terra Nova on thetransaction.  As compensation for TerraNova’s services, we paid Terra Nova a fee equal to 7% of the aggregate offeringprice, at each close of each stage of the transaction.

Terra Nova’s fee alsoincluded warrants, due to Terra Nova at the close of the transaction, to purchaseshares of our common stock at the exercise price of $0.25 per share.  Since Terra Nova succeeded in selling themaximum offering plus the over-allotment, totaling an aggregate of $989,000, itreceived $69,230 in cash, and warrants to purchase 276,920 shares of commonstock at an exercise price of $0.25 per share.

On March 1, 2007, weexecuted an exclusive license agreement (the “License Agreement”) with CreativeClinical Concepts, Inc. (“CCC”).  TheLicense Agreement provides that CCC license to us certain products and assetsrelated to determining the effectiveness of aspirin and / or anti-platelettherapy (collectively, “Aspirin Effectiveness Technology,” or the “LicensedProducts”).  The Aspirin EffectivenessTechnology includes US trademark registration number 2,688,842, which includesthe term “AspirinWorks”® and related designs.

We believe that there isa present and growing need for non-invasive, simple and accurate confirmationof aspirin effectiveness and aspirin therapy, and that the License Agreementwill position us to provide products to meet this need.  Since 2005, Corgenix and CCC have beenengaged in a collaborative partnership to develop, manufacture and marketproducts for aspirin monitoring, including the AspirinWorks® Test Kit, a simpleurine test that measures a person’s response to aspirin and allows physiciansto determine the effect of aspirin therapy on an individual basis.  Under terms of the original agreement, CCCand Corgenix had agreed to equally share expenses and revenues that resultedfrom the business.  Under the LicenseAgreement, Corgenix will acquire the remaining 50 percent of the license to CCC’sAspirin Effectiveness Technology, thereby owning 100 percent of the rights toCCC’s Aspirin Effectiveness Technology.

The License Agreementrequires CCC to provide us with a worldwide, perpetual license for the use ofCCC’s Aspirin Effectiveness Technology. Additionally, CCC will provide us with the names of contacts, customerlists, market information, competitive information and technology related toCCC’s already-developed market in Aspirin Effectiveness Technology.  The License Agreement requires CCC to assistwith the manufacture of products derived from the Aspirin EffectivenessTechnology, and also provide us with a right of first refusal with regard toany new products developed by CCC for the purpose of measuring aspirineffectiveness and the use of thromboxane and prostacyclin metabolites todetermine the effect of aspirin on platelets or endothelial cells.

We may use the LicensedProducts in connection with any other asset or trademark.  We may also enter into sublicense agreementswith any other entity for the rights, privileges and licenses granted to usunder the License Agreement.  We mustseek CCC’s consent before entering any sublicense agreement, but CCC may notunreasonably withhold its consent so long as the sublicensee will use itscommercially reasonable best efforts to market and sell the LicensedProducts.  We must use our commerciallyreasonable best efforts to market and sell the Licensed Products.  To this end, within ninety days of the datethe FDA grants clearance for the Licensed Products, and for five yearsthereafter, we must develop and maintain an interactive website dedicated tothe Licensed Products.  CCC may not useor license or in any way transfer rights to any of the Licensed Products to anythird party.

The License Agreementprovides that responsibility for manufacture, distribution, and administrationof the sale of the Licensed Products is with us.  However, the Agreement requires CCC to assistand cooperate with us in this regard.

Our first payment to CCCbecame due at the execution of the Agreement. We have provided a combination of cash, shares of the Company’s commonstock, and warrants to purchase the Company’s common stock.  Following FDA clearance of the first LicensedProduct, we are required to make additional payments to CCC.  On the first, second and third anniversary ofthat clearance, we will be obligated to make payments consisting of cash,shares of common stock, and warrants to purchase shares of common stock.  The amount of cash and number of shares andwarrants due in these anniversary payments will be determined by application ofa formula including a certain dollar value, the total cumulative revenuereceived by us from sales of the Licensed Products during that year, and ourcommon stock share price on the relevant anniversary.  The dollar value applicable to that ratioincreases with each anniversary.

The License Agreementimposes caps on the total amount of cash, common stock, and warrant paymentsfrom us to CCC from the date of execution through to and including the thirdanniversary payment.  Under that caplimitation, the total anniversary payments will not exceed $200,000 in cash,$300,000 in value of shares of common stock (as valued on the date of issue),and 300,000 warrants to purchase shares of common stock at an exercise price of$0.35 per share.

 

 

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The License Agreementalso requires that, for all sales of the Licensed Products subsequent to theexecution of the agreement, we pay CCC a quarterly royalty fee equal to sevenpercent of net sales of the Licensed Products during the immediately precedingquarter.  The License Agreement’s caps onpayments from us to CCC do not apply to royalty payments. Royalty payments forthe quarter ended September 30, 2007 were minimal.

The Company and CCCanticipate that the License Agreement will remain in effect in perpetuity; however,the License Agreement provides for termination in the event of material breach,or if we become insolvent or file for protection under the U.S. BankruptcyCode.  Termination would cause all of ourrights under the License Agreement to revert to CCC, although any rightssublicensed to a third party would not be revoked or infringed by any suchtermination.

The License Agreementrequired that we forgive all unpaid fees, costs and expenses due to us underthat certain Product Developing, Manufacturing, and Distribution Agreementbetween us and CCC dated May 13, 2005. The License Agreement also requires that we forgive all unpaid fees,costs, expenses and charges due to us under that certain license agreementbetween the parties and McMaster University, dated October 19, 2005.  The total value of such forgiven fees, costs,expenses and charges was approximately $230,000 and was capitalized as part ofthe license on the accompanying balance sheet.

Certaininformation and note disclosures normally included in financial statementsprepared in accordance with accounting principles generally accepted in theUnited States of America (GAAP) have been omitted from these unauditedconsolidated financial statements. These unaudited consolidated financialstatements should be read in conjunction with the financial statements andnotes thereto included in the Company’s Annual Report on Form 10-KSB for thefiscal year ended June 30, 2007.  Theresults of operations for the three months ended September 30, 2007 and 2006 arenot necessarily indicative of the operating results for the full year.

In the opinion ofmanagement, all adjustments, consisting only of normal recurring accruals, havebeen made to present fairly the Company’s financial position at September 30,2007 and the results of operations and its cash flows for the three monthsended September 30, 2007 and 2006.

***Our Business***

***          *****Introduction**

Our business includes the research, development, manufacture, andmarketing of in vitro 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 from other healthcare manufacturersfor resale by us.  All of these productsare used in clinical laboratories for the diagnosis and/or monitoring of threeimportant areas of health 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).

In addition to ourcurrent products, we are actively developing new laboratory tests in otherimportant diagnostic testing areas.  See “—Other Strategic Relationships.”  Wemanufacture and market to clinical laboratories and other testing sitesworldwide.  Our customers include largeand emerging health care companies such as diaDexus, Inc., Bio RadLaboratories, Inc., Instrumentation Laboratories, Helena Laboratories andDiagnostic Grifols, S.A.

Most of our products arebased on our patented and proprietary application of Enzyme LinkedImmunoSorbent Assay, or ELISA, technology, a clinical testing methodologycommonly used worldwide.  Most of ourcurrent products are based on this platform technology in a delivery formatconvenient for clinical testing laboratories. The delivery format,

 

 

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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 which a resulting color occurs.  The amount of color developed in the finalstep of the test is directly proportional to the amount of the specific markerbeing tested for in the patient or unknown sample.  The amount of color is measured and theresults 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, increasedaccuracy and  superior specificity thanthe products of our competitors.

Some of the OM productswhich we obtain from other manufacturers and sell through our distributionnetwork utilize technologies other than our patented and proprietary ELISAtechnology.

Our diagnostic tests areintended to aid in the identification of the causes of illness and disease,enabling a physician to select appropriate patient therapy.

Internally and throughcollaborative arrangements, we are developing additional products that areintended to broaden the range of applications for our existing products and toresult in the introduction of new products.

Since 1990, our salesforce and distribution partners have sold over 12 million tests worldwide underthe REAADS and Corgenix labels, as well as products sold under othermanufacturers’ 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 ourrelationships with current and potential partners will enable us to enhance ourmenu of diagnostic products and accelerate our ability to penetrate theworldwide markets for new products.

