**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

**Form10-QSB**

**x****     ****QUARTERLY REPORT PURSUANT TOSECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

**For the quarterly period ended December 31, 2006**

**o****        ****TRANSITION REPORT UNDER SECTION13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

**For the transition period from             to              **

**CommissionFile 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 of principal executive offices, including zip code)

**(303)457-4345**(Issuer’s telephone number, including area code)

 

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

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

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

The number of shares ofCommon Stock outstanding was 13,333,516 as of February 14, 2007.

Transitional SmallBusiness Disclosure Format. Yes o  No x

 

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**CORGENIXMEDICAL CORPORATION**

**December31, 2006**

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

 

2

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**PART I**

**Item 1. Consolidated Financial Statements**

**CORGENIX MEDICAL CORPORATIONAND SUBSIDIARIES**

ConsolidatedBalance Sheets
| ** **                                                                                                                                                                                                              | ** ** | **December 31, 2006** | ** ** | **June 30, 2006** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------|------------|-----------------------------|------------|
| ** **                                                                                                                                                                                                              | ** ** | **(Unaudited)**                 | ** ** | ** **                  | ** ** |
| **Assets**                                                                                                                                                                                                              |       |                            |       |                        |       |
| Current assets:                                                                                                                                                                                                         |       |                            |       |                        |       |
| Cash and cash  equivalents                                                                                                                                                                                              |       | $                               | 1,352,951  |                        | $          | 3,118,494 |   |
| Accounts  receivable, less allowance for doubtful accounts of $44,097                                                                                                                                                   |       | 1,367,475                       |       | 1,362,768                   |       |
| Inventories                                                                                                                                                                                                             |       | 2,187,212                       |       | 1,635,549                   |       |
| Prepaid expenses                                                                                                                                                                                                        |       | 131,743                         |       | 64,596                      |       |
| Total current  assets                                                                                                                                                                                                   |       | 5,039,381                       |       | 6,181,407                   |       |
| Equipment:                                                                                                                                                                                                              |       |                            |       |                        |       |
| Capitalized  software costs                                                                                                                                                                                             |       | 252,077                         |       | 122,855                     |       |
| Machinery and  laboratory equipment                                                                                                                                                                                     |       | 757,233                         |       | 671,495                     |       |
| Furniture,  fixtures, leaseholds & office equipment                                                                                                                                                                 |       | 1,763,876                       |       | 585,399                     |       |
|                                                                                                                                                                                                                    |       | 2,773,186                       |       | 1,379,749                   |       |
| Accumulated  depreciation and amortization                                                                                                                                                                              |       | (605,682                        | )          | (1,113,131                  | )          |
| Net equipment                                                                                                                                                                                                           |       | 2,167,504                       |       | 266,618                     |       |
| Intangible assets:                                                                                                                                                                                                      |       |                            |       |                        |       |
| License                                                                                                                                                                                                                 |       | 29,515                          |       | 27,848                      |       |
|                                                                                                                                                                                                                    |       | 29,515                          |       | 27,848                      |       |
| Other assets:                                                                                                                                                                                                           |       |                            |       |                        |       |
| Deferred  financing costs net of amortization of $720,025 and $469,065                                                                                                                                                  |       | 896,603                         |       | 1,147,563                   |       |
| Restricted cash                                                                                                                                                                                                         |       | —                          |       | 250,000                     |       |
| Due from officer                                                                                                                                                                                                        |       | 12,000                          |       | 12,000                      |       |
| Other assets                                                                                                                                                                                                            |       | 506,578                         |       | 328,180                     |       |
| Total assets                                                                                                                                                                                                            |       | $                               | 8,651,581  |                        | $          | 8,213,616 |   |
| **Liabilities  and Stockholders’ Equity**                                                                                                                                                                          | ** ** | ** **                      |       |                        |       |
| Current liabilities:                                                                                                                                                                                                    |       |                            |       |                        |       |
| Current portion  of notes payable, net of discount                                                                                                                                                                      |       | $                               | 153,001    |                        | $          | 770,151 |   |
| Current portion  of capital lease obligations                                                                                                                                                                           |       | 195,246                         |       | 15,945                      |       |
| Accounts payable                                                                                                                                                                                                        |       | 739,025                         |       | 511,397                     |       |
| Accrued payroll  and related liabilities                                                                                                                                                                                |       | 283,745                         |       | 270,542                     |       |
| Accrued interest                                                                                                                                                                                                        |       | 41,731                          |       | 43,914                      |       |
| Accrued  liabilities                                                                                                                                                                                                    |       | 218,975                         |       | 364,348                     |       |
| Total current  liabilities                                                                                                                                                                                              |       | 1,631,723                       |       | 1,976,297                   |       |
| Notes payable, net of  discount, less current portion                                                                                                                                                                   |       | 1,662,512                       |       | 1,290,776                   |       |
| Capital lease  obligations, less current portion                                                                                                                                                                        |       | 456,535                         |       | 5,130                       |       |
| Deferred facility lease  payable, excluding current portion                                                                                                                                                             |       | 1,098,043                       |       | —                      |       |
| Total  liabilities                                                                                                                                                                                                      |       | 4,848,813                       |       | 3,272,203                   |       |
| Redeemable common  stock, $0.001 par value. 774,650 shares issued and outstanding, aggregate  redemption value of $420,000, and $450,000 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 $700,000 and  $700,000. Authorized 5,000,000 shares, Issued and outstanding 2,088,725 and  2,000,000 on December 31 and June 30, respectively |       | 2,088,725                       |       | 2,000,000                   |       |
| Common stock,  $0.001 par value. Authorized 100,000,000 shares; Issued and outstanding  12,140,618 and 10,723,205 on December 31 and June 30, respectively                                                              |       | 11,366                          |       | 9,895                       |       |
| Additional paid-in  capital                                                                                                                                                                                             |       | 12,578,816                      |       | 12,060,729                  |       |
| Accumulated deficit                                                                                                                                                                                                     |       | (11,118,880                     | )          | (9,367,556                  | )          |
| Accumulated other  comprehensive income                                                                                                                                                                                 |       | (7,259                          | )          | (11,655                     | )          |
| Total  stockholders’ equity                                                                                                                                                                                        |       | 3,552,768                       |       | 4,691,413                   |       |
| Total liabilities and stockholders’ equity                                                                                                                                                                         |       | $                               | 8,651,581  |                        | $          | 8,213,616 |   |

 

Seeaccompanying notes to consolidated financial statements.

3

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# **CORGENIXMEDICAL CORPORATIONAND SUBSIDIARIES**

 

## ConsolidatedStatements of Operations

| ** **                                                         | ** ** | **Three Months Ended** | ** ** | **Six Months Ended** | ** ** |
|--------------------------------------------------------------------|------------|----------------------------------|------------|--------------------------------|------------|
| ** **                                                         | ** ** | **December 31,  2006**      | ** ** | **December 31,  2005**    | ** ** | **December 31,**2006 | ** ** | **December 31,  2005** | ** ** |
| ** **                                                         | ** ** | **(Unaudited)**                  | ** ** | **(Unaudited)**                | ** ** |
| Net sales                                                          |       | $                                | 1,684,811  |                           | $          | 1,580,883 |   | $ | 3,378,923 |   | $ | 3,215,836 |   |
| Cost of sales                                                      |       | 671,799                          |       | 577,592                        |       | 1,316,908 |   | 1,159,458 |   |
|                                                               |       |                             |       |                           |       |   |   |   |   |
| Gross profit                                                       |       | 1,013,012                        |       | 1,003,291                      |       | 2,062,015 |   | 2,056,378 |   |
|                                                               |       |                             |       |                           |       |   |   |   |   |
| Operating expenses:                                                |       |                             |       |                           |       |   |   |   |   |
| Selling and  marketing                                             |       | 577,752                          |       | 365,714                        |       | 1,065,738 |   | 746,426 |   |
| Research and  development                                          |       | 173,120                          |       | 153,246                        |       | 405,807 |   | 281,756 |   |
| General and  administrative                                        |       | 697,179                          |       | 400,412                        |       | 1,293,479 |   | 730,515 |   |
| Total expenses                                                     |       | 1,448,051                        |       | 919,372                        |       | 2,765,024 |   | 1,758,697 |   |
|                                                               |       |                             |       |                           |       |   |   |   |   |
| Operating income  (loss)                                           |       | (435,039                         | )          | 83,919                         |       | (703,009 | ) | 297,681 |   |
|                                                               |       |                             |       |                           |       |   |   |   |   |
| Other income (expense)                                             |       |                             |       |                           |       |   |   |   |   |
| Other income,  net                                                 |       | 17,902                           |       | 7,276                          |       | 59,272 |   | 14,476 |   |
| Interest expense                                                   |       | (490,984                         | )          | (351,722                       | )          | (1,107,587 | ) | (696,792 | ) |
|                                                               |       |                             |       |                           |       |   |   |   |   |
| Net loss                                                           |       | (908,121                         | )          | (260,527                       | )          | (1,751,324 | ) | (384,635 | ) |
|                                                               |       |                             |       |                           |       |   |   |   |   |
| Net loss per share,  basic and diluted                             |       | $                                | (0.08      | )                              | (0.03      | ) | (0.15 | ) | (0.04 | ) |
|                                                               |       |                             |       |                           |       |   |   |   |   |
| Weighted average shares  outstanding, basic and diluted (note 2)   |       | 11,959,592                       |       | 9,023,495                      |       | 11,542,725 |   | 8,701,274 |   |
|                                                               |       |                             |       |                           |       |   |   |   |   |
| Net loss                                                           |       | $                                | (908,121   | )                              | (260,527   | ) | (1,751,324 | ) | (384,635 | ) |
|                                                               |       |                             |       |                           |       |   |   |   |   |
| Other comprehensive  loss-foreign currency translation gain (loss) |       | 2,694                            |       | (1,123                         | )          | 4,396 |   | (1,435 | ) |
|                                                               |       |                             |       |                           |       |   |   |   |   |
| Total comprehensive loss                                           |       | $                                | (905,427   | )                              | (261,650   | ) | (1,746,928 | ) | (386,070 | ) |
|                                                                    |            |                                  |            |                                |            |  |  |  |  |  |  |  |  |

 

See accompanying notes to consolidated financial statements.

