**SECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

**Form10-KSB**

**x****                             ****ANNUAL REPORT PURSUANT TO SECTION13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934**

**For the fiscal year ended June 30, 2006**

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

**For thetransition period from                     to**

**Commission File Number 000-24541**

**CORGENIXMEDICAL CORPORATION**

(Name of smallbusiness issuer as specified in its charter)

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

 

**11575Main Street, Broomfield, Colorado 80020**

(Address ofprincipal executive offices)

**(303)457-4345**

(Issuer’stelephone number)

Securitiesregistered pursuant to Section 12(b) of the Act:  **None**

Securitiesregistered pursuant to Section 12(g) of the Act:  **Common Stock, $.001 ParValue**

Check whether theissuer:  (1) filed all reportsrequired to be filed by Section 13 or 15(d) of the Exchange Act during the past12 months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements forthe past 90 days.     Yes xNo o

Check if nodisclosure of delinquent filers in response to Item 405 of Regulation S-Bis contained in this form, and no disclosure will be contained, to the best ofthe issuer’s knowledge, in definitive proxy or information statementsincorporated by reference in Part III of this Form 10-KSB or any amendment tothis Form 10-KSB.  x

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

The issuer’srevenues for its most recent fiscal year were: $6,635,779

The aggregatemarket value of the voting stock and non-voting common equity held by non-affiliatesof the issuer was $3,297,829 as of June 30, 2006, based on the closing price of$0.42 as reported on the OTCBB on June 30, 2006.

The number ofshares of Common Stock outstanding was 11,153,252 as of September 29, 2006.

Transitional SmallBusiness Disclosure Format.     Yes o     No x

 

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**PART I**

**Item1.  Description of Business.**

*Certainterms used in this annual report are defined in the Glossary that follows atthe end of Part I.*

##### ***Company Overview***

Corgenix MedicalCorporation, which we refer to as Corgenix or the Company, is engaged in the research,development, manufacture, and marketing of in vitro (outside the body)diagnostic products for use in disease detection and prevention. We currentlysell 51 diagnostic products on a worldwide basis to hospitals, clinical testinglaboratories, universities, biotechnology and pharmaceutical companies andresearch institutions.  In the UnitedStates and the United Kingdom, we sell directly to these customers.  Elsewhere in the world, we primarily sell toindependent distributors that in turn sell to the laboratories.

Our corporateheadquarters is located in Broomfield, Colorado. We have two wholly ownedoperating subsidiaries:

·                  Corgenix,Inc. (formerly REAADS Medical Products, Inc.), established in 1990 and locatedin Broomfield, Colorado. Corgenix, Inc. is responsible for sales and marketingactivities for North America, and also executes product development, productsupport, clinical and regulatory affairs, and product manufacturing.

·                  Corgenix(UK) Ltd, incorporated in the United Kingdom in 1996 (formerly REAADSBio-Medical Products (UK) Limited) and located in Peterborough, England.Corgenix UK manages our international sales and marketing activities except fordistribution in North America, which is the responsibility of Corgenix, Inc. Wecontinue to use the REAADS trademark and trade name in the sale of productsthat we manufacture.

***Recent Developments***

TheCompany entered into agreements on December 28, 2005 to complete twoseparate private placement financings with certain institutional and otheraccredited investors.

Thefirst financing was a private placement to Barron Partners, L.P., or Barron, aNew York based private partnership, consisting of two million shares of SeriesA Convertible Preferred Stock. The shares of Series A Convertible PreferredStock were sold at $1.00 per share for gross proceeds of $2,000,000.  Each share of preferred stock is convertibleinitially into 2.8571428571 shares of the Company’s common stock. In addition,Corgenix issued warrants to Barron to acquire up to an additional 15,000,000shares of Corgenix common stock, of which 5,000,000 are exercisable at $0.40per share, 5,000,000 are exercisable at $0.50, and 5,000,000 are exercisable at$0.60. The warrants are exercisable for five years from the date of issuance.

Theexercise prices of the warrants, and the conversion rate and price of theshares of preferred stock, are subject to adjustment upon the occurrence ofcertain specified events, including issuance of additional shares of commonstock or subdivision or combining of shares of common stock.

Theconversion right as contained in the preferred stock certificate ofdesignations and the exercise rights contained in the warrants provide that aholder will not convert an amount of preferred stock or exercise warrants tothe extent that the number of shares held by the holder, when added to thenumber of shares of common stock beneficially owned by such holder or issuableif the holder exercised one or more of its warrants immediately prior toconversion, would exceed 4.9% of the Company’s issued and outstanding commonstock.

Thetransaction with Barron also included a Registration Rights Agreement in whichthe Company agreed to file a registration statement on Form SB-2 covering theshares of common stock issuable upon the exercise of the warrants or theconversion of the preferred stock, which was declared effective on April 21,2006.

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Atthe closing, the Company reimbursed Barron $15,000 for due diligence expenses.In addition, Ascendiant Securities, LLC acted as a financial advisor to theCompany. As compensation for its services, the Company paid to Ascendiant asuccess fee equal to 8% of the initial gross proceeds ($160,000), which fee waspaid from escrow  when those funds werereleased to Corgenix from escrow.  If andwhen the Barron warrants are exercised, then Corgenix would pay Ascendiant 8%of those gross proceeds. Three warrants were issued to Ascendiant, each for thepurchase of up to 552,380 shares, or 8% of the securities issued in thetransaction, at $.40, $.50, and $.60 with net exercise rights.  The estimated fair value of the warrants uponissuance exceeded the $2,000,000 investment in the convertible preferred stock.The estimated fair value of the warrants was calculated using the Black-Scholesoption-pricing model with the following assumptions: no expected dividendyield, 111.5% volatility, risk free interest rate of 4.39% and an expected lifeof five years. Since the convertible preferred stock was immediatelyconvertible, the entire value of the calculated discount (value of thewarrants) was deemed to be imputed dividends on the convertible preferredstock.

Asconstituted on December 28, 2005, the Company had 40 million shares ofcommon stock authorized, of which approximately 9.3 million shares were issuedand outstanding, and approximately 30.7 million were reserved for issuance toaccommodate the exercise or conversion of warrants, options, and convertibledebt that is currently outstanding. If all of the shares of preferred stock andwarrants issued to Barron in the recent financing were converted or exercisedat that point, then approximately 20.7 million shares of common stock would beneeded to satisfy such activity.

Aspecial meeting of the shareholders of the Company was held on March 24,2006 to vote upon an amendment to the articles of incorporation increasingthe number of authorized shares of Common Stock from 40 million to 100 million(the “Share Increase Amendment”).  TheShare Increase Amendment was adopted by the Company’s shareholders at thespecial meeting.  As a result, the$2,000,000 plus accrued interest was released to the Company, and the preferredstock certificates were issued from escrow to Barron. In addition, because theShare Increase Amendment was adopted and approved by the Company’sshareholders, the Company has reserved and keeps available shares of commonstock for the purpose of enabling the Company to issue the shares of commonstock underlying the preferred stock and warrants issued to Barron.

Aspreviously disclosed, the Company has been and plans to continue to use the netproceeds, after transaction fees and expenses, for key strategic initiatives,working capital and other general corporate purposes.

Corgenixgranted to Barron the right to participate in any subsequent financings by theCompany on a pro rata basis at one hundred percent (100%) of the offeringprice; provided that any such right to participate shall be effective if andonly if the right of first refusal in favor of the Company’s currentconvertible debt investors has not been exercised.

Nowthat the funds in escrow have been released to the Company due to shareholderapproval of the Share Increase Amendment, the agreements with Barron state thatif the Company’s EBITDA for the audited fiscal year ended June 30, 2006,as calculated based upon the audited financial statements filed with theCompany’s Form 10-KSB filed with the Securities and Exchange Commission, isless than $1,150,000, then the Company must issue to Barron such number ofadditional shares of preferred stock equal to 2,000,000 multiplied by thepercentage by which EBITDA is less than $1,150,000, expressed as a positivenumber; provided that in no event will the number of additional shares ofpreferred stock issued due to this EBITDA adjustment exceed 14% of the numberof shares of Preferred Stock originally issued to Barron, or 280,000 shares.For example if EBITDA is $920,000 (20% decline) then the Company would issue tothe Investor an additional 14% (i.e., 280,000) shares of preferred stock;provided that at the time Barron continues to hold all 2,000,000 shares ofpreferred stock originally issue on the Closing.  EBITDA is defined in the Preferred StockPurchase Agreement as net income of the Company, before interest, taxes,depreciation, amortization and one time charges, including, but not limited to,loss on the extinguishment of debt. EBITDA for the fiscal year ended June 30, 2006 was $443,591,therefore we must issue 280,000 shares of preferred stock within 5business days after this annual report is filed with the SEC.

TheCompany agreed that a majority of the members of the board of directors, and amajority of the compensation and audit committees, would be qualifiedindependent directors, as defined by the NASD, within 90 days afterDecember 28, 2005. As of March 30, 2006, these requirements have beenfulfilled.

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Theforegoing is a summary of the terms of the Barron Preferred Stock PurchaseAgreement, the Barron Common Stock Purchase Warrants, the Barron RegistrationRights Agreement, the Barron Escrow Agreement, and the Barron LockupAgreements. Such summary does not purport to be complete and is qualified inits entirety by reference to the full text of each such agreement, copies ofwhich are attached hereto and incorporated herein by reference.

Thesecond financing, also completed on December 28, 2005, was a privateplacement financing with certain institutional investors that had previouslyinvested in the Company, including Truk International Fund, LP, TrukOpportunity Fund, LLC and CAMOFI Master LDC (f/k/a DCOFI Master LDC),representing net proceeds to the Company of $1,363,635. This financing was madepursuant to the exercise of an additional investment right by suchinstitutional investors that was granted to them pursuant to a financing onsubstantially similar terms completed on May 19, 2005.

Thisprivate placement included $1,500,000 in aggregate principal amount of SecuredConvertible Term Notes due 2008. Warrants to acquire approximately 3,800,000shares of the Company’s common stock, at $0.23 per share, were also issued tothe investors (the AIR Warrants). The estimated fair value of the warrants uponissuance was calculated as $1,647,382 using the Black-Scholes option-pricingmodel with the same assumptions as noted in the Barron financing warrantsabove. Since the calculated value of the warrants exceeded the $1,500,000convertible debt, the entire amount was attributed to discount on the notespayable and will be accreted over the 36-month period of the debt.

Theinterest rate on the Secured Convertible Term Notes is the greater of(i) prime rate plus 3% or (ii) 12%, except for the portion of thenote proceeds that is held in the restricted cash account, which amount accruesinterest at the prime rate. However, (i) if the Company has registered theshares of common stock underlying the Secured Convertible Term Notes and theAIR Warrants, and that registration is declared effective, and (ii) themarket price of the common stock for the five consecutive trading days precedingthe last business day of each month exceeds the conversion price (as adjusted)by 25%, then the interest rate for the next calendar month is reduced by 25basis points for each incremental 25% increase in the market price above thefixed conversion price.  Since December2005, the interest rate has been reduced 13 times due to increases in themarket price of our common stock, and stood at****11.75%as of June 30, 2006, and 11.75% as of September 1, 2006.

Amortizingpayments of the principal amount began on June 1, 2006 and such paymentsare due on the first day of each month thereafter until the maturity date inDecember 2008, at which time any outstanding principal shall be due andpayable. Interest payments began January 1, 2006, and such interest paymentsare due on the first day of each subsequent month until the principal amount ispaid in full.

TheSecured Convertible Term Notes may be prepaid, but any prepayment must be 125%of the portion of the principal amount to be prepaid, together with accrued butunpaid interest thereon and any other sums due. The holders of the SecuredConvertible Term Notes may accelerate all sums of principal, interest and otherfees then remaining unpaid upon the occurrence of an event of default (asdefined in the Secured Convertible Term Notes) beyond any applicable graceperiod. In the event of such acceleration, the amount due and owing the holdershall be 125% of the outstanding principal amount (plus accrued and unpaidinterest and fees, if any). As part of the financing terms, a blanket lienfiled in connection with the May 19, 2005 financing covering all of theCompany’s assets extends to this financing.

Thenumber of shares of common stock to be issued upon conversion of a SecuredConvertible Term Note is determined by dividing that portion of the principalamount, interest and fees to be converted by the then applicable conversionprice, which is initially set at $0.30. The conversion price may be adjusted toaccount for certain events, such as stock splits, combinations, dividends andshare issuances below the then current conversion price.

Theconversion right as contained in the Secured Convertible Term Notes providethat a holder will not convert an amount of a Note that would be convertibleinto shares of common stock to the extent that the number of shares held by theholder, when added to the number of shares of common stock beneficially ownedby such holder or issuable if the holder exercised one or more of its AIRWarrants immediately prior to conversion, would exceed 4.99% of the Company’sissued and outstanding common stock.

TheCompany also issued AIR Warrants to acquire approximately 3,800,000 shares ofthe Company’s common stock. The AIR Warrants are exercisable for seven yearsfrom the date of issuance at an exercise price of $0.23 per share. 

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The exercise price isalso subject to adjustment upon the occurrence of certain specified events,including issuance of additional shares of common stock or subdivision orcombining of shares of common stock.

Thetransaction also included a Registration Rights Agreement in which the Companyagreed to file a registration statement on Form SB-2, covering the shares ofcommon stock issuable upon the exercise of the AIR Warrants and the conversionof the Secured Convertible Term Notes. The Form SB-2 was declared effective onApril 21, 2006.

Weevaluated the embedded conversion features in both the Series A PreferredStock and the Secured Convertible Term Notes and concluded that the featuredoes not require classification as a derivative instrument because the featureswould be classified in equity if they were freestanding instruments inaccordance with EITF 00-19 *Accounting for DerivativeFinancial Instruments Indexed to, and Potentially Settled In, a Company’s Own Stock*,and, therefore, meet the scope exception found in SFAS 133, *Accounting for Derivative Instruments and Hedging Activities*.  We also evaluated the warrants and concludedthat the warrants also meet the scope exception found in SFAS 133 and,therefore, are appropriately classified in equity. Finally, we evaluated thefreestanding registration rights agreements and concluded that they do meet thedefinition of a derivative instrument under SFAS 133.  The fair value of these derivativeliabilities are immaterial based on a probability-weighted, discounted cashflow evaluation of its terms.  In Issue05-4, *The Effect of a Liquidated Damages Clause on aFreestanding Financial Instrument Subject to Issue No. 00-19*, theEITF has been deliberating the appropriate accounting treatment when aregistration rights agreement exists, but has not yet reached a consensus.  Once a consensus is reached by the EITF, itis possible that the transition based on that consensus may have a materialeffect on our financial statements.