We currently use theREAADS and Corgenix trademarks and trade names in the sale of the productswhich we manufacture.  These productsconstitute the majority of our product sales.

 

 

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**2.            ****EARNINGS (LOSS)PER SHARE**

Basic earnings (loss) per share is computed by dividing netloss attributable to common stockholders by the weighted average number ofcommon shares outstanding.  Dilutedearnings (loss) per share is computed by dividing net loss attributable tocommon stockholders by the weighted average number of common shares outstandingincreased for potentially dilutive common shares outstanding during theperiod.  The dilutive effect of stockoptions and their equivalents is calculated using the treasury stockmethod.  Stock options to purchase1,085,000 shares were granted in fiscal 2007. Stock options to purchase 150,000shares were granted during the quarter ended September 30, 2007. Options and warrantsto purchase common stock totaling 34,366,238 and 33,998,526 shares as ofSeptember 30, 2007 and 2006, respectively, are not included in the calculationof weighted average common shares-diluted below as their effect isanti-dilutive. Redeemable common stock is included in the common sharesoutstanding for purposes of calculating net income (loss) per share.

| ** **                                                    | ** ** | **3 Months ended  September 30,  2007** | ** ** | **3 Months ended  September 30,  2006** | ** ** |
|---------------------------------------------------------------|------------|--------------------------------------------------------|------------|--------------------------------------------------------|------------|
|                                                          |       |                                                   |       |                                                   |       |
| Net loss                                                      |       | $                                                      | (688,129   | )                                                      | $          | (843,203 | ) |
|                                                          |       |                                                   |       |                                                   |       |
| Common and  common equivalent shares outstanding:             |       |                                                   |       |                                                   |       |
| Historical  common shares outstanding at beginning of year    |       | 14,483,342                                             |       | 10,723,205                                             |       |
| Weighted average  common equivalent shares issued during year |       | 4,857,042                                              |       | 402,654                                                |       |
|                                                          |       |                                                   |       |                                                   |       |
| Weighted average  common shares — basic and diluted      |       | 19,340,384                                             |       | 11,125,859                                             |       |
|                                                          |       |                                                   |       |                                                   |       |
| Net loss per  share — basic and diluted                  |       | $                                                      | (0.04      | )                                                      | $          | (0.08 | ) |

 

**3.             INCOME TAXES**

On July 1, 2007, the Company adopted FASB Interpretation No. 48 (“FIN 48”),*“Accounting for Uncertainty in Income Taxes — aninterpretation of FASB Statement 109,”*which was issued in July2006. FIN 48 prescribes a comprehensive model for recognizing, measuring,presenting and disclosing in the financial statements, tax positions taken orexpected to be taken on a tax return, including a decision whether to file ornot to file in a particular jurisdiction. If there are changes in net assets asa result of application of FIN 48, these will be accounted for as an adjustmentto retained earnings. There were no unrecognized tax benefits as of July 1,2007, the date that FIN 48 was adopted. If there was an adjustment related toimplementation of FIN 48, there would be a reduction to the deferred tax assetsand a corresponding reduction to the valuation allowance, resulting in no neteffect on accumulated deficit. If any unrecognized benefit would be recognized,it would not affect the Company’s effective tax rate since it is subject to afull valuation allowance.

The Company’s practice is to recognize interest and/or penalties relatedto income tax matters in income tax expense. The Company has accrued $0 forinterest and penalties as of September 30, 2007.

A valuation allowance was provided for deferred tax assets, as theCompany is unable to conclude under relevant accounting standards that it ismore likely than not that deferred tax assets will be realizable.

The Company did not record a provision for income taxes for the threemonth periods ended September 30, 2007 or 2006 as a result of operating lossesand current estimated operating results for the current fiscal year. TheCompany has recorded valuation allowances to fully reserve its deferred taxassets, as management believes it is more likely than not that these assetswill not be realized. It is possible that management’s estimates as to thelikelihood of realization of its deferred tax assets could change as a resultof changes in estimated operating results. Should management conclude that itis more likely than not that these deferred tax assets are, at least in part,realizable, the valuation allowance will be reduced and recognized as adeferred income tax benefit in the statement of operations in the period ofchange, except as noted herein.

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**4.             SEGMENT INFORMATION**

The Company hastwo segments of business: North American and International operations.  North American operations transacts all salesin North America (US, Canada and Mexico). International operations transactsall other sales.  The following tablesets forth selected financial data for these segments for the three-monthperiods ended September 30, 2007 and 2006.
| ** **                    | ** ** | ** ** | ** ** | **Three Months Ended September 30** | ** ** |
|-------------------------------|------------|------------|------------|---------------------------------------------------------|------------|
| ** **                    | ** ** | ** ** | ** ** | **North America**                                  | ** ** | **International** | ** ** | **Total** | ** ** |
| Net sales                     |       | 2007       |       | $                                                       | 1,630,689  |   | $ | 474,499 |   | $ | 2,105,188 |   |
|                          |       | 2006       |       | $                                                       | 1,245,518  |   | $ | 389,435 |   | $ | 1,634,953 |   |
|                          |       |       |       |                                                    |       |   |   |   |   |
| Net income  (loss)            |       | 2007       |       | $                                                       | (797,423   | ) | $ | 109,294 |   | $ | (688,129 | ) |
|                          |       | 2006       |       | $                                                       | (968,639   | ) | $ | 125,436 |   | $ | (843,203 | ) |
|                          |       |       |       |                                                    |       |   |   |   |   |
| Depreciation and              |       | 2007       |       | $                                                       | 81,270     |   | $ | 1,190 |   | $ | 82,460 |   |
| amortization                  |       | 2006       |       | $                                                       | 76,302     |   | $ | 1,104 |   | $ | 77,406 |   |
|                          |       |       |       |                                                    |       |   |   |   |   |
| Interest  expense, net        |       | 2007       |       | $                                                       | 679,293    |   | $ | 1,031 |   | $ | 680,324 |   |
|                          |       | 2006       |       | $                                                       | 616,078    |   | $ | 525 |   | $ | 616,603 |   |
|                          |       |       |       |                                                    |       |   |   |   |   |
| Segment assets  September 30, |       | 2007       |       | $                                                       | 8,296,678  |   | $ | 797,291 |   | $ | 9,093,969 |   |
| June 30,                      |       | 2007       |       | $                                                       | 8,156,103  |   | $ | 732,573 |   | $ | 8,888,676 |   |

 

**5.****                                     ****REDEEMABLE COMMON STOCK**

On July 1, 2002,as part of the Medical & Biological Laboratories Co., Ltd. (MBL) Agreement,MBL purchased shares of the Company’s common stock for $500,000, which MBL canrequire the Company to repurchase at the same price in the event that apreviously existing distribution agreement with RhiGene, Inc. is terminated.For no additional consideration, MBL was also issued warrants to purchase anadditional 880,282 shares of Common Stock at a price of $.568 per share, whichis equal to an aggregate amount of $500,000. These warrants expire on July 3,2007 and may be exercised in whole or in part at any time prior to theirexpiration.  The estimated fair value ofthe warrant upon issuance was calculated as $401,809 using the Black-Scholesoption-pricing model 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 proceedsof $500,000 were allocated $277,221 to redeemable common stock and $222,779 tothe related warrants based on the relative fair values of the respectiveinstruments to the fair value of the aggregate transaction. Issuance costs andthe discount attributed to the redeemable common stock upon issuance wereaccreted over the 33-month period to the first date whereupon the put optionmay be exercised, which was the expiration date of the distribution agreementbetween the Company and RhiGene, Inc. (March 31, 2005). Furthermore, pursuantto the agreement with MBL, as long as MBL holds at least 50% of the commonstock purchased under the MBL agreement, MBL must give its written consent withrespect to the payment of any dividend, the repurchase of any of the Company’sequity securities, the liquidation or dissolution of the Company or theamendment of any provision of the Company’s Articles of Incorporation or Bylawswhich would adversely affect the rights of MBL under the stock purchasetransaction documents.  MBL was grantedstandard anti-dilution rights with respect to stock issuances not registeredunder the Securities Act.  MBL alsoreceived standard piggyback registration rights along with certain demandregistration rights.