 

4

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**CORGENIXMEDICAL CORPORATION****ANDSUBSIDIARIES**

# Consolidated Statement of Stockholders’ EquityFor the six months ended December 31, 2006(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, 2006                                           |       | 2,000,000                                     |       | $                                      | 2,000,000  |                                       | 10,723,205 |                            | $          | 9,895                            |       | $                        | 12,060,729 |                                                      | $          | (9,367,556                            | )          | $ | (11,655 | ) | $ | 4,691,413 |   |
|                                                               |       |                                          |       |                                   |       |                                       |       |                            |       |                             |       |                     |       |                                                      |       |                                  |       |
| In-kind dividend                                                   |       | 280,000                                       |       | 280,000                                |       | —                                     |       | —                          |       | —                           |       | —                   |       | —                                                    |       | 280,000                               |       |
| Conversion of preferred  stock into common stock                   |       | (191,275                                      | )          | (191,275                               | )          | 546,500                                    |       | 547                             |       | 190,728                          |       | —                   |       | —                                                    |       | —                                |       |
| Issuance of common stock  for services                             |       | —                                        |       | —                                 |       | 180,587                                    |       | 181                             |       | 33,464                           |       | —                   |       | —                                                    |       | 33,645                                |       |
| Issuance of common stock  in exchange for debt and interest        |       | —                                        |       | —                                 |       | 743,142                                    |       | 743                             |       | 222,201                          |       | —                   |       | —                                                    |       | 222,944                               |       |
| Compensation expense  recorded as a result of stock options issued |       | —                                        |       | —                                 |       | —                                     |       | —                          |       | 71,694                           |       | —                   |       | —                                                    |       | 71,694                                |       |
| Cancellation of  redeemable stock upon note pay down               |       | —                                        |       | —                                 |       | (52,816                                    | )          | —                          |       | —                           |       | —                   |       | —                                                    |       | —                                |       |
| Foreign currency translation                                       |       | —                                        |       | —                                 |       | —                                     |       | —                          |       | —                           |       | —                   |       | 4,396                                                     |       | 4,396                                 |       |
| Net loss                                                           |       | —                                        |       | —                                 |       | —                                     |       | —                          |       | —                           |       | (1,751,324               | )          | —                                                    |       | (1,751,324                            | )          |
|                                                               |       |                                          |       |                                   |       |                                       |       |                            |       |                             |       |                     |       |                                                      |       |                                  |       |
| Balance at December 31, 2006                                       |       | 2,088,725                                     |       | $                                      | 2,088,725  |                                       | 12,140,618 |                            | $          | 11,366                           |       | $                        | 12,578,816 |                                                      | $          | (11,118,880                           | )          | $ | (7,259 | ) | $ | 3,552,768 |   |

 

See accompanying notes toconsolidated financial statements.

5

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**CORGENIX MEDICAL CORPORATIONAND SUBSIDIARIES**

## **Consolidated Statements of Cash Flows**

| ** **                                                                     | ** ** | **Six Months Ended** | ** ** |
|--------------------------------------------------------------------------------|------------|--------------------------------|------------|
| ** **                                                                     | ** ** | **December 31,  2006**    | ** ** | **December 31,  2005** | ** ** |
| ** **                                                                     | ** ** | **(Unaudited)**                | ** ** | **(Unaudited)** | ** ** |
| Cash flows from  operating activities:                                         |       |                           |       |   |   |
| Net loss                                                                       |       | $                              | (1,751,324 | ) | $ | (384,635 | ) |
| Adjustments to  reconcile net loss to net cash (used) in operating activities: |       |                           |       |   |   |
| Depreciation and  amortization                                                 |       | 170,132                        |       | 71,869 |   |
| Accretion of  discount on note payable                                         |       | 582,921                        |       | 382,796 |   |
| Gain on disposal  of equipment                                                 |       | (6,729                         | )          | — |   |
| Common stock  issued for services                                              |       | 33,645                         |       | 59,710 |   |
| Common stock  issued for interest                                              |       | 52,156                         |       | 45,982 |   |
| Compensation  expense recorded for stock options issued                        |       | 71,694                         |       | — |   |
| Amortization of  deferred financing costs                                      |       | 250,960                        |       | 161,934 |   |
| Changes in  operating assets and liabilities:                                  |       |                           |       |   |   |
| Accounts  receivable, net                                                      |       | 26,032                         |       | (206,315 | ) |
| Inventories                                                                    |       | (548,770                       | )          | (145,539 | ) |
| Prepaid expenses  and other assets, net                                        |       | (243,402                       | )          | (241,371 | ) |
| Accounts payable                                                               |       | 190,286                        |       | (199,318 | ) |
| Accrued payroll  and related liabilities                                       |       | 31,594                         |       | 20,515 |   |
| Accrued interest  and other liabilities                                        |       | 35,904                         |       | (47,937 | ) |
| Net cash (used)  in operating activities                                       |       | (1,104,901                     | )          | (482,309 | ) |
|                                                                           |       |                           |       |   |   |
| Cash flows used in  investing activities:                                      |       |                           |       |   |   |
| Procceds from  disposal of equipment                                           |       | 43,051                         |       | — |   |
| Additions to  equipment                                                        |       | (214,974                       | )          | (28,867 | ) |
| Net cash used in  investing activities                                         |       | (171,923                       | )          | (28,867 | ) |
| Cash flows provided  (used) in financing activities:                           |       |                           |       |   |   |
| Proceeds from  issuance of preferred stock.                                    |       | —                         |       | 2,000,000 |   |
| Proceeds from exercise  of stock options.                                      |       | —                         |       | 4,500 |   |
| Proceeds upon  exercise of warrants.                                           |       | —                         |       | 6,900 |   |
| Proceeds from  issuance of notes payable, net of original discount             |       | —                         |       | 1,363,635 |   |
| Payments on  notes payable                                                     |       | (407,547                       | )          | (20,000 | ) |
| Proceeds from  preferred stock deposited in escrow                             |       | —                         |       | (2,000,000 | ) |
| Payments on  capital lease obligations                                         |       | (87,632                        | )          | (13,332 | ) |
|                                                                           |       |                           |       |   |   |
| Net cash  provided (used) in financing activities                              |       | (495,179                       | )          | 1,341,703 |   |
|                                                                           |       |                           |       |   |   |
| Net increase  (decrease) in cash and cash equivalents                          |       | (1,772,003                     | )          | 830,527 |   |
|                                                                           |       |                           |       |   |   |
| Impact of exchange rate  changes on cash                                       |       | 6,460                          |       | (4,213 | ) |
|                                                                           |       |                           |       |   |   |
| Cash and cash  equivalents at beginning of period                              |       | 3,118,494                      |       | 1,281,966 |   |
| Cash and cash  equivalents at end of period                                    |       | $                              | 1,352,951  |   | $ | 2,108,280 |   |
|                                                                           |       |                           |       |   |   |
| Supplemental cash flow  disclosures:                                           |       |                           |       |   |   |
| Cash paid for  interest                                                        |       | $                              | 232,385    |   | $ | 84,241 |   |
| Noncash  investing and financing activities:                                   |       |                           |       |   |   |
| Equipment  acquired under capital leases                                       |       | $                              | 718,338    |   | $ | — |   |
| Issuance of  stock for debt                                                    |       | $                              | 170,788    |   | $ | 112,834 |   |
| Placement  warrants issued in connection with financings                       |       | $                              | —     |   | $ | 360,969 |   |
| Conversion of  redeemable common stock to note payable                         |       | $                              | —     |   | $ | 250,000 |   |
| Restricted cash  pay-off of non-amortizing restricted debt                     |       | $                              | 250,000    |   | $ | — |   |
| Preferred Stock issued  in kind for dividend                                   |       | $                              | 280,000    |   | $ | — |   |

 

See accompanyingnotes to consolidated financial statements.

6

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**CORGENIX MEDICAL CORPORATION AND SUBSIDIARIES**

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

**1.****                                      DESCRIPTIONOF BUSINESS AND BASIS OF PRESENTATION**

##### *Company Overview*

CorgenixMedical Corporation, which we refer to as Corgenix or the Company, is engagedin the research, development, manufacture, and marketing of in vitro (outsidethe body) diagnostic products for use in disease detection and prevention. Wecurrently sell 51 diagnostic products on a worldwide basis to hospitals,clinical testing laboratories, universities, biotechnology and pharmaceuticalcompanies and research institutions. In the United States and the UnitedKingdom, we sell directly to these customers. Elsewhere in the world, weprimarily sell to independent distributors that in turn sell to the laboratories.We also sell our products to other diagnostic companies under their labels,which are then distributed worldwide.

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

·                  Corgenix, Inc. (formerly REAADS Medical Products,Inc.), established in 1990 and located in Broomfield, Colorado. Corgenix, Inc.is responsible for sales and marketing activities for North America, and alsoexecutes product development, product support, clinical and regulatory affairs,and product manufacturing.

·                  Corgenix (UK) Ltd, incorporated in the United Kingdomin 1996 (formerly REAADS Bio-Medical Products (UK) Limited) and located inPeterborough, England. Corgenix UK manages our international sales andmarketing activities except for distribution in North America, which is theresponsibility of Corgenix, Inc. We continue to use the REAADS trademark andtrade name in the sale of products that we manufacture. In addition to sales ofthe Company’s 51 products, Corgenix UK also sells viral products to researchlaboratories in the UK.

***Recent Developments***

The December 28, 2005Convertible Preferred financing agreements with Barron Partners, L.P., orBarron, stated that if the Company’s EBITDA for the audited fiscal year endedJune 30, 2006, as calculated based upon the audited financial statementsfiled with the Company’s Form 10-KSB filed with the Securities and ExchangeCommission, was less than $1,150,000, then the Company must issue to Barronsuch number of additional shares of preferred stock equal to 2,000,000multiplied by the percentage by which EBITDA is less than $1,150,000, expressedas a positive number; provided that in no event will the number of additionalshares of preferred stock issued due to this EBITDA adjustment exceed 14% ofthe number of shares of Preferred Stock originally issued to Barron, or 280,000shares. For example if EBITDA was $920,000 (20% decline) then the Company wouldissue to the Investor an additional 14% (i.e., 280,000) shares of preferredstock; provided that at the time Barron continues to hold all 2,000,000 sharesof preferred stock originally issue on the Closing. EBITDA is defined in thePreferred Stock Purchase Agreement as net income of the Company, beforeinterest, taxes, depreciation, amortization and one time charges, including,but not limited to, loss on the extinguishment of debt. EBITDA for the fiscalyear ended June 30, 2006 was $443,591, therefore, on October 4, 2006, theCompany issued 280,000 additional shares of preferred stock to Barron.

On November 30, 2006, theCompany executed an agreement to defer the minimum monthly principal paymentamounts due on the secured convertible term notes related to the May 19, 2005and December 28, 2005 financings. The agreement postpones all principalpayments otherwise due under each note beginning December 1, 2006 and endingDecember 1, 2007, at which time the remaining principal will be amortized overthe subsequent twenty-four-month period. As consideration for this deferral,the Company paid the note holders a total of $250,000, drawn entirely from arestricted account established at the closing of the May 2005 financing. Thisagreement and the amendments to the notes will allow the Company to deferpayment of $1,268,000 in principal payments over the next twelve months.

***Our Business***

**Introduction**

Our business includes theresearch, development, manufacture, and marketing of in vitro diagnosticproducts for use

7

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in disease detection andprevention. We sell 51 diagnostic products on a worldwide basis to hospitals,clinical testing laboratories, universities, biotechnology and pharmaceuticalcompanies and research institutions. We have developed and we manufacture mostof our products at our Colorado facility, and we purchase what we refer to asOM Products from other healthcare manufacturers for resale by us. All of theseproducts are used in clinical laboratories for the diagnosis and/or monitoringof three important areas of health care:

·                  Autoimmunedisease (diseases in which an individual creates antibodies to one’s self, forexample systemic lupus erythematosus (“SLE”) and rheumatoid arthritis (“RA”));

·                  Vasculardisease (diseases associated with certain types of thrombosis or clotformation, for example antiphospholipid syndrome, deep vein thrombosis, strokeand coronary occlusion); and

·                  Liverdiseases (fibrosis and cirrhosis).