***Our Business***

**Introduction**

Ourbusiness includes the research, development, manufacture, and marketing of invitro diagnostic products for use in disease detection and prevention. We sell51 diagnostic products on a worldwide basis to hospitals, clinical testinglaboratories, universities, biotechnology and pharmaceutical companies andresearch institutions. We have developed and we manufacture most of ourproducts at our Colorado facility, and we purchase what we refer to as OMProducts from other healthcare manufacturers for resale by us.  All of these products are used in clinicallaboratories for the diagnosis and/or monitoring of three important areas ofhealth care:

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

Most of ourproducts are based on our patented and proprietary application of Enzyme LinkedImmunoSorbent Assay, or ELISA, technology, a clinical testing methodologycommonly used worldwide. Most of our current products are based on thisplatform technology in a delivery format convenient for clinical testinglaboratories. The delivery format, which is referred to as “Microplate,” allowsthe testing of up to 96 samples per plate, and is one of the most commonly usedformats, employing conventional testing equipment found in virtually allclinical laboratories. The availability and broad acceptance of ELISAMicroplate products reduces entry barriers worldwide for our new products thatemploy this technology and delivery format. Our products are sold as “test kits”that include all of the materials required to perform the test, except forroutine laboratory chemicals and instrumentation. A test using ELISA technologyinvolves a series of reagent additions into the Microplate, triggering acomplex immunological reaction in which a resulting color occurs. The

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amount of colordeveloped in the final step of the test is directly proportional to the amountof the specific marker being tested for in the patient or unknown sample. Theamount of color is measured and the results calculated using routine laboratoryinstrumentation.  Our technologyspecifies a process by which biological materials are attached to the fixedsurface of a diagnostic test platform. Products developed using this uniqueattachment method typically demonstrate a more uniform and stable molecularconfiguration, providing a longer average shelf life, increased accuracyand  superior specificity than theproducts of our competitors.

Some of the OMproducts which we obtain from other manufacturers and sell through ourdistribution  network utilizetechnologies other than our patented and proprietary ELISA technology.

Our diagnostictests are intended to aid in the identification of the causes of illness anddisease, enabling a physician to select appropriate patient therapy.

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

Since 1990, oursales force and distribution partners have sold over 12 million tests worldwideunder the REAADS and Corgenix labels, as well as products sold under othermanufacturers’ labels, referred to as OEM products. An integral part of ourstrategy is to work with corporate partners to develop market opportunities andaccess important resources. We believe that our relationships with current andpotential partners will enable us to enhance our menu of diagnostic productsand accelerate our ability to penetrate the worldwide markets for new products.

We currently usethe REAADS and Corgenix trademarks and trade names in the sale of the productswhich we manufacture. These products constitute the majority of our productsales.

**IndustryOverview**

In vitrodiagnostic, or IVD, testing is the process of analyzing the components of awide variety of body fluids outside of the body to identify the presence ofmarkers for diseases or other human health conditions. The worldwide humanhealth IVD market consists of reference laboratory and hospital laboratory testing,testing in physician offices and the emerging over-the-counter market, in whichtesting is done at home by the consumer.

Traditionally,diagnostic testing has been performed in large, high-volume commercial orhospital-based laboratories using instruments operated by skilled technicians.Our products in a Microplate format are designed for such instrumentation andare marketed to these types of laboratories. The instrumentation and supportive equipment required to use our ELISAtests is relatively simple, and typically is used by a laboratory for manydifferent products.

The IVD industryhas undergone major consolidation over the last few years. As a result, theindustry is characterized by a small number of large companies or divisions oflarge companies that manufacture and sell numerous diagnostic productsincorporating a variety of technologies. Even given the industry consolidationmentioned above, there continues to be many small diagnostic companies, whichgenerally have limited resources to commercialize new products. As a result oftechnological fragmentation and customer support requirements, we believe thatthere may be a substantial competitive advantage for companies with unique anddifferentiated technologies that can be used to generate a broad menu ofdiagnostic products and that have developed successful customer supportsystems.

**Strategy**

Our primaryobjective is to apply our proprietary ELISA technology to the development andcommercialization of products for use in a variety of markets. Our strategiesfor achieving this objective include the following:

·                  *Apply our ELISA Technology to AdditionalDiagnostic Markets.*We havefocused our resources on the development of highly accurate tests in theMicroplate format for sale to clinical testing laboratories. We believe we canexpand our market focus with the addition of new tests that are complementaryto the current product line. In fiscal 2006 we completed or made significantprogress in the product development programs of several diagnostic products:

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·                  arecently patented ELISA assay to measure analytes in the urine to assessaspirin effectiveness useful in the prevention of cardiac disease

·                  oneELISA assay to measure Oxidized LDL, combined with B2GP1, which we havetrademarked  “AtherOx”, and two ELISAassays to measure antibodies against AtherOx; all three productsare used toassess risk of developing arterial thrombosis and atherosclerosis.

·                  *Leverage Sales and Marketing Resources.*Wemaintain a small marketing and sales organization, which is experienced inselling diagnostic tests into the laboratory market. We plan to expand thissales organization, adding distribution channels as opportunities arise. Wealso plan to pursue the expansion of our product menu with more high value, qualityproducts through internal development, acquisition or licensing ofcomplementary products and technologies.

·                  Infiscal 2006 we added additional sales and marketing management in our U.S. andEuropean organization.

·                  *Continue to Develop Strategic Alliances toLeverage Company Resources.* We havedeveloped, and will continue to pursue, strategic alliances to accesscomplementary resources (such as proprietary markers, funding, marketingexpertise and research and development assistance), to leverage our technology,expand our product menu and maximize the use of our sales force.

·                  Infiscal 2006 we made significant advances on several existing partnershipprograms, and have identified several new opportunities for fiscal 2007.

·                  *Pursue Synergistic Product and/or TechnologyAcquisitions.*We intend toproactively evaluate strategic acquisitions of companies, technologies andproduct lines where we identify a strategic opportunity to expand our corebusiness while increasing revenues and earnings from these new technologies.Any acquisition of  such synergisticproducts and/or technologies will, of necessity, depend on the availability tothe Company of adequate financial resources to do so.

·                  Infiscal 2006 we identified several acquisition opportunities that we intend toassess and, if appropriate, actively pursue, in fiscal 2007.

·                  *Expand into Additional Market Segments forExisting Products.* We intendto investigate additional market opportunities for both clinical and researchapplications of our existing products.

·                  Severalof our products are already being sold into new market areas, and the currentstrategic programs have all been selected due to their potential opportunitiesto provide us access to more significant markets.

# **Productsand Markets**

We currently sellELISA tests in major markets worldwide. To date, our sales force anddistribution partners have sold over 12 million tests since we first receivedproduct marketing clearance from the United States Food and Drug Administration(the “FDA”) for the first anti-cardiolipin antibody  test in 1990. Many peer reviewed medicalpublications, abstracts and symposia have been presented on the favorabletechnical differentiation of our tests over competitive products.

To extend theproduct offering for current product lines, and to complement ourpremium-priced, existing assays, we plan to add products from strategicpartners. Our current product menu, commercialized under the trademarks “REAADS”and “Corgenix,” includes the following:

*Autoimmune Disease Products*

 Our ELISAAutoimmune Disease Product line consists of twenty-one products, includingtests for antinuclear antibodies (ANA) screening, dsDNA, Sm, SM/RNP, SSA,SSB, Jo-1, Scl-70, Histones, Centromere, Mitochondria, MPO, 

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PR3,Thyroglobulin, LKM-1, anti Ribosomal P, BP-180, DSG-1, DSG-3, anti-polymerantibodies and thyroid peroxidase.  Inthe fiscal year ended June 30, 2006, these products represented approximately2.1% of our total product sales.

We manufacture twoof these products; the remainder are manufactured for us by other companies andsold by us through our distribution network. The products are used for thediagnosis and monitoring of autoimmune diseases including RA, SLE, MixedConnective Tissue Disease, Sjogren’s Syndrome, Dermatopolymyositis andScleroderma.

These autoimmunedisease products are formatted in the ELISA Microplate format, and aredifferentiated  from the competition bytheir user convenience. Historically, diagnostic tests utilized antiquatedtechnologies that presented significant limitations for the clinical laboratoryenvironment, including greater labor requirements and the need for a subjectiveinterpretation of the results. Our ELISA autoimmune tests overcome thesetechnology shortfalls, permitting a clinical laboratory to automate its tests,lowering the laboratory’s labor costs as well as providing objectivity to testresult interpretation.

*VascularDisease; Antiphospholipid Antibody Testing Products*

We manufacture andmarket eleven products for antiphospholipid antibody testing, which in thefiscal year ended June 30, 2006 represented approximately 47.5% of our totalproduct sales. These include: aCL IgG, aCL IgA, aCL IgM;anti-phosphatidylserine (“aPS”) IgG, aPS IgA, aPS IgM; anti-ß2-Glycoprotein I (“aß2GPI”)IgG, aß2GPI IgA, and aß2GPI IgM; and anti-Prothrombin (“aPT”) IgG and IgM.

ELISA technologyis typically used to measure the antibodies directed against membrane anionicphospholipids (i.e., negatively charged molecules such as cardiolipin andphosphatidylserine) or their associated plasma proteins, predominantly beta-2glycoprotein 1). Antiphospholipid antibodies are associated with the presenceof both venous and arterial thrombosis (clotting), thrombocytopenia (lowplatelet count that can result in bleeding), and recurrent miscarriage.  These autoantibodies are frequently found inpatients with systemic lupus erythematosis (SLE), Lupus and other autoimmunediseases, as well as in some individuals with no apparent previous underlyingdisease.

These antibodies are also found in patients withantiphospholipid syndrome, an important medical condition with serious clinicalmanifestations such as chronic and recurrent venous (deep vein) thrombosis, aswell as arterial thromboembolic disease including heart attacks, strokes andpulmonary embolism. Thrombocytopenia has been attributed to the temporaryremoval of platelets from circulation during a thrombotic episode (clotformation).

*VascularDisease: Bleeding/Clotting Risk Factors*

Wemarket twenty tests for bleeding and clotting risk factors which in the fiscalyear ended June 30, 2006 represented approximately 26.2% of our total productsales. We manufacture five products, and fifteen others are manufactured for usby other companies. Specialized tests include: Protein C Antigen ELISA, ProteinS Antigen ELISA, Monoclonal Free Protein S ELISA, von Willebrand Factor AntigenELISA, von Willebrand Factor Activity Test; abp Ristocetin, PIFA (HIT/PF4 rapidassay) and Collagen Binding Assay. Corgenix UK also distributes twelve OM productsfor routine coagulation testing.

These products are useful in thediagnosis of certain clotting and bleeding disorders including von Willebrand’sDisease (Hemophilia B).

Hemostasis (thenormal stable condition in which there is neither excessive bleeding norexcessive clotting) is maintained in the body by the complex interaction of theendothelial cells of blood vessels, coagulation cells such as platelets,coagulation factors, lipids (cholesterol) and antibodies (autoantibodies). Allplay important roles in maintaining this hemostasis. In clinical situations inwhich an individual demonstrates excessive clotting or bleeding, a group oflaboratory tests is typically performed to assess the source of the disorderusing the products that we market.

*LiverDisease Products*

We manufacture atest to quantitate hyaluronic acid (“Hyaluronic Acid” or “HA”) in a Microplateformat which in the fiscal year ended June30, 2006 represented approximately 13.4% of our total product sales..The product was distributed 

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through the Chugaidistribution network in Japan from 1996 to 2002, and has been distributedthrough Corgenix UK in the United Kingdom since 1998. On June 30, 2001, wesigned a license agreement with Chugai (now known as Fujirebio) whereby we haveco-exclusive rights to manufacture and market the HA product worldwide exceptfor Japan. On December 12, 2005, the HALicense Agreement was amended and extended until the expiration of all of thepatents.  See “— Chugai(Fujirebio) Strategic Relationship.”

Hyaluronic Acid isa component of the matrix of connective tissues, found in synovial fluid of thejoints where it acts as a lubricant and for water retention. It is produced inthe synovial membrane and leaks into the circulation via the lymphatic systemwhere it is quickly removed by specific receptors located in the liver.Increased serum levels of  HA have beendescribed in patients with rheumatoid arthritis due to increased productionfrom synovial inflammation, and in patients with liver disease, particularlyHepatitis C, due to interference with the removal mechanism. Patients withcirrhosis will have the highest serum HA levels, which correlate with thedegree of liver involvement.

**Technology**

Our ELISAapplication technology was developed to provide the clinical laboratory with amore sensitive, specific, and objective technology to measure clinicallyrelevant antibodies in patient serum samples. High levels of these antibodiesare frequently found in individuals suffering from various immunological diseases,and their serologic determination is useful not only for specific diagnosis butalso for assessing disease activity and/or response to treatment. To accomplishthese objectives, our current product line applies the ELISA technology in a96-Microplate format as a delivery system. ELISA provides a solid surface towhich purified antigens are attached, allowing their interaction with specificautoantibodies during incubation. This antigen-antibody interaction is thenobjectively measured by reading the intensity of color generated by anenzyme-conjugated secondary antibody and a chemical substrate added to thesystem.

Our technologyovercomes two basic problems seen in many other ELISA systems. First, thematerial coated onto the plate can be consistently coated without causingsignificant alteration of the molecular structure (which ensures maintenance ofimmunologic reactivity), and the stability of these coated antigens on thesurface can be maintained (which provides a product shelf life acceptable for commercialpurposes).  Our proprietary immunoassaytechnology is useful in the manufacture of ELISA tests for the detection ofmany analytes (target molecules) for the diagnosis and management ofimmunological diseases.

Our technologyresults in products generally demonstrating performance characteristics thatexceed those of competitive testing procedures. Many testing laboratoriesworldwide subscribe to external quality control systems or programs conductedby independent, third-party organizations. These programs typically involve thelaboratory receiving unknown test samples on a routine basis, performingcertain diagnostic tests on the samples, and providing results of their testingto the third party. Reports are then provided by the third party that tells thetesting laboratory how it compares to other testing laboratories in theprogram. Several of our products are included in laboratory surveysperiodically conducted by unaffiliated entities, and our products routinelydemonstrate good performance and/or reproducibility when compared to othermanufacturers included in such survey. Examples of such surveys include theCollege of America Pathologists (CAP) survey and the UKNEQAS (UK NationalExternal Quality Assessment Service).