On March 31, 2005 ourdistribution agreement with RhiGene expired, and the Company signed a newdistribution and OEM Supply Agreement with MBL International, Inc. (“MBLI”), awholly owned subsidiary of MBL, which grants the Company non-exclusive rightsto distribute MBL’s complete diagnostic line of autoimmune testing products inthe United States and exclusive distribution rights to the OEM Label productsworldwide excluding the United States, Japan, Korea and Taiwan.  In addition, on August 1, 2005 the Companyand MBL executed an Amendment to the Common Stock Purchase Agreement and CommonStock Purchase Warrant wherein one-half or 440,141of the original redeemableshares are exchanged for a three-year promissory note payable with interest atprime (7.75% as of September 30, 2007) plus two percent with paymentscommencing before September 1, 2005.  Theshares being exchanged for the promissory note will be returned to the Companyquarterly on a pro rata basis as payments are made on the promissory note. Asof September 30, 2007,  264,080 redeemableshares have been returned to the Company under this agreement. The remaining440,141 shares will be redeemable by the Company at $0.568 per share as ofAugust 1, 2008 for any shares still owned at that time by MBL and 

 

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only to the extent that MBL hasnot realized at least $250,000 in gross proceeds upon the sales of itsredeemable shares in the open market for the time period August 1, 2005 throughAugust 30, 2008.  Finally, the warrantsoriginally issued to MBL to purchase 880,282 shares have been extended toAugust 31, 2008 and re-priced from $0.568 per share to $0.40 per share.

**6.****             ****STOCK-BASED COMPENSATION**

*Adoption of SFAS 123(R)*

Effective July 1, 2006, the Company adopted the provisions ofStatement of Financial Accounting Standard No. 123 (revised 2004), “*Share-Based Payment”,*(SFAS 123(R)”) using the modifiedprospective transition method. In addition, the Securities and ExchangeCommission issued Staff Accounting Bulletin No. 107 “*Share-BasedPayment”*(“SAB 107”) in March 2005, which provides supplemental SFAS123(R) application guidance based on the views of the SEC. Under the modifiedprospective transition method, compensation cost recognized in the quarterlyperiod ended September 30, 2007 includes: (a) compensation cost for allshare-based payments granted prior to, but not yet vested as of July 1, 2006,based on the grant date fair value estimated in accordance with the originalprovisions of SFAS No. 123, and (b) compensation cost for all share-basedpayments granted beginning July 1, 2006, based on the grant date fair valueestimated in accordance with the provision so SFAS 123(R). In accordance withthe modified prospective transition method, results for prior periods have notbeen restated.

The adoption of SFAS 123(R) resulted in stock compensationexpense for the quarterly period ended September 30, 2007 of $40,065 charged togeneral and administrative expenses. This expense increased basic and dilutedloss per share by less than $0.01 for the quarter, compared to reported basicand diluted loss per share of $.03. The Company did not recognize a tax benefitfrom the stock compensation expense because the Company considers it more thanlikely than not that the related deferred tax assets, which have been reducedby a full valuation allowance, will not be realized.

The Black-Scholes option-pricing model was used to estimatethe option fair values. The option-pricing model requires a number ofassumptions, of which the most significant are expected stock price volatility,the expected pre-vesting forfeiture rate and the expected option term (theamount of time from the grant date until the options are exercised or expire).Expected volatility was calculated based upon actual historical stock pricemovements over recent periods equal to the expected option term. Expectedpre-vesting forfeitures were estimated based on actual historical pre-vestingforfeitures over recent periods for the expected option term. The expectedoption term was calculated using the “simplified”method permitted by SAB 107.

*Stock Options as of the Quarterly Period Ended September 30, 2007*

The Company’s Amended and Restated 1999 Incentive Stock Plan,the 2006 and 2007 Incentive Compensation Plans (the “Plans”) provide for two separatecomponents. The Stock Option Grant Program, administered by the CompensationCommittee (the “Committee”) appointed by the Company’s Board of Directors,provides for the grant of incentive and non-statutory stock options to purchasecommon stock to employees, directors or other independent advisors designatedby the Committee. The Restricted Stock Program administered by the Committee,provides for the issuance of Restricted Stock Awards to employees, directors orother independent advisors designated by the Committee.

The following table summarizes stock options outstanding andchanges during the quarterly period ended September 30, 2007:
| ** **                                 | ** ** | **Outstanding Options** | ** ** |
|--------------------------------------------|------------|------------------------------|------------|
| ** **                                 | ** ** | **Number of  Shares**   | ** ** | **Weighted  Average  Exercise  Price** | ** ** | **Weighted  Average  Remaining  Contractual  Term (in  months)** | ** ** | **Aggregate  Intrinsic  Value** | ** ** |
| Options  outstanding at June 30, 2007      |       | 2,305,600                    |       | 0.38 |   | 64.38 |   | $ | — |   |
| Granted                                    |       | 150,000                      |       | 0.44 |   | 84.0 |   |   |   |
| Exercised                                  |       | —                       |       | — |   | — |   | — |   |
| Cancelled or  forfeited                    |       | —                       |       | — |   | — |   | — |   |
| Options  outstanding at September 30, 2007 |       | 2,455,600                    |       | 0.382 |   | 64.38 |   | $ | 313,865 |   |
| Options  exercisable at September 30, 2007 |       | 1,588,933                    |       | 0.43 |   | 42.93 |   | $ | 169,517 |   |

 

 

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The total intrinsic value, or the difference between the exercise priceand the market price on the exercise dates, of all options exercised during thequarterly period ended September 30, 2007, was zero as no options wereexercised. Consequently, no cash was received, nor did the Company realize anytax deductions related to exercise of stock options during the quarter.

Stock options outstanding and currently exercisable at September 30, 2007are as follows:
| **Outstanding options**  | ** ** | **Exercisable options** | ** ** |
|-------------------------------|------------|------------------------------|------------|
| **Range of  exercise  price** | ** ** | **Number**                   | ** ** | **Weighted  average  remaining  contractual  life (months)** | ** ** | **Weighted  average  exercise  price** | ** ** | **Number** | ** ** | **Weighted  average  exercise  price** | ** ** |
| 0.625 — 1.375            |       | 83,500                       |       | 4.975 |   | $ | 0.787 |   | 83,500 |   | $ | 0.79 |   |
| 0.30-0.46                     |       | 2,372,100                    |       | 61.020 |   | 0.368 |   | 1,505,433 |   | 0.41 |   |
|                          |       |                         |       |   |   |   |   |   |   |   |   |
|                          |       | 2,455,600                    |       | 64.38 |   | $ | 0.382 |   | 1,588,933 |   | $ | 0.43 |   |

 

Total estimated unrecognized compensation cost from unvested stockoptions as of September 30, 2007 was approximately $152,926 which is expectedto be recognized over a weighted average period of approximately 65 months.

The weighted average per share fair value of stock options granted duringthe quarterly periods ending September 30, 2007 and 2006 was $0.34 and $0.33,respectively. The fair value was estimated as of the grant date using theBlack-Scholes option pricing model with the following assumptions:

 
| ** **               | ** ** | **Three Months Ended September 30,** | ** ** |
|--------------------------|------------|----------------------------------------------------------|------------|
| ** **               | ** ** | **2007**                                                 | ** ** | **2006** | ** ** |
| Volatility               |       | 84.7                                                     | %          | 111.5 | % |
| Expected option  term    |       | 7 years                                                  |       | 7 years |   |
| Risk-free  interest rate |       | 4.40                                                     | %          | 4.39 | % |
| Expected  dividend yield |       | 0                                                        | %          | 0 | % |

 

In addition to the stock options discussed above, the Company recognizedshare-basis compensation expense related to Restricted Stock awards, of $3,333for the three months ended September 30, 2007 and 2006. The following tablesummarizes Non-vested Restricted Stock and the related activity as of and forthe quarter ended September 30, 2007:

| ** **                        | ** ** | ** ** | ** ** | **Weighted**        | ** ** |
|-----------------------------------|------------|------------|------------|---------------------|------------|
| ** **                        | ** ** | ** ** | ** ** | **Average**         | ** ** |
| ** **                        | ** ** | ** ** | ** ** | **Grant-Date**      | ** ** |
| ** **                        | ** ** | **Shares** | ** ** | **Fair Value** | ** ** |
| Non-vested at  July 1, 2007       |       | 66,667     |       | $                   | 0.40       |   |
| Granted                           |       | —     |       | —              |       |
| Vested                            |       | —     |       | —              |       |
| Non-vested at  September 30, 2007 |       | 66,667     |       | $                   | 0.40       |   |

 

**7.****             ****RECENTLYISSUED ACCOUNTING PRONOUNCEMENTS**

*FAS 157, Fair Value Measurements.** *In September, 2006, the FASB issued Statement ofFinancial Accounting Standards No. 157, Fair Value Measurements (“SFAS 157”).  SFAS 157 defines fair value, establishes aframework and gives guidance regarding the methods used for measuring fairvalue, and expands disclosures about fair value measurements.  SFAS 157 is effective for financialstatements issued for fiscal years beginning after November 15, 2007, andinterim periods within those fiscal years. We are currently assessing the impact that SFAS 157 will have onour results of operations and financial position.