In addition to our current products, we are activelydeveloping new laboratory tests in other important diagnostic testing areas. Wemanufacture and market to clinical laboratories and other testing sitesworldwide. Our customers include large and emerging health care companies suchas Instrumentation Laboratories, Helena Laboratories and Diagnostic Grifols,S.A.

Most of our products are based on our patented andproprietary application of Enzyme Linked ImmunoSorbent Assay, or ELISA,technology, a clinical testing methodology commonly used worldwide. Most of ourcurrent products are based on this platform technology in a delivery formatconvenient for clinical testing laboratories. The delivery format, which isreferred to as “Microplate,” alws the testing of up to 96 samples per plate,and is one of the most commonly used formats, employing conventional testingequipment found in virtually all clinical laboratories. The availability andbroad acceptance of ELISA Microplate products reduces entry barriers worldwidefor our new products that employ this technology and delivery format. Ourproducts are sold as “test kits” that include all of the materials required toperform the test, except for routine laboratory chemicals and instrumentation.A test using ELISA technology involves a series of reagent additions into theMicroplate, triggering a complex immunological reaction in which a resultingcolor occurs. The amount of color developed in the final step of the test isdirectly proportional to the amount of the specific marker being tested for inthe patient or unknown sample. The amount of color is measured and the resultscalculated using routine laboratory instrumentation. Our technology specifies aprocess by which biological materials are attached to the fixed surface of adiagnostic test platform. Products developed using this unique attachmentmethod typically demonstrate a more uniform and stable molecular configuration,providing a longer average shelf life, increased accuracy and superiorspecificity than the products of our competitors.

Some of the OM products which we obtain from othermanufacturers and sell through our distribution network utilize technologiesother than our patented and proprietary ELISA technology.

Our diagnostic tests are intended to aid in theidentification of the causes of illness and disease, enabling a physician toselect appropriate patient therapy.

Internally and through collaborative arrangements, weare developing additional products that are intended to broaden the range ofapplications for our existing products and to result in the introduction of newproducts.

Since 1990, our sales force and distribution partnershave sold over 12 million tests worldwide under the REAADS and Corgenix labels,as well as products sold under other manufacturers’ labels, referred to as OEMproducts. An integral part of our strategy is to work with corporate partnersto develop market opportunities and access important resources. We believe thatour relationships with current and potential partners will enable us to enhanceour menu of diagnostic products and accelerate our ability to penetrate theworldwide markets for new products.

We currently use the REAADS and Corgenix trademarksand trade names in the sale of the products which we manufacture. Theseproducts constitute the majority of our product sales.

Certain information and note disclosures normallyincluded in financial statements prepared in accordance with accountingprinciples generally accepted in the United States of America (GAAP) have beenomitted from these unaudited consolidated financial statements. These unauditedconsolidated financial statements should be read in conjunction with thefinancial statements and notes thereto included in the Company’s Annual Reporton Form 10-KSB for the fiscal year ended June 30, 2006. The results ofoperations for the six months ended December 31, 2006 and 2005 are notnecessarily

8

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indicativeof the operating results for the full year.

In the opinion of management, all adjustments,consisting only of normal recurring accruals, have been made to present fairlythe Company’s financial position at December 31, 2006 and the results ofoperations and its cash flows for the six months ended December 31, 2006 and2005.

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

Basicearnings (loss) per share is computed by dividing net loss attributable tocommon stockholders by the weighted average number of common shares outstanding.Diluted earnings (loss) per share is computed by dividing net loss attributableto common stockholders by the weighted average number of common sharesoutstanding increased for potentially dilutive common shares outstanding duringthe period. The dilutive effect of stock options and their equivalents iscalculated using the treasury stock method. Stock options to purchase 220,000shares were granted in fiscal 2006. No stock options to purchase shares weregranted during the quarter ended December 31, 2006. Stock options to purchase860,000 shares were granted during the six months ended December 31, 2006.Options and warrants to purchase common stock totaling 34,085,426 and33,221,103 shares as of December 31, 2006 and 2005, respectively, are notincluded in the calculation of weighted average common shares-diluted below astheir effect is anti-dilutive. Redeemable common stock is included in thecommon shares outstanding for purposes of calculating net income (loss) pershare.
| ** **                                                          | ** ** | **3 Months ended  December 31,  2006** | ** ** | **3 Months ended  December 31,  2005** | ** ** | **6 Months ended  December 31,  2006** | ** ** | **6 Months ended  December 31,  2005** | ** ** |
|---------------------------------------------------------------------|------------|-------------------------------------------------------|------------|-------------------------------------------------------|------------|-------------------------------------------------------|------------|-------------------------------------------------------|------------|
|                                                                |       |                                                  |       |                                                  |       |                                                  |       |                                                  |       |
| Net loss  attributable to common stockholders                       |       | $                                                     | (908,121   | )                                                     | $          | (260,527                                              | )          | $                                                     | (1,751,324 | ) | $ | (384,635 | ) |
|                                                                |       |                                                  |       |                                                  |       |                                                  |       |                                                  |       |
| Common and common equivalent shares outstanding:                    |       |                                                  |       |                                                  |       |                                                  |       |                                                  |       |
| Historical common shares outstanding at beginning of  year          |       | 11,318,291                                            |       | 8,587,390                                             |       | 10,723,205                                            |       | 8,172,435                                             |       |
| Weighted average common equivalent shares issued  during the period |       | 641,301                                               |       | 436,105                                               |       | 819,520                                               |       | 528,839                                               |       |
|                                                                |       |                                                  |       |                                                  |       |                                                  |       |                                                  |       |
| Weighted average common shares – basic and diluted             |       | 11,959,592                                            |       | 9,023,495                                             |       | 11,542,725                                            |       | 8,701,274                                             |       |
|                                                                |       |                                                  |       |                                                  |       |                                                  |       |                                                  |       |
| Net loss per share –  basic and diluted                        |       | $                                                     | (0.08      | )                                                     | $          | (0.05                                                 | )          | $                                                     | (0.15      | ) | $ | (0.05 | ) |

 

**3.****                                      INCOMETAXES**

A valuation allowance was provided for deferred taxassets, as the Company is unable to conclude under relevant accountingstandards that it is more likely than not that deferred tax assets will berealizable.

**4.****                                      SEGMENTINFORMATION**

TheCompany has two segments of business: North American and Internationaloperations. North American operations transacts all sales in North America (US,Canada and Mexico). International operations transacts all other sales. Thefollowing table sets forth selected financial data for these segments for thethree-and six-month periods ended December 31, 2006 and 2005.
|                       | ** ** | **Three Months Ended December 31,** | ** ** | **Six Months Ended December 31,** | ** ** |
|-----------------------|------------|---------------------------------------------------------|------------|-------------------------------------------------------|------------|
| ** **            | ** ** | **Domestic**                                            | ** ** | **International**                                     | ** ** | **Total** | ** ** | **Domestic** | ** ** | **International** | ** ** | **Total** | ** ** |
|                  |       |                                                    |       |                                                  |       |   |   |   |   |   |   |   |   |
| Net sales             | 2006       |                                                    | $          | 1,188,375                                             |       | 496,436 |   | 1,684,811 |   | 2,481,401 |   | 897,522 |   | 3,378,923 |   |
|                       | 2005       |                                                    | $          | 1,150,686                                             |       | 430,197 |   | 1,580,883 |   | 2,396,204 |   | 819,632 |   | 3,215,836 |   |
|                  |       |                                                    |       |                                                  |       |   |   |   |   |   |   |   |   |
| Net income(loss)      | 2006       |                                                    | $          | (1,049,929                                            | )          | 141,808 |   | (908,121 | ) | (2,020,530 | ) | 269,206 |   | (1,751,324 | ) |
|                       | 2005       |                                                    | $          | (426,117                                              | )          | 165,590 |   | (260,527 | ) | (713,874 | ) | 329,239 |   | (384,635 | ) |
|                  |       |                                                    |       |                                                  |       |   |   |   |   |   |   |   |   |
| Depreciation and      | 2006       |                                                    | $          | 91,598                                                |       | 1,128 |   | 92,726 |   | 167,900 |   | 2,232 |   | 170,132 |   |
| Amortization          | 2005       |                                                    | $          | 23,443                                                |       | 1,037 |   | 24,480 |   | 70,397 |   | 1,472 |   | 71,869 |   |
|                  |       |                                                    |       |                                                  |       |   |   |   |   |   |   |   |   |
| Interest expense, net | 2006       |                                                    | $          | (490,094                                              | )          | (890 | ) | (490,984 | ) | (1,106172 | ) | (1,415 | ) | (1,107,587 | ) |
|                       | 2005       |                                                    | $          | (350,729                                              | )          | (993 | ) | (351,722 | ) | (693,919 | ) | (2,873 | ) | (696,792 | ) |
|                  |       |                                                    |       |                                                  |       |   |   |   |   |   |   |   |   |
| Segment assets        | 2006       |                                                    | $          | 8,057,666                                             |       | 593,915 |   | 8,651,581 |   | 8,057,666 |   | 593,915 |   | 8,651,581 |   |
| June 30,         | 2006       |                                                    | $          | 7,625,303                                             |       | 588,313 |   | 8,213,616 |   | 7,625,303 |   | 588,313 |   | 8,213,616 |   |

 

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**5.****                                      REDEEMABLECOMMON STOCK**

On July 1, 2002, as part of the Medical &Biological Laboratories Co., Ltd. (MBL) Agreement, MBL purchased shares of theCompany’s common stock for $500,000, which MBL can require the Company torepurchase at the same price in the event that a previously existingdistribution agreement with their wholly owned subsidiary RhiGene, Inc. (“Rhigene”)is terminated. For no additional consideration, MBL was also issued warrants topurchase an additional 880,282 shares of Common Stock at a price of $.568 pershare, which is equal to an aggregate amount of $500,000. These warrants expireon July 3, 2007 and may be exercised in whole or in part at any time prior totheir expiration. The estimated fair value of the warrants upon issuance wascalculated as $401,809 using the Black-Scholes option-pricing model with thefollowing assumptions: no expected dividend yield, 143% volatility, risk freeinterest rate of 4.2% and an expected life of five years**.**Thegross proceeds of $500,000 were allocated $277,221 to redeemable common stockand $222,779 to the related warrants based on the relative fair values of therespective instruments to the fair value of the aggregate transaction. Issuancecosts and the discount attributed to the redeemable common stock upon issuancewere accreted over the 33-month period to the first date whereupon the putoption may be exercised, which was the expiration date of the distributionagreement between the Company and RhiGene, Inc. (March 31, 2005). Furthermore,pursuant to the agreement with MBL, as long as MBL holds at least 50% of thecommon stock purchased under the MBL agreement, MBL must give its writtenconsent with respect to the payment of any dividend, the repurchase of any ofthe Company’s equity securities, the liquidation or dissolution of the Companyor the amendment of any provision of the Company’s Articles of Incorporation orBylaws which would adversely affect the rights of MBL under the stock purchasetransaction documents. MBL was granted standard anti-dilution rights withrespect to stock issuances not registered under the Securities Act. MBL alsoreceived standard piggyback registration rights along with certain demandregistration rights.