Our productstypically require less hands-on time by laboratory personnel as compared tomost other ELISA assays and provide an objective, quantitative orsemi-quantitative interpretation to improve and standardize the clinicalsignificance of results. We believe that our proprietary technology willcontinue to be the mainstay for our future diagnostic products. Most of theproducts in development will incorporate our basic technology.

Additionaltechnologies may be required for some of the newly identified tests. We believethat, in addition to internal expertise, most technology and delivery systemrequirements would be available through joint venture or licensing arrangementsor through acquisition.**.**

**DeliverySystems**

Most of ourcurrent products employ the Microplate delivery system using ELISA technology.This format is universally accepted in clinical laboratory testing and requiresroutine equipment currently available in most clinical labs.

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**Sales andMarketing**

We primarilymarket and sell our diagnostic products to the clinical laboratory market, bothhospital based and free standing laboratories. We utilize a diversedistribution program for our products. Our labeled products are sold directlyto testing laboratories in the United States through sales representatives(both employees and contract sales representatives).

Internationally,our labeled products are sold through established diagnostic companies inArgentina, Australia, Austria, Belgium, Brazil, Canada, Chile, Denmark, Egypt,Finland, France, Germany, Greece, Guatemala, Hong Kong, Hungary, India,Ireland, Israel, Italy, Japan, Korea, Kuwait, Lebanon, Malaysia, Mexico, TheNetherlands,  Norway, Paraguay,  Peru, Portugal,  Saudi Arabia, Singapore, South Africa, SouthKorea, Spain,  Sweden, Switzerland,  Thailand, Turkey, the United Kingdom, andUruguay.  We are continually seekingopportunities which will provide access to additional markets worldwide. Ouragreements with international distribution partners are on terms that are generallyterminable by us if the distributor fails to achieve certain sales targets.Either the Company or the respective distributor, given the occurrence ofcertain events, has the right, by giving written notice to the other party, toterminate the distribution agreement. We have also established private labelproduct agreements with several United States and European companies. We haveinternational distribution headquarters in the United Kingdom and will adddirect commercialization and distribution in selected additional countries asappropriate.  For the fiscal year endedJune 30, 2006, international sales represented approximately 25.4% of theCompany’s total sales.

We have an active marketing and promotionprogram for our diagnostic testing products. We publish technical and marketing promotional materials, which wedistribute to current and potential customers. We attend major industry trade shows and conferences, and our scientificstaff actively publishes articles and technical abstracts in peer reviewjournals.

**Manufacturing**

 The manufacturingprocess for our products utilizes a semi-automated production line for themanufacturing, assembly and packaging of our ELISA Microplate products.  Our current production capacity is 20,000tests per day with a single eight-hour shift. Since 1990, we have successfully produced over 12 million tests in ourColorado facility, and we expect that current manufacturing capability will besufficient to meet expected customer demand for the foreseeable future.

 Our manufacturingoperations are fully integrated and consist of raw material purification,reagent and Microplate processing, filling, labeling, packaging anddistribution.  We have considerableexperience in manufacturing our products using our proprietary technology.  We expect increases in the demand for ourproducts and have prepared plans to increase our manufacturing capability tomeet that increased demand.  We alsomaintain an ongoing investigation of scale-up opportunities for manufacturingto meet future requirements.  Weanticipate that production costs will decline as more products are added to theproduct menu in the future, permitting us to achieve greater economies of scaleas higher volumes are attained. We have registered our facility with the FDA..

### **Quality System Regulations Requirements ForOur Products**

 InApril 1999, we received ISO 9001: 1994 certification from TUV ProductService GmbH, a world leader in medical device testing and certification.  ISO 9001 represents the internationalstandard for quality management systems developed by the InternationalOrganization for Standardization, or ISO, to facilitate global commerce.  To ensure continued compliance with therigorous standards of ISO 9001, companies must undergo regularly scheduled assessmentsand re-certification every year.  The ISO9001 initiative is an important component in its commitment to maintainexcellence. Corgenix received re-certification in November 1999 and 2000,and in July 2002 received EN ISO 9001:1996, and EN ISO 13485:2000certification through TUV Rhineland of North America. We have been re-certifiedannually since 2002. In fiscal 2006 we certified to ISO 13485:2003.

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### **Corgenix’s Manufacturing Process Starts WithThe Qualification Of Raw Materials**

Our manufacturing process starts with the qualificationof raw materials.  The microplates arethen coated and bulk solutions prepared. The components and the microplates are checked for ability to meetpre-established specifications by our quality control department.  If required, adjustments in the bulk solutionsare made to provide optimal performance and lot-to-lot consistency.  The bulk solutions are then dispensed andpackaged into planned component configurations. The final packaging step in the manufacturing process includes kitassembly, where all materials are packaged into finished product.  The finished kit undergoes one finalperformance test by our Quality Control department.  Before product release for sale, our Quality Assurancedepartment must verify that all quality control testing and manufacturingprocesses have been completed, documented and have met all performancespecifications.

The majority ofraw materials and purchased components used to manufacture our products arereadily available.  We have establishedgood working relationships with primary vendors, particularly those that supplyunique or critical components for our products. The components of our productsinclude chemical, biological and packaging supplies that are generallyavailable from several suppliers, except certain antibodies and other criticalcomponents, which we purchase from single suppliers.  We mitigate the risk of a loss of supply bymaintaining a sufficient supply of such antibodies to ensure an uninterruptedsupply for at least three months. We have also qualified second vendors for allcritical raw materials and believe that we can substitute a new supplier withrespect to any of these components in a timely manner. If, for some reason, welose our main supplier for a given material, there can be no assurances that wewill be able to substitute a new supplier in a timely manner and failure to doso could impair the manufacturing of certain of our products and thus have amaterial adverse effect on our business, financial condition and results ofoperations.

Approximately 25.4% of our product revenues are derivedfrom sales outside of the United States. International regulatory bodies oftenestablish varying regulations governing product standards, packaging andlabeling requirements, import restrictions, tariff regulations, duties and taxrequirements.  To demonstrate ourcommitment to quality in the international marketplace, we obtained ISOcertification and have “CE” marked all of our products as required by theEuropean In Vitro Diagnostic Directive 98/79/EC.

Since 1990, we have entered into several contractmanufacturing agreements with other companies whereby we manufacture specificproducts for the partner company.  Weexpect to continue investigating and evaluating opportunities for additionalagreements.

**Chugai(Fujirebio) Strategic Relationship**

The relationship between Corgenix and Chugai DiagnosticsScience Co., Ltd. was established in June 1993.  In September 2002, Chugai was merged intoFujirebio, Inc.,  a large JapaneseCompany based in Tokyo, Japan. Currently, except for the ongoing HA LicenseAgreement described below, there are no sales to or operations related toFujirebio.

HA License Agreement. On June 30, 2001, Corgenix and Chugai executed a license agreement,which we refer to as the HA License Agreement, with Chugai Diagnostic Science,Co., Ltd., a Tokyo based pharmaceutical company that subsequently merged intoFujirebio, Inc., a large Japanese diagnostic company based in Tokyo and aleader in the field of immunoserology. Corgenix was granted co-exclusiveworldwide rights to manufacture and market the HA product (except forJapan).  The HA License Agreement wasinitially for a five-year period with certain extension rights.  On December 12, 2005, the HA LicenseAgreement was amended and extended until the expiration of all of the patents.The HA License Agreement establishes certain performance requirements forCorgenix, and provides early cancellation of exclusivity if Corgenix does notmeet those performance goals.  The HALicense Agreement is the only international distribution right currentlygranted by Chugai to Corgenix, and was formally assumed by Fujirebio.

**OtherStrategic Relationships**

An integral part of our strategy has been and willcontinue to be entering into strategic alliances as a means of accessing uniquetechnologies or resources or developing specific markets.  The primary aspects of our corporatepartnering strategy with regards to strategic affiliations include:

·              Companies that areinterested in co-developing diagnostic tests that use our technology;

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·                  Companies with complementary technologies;

·                  Companies with complementary products and novel disease markers; and/or

·                  Companies with access to distribution channels that supplement ourexisting distribution channels.

In furtherance of the foregoing strategies, we maintaina revenue-producing strategic relationship with Medical  & BiologicalLaboratories Co., Ltd., or MBL.  MBL is amedical diagnostic company located in Nagoya, Japan.  In March 2002 we signed a distributionagreement with RhiGene, Inc., a Des Plaines, Illinois based company which was awholly owned subsidiary of MBL, which granted us exclusive rights to distributeRhiGene’s complete diagnostic line of autoimmune testing products in North andSouth America.  The arrangement alsoprovided us with rights to certain other international markets.  In July 2002, MBL made a $500,000 strategicinvestment in the common stock of our Company. As part of the investment agreement, MBL has warrants to purchaseadditional shares of our common stock for a total potential investment of$1,000,000.

On March 31, 2005 our distribution agreement withRhiGene expired, and the Company signed a new distribution and OEM SupplyAgreement with MBL International, Inc. (“MBLI”), a wholly owned subsidiary ofMBL, which grants the Company non-exclusive rights to distribute MBL’s completediagnostic line of autoimmune testing products in the United States andexclusive distribution rights to the OEM Label products worldwide excluding theUnited States, Japan, Korea and Taiwan. In addition, on August 1, 2005 the Company and MBL executed an Amendmentto the Common Stock Purchase Agreement and Common Stock Purchase Warrantwherein one-half, or 440,141, of the original redeemable shares were exchangedfor a three-year promissory note payable with interest at prime  plus two percent (7.75% as of June 30, 2006)with payments having commenced in September, 2005.  The shares exchanged for the promissory notewill be returned to the Company quarterly on a pro rata basis as payments aremade on the promissory note. As of June 30, 2006, a total of****52,816 shares have been returned to the Company. Theremaining 440,141 shares must be redeemed by the Company at $0.568 per share onAugust 1, 2008 for any shares still owned at that time by MBL but only to theextent that MBL has not realized at least $250,000 in gross proceeds upon thesales of its redeemable shares in the open market for the time period August 1,2005 through August 30, 2008.  Finally,the warrants originally issued to MBL to purchase 880,282 shares have beenextended to August 31, 2008 and re-priced from $0.568 per share to $0.40 pershare.

We have established OEM agreements with severalinternational diagnostic companies, which in fiscal 2006, representedapproximately 15.7% of our total sales.  Under some of these agreements, we manufacture selected products in thesame configuration as the Company’s own products, under the partner’s label forworldwide distribution.  In other OEMagreements, the Company manufactures diagnostic kits according to the partner’sunique specifications under the partner’s label**.**

**Researchand Development**

We direct ourresearch and development efforts towards development of new products on ourproprietary platform ELISA technology in the Microplate format, as well asapplying our technology to automated laboratory testing systems.  In that regard, we have organized ourresearch and development effort into three major areas: (i) new productdevelopment, (ii) technology assessment, and (iii) technical and productsupport.

Our technicalstaff evaluates the performance of reagents (prepared internally or purchasedcommercially), creates working prototypes of potential products, performsinternal studies, participates in clinical trials, manufactures pilot lots ofnew products, establishes validated methods that can be manufacturedconsistently, creates documentation required for manufacturing and testing ofnew products, and collaborates with our quality assurance department to satisfyregulatory requirements and support regulatory clearance. They are responsiblefor assessing the performance of new technologies along with determining thetechnical feasibility of market introduction, and investigating thepatent/license issues associated with new technologies.

Our technicalstaff is responsible for supporting current products on the market throughscientific investigation, and is responsible for design transfer tomanufacturing of all new products developed. They assess the performance and validate all externally-sourced productsin order to confirm that these products meet our performance and qualitystandards.

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The technicalstaff includes individuals skilled in immunology, assay development, proteinbiochemistry, biochemistry and basic sciences. We maintain facilities to support our development efforts at theBroomfield, Colorado headquarters. Group leaders are also skilled in planningand project management under FDA-mandated design control.  See “— Regulation.”

During fiscal 2006and 2005, we spent $574,000 and $613,000, respectively, for research anddevelopment. The decrease was primarily attributable to decreased clinicalstudy expense, and  purchases related toadditional research and development projects partially offset by increases inconsulting and legal fees.  We expectresearch and development spending to increase during 2007. Of this amount,approximately 84% of the expenditures for research and development expenseswere internal expenditures exclusive of outside consultants, legal, etc.****In fiscal 2007, we expect expenditures for research anddevelopment to increase more than 15% over fiscal 2006.**** Research and development contract revenue(specific product development programs funded by a strategic partner) amountedto $20,334 and $75,321 for the 2006 and 2005 fiscal years ended June 30.

**Productsand Technology in Development**

We intend toexpand our product menu through internal development, development incollaboration with strategic partners and acquisition and/or licensing of newproducts and technologies.  We arecurrently working with partners to develop additional tests to supplement theexisting product lines. The following summarizes our current product andtechnology development programs:

*VascularDisease Testing Products*

We are one of themarket leaders in development of innovative tests in the antiphospholipidmarket, and expect to continue developing products in this area to ensure ourongoing strong market position.  For thepast two years we have been developing products in the area of Oxidized LDL, atechnology that assesses arterial thrombosis and atherosclerosis. Ourtechnology, which we have trademarked “AtherOx,” has the potential tosignificantly alter the standard of lipoprotein testing and cardiovascular riskassessment. Product development for three products has been completed, and theproducts launched into the international markets. We filed the initialapplication with the FDA in March of 2006. See “— Regulation.”

*Fibromyalgia*

We are in thefinal development and regulatory submission stages for a unique assay fortesting patients with fibromyalgia. The assay detects antibodies to polymers,which are present in a high percentage of patients suffering from fibromyalgia,also referred to as “chronic pain syndrome.” We expect, along with AutoimmuneTechnologies, LLC, our strategic partner, will complete clinical studies infiscal 2007 and also file a pre-market approval application with the FDA infiscal 2007.

*Aspirin Resistance*

We haveestablished a strategic collaboration with Creative Clinical Concepts, Inc. (“CCC”)and McMaster University in the development of an assay to assess aspirinresistance which may prove to be very useful in the prevention of cardiacdisease. We filed applications with the FDA for this product, trademarked “AspirinWorks”in July of 2006.