*SFAS 159, “The Fair Value Option for FinancialAssets and Financial Liabilities — Including an Amendment of FASB Statement No.115**.” *In November 2007, the FASB issued Statement ofFinancial Accounting Standards No. 159, The Fair Value Option forFinancial Assets and Financial Liabilities — Including an Amendment of FASBStatement No. 115 (“SFAS 159”).* *SFAS 159 is effective for fiscalyears beginning after November 15, 2007. SFAS 159 permits an entity to chooseto measure many financial instruments and certain other items at fair value atspecified election dates.  Subsequentunrealized gains and losses on items for which the fair value option has beenelected will be reported in earnings.  Wedo not 

 

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believe that the adoption of SFAS 159 will have amaterial impact on our consolidated financial statements.

**8.****             ****NOTES PAYABLE**

Notes payable consist of the following at September 30, 2007and June 30, 2007:
| ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | ** ** | **September 30, 2007** | ** ** | **June 30, 2007** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------|------------|-----------------------------|------------|
| Convertible term  note payable to institutional investors, net of discount of $137,680 with  interest at the greater of 12%, as adjusted by a stock trading formula, or  prime plus 3% (10.75% and 11.25% as of September 30, 2007 and June 30, 2007),  interest only from June 1, 2006 through October 1, 2006 and, via a note  modification dated November 30, 2006, December 1, 2006 through November 1,  2007 and then due in monthly installments of $19,350.71 plus interest from  December 1, 2007 through November 1, 2009, collateralized by all assets of  the company and a partial guaranty by an officer of the Company |       | $                                | 326,735    |                        | $          | 720,992 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |       |                             |       |                        |       |
| Convertible term  note payable to institutional investors, net of discount of $620,178 with  interest at the greater of 12%, as adjusted by a stock trading formula, or  prime plus 3% (10.75% and 11.25% as of September 30, 2007 and June 30, 2007),  interest only from December 28, 2006 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 $42,546.04 plus interest from  December 1, 2007 through November 1, 2009, collateralized by all assets of  the company and a partial guaranty by an officer of the Company |       | 400,926                          |       | 703,496                     |       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |       |                             |       |                        |       |
| Term note  payable to institutional investors, with interest at the greater of 12% or  prime plus 3% (10.75% and 11.25% as of September 30, 2007 and June 30, 2007),  interest only payments commencing June 1, 2006 until May 19, 2008,  collateralized by all assets of the Company                                                                                                                                                                                                                                                                                                                                                |       | 500,000                          |       | 500,000                     |       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |       |                             |       |                        |       |
| Note payable,  unsecured, to redeemable common stockholders, with interest at prime plus  2.0% (9.75% and 10.25% as of September 30, 2007 and June 30, 2007) due in  monthly installments with principal payments ranging from $5,000 to $10,000  plus interest through August 2008                                                                                                                                                                                                                                                                                                                                                  |       | 64,000                           |       | 90,000                      |       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |       | 1,291,661                        |       | 2,014,488                   |       |
| Current portion,  net of current portion of discount                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |       | (755,485                         | )          | (1,014,437                  | )          |
| Notes payable,  excluding current portion and net of long-term portion of discount                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |       | $                                | 536,175    |                        | $          | 1,000,051 |   |

 

The convertible notes payable restrict the payment ofdividends on the Company’s common stock.

**Item 2.**

**CORGENIXMEDICAL CORPORATION**

**Management’sDiscussion and Analysis Of**

**Financial Condition and Results of Operations**

Thefollowing discussion should be read in conjunction with the consolidatedfinancial statements and accompanying notes included elsewhere herein.

**General**

Sincethe Company’s inception, we have been primarily involved in the research,development, manufacturing and marketing/distribution of diagnostic tests forsale to clinical laboratories. We currently market 52 products coveringautoimmune disorders, vascular diseases, infectious diseases and liver disease.Our products are sold in the United States, the UK and other countries throughour marketing and sales organization that includes direct sales representatives,contract sales representatives, internationally through an extensivedistributor network, and to several significant OEM partners.

Wemanufacture products for inventory based upon expected sales demand, shippingproducts to customers, usually within 24 hours of receipt of orders if instock.  Accordingly, we do not operatewith a significant customer order backlog.

Exceptfor the fiscal year ending June 30, 1997, we have experienced revenue growthsince our inception, primarily from sales of products and contract revenuesfrom strategic partners. Contract revenues consist of service fees fromresearch and development agreements with strategic partners.

 

 

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Beginning in fiscal year 1996, we began adding third-partyOM licensed products to our diagnostic product line. Currently we sell 128products licensed from or manufactured by third party manufacturers. We expectto expand our relationships with other companies in the future to gain accessto additional products.

Althoughwe have experienced growth in revenues every year since 1990, except for 1997,there can be no assurance that, in the future, we will sustain revenue growth,current revenue 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 new products,(iii) seasonal customer demand, (iv) whether and when we receive research anddevelopment payments from strategic partners, (v) changes in reimbursementpolicies for the products that we sell, (vi) competitive pressures on averageselling prices for the products that we sell, and (vii) changes in the mix ofproducts that we sell.

**Recently Issued Accounting Pronouncements**

*FAS 157, Fair Value Measurements.** *In September, 2006, the FASB issued Statement ofFinancial Accounting Standards No. 157, Fair Value Measurements (“SFAS 157”).  SFAS 157 defines fair value, establishes aframework and gives guidance regarding the methods used for measuring fairvalue, and expands disclosures about fair value measurements.  SFAS 157 is effective for financialstatements issued for fiscal years beginning after November 15, 2007, andinterim periods within those fiscal years. We are currently assessing the impact that SFAS 157 will have onour results of operations and financial position.

*SFAS 159, “The Fair Value Option for FinancialAssets and Financial Liabilities — Including an Amendment of FASB Statement No.115**.” *In November 2007, the FASB issued Statement ofFinancial Accounting Standards No. 159, The Fair Value Option forFinancial Assets and Financial Liabilities — Including an Amendment of FASBStatement No. 115 (“SFAS 159”).* *SFAS 159 is effective for fiscalyears beginning after November 15, 2007. SFAS 159 permits an entity to chooseto measure many financial instruments and certain other items at fair value atspecified election dates.  Subsequentunrealized gains and losses on items for which the fair value option has beenelected will be reported in earnings.  Wedo not believe that the adoption of SFAS 159 will have a material impact on ourconsolidated financial statements.

**Critical AccountingPolicies**

The Company’s consolidated financial statements areprepared in accordance with accounting principles generally accepted in theUnited States (“GAAP”) and our significant accounting policies are summarizedin Note 1 to the accompanying consolidated financial statements.  The preparation of financial statements inconformity with GAAP requires management to make estimates and assumptions thataffect reported amounts of assets, liabilities, disclosure of contingent assetsand liabilities at the date of the financial statements and reported amounts ofrevenues and expenses during the reporting period.  Actual results could differ significantlyfrom those estimates.

The Company disclosed in Note 1 to its consolidatedfinancial statements included in the Form 10-KSB those accounting policies thatit considers to be significant in determining its results of operations andfinancial position. There have been no material changes to or application ofthe accounting policies previously identified and described in the Form 10-KSB.