OnMarch 31, 2005 our distribution agreement with RhiGene expired, and the Companysigned a new distribution and OEM Supply Agreement with MBL International, Inc.(“MBLI”), a wholly owned subsidiary of MBL, which grants the Companynon-exclusive rights to distribute MBL’s complete diagnostic line of autoimmunetesting products in the United States and exclusive distribution rights to theOEM Label products worldwide excluding the United States, Japan, Korea andTaiwan. In addition, on August 1, 2005 the Company and MBL executed anAmendment to the Common Stock Purchase Agreement and Common Stock PurchaseWarrant wherein one-half or 440,141 of the original redeemable shares areexchanged for a three-year promissory note payable with interest at prime(8.25% as of December 31, 2006) plus two percent. The shares being exchangedfor the promissory note are returned to the Company quarterly on a pro ratabasis as payments are made on the promissory note. As of December 31, 2006,105,632 redeemable shares have been returned to the Company under thisagreement. The remaining 440,141 shares will be redeemable by the Company at$0.568 per share as of August 1, 2008 for any shares still owned at that timeby MBL and only to the extent that MBL has not realized at least $250,000 ingross proceeds upon the sales of its redeemable shares in the open market forthe time period August 1, 2005 through August 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-BASEDCOMPENSATION**

*Adoptionof SFAS 123(R)*

EffectiveJuly 1, 2006, the Company adopted the provisions of Statement of FinancialAccounting Standard No. 123 (revised 2004), “*Share-BasedPayment”,*(SFAS 123(R)”) using the modified prospective transitionmethod. In addition, the Securities and Exchange Commission issued StaffAccounting Bulletin No. 107 “*Share-Based Payment*(“SAB107”) in March 2005, which provides supplemental SFAS 123(R) applicationguidance based on the views of the SEC. Under the modified prospectivetransition method, compensation cost recognized in the quarterly and six-monthperiods ended December 31, 2006 includes: (a) compensation cost for allshare-based payments granted prior to, but not yet vested as of

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July 1, 2006, based on thegrant date fair value estimated in accordance with the original provisions ofSFAS No. 123, and (b) compensation cost for all share-based payments grantedbeginning July 1, 2006, based on the grant date fair value estimated inaccordance with the provision so SFAS 123(R). In accordance with the modifiedprospective transition method, results for prior periods have not beenrestated.

Theadoption of SFAS 123(R) resulted in stock compensation expense for thequarterly and six-month periods ended December 31, 2006 of $40,375 and $71,694charged to general and administrative expenses. This expense increased basicand diluted loss per share by less than $0.01 for the quarter and six-monthperiod. The Company did not recognize a tax benefit from the stock compensationexpense because the Company considers more than likely than not that therelated deferred tax assets, which have been reduced by a full valuationallowance, will not be realized.

TheBlack-Scholes option-pricing model was used to estimate the option fair values.The option-pricing model requires a number of assumptions, of which the mostsignificant are expected stock price volatility, the expected pre-vestingforfeiture rate and the expected option term (the amount of time from the grantdate until the options are exercised or expire). Expected volatility wascalculated based upon actual historical stock price movements over recentperiods equal to the expected option term. Expected pre-vesting forfeitureswere estimated based on actual historical pre-vesting forfeitures over recentperiods for the expected option term. The expected option term was calculatedusing the “simplified” method permitted by SAB 107.

*Pro-Forma StockCompensation Expense for the Quarterly and Six-Month Periods Ended December 31,2005*

For the quarterly andsix-month periods ended December 31, 2005, the Company applied the intrinsicvalue method of accounting for stock options as prescribed by APB 25. Since alloptions granted to employees during the quarterly and six-month periods endedDecember 31, 2005 had an exercise price equal to the closing market price ofthe underlying common stock on the grant date, no compensation expense wasrecognized. If compensation expense had been recognized based on the estimatedfair value of each option granted in accordance with the provisions of SFAS 123as amended by Statement of Financial Accounting Standard 148, our net loss andnet loss per share would have been reduced to the following pro-forma amounts :
| ** **                                                                                                             | ** ** | **Three Months** | ** ** | **Six Months**   | ** ** |
|------------------------------------------------------------------------------------------------------------------------|------------|-----------------------|------------|-----------------------|------------|
| ** **                                                                                                             | ** ** | **Ended**             | ** ** | **Ended**             | ** ** |
| ** **                                                                                                             | ** ** | **December 31,** | ** ** | **December 31,** | ** ** |
| ** **                                                                                                             | ** ** | **2005**              | ** ** | **2005**              | ** ** |
|                                                                                                                   |       |                  |       |                  |       |
| Net loss  available to common shareholders as reported                                                                 |       | $                     | (260,527   | )                     | $          | (384,635 | ) |
| Deduct total  stock-based employee compensation expense determined under fair-value method  for all awards, net of tax |       | (16,977               | )          | $                     | (33,954    | ) |
| Pro forma net  loss available to common shareholders                                                                   |       | (277,504              | )          | $                     | (418,589   | ) |
| Net loss per  share, basic and diluted as reported                                                                     |       | $                     | (0.03      | )                     | $          | (0.03 | ) |
| Net loss per share,  basic and diluted pro forma                                                                       |       | $                     | (0.03      | )                     | $          | (0.05 | ) |

 

Pro-forma compensationexpense under SFAS 123, among other computational differences, does notconsider potential pre-vesting forfeitures. Because of these differences, thepro-forma stock compensation expense presented above for the prior quarterlyand six-month period ended December 31, 2005 under SFAS 123(R) are not directlycomparable. In accordance with the modified prospective transition method ofSFAS 123(R), the prior comparative quarterly results have not been restated.

*Stock Options asof the Six-Month Period Ended December 31, 2006*

The Company’s Amendedand Restated 1999 Incentive Stock Plan and the 2006 Incentive Compensation Plan(the “Plan”) provides for two separate components. The Stock Option GrantProgram, administered by the Compensation Committee (the “Committee”) appointedby the Company’s Board of Directors, provides for the grant of incentive andnon-statutory stock options to purchase common stock to employees, directors orother independent advisors designated by the Committee. The Restricted StockProgram administered by the Committee, provides for the issuance of RestrictedStock Awards to employees, directors or other independent advisors designatedby the Committee.

The following tablesummarizes stock options outstanding and changes during the six-month periodended December 31, 2006:

11

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| ** **                                | ** ** | **Outstanding Options** | ** ** |
|-------------------------------------------|------------|------------------------------|------------|
| ** **                                | ** ** | **Number of  Shares**   | ** ** | **Weighted  Average  Exercise  Price** | ** ** | **Weighted  Average  Remaining  Contractual  Term (in  months)** | ** ** | **Aggregate  Intrinsic  Value** | ** ** |
| Options  outstanding at June 30, 2006     |       | 1,262,300                    |       | 0.40 |   | 59.74 |   |   |   |
| Granted                                   |       | 860,000                      |       | 0.38 |   | 80.0 |   |   |   |
| Exercised                                 |       | —                       |       | — |   | — |   |   |   |
| Cancelled or forfeited                    |       | —                       |       | — |   | — |   |   |   |
| Options  outstanding at December 31, 2006 |       | 2,122,300                    |       | 0.39 |   | 64.38 |   | $ | — |   |
| Options exercisable at  December 31, 2006 |       | 806,633                      |       | 0.43 |   | 46.79 |   | $ | — |   |

 

The total intrinsic value,or the difference between the exercise price and the market price on the dateof exercise, of all options exercised during the six month period endedDecember 31, 2006, was zero as no options were exercised. Consequently, no cashwas received, nor did the Company realize any tax deductions related toexercise of stock options during the quarter.

Stock options outstandingand currently exercisable at December 31, 2006 are 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** | ** ** |
|                               |       |                         |       |   |   |   |   |   |   |   |   |
| $0.001                             |       | 15,000                       |       | 36.9 |   | 0.001 |   | 15,000 |   | $ | 0.001 |   |
|                               |       |                         |       |   |   |   |   |   |   |   |   |
| 0.625 – 1.375                 |       | 94,100                       |       | 21.2 |   | 0.84 |   | 94,100 |   | 0.84 |   |
| 0.30-0.46                          |       | 2,009,600                    |       | 68.9 |   | 0.37 |   | 693,933 |   | 0.38 |   |
| 3.28                               |       | 3,600                        |       | 5.0 |   | 3.28 |   | 3,600 |   | 3.28 |   |
|                               |       |                         |       |   |   |   |   |   |   |   |   |
|                               |       | 2,122,300                    |       | 66.4 |   | $ | 0.39 |   | 806,633 |   | $ | 0.43 |   |
|                                    |            |                              |            |  |  |  |  |  |  |  |  |  |  |

 

Total estimated unrecognizedcompensation cost from unvested stock options as of December 31, 2006 wasapproximately $437,787 which is expected to be recognized over a weightedaverage period of approximately 25.6 months.

The weighted average pershare fair value of stock options granted during the six-month periods endingDecember 31, 2006 and 2005 was $0.38 and $0.30, respectively. The fair valuewas estimated as of the grant date using the Black-Scholes option pricing modelwith the following assumptions:
| ** **               | ** ** | **Six Months Ended December 31,** | ** ** |
|--------------------------|------------|-------------------------------------------------------|------------|
| ** **               | ** ** | **2006**                                              | ** ** | **2005** | ** ** |
| Volatility               |       | 111.5                                                 | %          | 159.9 | % |
| Expected option  term    |       | 7 years                                               |       | 7 years |   |
| Risk-free  interest rate |       | 4.39                                                  | %          | 3.30 | % |
| Expected dividend yield  |       | 0                                                     | %          | 0 | % |

 

In addition to the stockoptions discussed above, the Company recognized share-basis compensationexpense related to Restricted Stock awards, of $3,333 and $6,666 for the threeand six months ended December 31, 2006. No such share-based compensationexpense was recognized for the quarter and six months ended December 31, 2005.The following table summarizes Non-vested Restricted Stock and the relatedactivity as of and for the six months ended December 31, 2006:
|                                  | ** ** | ** ** | ** ** | **Weighted**        | ** ** |
|----------------------------------|------------|------------|------------|---------------------|------------|
| ** **                       | ** ** | ** ** | ** ** | **Average**         | ** ** |
| ** **                       | ** ** | ** ** | ** ** | **Grant-Date**      | ** ** |
| ** **                       | ** ** | **Shares** | ** ** | **Fair Value** | ** ** |
| Non-vested at  July 1, 2006      |       | 100,000    |       | $                   | 0.40       |   |
| Granted                          |       | 0          |       | —              |       |
| Non-vested at December  31, 2006 |       | 100,000    |       | $                   | 0.40       |   |

 

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**7.****                                     ****RECENTLY ISSUED ACCOUNTINGPRONOUNCEMENTS**

*FAS 155Disclosure.*In February 2006, the FASB issued SFAS No. 155 “Accountingfor Certain Hybrid Financial Instruments”. This Statement amends FASBStatements No. 133, Accounting for Derivative Instruments and HedgingActivities, and No. 140, Accounting for Transfers and Servicing FinancialAssets and Extinguishments of Liabilities. This Statement resolves issuesaddressed in Statement 133 Implementation Issue No. D1, “Application ofStatement 133 to Beneficial Interests in Securitized Financial Assets.” SFASNo. 155 permits fair value remeasurement for any hybrid financial instrumentthat contains an embedded derivative that otherwise would require bifurcation,clarifies which interest-only strips and principal-only strips are not subjectto the requirements of Statement 133, and establishes a requirement to evaluateinterests in securitized financial assets to identify interests that arefreestanding derivatives or that are hybrid financial instruments that containan embedded derivative requiring bifurcation. It also clarifies thatconcentrations of credit risk in the form of subordination are not embeddedderivatives and amends Statement 140 to elimininate the prohibition on aqualifying special-purpose entity from holding a derivative financialinstruments that pertains to a beneficial interest other than anotherderivative financial instrument. This Statement is effective for all financialinstruments acquired or issued after the beginning of an entity’s first fiscalyear that begins after September 15, 2006. The Company has not yet determinedthe impact of the adoption of FAS 155 on its financial statements, if any.