*LassaVirus Program*

We haveestablished  a strategic collaborationwith Autoimmune, Biofactura, Inc. (“Biofactura”), the U.S. Army MedicalResearch Institute of Infectious Diseases (“USAMRIID”) and Tulane University (“Tulane”)to develop a group of products to detect several old world and new worldviruses, identified as potential bio-terrorism agents. The work is being doneunder a grant from the National Institute of Allergy and Infectious Diseases (“NIAID”)over a three-year period which began in September of 2005.

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**Competition**

Competition in thehuman medical diagnostics industry is significant. Our competitors range fromdevelopment stage diagnostics companies to major domestic and internationalpharmaceutical and biotechnology companies. Many of these companies havefinancial, technical, marketing, sales, manufacturing, distribution and otherresources significantly greater than we do. In addition, many of thesecompanies have name recognition, established positions in the market and longstanding relationships with customers and distributors. The diagnosticsindustry continues to experience significant consolidation in which many of thelarge domestic and international healthcare companies have been acquiringmid-sized diagnostics companies, further increasing the concentration ofresources. However, competition in diagnostic medicine remains highlyfragmented, with no company holding a dominant position in autoimmune orvascular diseases. There can be no assurance that new, superior technologieswill not be introduced that could be directly competitive with or superior toour technologies.

Our primarycompetitors include Inova Diagnostics, Inc., DIASORIN, Diagnostica Stago,American Bioproducts, Helena Laboratories Corporation (an existing licensee ofCorgenix technology), Hemagen Diagnostics, The Binding Site and IVAXDiagnostics (Diamedix). We compete against these companies and others on thebasis of product performance, customer service, and to a lesser extent, price.

### **Patents, Trade Secrets and Trademarks**

*TheREAADS Technology Patent*. We have built a strong patent andintellectual property position around our proprietary application of ELISAtechnology, which is used in a majority of our existing products. We hold oneUnited States patent (Lopez, et al. “method and diagnostic test kit fordetection of anti-dsdna antibodies”) which covers the critical manufacturingstep in the majority of our existing ELISA products.  This patent expires in 2010.

*TheHyaluronic Acid Technology Patents*. The HA product isprotected by U.S., Japanese and European patents held by Chugai (Fujirebio). Aspart of the agreements with Chugai and assumed by Fujirebio, we have a licenseto use the Chugai patents to manufacture this product for worldwidedistribution, and marketing rights worldwide except Japan. These rights expirein the various countries as the related patents expire. The first patentexpires in February 2008 with the last one expiring in October of 2009. Thepatent in the United States expires in May of 2008. See “— Chugai (Fujirebio)Strategic Relationship.”

*TheAtherOx Technology Patents*. Through a Japanese collaboration,we have exclusive worldwide rights (except Japan) for the clinical testingmarket using the unique AtherOx technology. To date we have one United StatesPatent with respect to the AtherOx technology, and have several US and Europeanpatents pending.

*TheAntipolymer Antibody Patents*. The antipolymer (APA) assaywhich we have developed and are marketing worldwide in collaboration with ourstrategic partner Autoimmune Technologies, LLC, is covered by an extensivegroup of worldwide patents and patents pending owned by Tulane University,which has granted Autoimmune Technologies exclusive worldwide rights.****These rights expire the later of ten years after the firstcommercial sale in each country or the expiration of the respective countrypatent.

*Aspirin  Effectiveness Technology Patents*.Products in development with our strategic partner  Creative Clinical Concepts, Inc., are coveredby a group of worldwide patents pending owned by McMaster University which hasgranted Corgenix and Creative Clinical Concepts exclusive worldwide rights. InJuly 2007, the first of the U.S, patents was issued by the U.S, Patent andTrademark office. The U.S. patent was approved for this technology in August2006.

Patentapplications in the United States are maintained in secrecy until patents areissued. There can be no assurance that our patents, and any patents that may beissued to us in the future, will afford protection against competitors withsimilar technology. In addition, no assurances can be given that the patentsissued 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.If the courts uphold existing or future patents containing broad claims overtechnology used by us, the holders of such patents could require us to obtainlicenses to use such technology.  Infiscal 2006 the Company did not incur any costs to defend our patents.  See “Part II. Item 6.  Management’s Discussion and Analysis —Forward-Looking Statements and Risk Factors — Uncertainty of Protection ofPatents, Trade Secrets and Trademarks.”

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We have registeredour trademark “REAADS” on the principal federal trademark register and with thetrademark registries in many countries of the world.  This trademark is eligible for renewal in2006 and will expire in 2007.  Thetrademark “Corgenix” was approved in September 2000.

Where appropriate,we intend to obtain patent protection for our products and processes.  We also rely on trade secrets and proprietaryknow-how in our manufacturing processes. We require each of our employees, consultants and advisors to execute aconfidentiality agreement upon the commencement of any employment, consultingor advisory relationship with us.  Eachagreement provides that all confidential information developed or made known tothe individual during the course of the relationship will be kept confidentialand not be disclosed to third parties except in specified circumstances.  In the case of employees, the agreementsprovide that all inventions conceived of by an employee shall be the exclusiveproperty of the Company.

The majority ofour product sales, approximately 85% for the fiscal year ended June 30, 2006and 90% in fiscal 2005, were products that utilized our proprietary technologyand marketed under our REAADS trademark.

**Regulation**

The testing,manufacturing and sale of our products are subject to regulation by numerousgovernmental authorities, principally the FDA and foreign regulatory agencies.The FDA regulates the clinical testing, manufacture, labeling, distribution andpromotion of medical devices, which includes diagnostic products. We arelimited in our ability to commence marketing or selling any new diagnosticproducts in the United States until clearance is received from the FDA. Inaddition, various foreign countries in which our products are or may be soldimpose local regulatory requirements. The preparation and filing ofdocumentation for FDA and foreign regulatory review can be a lengthy, expensiveand uncertain process.

In the UnitedStates, medical devices are classified by the FDA into one of three classes(Class I, II or III) on the basis of the controls deemed reasonably necessaryby the FDA to ensure their safety and effectiveness.  Class I devices are subject to generalcontrols such as labeling, pre-market notification and adherence to QualitySystem Regulations, or QSR requirements. Class II devices are subject togeneral and special controls (e.g., performance standards, post-marketsurveillance, patient registries and FDA guidelines). Generally, Class IIIdevices are those that must receive pre-market approval by the FDA to ensuretheir safety and effectiveness such as life-sustaining, life-supporting andimplantable devices or new devices that have been found not to be substantiallyequivalent to legally marketed devices. All of our current products andproducts under development are or are expected to be classified as Class II orClass III devices.

Before a newdevice can be introduced in the market, we must obtain either FDA clearance orapproval, depending on FDA guidelines, through either clearance of a 510(k)pre-market notification or approval of a pre market approval application, whichis a more extensive and costly application when compared to a pre-marketnotification**,**due to the requirements for moreextensive clinical trials, etc. All of our products have been cleared using a510(k) application, and we expect that most future products will also qualifyfor clearance using a 510(k) application (as described in Section 510(k) of theMedical Device Amendments to the F D & C Act of 1938).

Historically wehave been able to obtain 510(k) pre-market clearance in less than 90 days fromsubmission, but may take longer. The FDA may determine that a proposed deviceis not substantially equivalent to a legally marketed device or that additionalinformation is needed before a substantial equivalence determination can bemade.  A “not substantially equivalent”determination, or a request for additional information, could prevent or delaythe market introduction of new products that fall into this category. For anydevices that are cleared through the 510(k) process, modifications orenhancements that could significantly affect safety or effectiveness, orconstitute a major change in the intended use of the device, will require new510(k) submissions. There can be no assurance that we will be able to obtainnecessary regulatory approvals or clearances for our products on a timelybasis, if at all, and delays in receipt of or failure to receive such approvalsor clearances, the loss of previously received approvals or clearances,limitations on intended use imposed as a condition of such approvals orclearances, or failure to comply with existing or future regulatoryrequirements could have a material adverse effect on our business, financialcondition and results of operations.  See“Part II. Item 6.  Management’sDiscussion and Analysis — Forward-Looking Statements and Risk Factors  — Governmental Regulation of DiagnosticProducts.”

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Our customersusing diagnostic tests for clinical purposes in the United States are alsoregulated under the Clinical Laboratory Information Act of 1988, or CLIA. TheCLIA is intended to ensure the quality and reliability of all medical testingin laboratories in the United States by requiring that any health care facilityin which testing is performed meets specified standards in the areas ofpersonnel qualification, administration, participation in proficiency testing,patient test management, quality control, quality assurance and inspections.The regulations have established three levels of regulatory control based ontest complexity: “waived,” “moderately complex” and “highly complex.” Ourcurrent ELISA tests are categorized as “moderately complex” tests for clinicaluse in the United States. Under the CLIA regulations, all laboratoriesperforming high or moderately complex tests are required to obtain either aregistration certificate or certification of accreditation from the Centers forMedicare and Medicaid Services, known as CMS, formerly the United States HealthCare Financing Administration. The application of CLIA regulations to ouroperations and facilities and future administrative interpretations of CLIAcould have an adverse impact on the potential market for our future products byincreasing the cost and regulatory burden on our operations and facilities.

We are subject tonumerous federal, state and local laws relating to such matters as safe workingconditions, manufacturing practices, environmental protection, fire hazardcontrol and disposal of hazardous or potentially hazardous substances.  We may incur significant costs to comply withthese laws and regulations in the future.

**Reimbursement**

Currently ourlargest market segments are hospital laboratories and commercial referencelaboratories in the United States. Payment for testing in these segments islargely based on third-party payor reimbursement. The laboratory that performsthe test will submit an invoice to the patient’s insurance provider or to thepatient if he is not covered by an insurance program. Each diagnostic procedure(and in some instances, specific technologies) is assigned a current proceduralterminology, or CPT, code by the American Medical Association. Each CPT code isthen assigned a reimbursement level by CMS. Third party insurance payorstypically establish a specific fee to be paid for each code submitted. Thirdparty payor reimbursement policies are generally determined with reference tothe reimbursement for CPT codes for Medicare patients, which themselves aredetermined on a national basis by CMS.

**Employees (for Consolidated Entity)**

As of August 21,2006, we employed 49 employees, 47 are full-time, and 2 are part-time. Ofthese, 4 hold advanced scientific or medical degrees. None of Corgenix’semployees are covered by a collective bargaining agreement. We believe that theCompany maintains good relations with our employees.

**Item2.  Description of Property.**

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 is part of Landlord’smulti-tenant real property development known as the Broomfield CorporateCenter.  The Company will use theProperty for its headquarters, laboratory research and development facilitiesand production facilities.

Theterm of the Lease (the “Term”) is seven years and five months commencing on theCommencement Date [July 15, 2006] with tenant options to extend the Term for upto two periods of five years each.  Wehave a one time right of first refusal to lease contiguous premises.

Theinitial base lease rate payable on the 25,600 square foot portion of thepremises is $0.00 per square foot, plus estimated operating expenses of $1.61per square foot.

Thebase lease rate payable on the 25,600 square foot portion of the premisesincreases to $4.00 per square foot on September 1, 2006, plus amortization oftenant improvements of $5.24 per square foot, plus estimated operating expensesof $1.61 per square foot.  The base leaserate on the 25,600 square foot portion of the premises increases to $5.64

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per square foot onSeptember 1, 2007, with fixed annual increases each September 1 thereafterduring the initial Term, plus the amortization of tenant improvements of $5.24per square foot, and estimated operating expenses of $1.61 per square foot.

Theinitial base lease rate payable on the 6,400 square foot portion of thepremises is $0.00 per square foot, plus estimated operating expenses of $1.61per square foot.  The base lease rate onthe 6,400 square foot portion of the premises increases to $3.00 per squarefoot commencing on April 1, 2007, and increases to $3.07 on September 1, 2007,with fixed annual increases each September 1 thereafter during the initialTerm, plus estimated operating expenses of $1.61 per square foot.

Thus,the estimated total base rent on the whole (32,000 sf) of the premises isinitially $1.61 per square foot, then increases to an estimate of $9.00 persquare foot on September 1, 2006, then increases to an estimate of $9.60 persquare foot on April 1, 2007, then increases to an estimate of $10.93 persquare foot on September 1, 2007, with annual increases in the base lease rateeach September 1 thereafter during the initial Term, up to an estimated totalbase rent of $12.84 per square foot during the final year of the initial Term.

Additionally,the base rent on the premises is abated one day for each one day that thecommencement date occurred after May 15, 2006.

Thebase lease rate for an extension period is 100% of the then prevailing marketrental rate (but in no event less than the rent for the last month of the thencurrent Term) and shall thereafter increase annually by 3% for the remainder ofthe applicable extension period.

**Item3.  Legal Proceedings**

None.

**Item4.  Submission of Matters to a Vote ofSecurity-Holders.**

None.

**GLOSSARY**

*antibody*— a protein produced by the body in response to contact with an antigen, andhaving the specific capacity of neutralizing, hence creating immunity to, theantigen.

*anti-cardiolipinantibody (aCL)* — a class of antiphospholipid antibody whichreacts with a negatively-charged phospholipid called cardiolipin or aphospholipid-cofactor complex; frequently found in patients with SLE and otherautoimmune diseases; also reported to be significantly associated with thepresence of both arterial and venous thrombosis, thrombocytopenia, andrecurrent fetal loss.

*antigen*— an enzyme, toxin, or other substance, usually of high molecular weight, towhich the body reacts by producing antibodies.

*anti-phosphatidylserineantibodies (aPS)* — a class of antiphospholipid antibody whichreacts to phosphatidylserine;  similar toaCL; believed to be more specific for thrombosis.

*antiphospholipidantibodies* — a family of autoantibodies with specificityagainst negatively charged phospholipids, that are frequently associated withrecurrent venous or arterial thrombosis, thrombocytopenia, or spontaneous fetalabortion in individuals with SLE or other autoimmune disease.

*antiphospholipidsyndrome* — a clinical condition characterized by venous orarterial thrombosis, thrombocytopenia, or spontaneous fetal abortion, inassociation with elevated levels of antiphospholipid antibodies and/or lupusanticoagulant.

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*assay*— a laboratory test; to examine or subject to analysis.

*autoantibody*— an antibody with specific reactivity against a component substance of thebody in which it is produced; a disease marker.

*autoimmunediseases* — a group of diseases resulting from reaction of theimmune system against self components.