Prior to July 1, 2006, the Company accounted for stockoption awards granted under the Company’s Incentive Compensation Plan inaccordance with the recognition and measurement provisions of AccountingPrinciples Board Opinion No. 25, *Accounting for StockIssued to  Employees”,*(“APB25”) and related Interpretations, as permitted by Statement of FinancialAccounting Standards No. 123, “*Accounting for Stock-BasedCompensation”,*(“SFAS 123). Share-based employee compensation expensewas not recognized in the Company’s consolidated statements of operations priorto July 1, 2006 as all stock option awards granted to employees had an exerciseprice equal to or greater than the market value of the common stock on the dateof the grant. As permitted by SFAS 123, the Company reported pro-formadisclosures presenting results and earnings (loss) per share as if the Companyhad used the fair value recognition provisions of SFAS 123 in the Notes toConsolidated Financial Statements. Stock-based compensation related tonon-employees was accounted for based on the fair value of the related stock oroptions in accordance with SFAS 123 and its interpretations.

Effective July 1, 2006, the Company adopted theprovisions of Statement of Financial Accounting Standard No. 123 (revised2004), “*Share-Based Payment”,*(SFAS 123(R)”)using the modified prospective transition method. See Note 2 for further detailon the impact of SFAS 123(R) to the Company’s consolidated financialstatements.

 

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The Company maintains an allowance for doubtfulaccounts based on its historical experience and provides for any specificcollection issues that are identified. Such allowances have historically been adequate to provide for ourdoubtful accounts but involve a significant degree of management judgment andestimation.  Worse than expected futureeconomic conditions, unknown customer credit problems and other factors mayrequire additional allowances for doubtful accounts to be provided for infuture periods.

Equipment and software are recorded at cost.  Equipment under capital leases is recordedinitially at the present value of the minimum lease payments.  Depreciation and amortization is calculatedprimarily using the straight-line method over the estimated useful lives of therespective assets that range from 3 to 7 years.

The internal and external costs of developing andenhancing software costs related to website development, other than initialdesign and other costs incurred during the preliminary project stage, arecapitalized until the software has been completed.  Such capitalized amounts began to beamortized commencing when the website was placed in service on a straight-linebasis over a three-year period.

When assets are sold, retired or otherwise disposedof, the cost and related accumulated depreciation are eliminated from theaccounts and a gain or loss is recognized.

Repair and maintenance costs are expensed as incurred.

We evaluate the realizability of our long-livedassets, including property and equipment, whenever events or changes incircumstances indicate that the carrying amount of an asset may not berecoverable.

Revenue from sale of products is recognized uponshipment of products.

Revenue from research and development contractsrepresents amounts earned pursuant to agreements to perform research anddevelopment activities for third parties and is recognized as earned under therespective agreement.  Because researchand development services are provided evenly over the contract period, revenueis recognized ratably over the contract period. Research and development agreements in effect in 2007 and 2006 providedfor fees to the Company based on time and materials in exchange for performingspecified research and development functions.  Research and development and advertising costs are expensed whenincurred. Inventories are recorded at the lower of cost or market, using thefirst-in, first-out method.

# **Resultsof Operations**

*Three Months Ended September 30, 2007****compared to 2006*

*Net sales.*Net sales for the quarter ended September 30, 2007were $2,105,188 a 24.3% increase from $1,694,112 for the quarter endedSeptember 30, 2006. This increase resulted primarily from an increae inworldwide demand for most of our product lines. Total North American salesincreased $385,171 or 30.9% to $1,630,689 while total sales to internationaldistributors increased $85,064 or 21.8% to $474,499 from year to year. Withrespect to the Company’s major revenue categories and product lines, NorthAmerican direct product-only sales increased $137,120 or 13.9% to $1,122,332whereas international direct product-only sales increased $13,206 or 3.6% to$376,667.  Worldwide category resultswere as follows: Phospholipids kit sales increased $56,917 or 6.5% to $931,803for the period. Coagulation kit sales increased $117,716 or 30.6% to $502,617.HA kit sales increased $61,041 or 34.1% to $240,298, and Autoimmune kit salesincreased $7,842 or 30.2% to $33,794. Additionally, worldwide OEM/contractmanufacturing revenues increased $128,077, or 45.1% to $412,073. Overall, worldwide non-product revenue increased$96,907, or 99.7% to $194,116. Sales of products manufactured for us by othercompanies while still relatively small, are expected to continue to increaseduring fiscal 2008.

*Cost of sales*.  Cost ofsales, as a percentage of sales, increased to 45.8% for the quarter endedSeptember 30, 2007 from 38.1% in 2005. This increase was primarily attributableto an unexpected scrapping of numerous production lots of one of our largerproduct lines. This, normally difficult to produce product, encounterednumerous difficulties during the quarter which resulted in a much higher thannormal failure rate. Management has implemented a number of changes to themanufacturing process and the quality control testing protocols, but at thistime it is not known whether or not this will be a recurring problem.

*Selling and marketing. *For thequarter ended September 30, 2007, selling and marketing expenses increased 8.9%

 

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to $531,605 from$487,986 for the quarter ended September 30, 2006.  The increase was primarily due to increasesin advertising, sales commissions, consulting fees, trade shows and royalties.

*Research and development.* Research and development expenses decreased 29.7% to$163,693 for the quarter ended September 30, 2007, from $232,687 for thequarter ended September 30, 2006.  Thisdecrease primarily involved decreases in labor-related costs, clinical studiesexpense, travel-related expenses, and consulting fees, partially offset byreductions in legal fees and laboratory supplies.

*General and administrative.* For the quarter ended September 30, 2007, general andadministrative expenses decreased $152,570 or 25.6% to $443,730 from $596,300for the quarter ended September 30, 2006. This decrease was primarily attributable to decreases in labor-relatedexpenses, outside services, consulting expenses, and supplies, partially offsetby increases in equipment lease expense, rent and legal expenses.

*Interest expense.* Interest expense increased $63,721 or 10.3% to $680,324for the quarter ended September 30, 2007, from $616,603 for the quarter endedSeptember 30, 2006 due primarily to the additional discount and acceleration ofthe discount amortization on the convertible notes due to the contingentconversion feature, partially offset by a reduction of the amortization ofdeferred financing costs and discount on the notes payable as a result of therecently completed (November 2006) principal payment deferral on the Company’sconvertible debt.

**Liquidity and Capital Resources**

For the quarterended September 30, 2007, cash used by operating activities amounted to $94,066,versus cash used by operating activities of $594,149 for the quarter endedSeptember 30, 2006. The cash used by operations for the quarter resultedprimarily from the net loss for the current period, plus a decrease in accountspayable, an increase in inventories and a decrease in accrued liabilities.

 

Net cash used ininvesting activities, the purchase of laboratory equipment, leaseholdimprovements and computer equipment was $25,304 for the quarter ended September30, 2007, compared to purchases of laboratory, computer and office equipmenttotaling $192,733 for the quarter ended September 30, 2006. This substantialdecrease was due to a reduction of capital expenditures compared to the prioryear’s move to a new and larger facility, which necessitated increased spendingon new furniture, computers, laboratory and refrigeration equipment andflooring.

 

                Net cash provided by financingactivities amounted to $787,608 for the quarter ended September 30, 2007compared to cash used by financing activities of $258,579 for the quarter endedSeptember 30, 2006. This large difference in cash provided by financingactivities versus the amount used by financing activities in the comparableprior year was primarily due to the proceeds of the recently closed commonstock private placement, in addition to the decreased principal payments onnotes payable in the current period as a result of the principal deferralagreement reached in November 2006.

 

                Cash on the balance sheetamounted to $1,998,053 as of September 30, 2007 compared to $1,324,072 asof  June 30, 2007.

 

                Working capital as of  September 30, 2007 amounted to $3,297,325compared to $2,070,229 as of June 30, 2007.

 

                Total liabilities were $4,384,542as of September 30, 2007 compared to $5,645,796 as of June 30, 2007.

 

                Stockholders’ equity amounted to$4,459,427 as of September 30, 2007 compared to $2,992,880 as of June 30m,2007.