*SFAS No. 156 Disclosure*,“Accounting for Servicing of Financial Assets-An Amendment to FASB StatementNo. 140” In March 2006, the FASB issued SFAS No. 156, “Accountingfor Servicing of Financial Assets-an amendment to FASB Statement No. 140 (“SFAS156”). SFAS 156 requires that all separately recognized servicing rightsbe initially measured at fair value, if practicable. In addition, thisstatement permits an entity to choose between two measurement methods(amortization method or fair value measurement method) for each class ofseparately recognized servicing assets and liabilities. SFAS 156 is effectivefor the Company as of January 1, 2007. The Company does not believe thatthe adoption of SFAS 156 will have a material impact on its consolidatedfinancial statements.

*FASB Interpretation No. 48 Disclosure*,“Accounting for Uncertainty in Income Taxes-an interpretation of FASB StatementNo. 109. In July 2006, the FASB issued InterpretationNo. 48, “Accounting for Uncertainty in Income Taxes-an interpretation ofFASB Statement No. 109” (“FIN 48”). This interpretation clarifies theapplication of SFAS 109 by defining a criterion that an individual tax positionmust meet for any part of the benefit of that position to be recognized in anenterprise’s financial statements and also provides guidance on measurement,de-recognition, classification, interest and penalties, accounting in interimperiods and disclosure. FIN 48 is effective for the Company as of July 1,2007. At this time, we have not completed our review and assessment of theimpact of adoption of FIN 48.

*FAS 157 “Fair Value Measurements”.*InSeptember, 2006, the FASB issued Statement No. 157 “Fair Value Measurements”. SFAS157 defines fair value, establishes a framework and gives guidance regardingthe methods used for measuring fair value, and expands disclosures about fairvalue measurements. SFAS 157 is effective for financial statements issued forfiscal years beginning after November 15, 2007, and interim periods withinthose fiscal years. We are currently assessing the impact that SFAS 157 willhave on our results of operations and financial position.

*SFAS 158 “Employers’ Accounting for Defined BenefitPension and Other Postretirement Plans*” In September2006, the FASB issued Statement of Financial Accounting Standards No. 158.“Employers’ Accounting for Defined Benefit Pension and Other PostretirementPlans” ( SFAS 158). SFAS 158 requires employers to fully recognize theobligations associated with single-employer defined benefit pension, retireehealthcare and other postretirement plans in their financial statements. Theprovisions of SFAS 158 are effective as of the end of the fiscal year endingJune 30, 2007. The Company does not believe that the adoption ofSFAS 156 will have a material impact on its consolidated financialstatements.

*SAB 108 “Considering the Effects of Prior YearMisstatements when Quantifying Misstatements in Current Year FinancialStatements”* In September 2006, the SEC staff issued StaffAccounting Bulletin No. 108, “Considering the Effects of Prior YearMisstatements when Quantifying Misstatements in Current Year FinancialStatements” (SAB 108). SAB 108 requires public companies to quantify errorsusing both a balance sheet and income statement approach and evaluate whethereither approach results in quantifying a misstatement as material, when allrelevant quantitative and qualitative factors are considered. The guidance inSAB 108 is effective for the fiscal year ending June 30, 2007. The Companydoes not believe that the adoption of SFAS 156 will have a material impacton its consolidated financial statements.

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**8.****                                      NOTESPAYABLE**

Notes payable consist ofthe following at December 31, 2006 and June 30, 2006:
| ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | ** ** | **December 31, 2006** | ** ** | **June 30, 2006** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------|------------|-----------------------------|------------|
| Secured, amortizing convertible term note payable to  institutional investors, net of discount of $304,312, with interest at the  greater of 12%, as adjusted by a stock trading formula, or prime plus 3%  (11.75% as of December 31, 2006), interest only from June 1, 2005 through  October 1, 2005 and, via a note modification dated November 30, 2006, December  1, 2006 through November 1, 2007 and then due in monthly installments of  $39,430.56 plus interest from December 1, 2007 through November 1, 2009,  collateralized by commercial security agreements and a partial guaranty by an  officer of the company |       | $                               | 640,518    |                        | $          | 695,740 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |       |                            |       |                        |       |
| Secured, amortizing convertible term note payable to  institutional investors, net of discount of $675,005 with interest at the  greater of 12%, as adjusted by a stock trading formula, or prime plus 3%  (11.75% as of December 31, 2006), interest only from December 28, 2005  through June, 2006 and, via a note modification dated November 30, 2006,  December 1, 2006 through November 1, 2007 and then due in monthly  installments of $50,000 plus interest through November 1, 2009, collateralized  by commercial security agreements                                                                                |       | 524,995                         |       | 415,187                     |       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |       |                            |       |                        |       |
| Secured, non-amortizing convertible term note  payable to institutional investors, with interest at the greater of 12%, as  adjusted by a stock trading formula, or prime plus 3% (11.75% as of December  31, 2006), interest only payments commencing June 1, 2005 until May 19, 2008,  collateralized by commercial security agreements                                                                                                                                                                                                                                                                                        |       | 500,000                         |       | 500,000                     |       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |       |                            |       |                        |       |
| Secured, restricted, non-amortizing convertible term  note payable to institutional investors, under its original terms with  interest at prime, interest only payments commencing June 1, 2005 until the  earlier of May 19, 2008 or the date the proceeds to the company are no longer  restricted, collateralized by commercial security agreements. As a result of  the note modification dated November 30, 2006, referred to above, this note  was deemed paid in full                                                                                                                                                     |       | —                          |       | 250,000                     |       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |       |                            |       |                        |       |
| Note payable, unsecured, to redeemable common  stockholders, with interest at prime plus 2.0% (10.25% at December 31, 2006)  due in monthly installments with principal payments ranging from $5,000 to  $10,000 plus interest through August 2008                                                                                                                                                                                                                                                                                                                                                                               |       | 150,000                         |       | 200,000                     |       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |       |                            |       |                        |       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |       | 1,815,513                       |       | 2,060,927                   |       |
| Current portion,  net of current portion of discount                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |       | (153,001                        | )          | (770,151                    | )          |
| Notes payable,  excluding current portion                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |       | $                               | 1,662,512  |                        | $          | 1,290,776 |   |

 

The convertible notespayable restrict the payment of dividends on the Company’s common stock.

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**Item 2.**

**CORGENIX MEDICAL CORPORATIONManagement’s Discussion and Analysis OfFinancial Condition and Results of Operations**

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

**General**

Since the Company’s inception, we have been primarilyinvolved in the research, development, manufacturing and marketing/distributionof diagnostic tests for sale to clinical laboratories. We currently market 51products covering autoimmune disorders, vascular diseases, infectious diseasesand liver disease. Our products are sold in the United States, the UK and othercountries through our marketing and sales organization that includes directsales representatives, contract sales representatives, internationally throughan extensive distributor network, and to several significant OEM partners.

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

Except for the fiscal year ending June 30, 1997, wehave experienced revenue growth since our inception, primarily from sales ofproducts and contract revenues from strategic partners. Contract revenuesconsist of service fees from research and development agreements with strategicpartners.

Beginning in fiscal year 1996, we began adding third-party OM licensedproducts to our diagnostic product line. Currently we sell 128 productslicensed from or manufactured by third party manufacturers. We expect to expandour relationships with other companies in the future to gain access toadditional products.

Although we have experienced growth in revenues everyyear since 1990, except for 1997, there can be no assurance that, in thefuture, we will sustain revenue growth, current revenue levels, or achieve ormaintain profitability. Our results of operations may fluctuate significantlyfrom period-to-period as the result of several factors, including: (i) whetherand when new products are successfully developed and introduced, (ii) marketacceptance of current or new products, (iii) seasonal customer demand, (iv)whether and when we receive research and development payments from strategicpartners, (v) changes in reimbursement policies for the products that we sell,(vi) competitive pressures on average selling prices for the products that wesell, and (vii) changes in the mix of products that we sell.

**Recently Issued Accounting Pronouncements**

*FAS 155Disclosure.*In February 2006, the FASB issued SFAS No. 155 “Accountingfor Certain Hybrid Financial Instruments”. This Statement amends FASBStatements No. 133, Accounting for Derivative Instruments and HedgingActivities, and No. 140, Accounting for Transfers and Servicing FinancialAssets and Extinguishments of Liabilities. This Statement resolves issuesaddressed in Statement 133 Implementation Issue No. D1, “Application ofStatement 133 to Beneficial Interests in Securitized Financial Assets.” SFASNo. 155 permits fair value remeasurement for any hybrid financial instrumentthat contains an embedded derivative that otherwise would require bifurcation,clarifies which interest-only strips and principal-only strips are not subjectto the requirements of Statement 133, and establishes a requirement to evaluateinterests in securitized financial assets to identify interests that arefreestanding derivatives or that are hybrid financial instruments that containan embedded derivative requiring bifurcation. It also clarifies thatconcentrations of credit risk in the form of subordination are not embeddedderivatives and amends Statement 140 to elimininate the prohibition on aqualifying special-purpose entity from holding a derivative financialinstruments that pertains to a beneficial interest other than anotherderivative financial instrument. This Statement is effective for all financialinstruments acquired or issued after the beginning of an entity’s first fiscalyear that begins after September 15, 2006. The Company has not yet determinedthe impact of the adoption of FAS 155 on its financial statements, if any.

*SFAS No. 156 Disclosure*,“Accounting for Servicing of Financial Assets-An Amendment to FASB StatementNo. 140”. In March 2006, the FASB issued SFAS No. 156, “Accountingfor Servicing of Financial Assets-an amendment to

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FASB StatementNo. 140 (“SFAS 156”). SFAS 156 requires that all separatelyrecognized servicing rights be initially measured at fair value, ifpracticable. In addition, this statement permits an entity to choose betweentwo measurement methods (amortization method or fair value measurement method)for each class of separately recognized servicing assets and liabilities. SFAS156 is effective for the Company as of January 1, 2007. The Company doesnot believe that the adoption of SFAS 156 will have a material impact onits consolidated financial statements.