*beta 2glycoprotein I (ß2GPI)* — a serum protein (cofactor) that participates in the binding ofantiphospholipid antibodies.

*coagulation*— the process by which blood clots.

*cofactor*— a serum protein that participates in the binding of antiphospholipidantibodies, for example ß2GPI.

*deliveryformat —*the configuration of the product. Current Corgenixproducts utilize a 96-well microplate system for its delivery format.

*hemostasis*— mechanisms in the body to maintain the normal liquid state of blood; abalance between clotting and bleeding.

*hyaluronicacid (HA)* — a polysaccharide found in synovial fluid, serumand other body fluids and tissues, elevated in certain rheumatological andhepatic (liver) disorders.

*HDLcholesterol* — high density lipoprotein associated withcholesterol.

*immunoassay*— a technique for analyzing and measuring the concentration of disease markersusing antibodies; for example, ELISA.

*immunoglobulin*— a globulin protein that participates in the immune reaction as the antibodyfor a specific antigen.

*immunology*—  the branch of medicine dealing with(a) antigens and antibodies, esp. immunity to disease, and (b) hypersensitivebiological reactions (such as allergies), the rejection of foreign tissues,etc.

*in vitro*— isolated from the living organism and artificially maintained, as in a testtube.

*in vivo*— occurring within the living organism.

*lipids*— a group of organic compounds consisting of the fats and other substances ofsimilar properties.

*platelets*— small cells in the blood which play an integral role in coagulation (bloodclotting).

*platformtechnology* — the basic technology in use for a majority ofthe Company’s products, in essence the “platform” for new products. In the caseof Corgenix, the platform technology is ELISA (enzyme linked immunosorbentassay).

*phospholipids*—  a group of fatty compounds found inanimal and plant cells which are complex triglyceride esters containing longchain fatty acids, phosphoric acid and nitrogenous bases.

*protein C*— normal blood protein that regulates hemostasis; decreased levels lead tothrombosis.

*protein S*— normal blood protein that regulates hemostasis; decreased levels lead tothrombosis.

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*rheumaticdiseases* —  a group ofdiseases of the connective tissue, of uncertain cause and including rheumatoidarthritis (RA), rheumatic fever, etc., usually characterized by inflammation,pain and swelling of the joints and/or muscles.

*serum*—  the clear yellowish fluid whichseparates from a blood clot after coagulation and centrifugation.

*systemiclupus erythematosus (SLE)* — a usually chronic disease ofunknown cause, characterized by red, scaly patches on the skin that tend toproduce scars, frequently affecting connective tissue and involving thekidneys, spleen, etc.

*thrombin*— the enzyme of the blood, formed from prothrombin, that causes clotting byconverting fibrinogen to fibrin.

*thrombocytopenia*— a condition in which there is an abnormally small number of platelets in thecirculating blood.

*thromboembolism*— the obstruction or occlusion of a blood vessel by a thrombus.

*thrombosis*  — coagulation of the blood within a blood vessel of any organ, forming ablood clot.

*tumormarkers* —- serum proteins or molecules found in highconcentrations in patients with selected cancers.

*vascular*— of or pertaining to blood vessels.

*vonWillebrand’s Factor (vWF)* — normal blood protein thatregulates hemostasis; decreased levels lead to abnormal bleeding and increasedlevels may produce thrombosis.

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**PART II**

**Item5.  Market for Common Equity and RelatedStockholder Matters.**

Our common stockis traded on the OTC Bulletin Board ® under the symbol “CONX.” On August 22,2006, the closing price of our common stock on the OTC Bulletin Board ® asreported by the OTC Bulletin Board ® was $0.40.

The followingtable sets forth, for the periods indicated, the high and low bid prices of ourcommon stock as reported on the OTC Bulletin Board ®.  The following quotations reflect inter-dealerprices, without retail mark-up, markdown or commissions, and may not representactual transactions.
|                                 | ** ** | **Stock Price Ranges** | ** ** |
|---------------------------------|------------|----------------------------------|------------|
| **Stock Price Dates** | ** ** | **High**                         | ** ** | **Low** | ** ** |
|                            |       |                             |       |   |   |
| **Fiscal Year 2006**            |       |                             |       |   |   |
| Quarter Ended:                  |       |                             |       |   |   |
| September 30,  2005             |       | $                                | 0.70       |   | $ | 0.32 |   |
| December 31, 2005               |       | $                                | 0.65       |   | $ | 0.36 |   |
| March 31, 2006                  |       | $                                | 0.49       |   | $ | 0.37 |   |
| June 30, 2006                   |       | $                                | 0.46       |   | $ | 0.32 |   |
|                            |       |                             |       |   |   |
| **Fiscal Year 2005**            |       |                             |       |   |   |
| Quarter Ended:                  |       |                             |       |   |   |
| September 30,  2004             |       | $                                | 1.00       |   | $ | 0.40 |   |
| December 31,  2004              |       | $                                | 0.58       |   | $ | 0.36 |   |
| March 31, 2005                  |       | $                                | 0.55       |   | $ | 0.21 |   |
| June 30, 2005                   |       | $                                | 0.34       |   | $ | 0.21 |   |

 

On September 29,2006 there were approximately 180 holders of record of our Common Stock.

To date, we havenot paid any dividends on our common stock, and the Board of Directors of theCompany does not currently intend to declare cash dividends on our commonstock. While the Company’s Series A Preferred Stock is outstanding, dividendsmay not be paid with respect to the common stock.  In addition to any restrictions imposed bythe articles of incorporation with respect to the payment of dividends, anyfuture cash dividends would also depend on future earnings, capitalrequirements and the Company’s financial condition and other factors deemedrelevant by the Board of Directors.

**StockIssuance**

Aspreviously disclosed in our filings with the SEC, and as described in detail inPart I (“Recent Developments”) of this annual report, on December 28, 2005the Company completed a private placement to Barron Partners, L.P., or Barron,a New York based private partnership, consisting of two million shares ofSeries A Convertible Preferred Stock. The shares of Series A ConvertiblePreferred Stock were sold at $1.00 per share for gross proceeds of$2,000,000.  Each share of preferredstock is convertible initially into 2.8571428571 shares of the Company’s commonstock.

Nowthat the funds in escrow have been released to the Company, the agreements withBarron state 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, is less than $1,150,000, then the Company must issue to Barron suchnumber of additional shares of preferred stock equal to 2,000,000 multiplied bythe percentage by which EBITDA is less than $1,150,000, expressed as a positivenumber; provided that in no event will the number of additional shares ofpreferred stock issued due to this EBITDA adjustment exceed 14% of the numberof shares of Preferred Stock originally issued to Barron, or 280,000 shares.For example if EBITDA is $920,000 (20% decline) then the Company would issue tothe Investor an additional 14% (i.e., 280,000) shares of preferred stock;provided that at the time Barron continues to hold all 2,000,000 shares of preferredstock originally issue on the Closing.  

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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. Since the auditedfinancial statements for the fiscal year ended June 30, 2006 contained hereinshow the EBITDA to be considerably less than the $1,150,000 mentioned above,the Company is obligated to issue to Barron an additional 280,000 shares of theconvertible preferred stock. This will take place during the month of October2006.

As mentioned above,on August 1, 2005 the Company and MBL executed an Amendment to the Common StockPurchase Agreement and Common Stock Purchase Warrant wherein one-half, or440,141, of the original redeemable shares were exchanged for a three-yearpromissory note payable with interest at prime plus two percent (7.75% as of June 30, 2006) with payments having commencedin September, 2005.  The shares exchangedfor the promissory note will be returned to the Company quarterly on a pro ratabasis as payments are made on the promissory note. As of June 30, 2006, a totalof****79,224 shares have been redeemed bythe Company.

Corgenix Purchase of Equity Securities
| **Period**                     | ** ** | **(a)  Total number of  shares purchaased** | ** ** | **(b)  Average price paid  per share** | ** ** | **(c)  Total number of  shares purchased as  part of publicly  announced plans or  programs** | ** ** | **(d)  Maximum number of  shares that may yet  be purchased under  the plans or  programs** | ** ** |
|--------------------------------|------------|------------------------------------------------------------|------------|-------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------|------------|
|                           |       |                                                       |       |                                                  |       |                                                                                                                                  |       |                                                                                                                                     |       |
| September 2005  -November 2005 |       | 26,408                                                     |       | $                                                     | 0.568      |                                                                                                                                  | —     |                                                                                                                                     | —     |   |
|                           |       |                                                       |       |                                                  |       |                                                                                                                                  |       |                                                                                                                                     |       |
| December 2005 -February  2006  |       | 26,408                                                     |       | $                                                     | 0.568      |                                                                                                                                  | —     |                                                                                                                                     | —     |   |
|                           |       |                                                       |       |                                                  |       |                                                                                                                                  |       |                                                                                                                                     |       |
| March 2006 - May 2006          |       | 26,408                                                     |       | $                                                     | 0.568      |                                                                                                                                  | —     |                                                                                                                                     | —     |   |
|                           |       |                                                       |       |                                                  |       |                                                                                                                                  |       |                                                                                                                                     |       |
| Total                          |       | 79,224                                                     |       | $                                                     | 0.568      |                                                                                                                                  | —     |                                                                                                                                     | 361,817    |   |

 

**Forward-Looking Statements**

ThisForm 10-KSB includes statements that are not purely historical and are “forward-lookingstatements” within the meaning of Section 21E of the Securities Act of 1934, asamended, including statements regarding our expectations, beliefs, intentionsor strategies regarding the future.  Allstatements other than historical fact contained in this Form 10-KSB, including,without limitation, statements regarding future product developments,acquisition strategies, strategic partnership expectations, technologicaldevelopments, the availability of necessary components, research anddevelopment programs and distribution plans, are forward-lookingstatements.  All forward-lookingstatements included in this Form 10-KSB are based on information available tous on the date hereof, and we assume no obligation to update suchforward-looking statements.  Although webelieve that the assumptions and expectations reflected in such forward-lookingstatements are reasonable, we can give no assurance that such expectations willprove to have been correct or that we will take any actions that may presentlybe planned.

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**Item6.  Management’s Discussion and Analysisor Plan of Operation.**

The following discussion should be readin conjunction with the financial statements and accompanying notes includedelsewhere herein.

**General**

Since the Company’sinception, we have been primarily involved in the research, development,manufacturing and marketing/distribution of diagnostic tests for sale toclinical laboratories. We currently market 51 products covering autoimmunedisorders, vascular diseases and liver disease. Our products are sold in theUnited States, the UK and other countries through our marketing and salesorganization that includes employee and contract sales representatives,internationally through an extensive distributor network, and to severalsignificant OEM partners.

We manufactureproducts for inventory based upon expected sales demand, usually shippingproducts to customers within 24 hours of receipt of orders if in stock.  Accordingly, we do not operate with acustomer order backlog.

Except for thefiscal year ending June 30, 1997, we have experienced revenue growth every yearsince our inception, primarily from sales of products and contract revenuesfrom strategic partners. Contract revenues consist of service fees fromresearch and development agreements with strategic partners.

Beginning in fiscal year 1996, we beganadding third-party OM licensed products to our diagnostic product line. Weexpect to expand our relationships with other companies in the future to gainaccess to additional products.

Although we haveexperienced growth in revenues every year since 1990, except for 1997, therecan be no assurance that, in the future, we will sustain revenue growth,current revenue levels, or achieve or maintain profitability. Our results ofoperations may fluctuate significantly from period-to-period as the result ofseveral factors, including: (i) whether and when new products are successfullydeveloped and introduced, (ii) market acceptance of current or new products,(iii) seasonal customer demand, (iv) whether and when we receive research anddevelopment payments from strategic partners, (v) changes in reimbursementpolicies for the products that we sell, (vi) competitive pressures on averageselling prices for the products that we sell, and (vii) changes in the mix ofproducts that we sell.

**Recently Issued Accounting Pronouncements**

*FAS 123RDisclosure.*  In December 2004, the FASB issued SFASNo. 123(R), Share-Based Payment, which is a revision of SFASNo. 123, Accounting for Stock-Based Compensation. SFASNo. 123(R) will be effective for the Company beginning July 1, 2006,and supersedes APB Opinion No. 25, Accounting for Stock Issued toEmployees, and amends SFAS No. 95, Statement of Cash Flows. SFASNo. 123(R) requires all share-based payments to employees, includinggrants of employee stock options, to be recognized in the income statementbased on their fair values. Pro-forma disclosure is no longer an alternative.The Company does not expect the adoption of FAS 123(R) will have amaterial impact on the Company’s financial statements.

*FAS 154Disclosure.*  In June 2005, the FASB issued SFASNo. 154, Accounting Changes and Error Corrections, a replacement of APBOpinion No. 20 and SFAS No. 3. The statement applies to all voluntarychanges in accounting principles, and changes the requirements for accountingfor and reporting of a change in accounting principle. The Company does notbelieve the adoption of SFAS No. 154 will have a material impact on theCompany’s financial statements.

*FAS 155 Disclosure. *In February 2006,the FASB issued SFAS No. 155 Accounting for Certain Hybrid FinancialInstruments. This Statement amends FASB Statements No. 133, Accounting forDerivative Instruments and Hedging Activities, and No. 140, Accounting forTransfers and Servicing Financial Assets and Extinguishments of Liabilities.This Statement resolves issues addressed in Statement 133 Implementation IssueNo. D1, Application of  Statement 133 toBeneficial Interests in Securitized Financial Assets. SFAS No. 155 permits fairvalue remeasurement for any hybrid financial instrument that contains anembedded derivative that otherwise would require bifurcation, clarifies whichinterest-only

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strips and principal-only strips are not subject to therequirements 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 subordinatin are not embeddedderivatives and amends Statement 140 to elimininate the prohibition on a qualifyingspecial-purpose entity from holding a derivative financial instruments thatpertains to a beneficial interest other than another derivative financialinstrument. This Statement is effective for all financial instruments acquiredor issued after the beginning of an entity’s first fiscal year that beginsafter September 15, 2006. The Company has not yet determined the impact of theadoption of FAS 155 on its financial statements, if any.

*SFAS No. 156Disclosure*, “Accounting for Servicing of Financial Assets-AnAmendment to FASB Statement No. 140” In March 2006, the FASBissued SFAS No. 156, “Accounting for Servicing of Financial Assets-anamendment to FASB Statement No. 140 (“SFAS 156”). SFAS 156 requiresthat all separately recognized servicing rights be initially measured at fairvalue, if practicable. In addition, this statement permits an entity to choosebetween two measurement methods (amortization method or fair value measurementmethod) for each class of separately recognized servicing assets andliabilities. SFAS 156 is effective for the Company July 1, 2007. TheCompany does not believe that the adoption of SFAS 156 will have amaterial impact on its consolidated financial statements.