 

TheCompany has incurred operating losses and negative cash flow from operationsfor most of its history. Losses incurred since its inception, net of dividendson convertible preferred stock, have aggregated $10,216,258, and there can beno assurance that the Company will be able to generate positive cash flows tofund its operations in the future or to pursue its strategic objectives.  Historically, the Company has financed itsoperations primarily through long-term debt and the sales of common, redeemablecommon, and preferred stock.  The Companyhas also financed operations through sales of diagnostic

 

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products andagreements with strategic partners. Accounts receivable decreased 13.6% to $1,058,672 from $1,225,677 as ofSeptember 30, 2006, primarily as a result of accelerated collection procedures.

We have developedand are continuing to strive to implement an operating plan intended toeventually achieve sustainable profitability and positive cash flow fromoperations.  Key components of this planinclude accelerating revenue growth and the cash to be derived  from existing product lines as well as new diagnosticproducts, expansion of our strategic alliances with other biotechnology anddiagnostic companies, improving operating efficiencies to reduce cost of sales,thereby improving gross margins, and lowering overall operating expenses.  Management has been successful in increasingrevenues in the current quarter ended September 30, 2007 by $411,076 or 24.3%.,and is forecasting continued revenue growth for the remainder of the fiscalyear ended June 30, 2008.  However,management has not yet achieved the necessary level of operating efficienciesto lower our cost of sales and operating expenses, and consequently, we havescaled back expenditures, periodically delayed payments on accounts payable,and, in November of 2006, entered into a twelve month principal deferralagreement with our convertible debt holders in order to maintain financialliquidity.  This deferral was previouslyreported in filings to the SEC.  Thereare significant risks associated with the operating plan and we might be forcedto further modify the plan if circumstances change, in order to achieve thegoals of sustained profitability and positive cash flow from operations.

Although theoperating plan is intended to achieve sustainable profitability and positivecash flow from operations, it is possible that we may not be successful in ourefforts.  Even with our operating plan,we expect to continue incurring operating losses for the first three to sixmonths of fiscal 2008, as it will take time for our strategic and operatinginitiatives to have a positive effect on our business operations and cashflow.  In view of this, in July 2007, wereported that we had entered into subscription and other agreements to completea private placement with certain institutional and other accredited investors.  As of September 30, we had sold the maximum$989,000 in interests in this placement. *.*

Should any othersignificant negative events occur, our financial liquidity position will mostlikely be negatively impacted by our not achieving positive cash flow fromoperations.  Given all of thesecircumstances, as noted above, we have secured additional equityfinancing.  It is also possible that wemay also experience future defaults under the agreements with our convertibledebt holders and/or redeemable common shareholder, e.g., for non payment ofamounts due, in which case they would be entitled to accelerate the amountspayable to them.  We do not believe thatany defaults will occur in fiscal 2008. In order to help satisfy our workingcapital requirements we have raised additional funds through the sale of equitysecurities. In addition, if we are not able to achieve the hoped-for salesincreases, we may need to enter into collaborative agreements with thirdparties or evaluate the possible divestiture of product lines.  In addition, we may be required to reduce oursales and marketing activities, reduce the scope of or eliminate our researchand development programs, or relinquish rights to technologies or products thatwe might otherwise seek to develop or commercialize. Management believes thatwe will have adequate resources to continue operations for longer than 12months.

**Off-Balance Sheet Arrangements**

We donot have any off-balance sheet arrangements.

**Contractual Obligations and Commitments**

On February 8, 2006, weentered 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.  The Property 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 First Amendment to the Lease Agreement (the “FirstAmendment”) established July 6, 2006 as the date of the commencement of theLease

•                 June 19, 2007- The Second Amendment to the Lease Agreement (the “SecondAmendment”) redefined the amount of available rental space from 32,480 to32,000 square feet and recalculated the lease rates per square foot, and

•                 July 19, 2007- The Third Amendment to the Lease Agreement (the “ThirdAmendment”) established the base rent matrix for the period 11/28/2013 to12/05/2013 which was inadvertently omitted in the Second Amendment.

 

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Theterm of the Lease (the “Term”) is seven years and five months and commenced onJuly 6, 2006 with tenant options to extend the Term for up to two five-yearperiods.  We have a one time right offirst refusal to lease contiguous premises.

Initially there was no base lease rate payable on25,600 square feet of the Property, plus estimated operating expenses of $1.61per square foot.

The base lease rate payable on 25,600 square feet ofthe Property increased to $4.00 per square foot on January 28, 2007, plusamortization of tenant improvements of $5.24 per square foot, plus estimatedoperating expenses of $1.61 per square foot. The base lease rate on 25,600 square feet of the Property increases to$5.64 per square foot on January 28, 2008, with fixed annual increases eachJanuary 28 thereafter during the initial Term, plus the amortization of tenantimprovements of $5.24 per square foot, and estimated operating expenses of$1.61 per square foot.

Initially, there was no base lease rate payable on6,400 square feet of the Property, plus estimated operating expenses of $1.61per square foot.  The base lease rate on6,400 square feet of the Property increases to $3.00 per square foot commencingon August 28, 2007, and increases to $3.09 on January 28, 2008, with fixedannual increases each January 28 thereafter during the initial Term, plusestimated operating expenses of $1.61 per square foot.

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

The base lease rate for an extension period is 100% ofthe then prevailing market rental rate (but in no event less than the rent forthe last month of the then current Term) and shall thereafter increase annuallyby 3% for the remainder of the applicable extension period.

We have not invested in any real estate or real estatemortgages.

**Item 3.**

**Controls and Procedures**

**               **Under thesupervision and with the participation of the Company’s President and ChiefAccounting Officer, the Company’s management has evaluated the effectiveness ofthe Company’s disclosure controls and procedures as of the end of the periodcovered by this report as defined in Rule 13a-15(b) or Rule 15(d)-15(e) underthe Securities Exchange Act of 1934 (the “Exchange Act”). Based on thatevaluation, the President and Chief Accounting Officer have concluded that, asof the end of the period covered by this report, the Company’s disclosurecontrols and procedures are effective and ensure that information required tobe disclosed in the Company’s Exchange Act reports is (1) recorded, processed,summarized and reported in a timely manner, and (2) accumulated andcommunicated to management, including the President and our Chief AccountingOfficer, as appropriate, to allow timely decisions regarding requireddisclosure.

 

There were no changes in the Company’s internal control over financialreporting as of the end of the period covered by this report that materiallyaffected, or are reasonably likely to materially affect, the Company’s internalcontrol over financial reporting.

 

**Forward-LookingStatements and Risk Factors**

This10-QSB includes statements that are not purely historical and are “forward-lookingstatements” within the meaning of Section 21E of the Securities Act of 1934, asamended, including statements regarding our expectations, beliefs, intentionsor strategies regarding the future.  Allstatements other than historical fact contained in this 10-QSB, including,without limitation, statements regarding future capital requirements,acquisition strategies, strategic partnership expectations, technologicaldevelopments, the development, the availability of necessary components,research and development programs and distribution plans, are forward-lookingstatements.  All forward-lookingstatements included in this 10-QSB are based on information available to us onthe date hereof, and we assume no obligation to update such forward-lookingstatements.  

 

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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.

Aninvestment in Corgenix entails certain risks that should be carefullyconsidered. In addition, these risk factors could cause actual results todiffer materially from those expected include the following:

**We continue to incur losses and are likely to requireadditional financing.**

Wehave incurred operating losses and negative cash flow from operations for mostof our history. Losses incurred since our inception, net of dividends onconvertible preferred stock, have aggregated $10,216,258, and there can be noassurance that we will be able to generate positive cash flows to fund ouroperations in the future or to pursue our strategic objectives.  Historically, we have financed our operationsprimarily through long-term debt and the sales of common, redeemable common andpreferred stock.  We have also financedoperations through sales of diagnostic products and agreements with strategicpartners.  Accounts receivable decreased13.6% to $1,058,672, from $1,225,677 as of June 30, 2007 primarily as a resultof accelerated collection procedures.