*FASB Interpretation No. 48 Disclosure*,“Accounting for Uncertainty in Income Taxes-an interpretation of FASB StatementNo. 109. In July 2006, the FASB issued InterpretationNo. 48, “Accounting for Uncertainty in Income Taxes-an interpretation ofFASB Statement No. 109” (“FIN 48”). This interpretation clarifies theapplication of SFAS 109 by defining a criterion that an individual tax positionmust meet for any part of the benefit of that position to be recognized in anenterprise’s financial statements and also provides guidance on measurement,de-recognition, classification, interest and penalties, accounting in interimperiods and disclosure. FIN 48 is effective for the Company as of July 1,2007. At this time, we have not completed our review and assessment of theimpact of adoption of FIN 48.

*FAS 157 “Fair Value Measurements”.*InSeptember, 2006, the FASB issued Statement No. 157 “Fair Value Measurements”. SFAS157 defines fair value, establishes a framework and gives guidance regardingthe methods used for measuring fair value, and expands disclosures about fairvalue measurements. SFAS 157 is effective for financial statements issued forfiscal years beginning after November 15, 2007, and interim periods withinthose fiscal years. We are currently assessing the impact that SFAS 157 willhave on our results of operations and financial position.

*SFAS 158 “Employers’ Accounting for Defined BenefitPension and Other Postretirement Plans*” In September2006, the FASB issued Statement of Financial Accounting Standards No. 158.“Employers’ Accounting for Defined Benefit Pension and Other PostretirementPlans” (SFAS 158). SFAS 158 requires employers to fully recognize theobligations associated with single-employer defined benefit pension, retireehealthcare and other postretirement plans in their financial statements. Theprovisions of SFAS 158 are effective as of the end of the fiscal year endingJune 30, 2007. The Company does not believe that the adoption ofSFAS 156 will have a material impact on its consolidated financialstatements.

*SAB 108 “Considering the Effects of Prior YearMisstatements when Quantifying Misstatements in Current Year FinancialStatements”* In September 2006, the SEC staff issued StaffAccounting Bulletin No. 108, “Considering the Effects of Prior YearMisstatements when Quantifying Misstatements in Current Year FinancialStatements” (SAB 108). SAB 108 requires public companies to quantify errorsusing both a balance sheet and income statement approach and evaluate whethereither approach results in quantifying a misstatement as material, when allrelevant quantitative and qualitative factors are considered. The guidance inSAB 108 is effective for the fiscal year ending June 30, 2007. The Companydoes not believe that the adoption of SFAS 156 will have a material impacton its consolidated financial statements.

**Critical Accounting Policies**

The Company’s consolidated financial statements are prepared inaccordance with accounting principles generally accepted in the United States (“GAAP”)and our significant accounting policies are summarized in Note 1 to theaccompanying consolidated financial statements. The preparation of financialstatements in conformity with GAAP requires management to make estimates andassumptions that affect reported amounts of assets, liabilities, disclosure ofcontingent assets and liabilities at the date of the financial statements andreported amounts of revenues and expenses during the reporting period. Actualresults could differ significantly from those estimates.

The Company disclosed in Note 1 to its consolidated financialstatements included in the Form 10-KSB those accounting policies that itconsiders to be significant in determining its results of operations andfinancial position. Other than the Company’s compliance with the new accountingrequirements of SFAS No. 123(R), as described below, there have been no materialchanges to or application of the accounting policies previously identified anddescribed in the Form 10-KSB.

Prior to July 1, 2006, the Company accounted for stock option awardsgranted under the Company’s Incentive Compensation Plan in accordance with therecognition and measurement provisions of Accounting Principles Board OpinionNo. 25, *Accounting for Stock Issued to Employees”,*(“APB25”) and related Interpretations, as permitted by Statement of FinancialAccounting Standards No. 123, “*Accounting for Stock-BasedCompensation”,*(“SFAS 123). Share-based employee compensationexpense was not recognized in the Company’s consolidated statements ofoperations prior to July 1, 2006 as all stock option awards granted toemployees had an exercise price equal to or greater than the market value ofthe common stock on the date of the grant. As permitted by SFAS 123, theCompany reported pro-forma disclosures presenting results and earnings (loss)per share as if the Company had used the fair value recognition provisions ofSFAS 123 in the Notes to

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Consolidated Financial Statements. Stock-basedcompensation related to non-employees was accounted for based on the fair valueof the related stock or options in accordance with SFAS 123 and itsinterpretations.

Effective July 1, 2006, the Company adopted the provisions of Statementof Financial Accounting Standard No. 123 (revised 2004), “*Share-BasedPayment”,*(SFAS 123(R)”) using the modified prospective transitionmethod. See Note 2 for further detail on the impact of SFAS 123(R) to theCompany’s consolidated financial statements.

The Company maintains an allowance for doubtful accounts based on itshistorical experience and provides for any specific collection issues that areidentified. Such allowances have historically been adequate to provide for ourdoubtful accounts but involve a significant degree of management judgment andestimation. Worse than expected future economic conditions, unknown customercredit problems and other factors may require additional allowances fordoubtful accounts to be provided for in future periods.

Equipment and software are recorded at cost. Equipment under capitalleases is recorded initially at the present value of the minimum lease payments.Depreciation and amortization is calculated primarily using the straight-linemethod over the estimated useful lives of the respective assets that range from3 to 7 years.

The internal and external costs of developing and enhancing softwarecosts related to website development, other than initial design and other costsincurred during the preliminary project stage, are capitalized until thesoftware has been completed. Such capitalized amounts began to be amortizedcommencing when the website was placed in service on a straight-line basis overa three-year period.

When assets are sold, retired or otherwise disposed of, the cost andrelated accumulated depreciation are eliminated from the accounts and a gain orloss is recognized.

Repair and maintenance costs are expensed as incurred.

We evaluate the realizability of our long-lived assets, includingproperty and equipment, whenever events or changes in circumstances indicatethat the carrying amount of an asset may not be recoverable.

Revenue from sale of products is recognized upon shipment of products.

Revenue from research and development contracts represents amountsearned pursuant to agreements to perform research and development activitiesfor third parties and is recognized as earned under the respective agreement. Becauseresearch and development services are provided evenly over the contract period,revenue is recognized ratably over the contract period. Research anddevelopment agreements in effect in 2006 and 2005 provided for fees to theCompany based on time and materials in exchange for performing specifiedresearch and development functions. Research and development and advertisingcosts are expensed when incurred. Inventories are recorded at the lower of costor market, using the first-in, first-out method.

# **Resultsof Operations**

***Three Months Ended December 31, 2006compared to 2005***

*Net sales.*Netsales for the quarter ended December 31, 2006 were $1,684,811 a 6.6% increasefrom $1,580,883 in the first quarter of fiscal 2006. North American salesincreased 3.3% while sales to international distributors increased 15.4% fromyear to year. With respect to the Company’s major product lines, Phospholipidskit sales decreased 6.6% for the quarter, Coagulation kit sales increased 8.6%,HA kit sales increased 16.3%, whereas Autoimmune kit sales decreased 36.7%.Additionally, OEM/contract manufacturing revenues increased 85.1%. Sales ofproducts manufactured for us by other companies while still relatively small,are expected to continue to increase during fiscal 2007.

*Cost of sales*. Costof sales, as a percentage of sales, increased to 39.9% for the quarter endedDecember 31, 2006 from 36.1% in 2005 primarily due to product mix reductionfrom higher gross margin products in addition to higher direct labor andmaterial costs.

*Selling and marketing.*Forthe quarter ended December 31, 2006, selling and marketing expenses increased58.0% to $577,752 from $365,714 in 2005. The increase was due to increases inconsulting fees and outsider services, labor-related

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expenses,business promotion and trade show expenditures, travel-related expenses, rentand office supplies.

*Research and development.*Research and development expenses increased 13.0% to $173,120 for the quarterended December 31, 2006 from $153,246 in 2005. This increase involved increasesin labor-related costs, clinical studies, conventions and seminars, rent, andproduct testing expenses. The Company’s accelerated efforts in the developmentof their HA, Aspirin Effectiveness and AtherOx products in addition to theirsubmission of their applications to the FDA were the primary reasons for thesignificantly increased expenses in this area.

*General and administrative.*For the quarter ended December 31, 2006, general and administrative expensesincreased $296,767 or 74.1% to $697,179 from $400,412 in 2005. This increasewas attributable to increases in labor-related expenses, aborted licensingcosts, merger-related expenses, bank charges, consulting and outside services,sales and use taxes, and office supplies.

*Interest expense.*Interest expense increased 39.6% to $490,984 for the quarter ended December 31,2006 from $351,722 in 2005 due primarily to the amortization of deferredfinancing costs and discount on the notes payable as a result of the recentlycompleted private debt placement.

***Six Months Ended December 31, 2006compared to 2005***

*Net sales.*Netsales for the six months ended December 31, 2006 were $3,378,923 a 5.1%increase from $3,215,836 in the first six months of fiscal 2006. North Americansales increased 3.6% while sales to international distributors decreased 9.5%from year to year. One of the reasons for the small size of the increase insales for the six month period was related to the relocation into newfacilities both in the United States and the UK with the resultant manufacturing,shipping and receiving shut-down during the majority of July 2006. With respectto the Company’s major product lines, Phospholipids kit sales increased 4.8%for the period, Coagulation kit sales increased less than 1%, HA kit salesdecreased 4.4%, whereas Autoimmune kit sales decreased 18.5%. Additionally,OEM/contract manufacturing revenues increased 21.2%. Sales of productsmanufactured for us by other companies while still relatively small, areexpected to continue to increase during fiscal 2007.

*Cost of sales*. Costof sales, as a percentage of sales, increased to 39.0% for the six endedDecember 31, 2006 from 36.1% in 2005 primarily due to product mix reductionfrom higher gross margin products in addition to higher direct labor andmaterial costs.

*Selling and marketing.*Forthe six months ended December 31, 2006, selling and marketing expensesincreased 42.8% to $1,065,738 from $746,426 in 2005. The increase was due toincreases in consulting fees and outsider services, labor-related expenses,business promotion and trade show expenditures, travel-related expenses, rentand office supplies.

*Research and development.*Research and development expenses increased 44.0% to $405,807 for the sixmonths ended December 31, 2006 from $281,756 in 2005. This increase involvedincreases in labor-related costs, clinical studies, conventions and seminars,rent, and product testing expenses. The Company’s accelerated efforts in thedevelopment of their HA, Aspirin Effectiveness and AtherOx products in additionto their submission of their applications to the FDA were the primary reasonsfor the significantly increased expenses in this area.

*General and administrative.*For the six months ended December 31, 2006, general and administrative expensesincreased $562,964 or 77.1% to $1,293,479 from $730,515 in 2005. This increasewas attributable to increases in labor-related expenses, aborted licensingcosts, merger-related expenses, bank charges, consulting and outside services,sales and use taxes, and office supplies.