*FASBInterpretation No. 48 Disclosure*, “Accounting forUncertainty in Income Taxes-an interpretation of FASB Statement No. 109. InJuly 2006, the FASB issued Interpretation No. 48, “Accounting forUncertainty in Income Taxes-an interpretation of FASB Statement No. 109” (“FIN48”). This interpretation clarifies the application of SFAS 109 by defining acriterion that an individual tax position must meet for any part of the benefitof that position to be recognized in an enterprise’s financial statements andalso provides guidance on measurement, de-recognition, classification, interestand penalties, accounting in interim periods and disclosure. FIN 48 iseffective for the Company July 1, 2007. At this time, we have notcompleted our review and assessment of the impact of adoption of FIN 48.

# **Critical Accounting Policies**

TheCompany’s consolidated financial statements are prepared in accordance withaccounting principles generally accepted in the United States (“GAAP”) and oursignificant accounting policies are summarized in Note 1 to the accompanyingconsolidated financial statements.  Thepreparation of financial statements in conformity with GAAP requires managementto make estimates and assumptions that affect reported amounts of assets,liabilities, disclosure of contingent assets and liabilities at the date of thefinancial statements and reported amounts of revenues and expenses during thereporting period.  Actual results coulddiffer significantly from those estimates.

TheCompany maintains an allowance for doubtful accounts based on its historicalexperience and provides for any specific collection issues that areidentified.  Such allowances havehistorically been adequate to provide for our doubtful accounts but involve asignificant degree of management judgment and estimation.  Worse than expected  future economic conditions, unknown customercredit problems and other factors may require additional allowances  for doubtful accounts to be provided for infuture periods.  Equipment and softwareare recorded at cost.  Equipment undercapital leases is recorded initially at the present value of the minimum leasepayments.  Depreciation and amortizationis calculated primarily using the straight-line method over the estimateduseful lives of the respective assets which range from 3 to 7 years.  The internal and external costs of developingand enhancing software costs related to website development, other than initialdesign and other costs incurred during the preliminary project stage, arecapitalized until the software has been completed.  Such capitalized amounts began to beamortized commencing when the website was placed in service on a straight-linebasis over a three-year period.  Whenassets are sold, retired or otherwise disposed of, the cost and relatedaccumulated depreciation are eliminated from the accounts and a gain or loss isrecognized.  Repair and maintenance costsare expensed as incurred.  We evaluatethe realizability of our long-lived assets, including property and equipment,whenever events or changes in circumstances indicate that the carrying amountof an asset may not be recoverable. Revenue from sale of products is recognized upon shipment ofproducts.  Revenue from research anddevelopment contracts represents amounts earned pursuant to agreements toperform research and development activities for third parties and is recognizedas earned under the respective agreement. Because research and development services are provided evenly over thecontract period, revenue is recognized ratably over the contract period.  Research and development agreements in effectin 2004 and 2003 provided for fees to the Company based on time and materialsin exchange for

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performingspecified research and development functions.  Research and development and advertising costs are expensed whenincurred. Inventories are recorded at the lower of cost or market, using thefirst-in, first-out method.

# **Results of Operations**

*YearEnded June 30**,**2006****comparedto 2005*

*Netsales.*Net sales for the year ended June 30, 2006 wereapproximately $6,636,000, a 19.3% increase from approximately $5,565,000 in2005. North American sales increased 21.7% while sales to internationaldistributors increased 12.7% from year to year. With respect to the Company’s major product lines, Phospholipids kitsales increased  7.6% for the fiscal year,Coagulation kit sales increased 26.7%, HA kit sales increased 21.3%, andAutoimmune kit sales increased 4.4%. Additionally, OEM sales decreased2.0%.   Sales of products manufacturedfor us by other companies while still relatively small, are expected tocontinue to increase during fiscal 2007.

*Cost ofsales*.  Gross profit,as a percentage of sales, was essentially the same, being  62.9% in 2006 and 63.2% in 2005,respectively, primarily due to stable raw material and labor costs.

*Sellingand marketing. *Sellingand marketing expenses increased 8.4% to approximately $1,626,000 in 2006 fromapproximately $1,500,000 in 2005. The majority of this increase involvedincreases in advertising and promotional costs, commissions, travel,entertainment and trade show expenses, consulting expenses and labor-relatedexpenses.

*Researchand development.* Research and development expenses decreased6% to approximately $574,000 in 2006 from approximately $613,000 in 2005.  The majority of this decrease resulted frommaterial strategic parter billings with respect to one key development projectwhich were offset by  increases inclinical studies expense, consulting and legal fees, labor-related costs andpurchases and development costs.

*Generaland administrative.* General and administrative expensesincreased approximately $355,000, or 27.7% to approximately $1,639,000 in 2006from approximately $1,284,000 in 2005. This increase was primarily the resultof increases in outside services, most notably investor relations, in additionto legal and consulting, travel and entertainment, acquisition-related andlabor-related expenses.

*Netinterest expense.* Net interest expense increased 323.6% toapproximately $1,906,000 in 2006 from approximately $470,000 in 2005 dueprimarily to the amortization of deferred financing costs and discount on the notes payable to theinstitutional investors in the recently completed convertible debt financings.This was partially offset by approximately $83,000 of interest income earnedduring the current fiscal year versus none earned in the prior fiscal year.

**Liquidityand Capital Resources**

Cash used inoperating activities was $994,540 for the current fiscal year compared to$767,107 during the prior fiscal year. The cash used in operations resulted primarily from increases indeferred financing costs and to a lesser extent increase in inventories andaccounts receivable, partially offset by charges to income resulting from theamortization of deferred financing and the related accretion of discount onnotes payable along with charges to income from common stock issued forservices and interest.  The Companybelieves that uncollectible accounts receivable will not have a significanteffect on future liquidity, as a significant portion of its accounts receivableare due from financially sound enterprises.

Net cash used byinvesting activities, the purchase of equipment, was $93,166 in fiscal 2006compared to $18,392 for fiscal 2005. The increase was mainly attributable toincreased spending on refrigeration equipment and computers.

Net cash providedby financing activities amounted to $2,923,304 during fiscal 2006 compared to$1,598,895 in the prior fiscal year. This increase in cash provided over thecomparable prior year was primarily due to the December 2005 financingsdiscussed in Item 1.

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Historically, wehave financed our operations primarily through long-term debt and sales ofcommon, redeemable common and preferred stock. We have also financed operations through sales of diagnostic productsand agreements with strategic partners. Accounts receivable increased 53.5% to $1,362,768 from $887,645 in 2005primarily as a result of significant sales increases during the period.

Our future capital requirements will depend on a numberof factors, including the ability to complete new equity or debt financing, thepossible redemption of common stock, our profitability or lack thereof, therate at which we grow our business and our investment in proprietary researchactivities, the ability of our current and future strategic partners to fundoutside research and development activities, our success in increasing sales ofboth existing and new products and collaborations, expenses associated withunforeseen litigation, regulatory changes, competition, technologicaldevelopments, general economic conditions and potential future merger andacquisition activity.  Our principalsources of liquidity have been cash raised from the private sale of securedconvertible term notes and the sale of redeemable common, common and preferredstock, the bridge note from Genesis, and long-term bank debt financing.  We believe that our current availability ofcash, working capital, proceeds from the issuance of preferred or common stockand debt financing and expected cash flows from operations, taking intoconsideration the increased sales volume the Company  experienced in fiscal 2006, will be adequate to meet our ongoing needs for at leastthe next twelve months.

**RiskFactors**

An investment inCorgenix entails certain risks that should be carefully considered. Inaddition, these risk factors could cause actual results to differ materiallyfrom those expected include the following:

**Wecontinue to incur losses and are likely to require additional financing.**

Wehave incurred operating losses and negative cash flow from operations for mostof our history.  Losses incurred sinceour inception have aggregated $9,367,556 and there can be no assurance that wewill be able to generate positive cash flows to fund our operations in the futureor to pursue our strategic objectives. Assuming no significant changes from our budget, we believe that we willhave sufficient cash to satisfy our needs for at least the next twelve months.  If we are not able to operate profitably andgenerate positive cash flows, we will undoubtedly need to raise additionalcapital, most likely via the sale of equity securities, to fund ouroperations.  If we do in fact needadditional financing to meet our requirements, there can be no assurance thatwe will be able to obtain such financing on terms satisfactory to us, if atall.  Alternatively, any additionalequity financing may be dilutive to existing stockholders, and debt financing,if available, may include restrictive covenants. If adequate funds are not available,we might be required to limit our research and development activities or ourselling, marketing and administrative activities any of which could have amaterial adverse effect on the future of the business.

**We dependupon collaborative relationships and third parties for product development andcommercialization.**

We havehistorically entered into research and development agreements withcollaborative partners, from which we derived revenues 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 to rely on futurecollaborative partners for the development of products and technologies.  There can be no assurance that we will beable to negotiate such collaborative arrangements on acceptable terms, if atall, or that current or future collaborative arrangements will besuccessful.  To the extent that we are notable to establish such arrangements, we could be forced to undertake such activities entirely at our own expense.  The amount and timing of resources that anyof these partners devotes to these activities may be based on progress by us inour product development efforts. Collaborative arrangements may be terminated by the partner upon priornotice without cause and there can be no assurance that any of these partnerswill perform its contractual obligations or that it will not terminate itsagreement.  With respect to any productsmanufactured by third parties, there can be no assurance that any third-partymanufacturer will perform acceptably  orthat failures by third parties will not delay clinical trials or the submissionof products for regulatory approval or impair our ability to deliver productson a timely basis.

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**There canbe no assurance of successful or timely development of additional products.**

Our businessstrategy includes the development of additional diagnostic products for thediagnostic 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 requires significant research, developmentand testing efforts.  We have limitedresources to devote to the development of products and, consequently, a delayin the development of one product or the use of resources for productdevelopment efforts that prove unsuccessful may delay or jeopardize the developmentof other products.  Any delay in thedevelopment, introduction and marketing of future products could result in suchproducts being marketed at a time when their cost and performancecharacteristics would not enable them to compete effectively in theirrespective markets.  If we are unable,for technological or other reasons, to complete the development andintroduction of any new product or if any new product is not approved orcleared for marketing or does not achieve a significant level of market acceptance,our ability to remain competitive in our product niches would be impaired.

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

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

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

The testing, manufacture and sale of ourproducts is subject to regulation by numerous governmental authorities,principally the United States Food and Drug Administration and certain foreignregulatory agencies.  Pursuant to theFederal Food, Drug, and Cosmetic Act, and the regulations promulgated thereunder, the FDA regulates the preclinical and clinical testing, manufacture,labeling, distribution and promotion 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 with applicable requirementscan result in, among other consequences, fines, injunctions, civil penalties,recall or seizure of products, repair, replacement or refund of the cost ofproducts, total or partial suspension of production, failure of the governmentto grant pre-market clearance or pre-market approval for devices, withdrawal ofmarketing clearances or approvals, and criminal prosecution.

There can be noassurance that we will be able to obtain necessary regulatory approvals orclearances for our products on a timely basis, if at all, and delays in receiptof or failure to receive such approvals or clearances, the loss of previouslyreceived approvals or clearances, limitations on intended use imposed as acondition of such approvals or clearances or failure to comply with existing orfuture regulatory requirements could negatively impact our sales and thus havea material adverse effect on our business.

As a manufacturerof medical devices for marketing in the United States, we are required toadhere to applicable regulations setting forth detailed good manufacturingpractice requirements, which include testing, control and documentationrequirements.  We must also comply withMedical Device Report (MDR) requirements, which require that a manufacturerreports to the FDA any incident in which its product may have caused orcontributed to a death or serious injury, or in which its product malfunctionedand, if the malfunction were to recur, it would be likely to cause orcontribute to a death or serious injury. We are also subject to routine inspection by the FDA for compliance withQSR requirements, MDR requirements and other applicable regulations. Labelingand promotional activities are subject to scrutiny by the FDA and, in certaincircumstances, by the Federal Trade Commission. We may incur significant costs to comply with laws and regulations inthe future, which would decrease our net income or increase our net loss andthus have a potentially material adverse effect upon our business, financialconditions and results of operations.

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Distribution ofdiagnostic products outside the United States is subject to extensive foreigngovernment regulation. These regulations, including the requirements forapprovals or clearance to market, the time required for regulatory review andthe sanctions imposed for violations, vary from country to country.  We may be required to incur significant costsin obtaining or maintaining foreign regulatory approvals.  In addition, the export of certain of ourproducts that  have not yet been clearedfor United 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 dependupon distribution partners for sales of diagnostic products in internationalmarkets.**

We have enteredinto distribution agreements with collaborative partners in which we havegranted distribution rights for certain of our products to these partnerswithin specific international geographic areas. Pursuant to these agreements,our collaborative partners have certain responsibilities for marketdevelopment, promotion, and sales of the products. If any of these partnersfails to perform its contractual obligations or terminates its agreement, thiscould have a reduce our sales and cash flow and thus have a potentiallymaterial adverse effect on our business, financial condition and results ofoperations.

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

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

**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.**

Most of ourproducts are based on our patented and proprietary application of Enzyme LinkedImmunoSorbent Assay, or ELISA, technology, a clinical testing methodologycommonly used worldwide. Most of our current products are based on thisplatform technology in a delivery format convenient for clinical testinglaboratories. The delivery format, which is referred to as “Microplate,” allowsthe testing of up to 96 samples per plate, and is one of the most commonly usedformats, employing conventional testing equipment found in virtually allclinical laboratories. The availability and broad acceptance of ELISAMicroplate products reduces entry barriers worldwide for our new products thatemploy this technology and delivery format.There can be no assurance that ourissued patents will afford meaningful protection against a competitor, or thatpatents issued or licensed to us will not be infringed upon or designed aroundby others, or that others will not obtain patents that we would need to licenseor design around. We could incur substantial costs in defending the Company orour licensees in litigation brought by others. The potential for reduced salesand increased legal expenses would have a negative impact on our cash flow andthus our overall business could be adversely affected, or, in an extreme case,our ability to remain in business could be jeopardized.