Wehave developed and are continuing to strive to implement an operating planintended to eventually achieve sustainable profitability and positive cash flowfrom operations.  Key components of thisplan include accelerating revenue growth and the cash to be derived  from existing product lines as well as newdiagnostic products, expansion of our strategic alliances with otherbiotechnology and diagnostic companies, improving operating efficiencies toreduce cost of sales, thereby improving gross margins, and lowering overalloperating expenses.  Management has beensuccessful in increasing revenues in the current fiscal quarter ended September30, 2007 by $411,075 or 24.3%., and is forecasting continued revenue growth forthe fiscal year ended June 30, 2008. However, management has not yet achievedthe necessary level of operating efficiencies to lower our cost of sales andoperating expenses, and consequently, we have scaled back expenditures,periodically delayed payments on accounts payable, and, in November of 2006,entered into a twelve month principal deferral agreement with our convertibledebt holders in order to maintain financial liquidity. This deferral waspreviously reported in filings to the SEC. There are significant risks associated with the operating plan and wemight be forced to further modify the plan if circumstances change, in order toachieve the goals of sustained profitability and positive cash flow fromoperations.

Althoughthe operating plan is intended to achieve sustainable profitability andpositive cash flow from operations, it is possible that we may not besuccessful in our efforts.  Even with ouroperating plan, we expect to continue incurring operating losses for the firstthree to six months of fiscal 2008, as it will take time for our strategic andoperating initiatives to have a positive effect on our business operations andcash flow.  In view of this, in July2007, we reported that we have entered into subscription and other agreementsto complete a private placement with certain institutional and other accreditedinvestors.  As of September 30, 2007,we  sold the maximum $989,000 in Sharesand Warrants in this offering.  See *Recent Developments.*

Shouldany other significant negative events occur, our financial liquidity positionwill likely be negatively impacted by our not achieving positive cash flow fromoperations.  Given all of thesecircumstances, as noted above, we have secured additional equity financing.  It is also possible that we may also experiencefuture defaults under the agreements with our convertible debt holders and/orredeemable common shareholder, in which case they would be entitled toaccelerate the amounts payable to them. In order to help satisfy our working capital requirements we have raisedadditional funds through the sale of equity securities.  In addition, if we are not able to achievethe hoped-for sales increases, we may need to enter into collaborativeagreements with third parties or evaluate the possible divestiture of productlines.  In addition, we may be requiredto reduce our sales and marketing activities, reduce the scope of or eliminateour research and development programs, or relinquish rights to technologies orproducts that we might otherwise seek to develop or commercialize.  Management believes that we will haveadequate resources to continue operations for longer than 12 months.

**We depend upon collaborativerelationships and third parties for product development and commercialization.**

Wehave historically entered into research and development agreements withcollaborative partners, from which we derived revenues in past years.  Pursuant to these agreements, ourcollaborative partners have specific responsibilities for the costs ofdevelopment, promotion, regulatory approval and/or sale of our products.  We will continue to rely on futurecollaborative partners for the development of products and technologies.  There can be no assurance that we will beable to

 

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negotiate suchcollaborative arrangements on acceptable terms, if at all, or that current orfuture collaborative arrangements will be successful.  To the extent that we are not able toestablish such arrangements, we could be forced to undertake such activitiesentirely at our own expense.  The amountand timing of resources that any of these partners devotes to these activitiesmay be based on progress by us in our product development efforts.  Collaborative arrangements may be terminatedby the partner upon prior notice without cause and there can be no assurancethat any of these partners will perform its contractual obligations or that itwill not terminate its agreement.  Withrespect to any products manufactured by third parties, there can be no assurancethat any third-party manufacturer will perform acceptably or thatfailures by third parties will not delay clinical trials or the submission ofproducts for regulatory approval or impair our ability to deliver products on atimely basis.

**There can be no assurance of successful or timely developmentof additional products.**

Ourbusiness strategy includes the development of additional diagnostic productsfor the diagnostic business.  Our successin developing new products will depend on our ability to achieve scientific andtechnological advances and to translate these advances into commerciallycompetitive products on a timely basis. Development of new products requires significant research, developmentand testing efforts.  We have limitedresources to devote to the development of products and, consequently, a delayin the development of one product or the use of resources for productdevelopment efforts that prove unsuccessful may delay or jeopardize thedevelopment of other products.  Any delayin the development, introduction and marketing of future products could resultin such products being marketed at a time when their cost and performancecharacteristics would not enable them to compete effectively in theirrespective markets.  If we are unable, fortechnological or other reasons, to complete the development and introduction ofany new product or if any new product is not approved or cleared for marketingor does not achieve a significant level of market acceptance, our ability toremain competitive in our product niches would be impaired.

**Competition in the human medicaldiagnostics industry is, and is expected to remain, significant.**

Ourcompetitors range from development stage diagnostics companies to majordomestic and international pharmaceutical and biotechnology companies. Many ofthese companies have financial, technical, marketing, sales, manufacturing,distribution and other resources significantly greater than ours.  In addition, many of these companies havename recognition, established positions in the market and long standingrelationships with customers and distributors also greater than ours. Moreover,the diagnostics industry continues to demonstrate a degree consolidation,whereby some of the large domestic and international pharmaceutical companieshave been acquiring mid-sized diagnostics companies, further increasingthe concentration of resources.  Therecan be no assurance that technologies will not be introduced that could bedirectly competitive with or superior to our technologies.

**Our products and activities aresubject to regulation by various governments and government agencies.**

The testing, manufacture and sale of our products issubject to regulation by numerous governmental authorities, principally theUnited States Food and Drug Administration and certain foreign regulatoryagencies.  Pursuant to the Federal Food,Drug, and Cosmetic Act, and the regulations promulgated there under, the FDAregulates the preclinical and clinical testing, manufacture, labeling,distribution and promotion of medical devices. We are limited in our ability to commence marketing or commercial salesin the United States of new products under development until we receiveclearance or approval from the FDA. The testing for, preparation of and subsequentFDA regulatory review of required filings can be a lengthy, expensive anduncertain process.  Noncompliance withapplicable requirements can result in, among other consequences, fines,injunctions, civil penalties, recall or seizure of products, repair,replacement or refund of the cost of products, total or partial suspension ofproduction, failure of the government to grant pre-market clearance orpre-market approval for devices, withdrawal of marketing clearances orapprovals, and criminal prosecution.

Therecan be no assurance that we will be able to obtain necessary regulatoryapprovals or clearances for our products on a timely basis, if at all, anddelays in receipt of or failure to receive such approvals or clearances, theloss of previously received approvals or clearances, limitations on intendeduse imposed as a condition of such approvals or clearances or failure to complywith existing or future regulatory requirements could negatively impact oursales and thus have a material adverse effect on our business.

As amanufacturer of medical devices for marketing in the United States, we arerequired to adhere to applicable regulations setting forth detailed goodmanufacturing practice requirements, which include testing, control anddocumentation requirements.  We must alsocomply with Medical Device Report (MDR) requirements, which require that a 

 

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manufacturerreports to the FDA any incident in which its product may have caused orcontributed to a death or serious injury, or in which its product malfunctionedand, if the malfunction were to recur, it would be likely to cause orcontribute to a death or serious injury. We are also subject to routine inspection by the FDA for compliance withQSR requirements, MDR requirements and other applicable regulations. Labelingand promotional activities are subject to scrutiny by the FDA and, in certaincircumstances, by the Federal Trade Commission. We may incur significant costs to comply with laws and regulations inthe future, which would decrease our net income or increase our net loss andthus have a potentially material adverse effect upon our business, financialconditions and results of operations.

Distributionof diagnostic products outside the United States is subject to extensiveforeign government regulation. These regulations, including the requirementsfor approvals or clearance to market, the time required for regulatory reviewand the sanctions imposed for violations, vary from country to country.  We may be required to incur significant costsin obtaining or maintaining foreign regulatory approvals.  In addition, the export of certain of ourproducts that have not yet been cleared for United States commercialdistribution may be subject to FDA export restrictions. Failure to obtainnecessary regulatory approval or the failure to comply with regulatoryrequirements could reduce our product sales and thus have a potentiallymaterial adverse effect on our business, financial condition and results ofoperations.