*Interest expense.*Interest expense increased 59.0% to $1,107,587 for the six months endedDecember 31, 2006 from $682,316 in 2005 due primarily to the amortization ofdeferred financing costs and discount on the notes payable as a result of therecently completed private debt placement.

**Liquidity and Capital Resources**

Cash used in operating activities was $1,104,901 forthe current fiscal six months compared to cash used in operating activities of$482,309 during the prior year’s first fiscal six months. The increase in cashused in operations resulted primarily from the larger net loss for the currentperiod in addition to increases in inventories and accounts

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receivable,prepaid expenses and other assets. The substantial increase in inventories fromyear to year was primarily due to increases in overhead as a result of the moveto a considerably larger facility, plus increases in direct labor costs,purchases of raw materials and freight charges. The Company believes thatuncollectible accounts receivable will not have a significant effect on futureliquidity, as a significant portion of its accounts receivable are due fromfinancially sound enterprises.

Net cash used by investing activities, the purchase ofequipment, was $171,923 in the six-month period compared to $28,867 for theprior year’s same six-month period. The increase was mainly attributable toincreased spending on laboratory, refrigeration and manufacturing equipment inaddition to data processing equipment.

Net cash used by financing activities amounted to$495,179 during the recent six months compared to $1,341,703 provided byfinancing activities the prior fiscal year. This decrease in cash used versusthe comparable prior year was primarily due to increased cash payments on notespayable and capital lease obligations.

Historically, we have financed our operationsprimarily through long-term debt and the sales of common, redeemable common andpreferred stock. We have also financed operations through sales of diagnosticproducts and agreements with strategic partners. Accounts receivable increased26.8% to $1,367,475 from $1,078,262 as of December 31, 2005 primarily as aresult of sales increases in addition to a slight slowdown in collectionsduring the period.

Ourfuture capital requirements will depend on a number of factors, including theability to complete new equity or debt financing, the possible redemption ofcommon stock, our profitability or lack thereof, the rate at which we grow ourbusiness and our investment in proprietary research activities, the ability ofour current and future strategic partners to fund outside research anddevelopment activities, our success in increasing sales of both existing andnew products and collaborations, expenses associated with unforeseenlitigation, regulatory changes, competition, technological developments,general economic conditions and potential future merger and acquisitionactivity. Our principal sources of liquidity have been cash raised from theprivate sale of secured convertible term notes and the sale of redeemablecommon, common and preferred stock, and long-term bank debt financing. Webelieve that our current availability of cash, working capital, proceeds fromthe issuance of preferred or common stock and/or debt financing and expected cashflows from operations, taking into consideration the increased sales volume andreduction in operating expeses which the Company forecasts for the second halfof fiscal 2007 along with the recently executed 12-month deferral of principalpayments on the Company’s convertible debt, will be adequate to meet ourongoing needs for at least the next twelve months.

**Off -Balance Sheet Arrangements**

We do not have any off-balance sheet arrangements.

**Contractual Obligations and Commitments**

OnFebruary 8, 2006, Corgenix Medical Corporation (the “Company”) entered into aLease Agreement (the “Lease”) with York County, LLC, a California limitedliability company (“Landlord”) pursuant to which the Company will leaseapproximately 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 ispart of Landlord’s multi-tenant real property development known as theBroomfield Corporate Center. The Company will use the Property for itsheadquarters, laboratory research and development facilities and productionfacilities.

The term of theLease (the “Term”) is seven years and five months commencing on theCommencement Date July 6, 2006 withtenant options to extend the Term for up totwo periods of five years each. We have a one time right of first refusal tolease contiguous remises.

The initial base leaserate payable on the 25,600 square foot portion of the premises is $0.00 persquare foot, plus estimated operating expenses of $1.61 per square foot.

The base lease ratepayable on the 25,600 square foot portion of the premises increases to $4.00per square foot on January 28, 2007, plus amortization of tenant improvementsof $5.24 per square foot, plus estimated operating expenses of $1.61 per squarefoot. The base lease rate on the 25,600 square foot portion of the premisesincreases to $5.64 per square foot on January 28, 2008, with fixed annualincreases each January 28 thereafter during the initial Term, plus theamortization of tenant improvements of $5.24 per square foot, and estimatedoperating expenses of $1.61 per square foot.

The initial base leaserate payable on the 6,400 square foot portion of the premises is $0.00 persquare foot, plus

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estimated operatingexpenses of $1.61 per square foot. The base lease rate on the 6,400 square footportion of the premises increases to $3.00 per square foot commencing on August28, 2007, and increases to $3.09 on January 28, 2008, with fixed annualincreases each January 28 thereafter during the initial Term, plus estimatedoperating expenses of $1.61 per square foot.

Thus, the estimated totalrent (this is dependent upon the actual operating expenses) on the whole(32,000 sf) of the premises is initially $1.61 per square foot, then increasesto approximately $9.00 per square foot on January 28, 2007, then increases toapproximately $9.60 per square foot on August 28 2007, then increases toapproximately $10.93 per square foot on January 28, 2008, with annual increasesin the base lease rate each January 28 thereafter during the initial Term, upto an estimated total rent of $13.18 per square foot during the final year ofthe initial Term.

The base lease rate foran extension period is 100% of the then prevailing market rental rate (but inno event less than the rent for the last month of the then current Term) andshall thereafter increase annually by 3% for the remainder of the applicableextension period.

**Item 3.**

**Controls and Procedures**

Evaluation of disclosure controls and procedures. TheCompany, under the supervision and with the participation of the Company’smanagement, including its Chief Executive Officer and Chief Financial Officer,carried out an evaluation of the effectiveness of the design and operation ofthe Company’s disclosure controls and procedures (as defined in Rules240.13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934 (the “ExchangeAct”) as of the end of the period covered by this quarterly report (the “EvaluationDate”). Based upon this evaluation, the Chief Executive Officer and ChiefFinancial Officer concluded that, as of the Evaluation Date, the Company’sdisclosure controls and procedures were effective for the purposes ofrecording, processing, summarizing and timely reporting information required tobe disclosed by the Company in the reports that it files under the SecuritiesExchange Act of 1934 and that such information is accumulated and communicatedto the Company’s management in order to allow timely decisions regardingrequired disclosure.

Changes in internal controls. Therehave been no significant changes in the Company’s internal controls or in otherfactors that could significantly affect the Company’s disclosure controls andprocedures subsequent to the Evaluation Date, nor were there any significantdeficiencies or material weaknesses in the Company’s internal controls.

**Forward-Looking Statements and Risk Factors**

This 10-QSB includes statements that are not purelyhistorical and are “forward-looking statements” within the meaning of Section21E of the Securities Act of 1934, as amended, including statements regardingour expectations, beliefs, intentions or 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, researchand development programs and distribution plans, are forward-looking statements.All forward-looking statements included in this 10-QSB are based on informationavailable to us on the date hereof, and we assume no obligation to update suchforward-looking statements. Although we believe that the assumptions andexpectations reflected in such forward-looking statements are reasonable, wecan give no assurance that such expectations will prove to have been correct orthat we will take any actions that may presently be planned.

An investment in Corgenix entails certain risks thatshould be carefully considered. In addition, these risk factors could causeactual results to differ materially from those expected include the following:

**We continue to incur losses and arelikely to require additional financing.**

We have incurredoperating losses and negative cash flow from operations for most of our history.Losses incurred since our inception have aggregated $11,118,880 and there canbe no assurance that we will be able to generate positive cash

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flows to fund ouroperations in the future or to pursue our strategic objectives. Assuming nosignificant changes from our budget, we believe that we will have sufficientcash to satisfy our needs for at least the next twelve months. If we are notable to operate profitably and generate positive cash flows, we willundoubtedly need to raise additional capital, most likely via the sale ofequity securities, to fund our operations. If we do in fact need additionalfinancing to meet our requirements, there can be no assurance that we will beable to obtain such financing on terms satisfactory to us, if at all. Alternatively,any additional equity financing may be dilutive to existing stockholders, anddebt financing, if available, may include restrictive covenants. If adequatefunds are not available, we might be required to limit our research anddevelopment activities or our selling, marketing and administrative activitiesany of which could have a material adverse effect on the future of thebusiness.

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

We have historically entered into research anddevelopment agreements with collaborative partners, from which we derivedrevenues in past years. Pursuant to these agreements, our collaborativepartners have specific responsibilities for the costs of development,promotion, regulatory approval and/or sale of our products. We will continue torely on future collaborative partners for the development of products andtechnologies. There can be no assurance that we will be able to negotiate suchcollaborative arrangements on acceptable terms, if at all, or that current orfuture collaborative arrangements will be successful. To the extent that we arenot able to establish such arrangements, we could be forced to undertake suchactivities entirely at our own expense. The amount and timing of resources thatany of these partners devotes to these activities may be based on progress byus in our product development efforts. Collaborative arrangements may beterminated by the partner upon prior notice without cause and there can be noassurance that any of these partners will perform its contractual obligationsor that it will not terminate its agreement. With respect to any productsmanufactured by third parties, there can be no assurance that any third-partymanufacturer will perform acceptably or that failures by third parties will notdelay clinical trials or the submission of products for regulatory approval orimpair our ability to deliver products on a timely basis.

**There can be no assurance ofsuccessful or timely development of additional products.**

Our business strategy includes the development ofadditional diagnostic products for the diagnostic business. Our success indeveloping 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 requiressignificant research, development and 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 delay in the development, introduction andmarketing of future products could result in such products being marketed at atime when their cost and performance characteristics would not enable them tocompete effectively in their respective 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.

**Competitionin the human medical diagnostics industry is, and is expected to remain,significant.**

Our competitors range from development stagediagnostics companies to major domestic and international pharmaceutical andbiotechnology companies. Many of these companies have financial, technical,marketing, sales, manufacturing, distribution and other resources significantlygreater than ours. In addition, many of these companies have name recognition,established positions in the market and long standing relationships withcustomers and distributors also greater than ours. Moreover, the diagnosticsindustry continues to demonstrate a degree consolidation, whereby some of thelarge domestic and international pharmaceutical companies have been acquiringmid-sized diagnostics companies, further increasing the concentration ofresources. There can be no assurance that technologies will not be introducedthat could be directly competitive with or superior to our technologies.

**Ourproducts and activities are subject to regulation by various governments andgovernment agencies.**

The testing, manufacture and sale of our products is subject toregulation by numerous governmental authorities, principally the United StatesFood and Drug Administration and certain foreign regulatory agencies. Pursuantto the Federal Food, Drug, and Cosmetic Act, and the regulations promulgatedthere under, the FDA regulates the preclinical and clinical

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testing, manufacture, labeling, distribution andpromotion of medical devices. We are limited in our ability to commencemarketing or commercial sales in the United States of new products underdevelopment until we receive clearance or approval from the FDA. The testingfor, preparation of and subsequent FDA regulatory review of required filingscan be a lengthy, expensive and uncertain 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 or pre-marketapproval for devices, withdrawal of marketing clearances or approvals, andcriminal prosecution.