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

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

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

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

**We haveonly limited manufacturing experience with certain products.**

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

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

We believe oursuccess will depend to a significant extent on the efforts and abilities of Dr.Luis R. Lopez and Douglass T. Simpson. Loss of either  would be disruptive to our business.  There can be no assurance that we will besuccessful 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 scientificand executive personnel may have a material adverse effect on our business,financial condition and results of operations.

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

To date, we haveexperienced no product liability claims, but any such claims arising in thefuture could have a material adverse effect on our business, financialcondition and results of operations. Potential product liability claims mayexceed the amount of our insurance coverage or may be excluded from coverageunder the terms of our policy or limited by other claims under our umbrellainsurance policy.  Additionally, therecan be no assurance that our existing insurance can be renewed by us at a costand level of coverage comparable to that presently in effect, if at all.  In the event that we are held liable for aclaim against which we are not insured or for damages exceeding the limits ofour insurance coverage, such claim could have a material adverse effect on ourcash flow and thus potentially a materially adverse effect on our business,financial condition and results of operations.

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**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 ourCommon Stock has been traded on the OTC Bulletin Board® since February 1998,the trading has been sporadic with insignificant volume.

Moreover, the over-the-counter markets forsecurities of very small companies historically have experienced extreme priceand volume fluctuations.  These broadmarket fluctuations and other factors, such as new product developments, trendsin our industry, the investment markets, economic conditions generally, andquarterly variation in our results of operations, may adversely affect themarket price of our common stock.  Inaddition, our common stock is subject to rules adopted by the Securities andExchange Commission regulating broker-dealer practices in connection withtransactions in “penny stocks.”  Suchrules require the delivery prior to any penny stock transaction of a disclosureschedule explaining the penny stock market and all associated risks and imposevarious sales practice requirements on broker-dealers who sell penny stocks topersons other than established customers and accredited investors. For thesetypes of transactions the broker-dealer must make a special suitabilitydetermination for the purchaser and have received the purchaser’s writtenconsent to the transaction prior to sale. 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 with fluctuatingexchange rates.**

Our financial statementsare presented in US dollars. At the end of each fiscal quarter and the fiscalyear, we convert the financial statements of Corgenix UK, which operates inpounds sterling, into US dollars, and consolidate them with results fromCorgenix, Inc.  We may, from time totime, also need to exchange currency from income generated by Corgenix UK.Foreign exchange rates are volatile and can change in an unknown andunpredictable fashion. Should the foreign exchange rates change to levelsdifferent than anticipated by us, our business, financial condition and  results of operations may be adverselyaffected.

**Item7.  Financial Statements.**

The financial statements listed in theaccompanying index to the consolidated financial statements are filed as partof this Annual Report on Form 10-KSB.

**Item8.  Changes In and Disagreements WithAccountants on Accounting and Financial Disclosure.**

None.

**Item8A.  Controls and Procedures.**

**Evaluationof disclosure controls and procedures**

The Company, underthe supervision and with the participation of the Company’s management,including its Chief Executive Officer and Chief Financial Officer, carried outan evaluation of the effectiveness of the design and operation of the Company’sdisclosure controls and procedures (as defined in Rules 240.13a-14c under theSecurities Exchange Act of 1934 (the “Exchange Act”) as of the end of theperiod covered by this report (the “Evaluation Date”).  Based upon this evaluation, the ChiefExecutive Officer and Chief Financial Officer concluded that, as of theEvaluation Date, the Company’s disclosure controls and procedures wereeffective for the purposes of recording, processing, summarizing and timelyreporting information required to be disclosed by the Company in the reportsthat it files under the Securities Exchange Act of 1934 and that suchinformation is accumulated and communicated to the Company’s management inorder to allow timely decisions regarding required disclosure.

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**Changesin internal controls**

There have been nosignificant changes in the Company’s internal controls or in other factors thatcould significantly affect the Company’s disclosure controls and proceduressubsequent to the Evaluation Date, nor were there any significant deficienciesor material weaknesses in the Company’s internal controls.

**Item8B.  Other Information.**

None.

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**PART III**

**Item9.  Directors and Executive Officers.**

**Directorsand Executive Officers**

Thefollowing table sets forth certain information with respect to the directorsand executive officers of Corgenix as of June 30, 2006:
| **Name**               | ** ** | **Age** | ** ** | **Position**                                                                  | ** ** | **Director/Officer  Since** |
|------------------------|------------|---------|------------|-------------------------------------------------------------------------------|------------|-----------------------------|
|                   |       |    |       |                                                                          |       |                        |
| Luis R. Lopez          |       | 58      |       | Chief Medical Officer and  Chairman of the Board                              |       | 1998                        |
|                   |       |    |       |                                                                          |       |                        |
| Douglass T. Simpson    |       | 58      |       | President and Chief Executive  Officer, Director                              |       | 1998                        |
|                   |       |    |       |                                                                          |       |                        |
| Ann L. Steinbarger     |       | 53      |       | Senior Vice President  Operations                                             |       | 1998                        |
|                   |       |    |       |                                                                          |       |                        |
| Taryn G. Reynolds      |       | 47      |       | Vice President, Facilities and  IT                                            |       | 1998                        |
|                   |       |    |       |                                                                          |       |                        |
| William H. Critchfield |       | 60      |       | Senior Vice President Finance  and Administration and Chief Financial Officer |       | 2000                        |
|                   |       |    |       |                                                                          |       |                        |
| Robert Tutag           |       | 65      |       | Director                                                                      |       | 2005                        |
|                   |       |    |       |                                                                          |       |                        |
| Dennis Walcewski       |       | 57      |       | Director                                                                      |       | 2006                        |
|                   |       |    |       |                                                                          |       |                        |
| Charles H. Scoggin     |       | 61      |       | Director                                                                      |       | 2006                        |
|                   |       |    |       |                                                                          |       |                        |
| Larry G. Rau           |       | 60      |       | Director                                                                      |       | 2006                        |
|                   |       |    |       |                                                                          |       |                        |
| C. David Kikumoto      |       | 56      |       | Director                                                                      |       | 2006                        |

 

Luis R. Lopez, M.D.****has served as the Chief Executive Officer and Chairman ofthe Board of Directors of Corgenix from May 1998 until April 2005 when histitle was changed to Chief Medical Officer. From 1987 to 1990, Dr. Lopez was Vice President of Clinical Affairs atBioStar Medical Products, Inc., a Boulder, Colorado diagnostic firm.  From 1986 to 1987 he served as ResearchAssociate with the Rheumatology Division of the University of Colorado HealthSciences Center, Denver, Colorado.  From1980 to 1986 he was Professor of Immunology at Cayetano Heredia UniversitySchool of Medicine in Lima, Peru, during which time he also maintained amedical practice with the Allergy and Clinical Immunology group at ClinicaRicardo Palma in Lima.  From 1978 to 1980Dr. Lopez held a fellowship in Clinical Immunology at the University ofColorado Health Sciences Center.  Hereceived his M.D. degree in 1974 from Cayetano Heredia University School ofMedicine in Lima, Peru.  He is a clinicalmember of the American College of Rheumatology, and a corresponding member ofthe American Academy of Allergy, Asthma and Immunology.  Dr. Lopez is licensed to practice medicine inColorado, and is widely published in the areas of immunology and autoimmunedisease.

Douglass T. Simpson hasbeen the President of Corgenix since May 1998 and was elected a director in May1998.  Mr. Simpson joined Corgenix’soperating subsidiary as Vice President of Business Development in 1992, waspromoted to Vice President, General Manager in 1995, to Executive VicePresident in 1996, to President in February 1998 and then to Chief ExecutiveOfficer in April 2005.  Prior to joiningCorgenix’s operating subsidiary, he was a Managing Partner at Venture MarketingGroup in Austin, Texas, a health care and biotechnology marketing firm, and inthat capacity, served as a consultant to REAADS from 1990 until 1992.  From 1984 to 1990 Mr. Simpson was employed byKallestad Diagnostics,

30

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Inc. (now part of BioRadLaboratories, Inc.), one of the largest diagnostic companies in the world,where he served as Vice President of Marketing, in charge of all marketing andbusiness development.  Mr. Simpson holdsB.S. and M.S. degrees in Biology and Chemistry from Lamar University in Beaumont,Texas.

William H. Critchfield*,*has been Senior Vice President Finance and Administrationand Chief Financial Officer of the Company since April 2005 and was VicePresident and Chief Financial Officer from December 2000 to April 2005.  Prior to joining Corgenix, Mr. Critchfieldwas Executive Vice President and Chief Financial Officer of U.S. Medical, Inc.,a Denver, Colorado based privately held distributor of new and used capitalmedical equipment.  From May of 1994through July of 1999, he served as President and Chief Financial Officer of W.L.C.Enterprises, Inc., a retail business holding company.  From November 1991 to May 1994, Mr.Critchfield served as Executive Vice President and Chief Financial Officer ofAir Methods Corporation, a publicly traded company which is the leading U.S.company in the air medical transportation industry and is the successor companyto Cell Technology, Inc., a publicly traded biotechnology company, where heserved in a similar capacity from 1987-1991. From 1986 through September 1987 he served as Vice President of Financeand Administration for Biostar Medical Products, Inc., a developer andmanufacturer of diagnostic immunoassays. In the past, Mr. Critchfield also served as Vice President of Financefor Nuclear Pharmacy, Inc., formerly a publicly traded company and the world’slargest chain of centralized radiopharmacies. Mr. Critchfield is a certified public****accountantin Colorado.  He graduated magna cumlaude from California State University-Northridge with a Bachelor of Sciencedegree in Business Administration and Accounting.

Ann L. Steinbarger***,*** has been the Senior VicePresident, Operations of Corgenix since April 2005 and was the Vice Presidentof Sales and Marketing from May 1998 to April 2005.  Ms. Steinbarger joined Corgenix’s operatingsubsidiary in January 1996 as Vice President, Sales and Marketing withresponsibility for its worldwide marketing and distribution strategies.  Prior to joining Corgenix, Ms. Steinbargerwas with Boehringer Mannheim Corporation, Indianapolis, Indiana, a $200 millionIVD company.  At Boehringer from 1976 to1996, she served in a series of increasingly important sales managementpositions.  Ms. Steinbarger holds a B.S.degree in Microbiology from Purdue University in West Lafayette, Indiana.

Taryn G. Reynolds***,*** has been a Vice President ofCorgenix since May 1998.  Mr. Reynoldsjoined Corgenix’s operating subsidiary in 1992, serving first as Director ofAdministration, then as Managing Director, U.S. Operations. He has served asVice President, Operations and in 1999, became Vice President, Facilities andInformation Technology.  Prior to joiningCorgenix, Mr. Reynolds held executive positions at Brinker International, MJARCorporation and M&S Incorporated, all Colorado-based property, operationaland financial management firms.

Robert Tutag wasappointed to the Board in September 2005. Mr. Tutag is currently and since 1990has been President of Unisource, Inc., a privately held Boulder, Coloradocompany which identifies and develops niche pharmaceutical products for genericand brand name pharmaceutical companies. From 1964 through 1982, Mr. Tutag was President and Chief OperatingOfficer of Tutag Corporation. In that capacity, he developed and managedoperations of Cord Laboratories, one of the original generic pharmaceuticalmanufacturing companies, in addition to founding and overseeing GenevaGenerics, a generic sales and distribution company, which developed into one ofthe country’s premier companies in its industry. Both Cord Laboratories andGeneva Generics were acquired by Ciba-Geigy Corporation. During that timeperiod, Mr. Tutag also served as a Director of Geneva Generics and as VicePresident of Sales and a Director of Tutag Pharmaceuticals, a brandeddistribution company. From 1983 through 1989, Mr. Tutag was President and ChiefExecutive Officer of NBR Financial, Inc., a multi-bank holding company inBoulder, Colorado. Since 1977 until the present, Mr. Tutag has also been editorof GMP Trends, Inc., Boulder, Colorado, an informational newsletter thatreviews FDA and GMP inspection reports (483’s) for the pharmaceutical andmedical device industries. Mr. Tutag also served as interim president from1999-2000 and was a director from 1997-2001 of the Bank of Cherry Creek inBoulder, Colorado. He received a BBA and an MBA from the University ofMichigan.

Dennis Walczewski wasappointed to the Company’s Board of Directors on January 3, 2006 to fill thevacancy created by the resignation of Mr. Jun Sasaki on the same day. Mr.Walczewski’s background consists of over 25 years experience in the Diagnosticand Biotechnology industries. Mr. Walczewski has held either management orexecutive positions in Promega, T-Cell Diagnostics, Endogen and BoehringerManheim (now Roche). He has been employed by MBL international or MBLI for theprevious four years and now is their Chief Executive Officer.   Per our arrangement with MBL, Mr. Walczewskiis not  compensated by Corgenix for boardmeetings attended.

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Charles H. Scoggin,M.D., was appointed to the Company’s Board of Directors on March 27, 2006. Dr.Scoggin is currently a Director of Nitrox, a privately held NorthCarolina-based biopharmaceutical company founded on technology developed atDuke University. Companies previously founded or co-founded by Dr. Scoggininclude: Somatogen, a biopharmaceutical company that successfully synthesizedand genetically modified the human hemoglobin molecule, for which Dr. Scogginserved as President, Chief Executive Officer and Chairman through its initialpublic offering, several secondary financings and strategic alliances;Somatogen Instruments, a biomedical and scientific instruments company, forwhich Dr. Scoggin served as President and Chief Executive Officer until itssale to Beckman Instruments; Rodeer Systems, a biomedical informatics company,for which Dr. Scoggin served as Chairman, President and Chief ExecutiveOfficer; Dr. Scoggin also served as President and Chief Executive Officer ofboth Medrock, a medical information company; and Sagemed, a company focused onstrategic healthcare information services.

Larry G. Rau wasappointed to the Company’s Board of Directors on March 27, 2006. Mr. Rau iscurrently and since 1995 has been President and CEO of Rau Financial Services,a Sioux Falls, South Dakota firm specializing in alternative investments suchas 1031 property exchanges, Real Estate, Oil and Gas, and Medical Receivablesin addition to stocks and fixed income investments. From 1986 to 1995, Mr. Rauwas an investment executive with A.G. Edwards and UBS PaineWebber, and from1968 to 1986 he worked in pharmaceutical sales and/or marketing for CutterLabs, Baxter International and Fort Dodge Labs.