**We depend upon distribution partners for sales of diagnosticproducts in international markets.**

Wehave entered into distribution agreements with collaborative partners in whichwe have granted distribution rights for certain of our products to thesepartners within specific international geographic areas. Pursuant to theseagreements, our collaborative partners have certain responsibilities for marketdevelopment, promotion, and sales of the products. If any of these partnersfails to perform its contractual obligations or terminates its agreement, thiscould  reduce our sales and cash flow andthus have a potentially material adverse effect on our business, financialcondition and results of operations.

**Third party reimbursement for purchasesof our diagnostic products is uncertain.**

In theUnited States, health care providers that purchase diagnostic products, such ashospitals and physicians, generally rely on third party payers, principallyprivate health insurance plans, federal Medicare and state Medicaid, toreimburse all or part of the cost of the purchase.  Third party payers are increasinglyscrutinizing and challenging the prices charged for medical products andservices and they can affect the pricing or the relative attractiveness of theproduct. Decreases in reimbursement amounts for tests performed using ourdiagnostic products, failure by physicians and other users to obtainreimbursement from third party payers, or changes in government and privatethird party payers’ policies regarding reimbursement of tests utilizingdiagnostic products, may affect our ability to sell our diagnostic productsprofitably. Market acceptance of our products in international markets is alsodependent, in part, upon the availability of reimbursement within prevailinghealth care payment systems.

**Our success depends, in part, on ourability to obtain patents and license patent rights, to maintain trade secretprotection and to operate without infringing on the proprietary rights ofothers.**

Therecan be no assurance that our issued patent will afford meaningful protectionagainst a competitor, or that patents issued or licensed to us will not beinfringed upon or designed around by others, or that others will not obtainpatents that we would need to license or design around. We could incursubstantial costs in defending the Company or our licensees in litigationbrought by others. The potential for reduced sales and increased legal expenseswould have a negative impact on our cash flow and thus our overall businesscould be adversely affected.

**We may not be able to successfullyimplement our plans to acquire other companies or technologies.**

Ourgrowth strategy includes the acquisition of complementary companies, productsor technologies. There is no assurance that we will be able to identifyappropriate companies or technologies to be acquired, to negotiate satisfactoryterms for such an acquisition, or to obtain sufficient capital to make suchacquisitions. Moreover, because of limited cash resources, we will be unable toacquire any significant companies or technologies for cash and our ability toeffect acquisitions in exchange for our capital stock may depend upon themarket prices for our common stock, which could result in significant dilutionto its existing stockholders.  If we docomplete one or more acquisitions, a number of risks arise, such as disruptionof our existing business, short-term negative effects on our reportedoperating results, diversion of management’s attention, unanticipated problemsor legal liabilities, and difficulties in the integration of potentiallydissimilar operations. Any of these factors could materially harm Corgenix’sbusiness or its operating results.

 

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**We depend on suppliers for ourproducts’ components.**

Thecomponents of our products include chemical, biological and packaging suppliesthat are generally available from several suppliers, except certain antibodiesand other critical components, which we purchase from single suppliers.  We mitigate the risk of a loss of supply bymaintaining a sufficient supply of such antibodies to ensure an uninterruptedsupply for at least three months. We have also qualified second vendors for allcritical raw materials and believe that we can substitute a new supplier withrespect to any of these components in a timely manner. If, for some reason, welose our main supplier for a given material, there can be no assurances that wewill be able to substitute a new supplier in a timely manner and failure to doso could impair the manufacturing of certain of our products and thus have amaterial adverse effect on our business, financial condition and results ofoperations.

**We have only limited manufacturingexperience with certain products.**

Althoughwe have manufactured over twelve million diagnostic tests based on ourproprietary applications of ELISA (enzyme linked immuno-absorbent assay)technology, certain of our diagnostic products in consideration for futuredevelopment, incorporate technologies with which we have limited manufacturingexperience.  Assuming successfuldevelopment and receipt of required regulatory approvals, significant work maybe required to scale up production for each new product prior to such product’scommercialization.  There can be noassurance that such work can be completed in a timely manner and that such newproducts can be manufactured cost-effectively, to regulatory standards orin sufficient volume.

**Due to the specialized nature of ourbusiness, our success will be highly dependent upon our ability to attract andretain qualified scientific and executive personnel.**

Webelieve our success will depend to a significant extent on the efforts andabilities of certain key officers and employees, who would be difficult toreplace.  There can be no assurance thatwe will be successful in attracting and retaining such skilled personnel, whoare generally in high demand by other companies.  The loss of, inability to attract, or poorperformance by key scientific and executive personnel may have a materialadverse effect on our business, financial condition and results of operations.

**The testing, manufacturing andmarketing of medical diagnostic devices entails an inherent risk of productliability claims.**

Todate, we have experienced no product liability claims, but any such claimsarising in the future could have a material adverse effect on our business,financial condition and results of operations. Potential product liabilityclaims may exceed the amount of our insurance coverage or may be excluded fromcoverage under the terms of our policy or limited by other claims under ourumbrella insurance policy.  Additionally,there can be no assurance that our existing insurance can be renewed by us at acost and level of coverage comparable to that presently in effect, if atall.  In the event that we are heldliable for a claim against which we are not insured or for damages exceedingthe limits of our insurance coverage, such claim could have a material adverseeffect on our cash flow and thus potentially a materially adverse effect on ourbusiness, financial condition and results of operations.

**There has, to date, been no activepublic market for our Common Stock, and there can be no assurance that anactive public market will develop or be sustained.**

Althoughour Common Stock has been traded on the OTC Bulletin Board® since February1998, the trading has been sporadic with insignificant volume.

Moreover, the over-the-counter markets for securitiesof very small companies historically have experienced extreme price and volumefluctuations.  These broad marketfluctuations and other factors, such as new product developments, trends in ourindustry, the investment markets, economic conditions generally, and quarterlyvariation in our results of operations, may adversely affect the market priceof our common stock.  In addition, ourcommon stock is subject to rules adopted by the Securities and ExchangeCommission regulating broker-dealer practices in connection with transactionsin “penny stocks.”  Such rules requirethe delivery prior to any penny stock transaction of a disclosure scheduleexplaining the penny stock market and all associated risks and impose varioussales practice requirements on broker-dealers who sell penny stocks to personsother than established customers and accredited investors, which are generallydefined as institutions or an investor with a net worth in excess of $1,000,000or annual income exceeding $200,000 or $300,000 

 

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together with the spouse.  For these types of transactions thebroker-dealer must make a special suitability determination for the purchaserand have received the purchaser’s written consent to the transaction prior tosale.  The additional burdens imposedupon broker-dealers by such requirements may discourage broker-dealers fromeffecting transactions in securities subject to the penny stock rules.

**There are risks associated with fluctuating exchange rates.**

Our financial statements are presented in US dollars.At the end of each fiscal quarter and the fiscal year, we convert the financialstatements of Corgenix UK, which operates in pounds sterling, into US dollars,and consolidate them with results from Corgenix, Inc.  We may, from time to time, also need toexchange currency from income generated by Corgenix UK. Foreign exchange ratesare volatile and can change in an unknown and unpredictable fashion. Should theforeign exchange rates change to levels different than anticipated by us, ourbusiness, financial condition and results of operations may be adverselyaffected.

**CORGENIXMEDICAL CORPORATION**

**PART II**

**OtherInformation**

**Item 1.    Legal Proceedings**

None

**Item 2.    Unregistered Sales of Equity Securities andUse of Proceeds**

None

**Item 3.    Defaults UponSenior Securities**

None

**Item 4.    Submissionof Matters to a Vote of Security Holders**

None

**Item 5.    OtherInformation**

None

I**tem 6.  Exhibits and Reports on Form 8-K.**

**a.****              ****Index to and Descriptionof 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. |

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*                 Filed herewith.

 

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**(b)           Reports on Form 8-K.**

**   **1.         Form8-K filed July 23, 2007 *Entry into MaterialAgreements*

    2.         Form 8-K filed September 21,2007 *Entry into Material Agreements*

 

 

**SIGNATURES**

In accordance withthe requirements of the Securities Exchange Act of 1934, the registrant causedthis report to be signed on its behalf by the undersigned, thereunto dulyauthorized.
|              | CORGENIX MEDICAL CORPORATION |
|-------------------|------------------------------|
|              |                         |   |   |
|              |                         |   |   |
| November 19, 2007 | 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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