There can be no assurance that we will be able toobtain necessary regulatory approvals or clearances for our products on atimely basis, if at all, and delays in receipt of or failure to receive suchapprovals or clearances, the loss of previously received approvals orclearances, limitations on intended use imposed as a condition of suchapprovals or clearances or failure to comply with existing or future regulatoryrequirements could negatively impact our sales and thus have a material adverseeffect on our business.

As a manufacturer of medical devices for marketing inthe United States, we are required to adhere to applicable regulations settingforth detailed good manufacturing practice requirements, which include testing,control and documentation requirements. We must also comply with Medical DeviceReport (MDR) requirements, which require that a manufacturer reports to the FDAany incident in which its product may have caused or contributed to a death orserious injury, or in which its product malfunctioned and, if the malfunctionwere to recur, it would be likely to cause or contribute to a death or seriousinjury. We are also subject to routine inspection by the FDA for compliancewith Quality System Regulations requirements, MDR requirements and otherapplicable regulations. Labeling and promotional activities are subject toscrutiny by the FDA and, in certain circumstances, by the Federal Trade Commission.We may incur significant costs to comply with laws and regulations in thefuture, which would decrease our net income or increase our net loss and thushave a potentially material adverse effect upon our business, financialconditions and results of operations.

Distribution of diagnostic products outside the UnitedStates is subject to extensive foreign government regulation. Theseregulations, including the requirements for approvals or clearance to market,the time required for regulatory review and the sanctions imposed forviolations, vary from country to country. We may be required to incursignificant costs in obtaining or maintaining foreign regulatory approvals. Inaddition, the export of certain of our products that have not yet been cleared forUnited States commercial distribution may be subject to FDA exportrestrictions. Failure to obtain necessary regulatory approval or the failure tocomply with regulatory requirements could reduce our product sales and thushave a potentially material adverse effect on our business, financial conditionand results of operations.

**We depend upon distribution partnersfor sales of diagnostic products in international markets.**

We have entered into distribution agreements withcollaborative partners in which we have granted distribution rights for certainof our products to these partners within specific international geographicareas. Pursuant to these agreements, our collaborative partners have certainresponsibilities for market development, promotion, and sales of the products.If any of these partners fails to perform its contractual obligations orterminates its agreement, this could reduce our sales and cash flow and thushave a potentially material adverse effect on our business, financial conditionand results of operations.

**Thirdparty reimbursement for purchases of our diagnostic products is uncertain.**

In the United States, health care providers thatpurchase diagnostic products, such as hospitals and physicians, generally relyon third party payers, principally private health insurance plans, federalMedicare and state Medicaid, to reimburse all or part of the cost of thepurchase. Third party payers are increasingly scrutinizing and challenging theprices charged for medical products and services and they can affect thepricing or the relative attractiveness of the product. Decreases inreimbursement amounts for tests performed using our diagnostic products,failure by physicians and other users to obtain reimbursement from third partypayers, or changes in government and private third party payers’ policiesregarding reimbursement of tests utilizing diagnostic products, may affect ourability to sell our diagnostic products profitably. Market acceptance of ourproducts in international markets is also dependent, in part, upon theavailability of reimbursement within prevailing health care payment systems.

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**Oursuccess depends, in part, on our ability to obtain patents and license patentrights, to maintain trade secret protection and to operate without infringingon the proprietary rights of others.**

There can be no assurance that our issued patent willafford meaningful protection against a competitor, or that patents issued orlicensed to us will not be infringed upon or designed around by others, or thatothers will not obtain patents that we would need to license or design around.We could incur substantial costs in defending the Company or our licensees inlitigation brought by others. The potential for reduced sales and increasedlegal expenses would have a negative impact on our cash flow and thus ouroverall business could be adversely affected.

**We maynot be able to successfully implement our plans to acquire other companies ortechnologies.**

Our growth strategy includes the acquisition ofcomplementary companies, products or technologies. There is no assurance thatwe will be able to identify appropriate companies or technologies to beacquired, to negotiate satisfactory terms for such an acquisition, or to obtainsufficient capital to make such acquisitions. Moreover, because of limited cashresources, we will be unable to acquire any significant companies ortechnologies for cash and our ability to effect acquisitions in exchange forour capital stock may depend upon the market prices for our common stock, whichcould result in significant dilution to 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 reported operatingresults, diversion of management’s attention, unanticipated problems or legalliabilities, and difficulties in the integration of potentially dissimilaroperations. Any of these factors could materially harm Corgenix’s business orits operating results.

**We dependon suppliers for our products’ components.**

The components of our products include chemical,biological and packaging supplies that are generally available from severalsuppliers, except certain antibodies and other critical components, which wepurchase 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 haveonly limited manufacturing experience with certain products.**

Although we have manufactured over twelve milliondiagnostic tests based on our proprietary applications of ELISA (enzyme linkedimmuno-absorbent assay) technology, certain of our diagnostic products inconsideration for future development, incorporate technologies with which wehave limited manufacturing experience. Assuming successful development andreceipt of required regulatory approvals, significant work may be required toscale up production for each new product prior to such product’s commercialization.There can be no assurance that such work can be completed in a timely mannerand that such new products can be manufactured cost-effectively, to regulatorystandards or in sufficient volume.

**Due tothe specialized nature of our business, our success will be highly dependentupon our ability to attract and retain qualified scientific and executivepersonnel.**

We believe our success will depend to a significantextent on the efforts and abilities of Dr. Luis R. Lopez and Douglass T.Simpson, who would be difficult to replace. There can be no assurance that wewill be successful in attracting and retaining such skilled personnel, who aregenerally in high demand by other companies. The loss of, inability to attract,or poor performance by key scientific and executive personnel may have amaterial adverse effect on our business, financial condition and results ofoperations.

**Thetesting, manufacturing and marketing of medical diagnostic devices entails aninherent risk of product liability claims.**

To date, we have experienced no product liabilityclaims, but any such claims arising in the future could have a material adverseeffect on our business, financial condition and results of operations.Potential product liability claims may exceed the amount of our insurancecoverage or may be excluded from coverage under the terms of our policy orlimited by other claims under our umbrella insurance policy. Additionally,there can be no assurance that our existing insurance can be

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renewedby us at a cost and level of coverage comparable to that presently in effect,if at all. In the event that we are held liable for a claim against which weare not insured or for damages exceeding the limits of our insurance coverage,such claim could have a material adverse effect on our cash flow and thuspotentially a materially adverse effect on our business, financial conditionand results of operations.

**Therehas, to date, been no active public market for our Common Stock, and there canbe no assurance that an active public market will develop or be sustained.**

Although our Common Stock has been traded on the OTCBulletin Board® since February 1998, the trading has been sporadic withinsignificant volume.

Moreover, the over-the-counter markets for securitiesof very small companies historically have experienced extreme price and volumefluctuations. These broad market fluctuations and other factors, such as newproduct developments, trends in our industry, the investment markets, economicconditions generally, and quarterly variation in our results of operations, mayadversely affect the market price of our common stock. In addition, our commonstock is subject to rules adopted by the Securities and Exchange Commissionregulating broker-dealer practices in connection with transactions in “pennystocks.” Such rules require the delivery prior to any penny stock transactionof a disclosure schedule explaining the penny stock market and all associatedrisks and impose various sales practice requirements on broker-dealers who sellpenny stocks to persons other than established customers and accreditedinvestors, which are generally defined as institutions or an investor with anet worth in excess of $1,000,000 or annual income exceeding $200,000 or$300,000 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 imposed upon broker-dealers by such requirementsmay discourage broker-dealers from effecting transactions in securities subjectto the penny stock rules.

**There are risks associated withfluctuating exchange rates.**

Our financial statements are presented in US dollars. At the end ofeach fiscal quarter and the fiscal year, we convert the financial statements ofCorgenix UK, which operates in pounds sterling, into US dollars, andconsolidate them with results from Corgenix, Inc. We may, from time to time,also need to exchange currency from income generated by Corgenix UK. Foreignexchange rates are volatile and can change in an unknown and unpredictablefashion. Should the foreign exchange rates change to levels different thananticipated by us, our business, financial condition and results of operationsmay be adversely affected.

**CORGENIXMEDICAL CORPORATION**

**PART II**

**Other Information**

**Item 1.****        Legal Proceedings**

On January 4, 2007the Company filed a complaint in the United States District Court for theDistrict of Colorado against Biosafe Laboratories, Inc., a corporationorganized and existing under the laws of the State of Illinois. The complaintstates, among other things, that Corgenix and Biosafe are parties to anon-binding Letter of Intent dated September 12, 2006 (the “LOI”), under whichthe companies explored the possibility of a licensing arrangement between themfor the sale of some of Biosafe’s products. Upon execution of this non-bindingLOI, Corgenix paid to Biosafe a deposit of $250,000. The LOI specificallyrequired Biosafe to refund $225,000 of that deposit to Corgenix in the eventthat a binding agreement was not reached between the parties (the “RefundableDeposit”). A binding agreement was never reached between the two companies andeven though Biosafe was obligated to refund the Refundable Deposit to Corgenixand demand was made by Corgenix for said Refundable Deposit, Biosafe refused toreturn the Refundable Deposit. Corgenix has brought suit against Biosafe, andseeks relief in the form of, but not limited to, the refund of the RefundableDeposit, in addition to all damages sustained.

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**Item 2.****        Unregistered Sales ofEquity Securities and Use of Proceeds**

None

**Item 3.****        Defaults Upon SeniorSecurities**

None

**Item 4.****        Submission of Matters to aVote of Security Holders**

None

**Item 5.****        Other Information**

None

I**tem 6.****        Exhibitsand Reports on Form 8-K.**

**a.****               Index to andDescription of Exhibits***.*
| Exhibit  Number | ** ** | **Description of Exhibit**                                                                                                                                                                                                               |
|-----------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.1            |       | Amendment Concerning Secured Convertible Term Notes  (including Amendment No. 1 to each Secured Convertible Term Note) filed as  Exhibit 10 to the Company’s Form 8-K filed December 5, 2006 and incorporated  herein by reference. |
| ** **      | ** ** | ** **                                                                                                                                                                                                                               |
| 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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*                    Filedherewith.

**(b)****                                  Reportson Form 8-K.**

1.               Form8-K filed November 15, 2006 *Results ofOperation and Financial Condition*.

2.               Form 8-K filedDecember 5, 2006 *Entry into a Material Definitive Agreementand Creation of a Direct Obligation under an Off-Balance Sheet Arrangement of aRegistrant*

3.               Form 8-K filedJanuary 4, 2007 *Other Events*

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**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                     |
|-------------------|--------------------------------------------------|
|              |
|              |                                             |
| February 14, 2007 | By:                                              | /s/ Douglass T. Simpson |   |
|              | Douglass T. Simpson                              |
|              | President and Chief Executive Officer            |
| ** **        | **(Principal Executive Officer)**                |
|              |                                             |
|              |                                             |
|              | /s/ William H. Critchfield                       |   |
|              | William H. Critchfield                           |
|              | Chief Financial Officer                          |
|              | **(Principal Financial and Accounting Officer)** |
|                   |                                                  |  |  |  |  |

 

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