C. David Kikumoto wasappointed to the Company’s Board of Directors on March 30, 2006.  Mr. Kikumoto is the founder and is currentlythe Chief Executive Officer of Denver Management Advisors, a firm that hasassembled leading team of health care cost containment specialists in the RockyMountain West, providing cost containment services to large employers,insurers, and healthcare providers.  From1999-2000, Mr. Kikumoto was the President and Vice Chairman at Anthem BlueCross and Blue Shield, Colorado and Nevada. He led the merger of Blue Cross and Blue Shield to Anthem resulting inthe creation of one of the largest private foundations in the State ofColorado.  Mr. Kikumoto also providedstrategic advice and counsel to the new leadership team and served as a liaisonto customers, community leaders and regulators. From 1987 - 1999 Mr. Kikumoto served in several roles at Blue Cross andBlue Shield of Colorado, Nevada and New Mexico. From 1993 - 1999 Mr. Kikumoto was the President and Chief ExecutiveOfficer.  He directed, developed andcreated one the first regional Blue Cross and Blue Shield Plans with totalmembership of 750,000 and annual premium income of $800 million.  From 1991 - 1993 he was the Senior VicePresident, Chief Marketing Officer. Mr. Kikumoto was responsible for the marketing and sales of health,life, dental and workers’ compensation products in a three-state region while concurrentlyserving as the CEO of several subsidiary companies.  During 1987 - 1991 Mr. Kikumoto was the VicePresident, Alternative Delivery Systems. In that position he managed health care costs in a three-state regionthrough the development of alternatives to traditional health care models.

Audit Committee

The Board of Directors has determinedthat, by virtue of his having over twenty years experience as both Presidentand Chief Operating Officer, plus serving over six years as President and ChiefExecutive Officer of a multi-bank holding company,  Mr. Robert Tutag qualifies as an “AuditCommittee Financial Expert” as that term is defined in the rules promulgated bythe SEC.

**COMPLIANCE WITH SECTION 16 (a) OF THE SECURITIESEXCHANGE ACT OF 1934**

Section 16 (a) of the Securities Exchange Act of1934, as amended, requires the Company’s directors and executive officers, aswell as persons beneficially owning more than 10% of the Company’s outstandingCommon Stock, to file reports of ownership and changes in ownership with theCommission within specified time periods. Such officers, directors and stockholders are also required to furnishthe Company with copies of all Section 16 (a) forms they file.

Based solely on its review of such formsreceived by it, or written representations from certain reporting persons, theCompany believes that most Section 16 (a) filing requirements applicable to itsofficers, directors and 10% stockholders were complied with during the fiscalyear ended June 30, 2006.

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**Item10.  Executive Compensation.**

The followingtable shows how much compensation was paid by Corgenix for the last threefiscal years to Corgenix’s Chief Executive Officer and each other executiveofficer whose total annual salary and bonus exceeded $100,000 for servicesrendered to the subsidiaries during such fiscal years (collectively, the “NamedExecutive Officers”).

##### **Summary Compensation Table**

|                                                         | ** ** | ** **       | ** ** | **Annual Compensation** | ** ** | **Long Term Compensation** | ** ** | ** **                    | ** ** |
|---------------------------------------------------------|------------|------------------|------------|------------------------------|------------|--------------------------------------|------------|-------------------------------|------------|
| ** **                                              | ** ** | ** **       | ** ** | ** **                   | ** ** | ** **                           | ** ** | **Other**                     | ** ** | **Awards** | ** ** | **Payouts** | ** ** | ** ** | ** ** |
| **Name and  principal  position**                  | ** ** | **Fiscal  Year** | ** ** | **Salary  ($)**              | ** ** | **Bonus  ($)**                       | ** ** | **Annual  Compensation  (1)** | ** ** | **Restricted  Stock  awards** | ** ** | **Securities  Underlying  Options/SARs** | ** ** | **LTIP  payouts** | ** ** | **All  other  compensation** | ** ** |
|                                                    |       |             |       |                         |       |                                 |       |                          |       |   |   |   |   |   |   |   |   |
| Douglass T. Simpson                                     |       | 2006             |       | $                            | 180,000    |                                 | —     |                          | $          | 14,540 |   | — |   | — |   | — |   | — |   |
| President, Chief                                        |       | 2005             |       | $                            | 157,826    |                                 | —     |                          | $          | 11,970 |   | — |   | — |   | — |   | — |   |
| Executive Officer                                       |       | 2004             |       | $                            | 148,386    |                                 | —     |                          | $          | 11,617 |   | — |   | — |   | — |   | — |   |
|                                                    |       |             |       |                         |       |                                 |       |                          |       |   |   |   |   |   |   |   |   |
| Dr. Luis R. Lopez                                       |       | 2006             |       | $                            | 184,572    |                                 | —     |                          | $          | 18,289 |   | — |   | — |   | — |   | — |   |
| Chairman and Chief                                      |       | 2005             |       | $                            | 180,372    |                                 | —     |                          | $          | 15,057 |   | — |   | — |   | — |   | — |   |
| Medical Officer                                         |       | 2004             |       | $                            | 169,583    |                                 | —     |                          | $          | 14,679 |   | — |   | — |   | — |   | — |   |
|                                                    |       |             |       |                         |       |                                 |       |                          |       |   |   |   |   |   |   |   |   |
| William H. Critchfield                                  |       | 2006             |       | $                            | 165,000    |                                 | $          | 17,556                        | (2)        | $ | 14,540 |   | $ | 40,000 |   | — |   | — |   | — |   |
| Senior Vice President                                   |       | 2005             |       | $                            | 140,916    |                                 | —     |                          | $          | 13,677 |   | — |   | — |   | — |   | — |   |
| Finance and Administration and Chief  Financial Officer |       | 2004             |       | $                            | 132,487    |                                 | —     |                          | $          | 14,679 |   | — |   | — |   | — |   | — |   |
|                                                    |       |             |       |                         |       |                                 |       |                          |       |   |   |   |   |   |   |   |   |
| Ann L. Steinbarger                                      |       | 2006             |       | $                            | 150,000    |                                 | —     |                          | $          | 14,540 |   | — |   | — |   | — |   | — |   |
| Senior Vice President                                   |       | 2005             |       | $                            | 140,916    |                                 | —     |                          | $          | 11,970 |   | — |   | — |   | — |   | — |   |
| Operations                                              |       | 2004             |       | $                            | 132,487    |                                 | —     |                          | $          | 11,617 |   | — |   | — |   | — |   | — |   |
|                                                    |       |             |       |                         |       |                                 |       |                          |       |   |   |   |   |   |   |   |   |
| Taryn G. Reynolds                                       |       | 2006             |       | $                            | 120,360    |                                 | —     |                          | $          | 18,289 |   | — |   | — |   | — |   | — |   |
| Vice President                                          |       | 2005             |       | $                            | 112,733    |                                 | —     |                          | $          | 15,057 |   | — |   | — |   | — |   | — |   |
| Facilities and Information Technology                   |       | 2004             |       | $                            | 105,991    |                                 | —     |                          | $          | 14,679 |   | — |   | — |   | — |   | — |   |
|                                                         |            |                  |            |                              |            |                                      |            |                               |            |  |  |  |  |  |  |  |  |  |  |  |  |

 

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 (1) The Company paid eachexecutive officer an automobile allowance of $500 per month in 2006 and $400per month in 2004 and 2005 in addition to paying approximately 90% of eachoffier’s group health insurance premium.

(2) On February 24, 2006, Mr. Critchfield received a restricted stockaward of 100,000 shares and a cash bonus to pay the estimated income taxes onsaid award of $17,556. The fair market value of the restricted stock at thedate of issuance was $0.40***.***

**Long-Term Incentive Compensation**

EffectiveJanuary 1, 1999, the Company adopted a Stock Compensation Plan to provideexecutive officers an opportunity to purchase shares of its common stock as abonus or in lieu of cash compensation for services rendered. No 

33

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issuances of stockwere made under the Stock Compensation Plan to the Named Executive Officersduring the three fiscal years ended June 30, 2006.

**AggregatedOption Exercises in Last Fiscal Year and Fiscal Year-End Option Values**

The followingtable sets forth information concerning option exercises by the Named ExecutiveOfficers during the fiscal year ended June 30, 2006 and outstandingoptions held by the Named Executive Officers as of June 30, 2006:

| Name                   | ** ** | **Number of  Shares  Acquired  on Exercise** | ** ** | **Value  Realized ($)** | ** ** | **Number of Shares  Underlying Unexercised  Options at FY-End  Exercisable/Unexercisable** | ** ** | **Value of In-the-Money  Options at FY-End ($)  Exercisable/Unexercisable(1)** |
|------------------------|------------|----------------------------------------------|------------|-------------------------|------------|--------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------------------|
| Douglass T. Simpson    |       | 0                                            |       | 0                       |       | 149,613/136,667                                                                            |       | 36,290/57,400                                                                  |
| Dr. Luis R. Lopez      |       | 0                                            |       | 0                       |       | 66,667/144,180                                                                             |       | 16,668/28,000                                                                  |
| William H. Critchfield |       | 0                                            |       | 0                       |       | 97,667/83,333                                                                              |       | 21,330/35,000                                                                  |
| Ann L. Steinbarger     |       | 0                                            |       | 0                       |       | 83,694/75,786                                                                              |       | 20,518/28,000                                                                  |
| Taryn G. Reynolds      |       | 0                                            |       | 0                       |       | 73,813/46,667                                                                              |       | 15,552/19,600                                                                  |

 

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(i)  Based on the price of the Company’s commonstock at June 30, 2006 of $0.42 per share.

**Employment and Consulting Agreements**

Corgenix hasentered into employment agreements as of July 1, 2005 with the followingofficers. The current annual salaries are as noted opposite each of theirnames:

| Officer                                                                                                                                                                                                             | ** ** | **Current Annual Salary**   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------|
|                                                                                                                                                                                                                |       |                        |
| ·                              Douglass T.  Simpson –    |       | $211,000 as of July 1, 2007 |
| ·                              Dr. Luis R.  Lopez –      |       | $190,000 as of July 1, 2007 |
| ·                              William H.  Critchfield – |       | $180,000 as of July 1, 2007 |
| ·                              Ann L. Steinbarger  –     |       | $161,000 as of July 1, 2007 |
| ·                              Taryn G.  Reynolds –      |       | $124,000 as of July 1, 2007 |

 

Eachof the above employment agreements is for continuously renewable terms of threeyears, provides for severance payments equal to eighteen month’s salary andbenefits if the employment of the officer is terminated without cause (asdefined in the respective agreements), and an automobile expense reimbursementof  $500 per month.

**Compensation Committee Interlocks and Insider Participation**

TheCompensation Committee of Corgenix is currently composed of  Mssrs. Tutag, Scoggin, Rau and Kikumoto, withMr. Tutag serving as Chairman.  Nointerlocking relationship exists between any member of the Board orCompensation Committee and any member of the board of directors or compensationcommittee of any other company, nor has any such interlocking relationshipexisted in the past.

**Code ofEthics**

The Company hasadopted a written code of ethics that applies to our CEO and CFO.

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**DirectorCompensation**

The Company’scurrent policy is to pay each independent director $500 per board meeting and$250 per board committee either attended in person or via telephone. Inaddition, annually each independent director is granted options to purchase30,000 shares of the Company’s common stock at the fair market value at thedate of grant and vesting 100% upon grant.

**Item11.  Security Ownership of CertainBeneficial Owners and Management and Related Stockholder Matters.**

Thefollowing table sets forth, as of June 30, 2006, certain information regardingthe ownership of Corgenix’s common stock by (i) each person known by Corgenixto be the beneficial owner of more than 5% of the outstanding shares of commonstock, (ii) each of Corgenix’s directors, (iii) each executive officer and (iv)all of Corgenix’s executive officers and directors as a group.  Unless otherwise indicated, the address ofeach person shown is c/o Corgenix, 11575 Main Street, Suite 400, Broomfield, CO80020.  Beneficial ownership, forpurposes of this table, includes debt convertible into common stock and optionsand warrants to purchase common stock that are either currently exercisable orconvertible or will be exercisable or convertible within 60 days ofJune 30, 2006.  Other than Dr. Lopezand Mr. Reynolds, no other director or executive officer beneficially ownedmore than 5% of the common stock.

Thepercentage ownership data is based on 10,723,205 shares of our common stockoutstanding as of June 30, 2006. Under the rules of the SEC, beneficialownership includes shares over which the indicated beneficial owner exercisesvoting and/or investment power. Shares of common stock subject to options orwarrants or underlying convertible debt that are currently exercisable or convertible, or will becomeexercisable or convertible, within 60 days of June 30, 2006 are deemedoutstanding for the purpose of computing the percentage ownership of the personholding the option or warrant, convertible preferred stock, or convertiblepromissory note, but are not deemed outstanding for the purpose of computingthe percentage ownership of any other person. Except as otherwise noted, webelieve that the beneficial owners of the shares of common stock listed belowhave sole voting and investment power with respect to all shares beneficiallyowned.

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| ** **                                                                                                               | ** ** | **Amount and Nature  of Beneficial Owner** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------------------------|------------|
| **Name and Address of Beneficial Owner**                                                        | ** ** | **Number**                                                     | ** ** | **Percent of Class** | ** ** |
|                                                                                                                     |       |                                                           |       |   |   |
| Barron Partners LP (2)  c/o Barron Capital Advisors, LLC  730 Fifth Avenue, 9th Floor  New York, NY 10019           |       | 1,542,045                                                      |       | 4.90 | % |
|                                                                                                                     |       |                                                           |       |   |   |
| CAMOFI Master LDC (3)  350 Madison Avenue  New York, NY 10017                                                            |       | 1,153,574                                                      |       | 4.99 | % |
|                                                                                                                     |       |                                                           |       |   |   |
| Truk Opportunity Fund (3)  c/o RAM Capital Resources, LLC  One East 52nd Street, Sixth Floor  New York, NY 10022         |       | 836,903                                                        |       | 4.99 | % |
|                                                                                                                     |       |                                                           |       |   |   |
| Taryn G. Reynolds (1)                                                                                                    |       | 979,668                                                        |       | 8.62 | % |
|                                                                                                                     |       |                                                           |       |   |   |
| Ascendiant Capital Group LLC, Ascendiant Securities  LLC (4)  18881 Von Karman Avenue, 16th Floor  Irvine, CA 92612 |       | 701,882                                                        |       | 4.99 | % |
|                                                                                                                     |       |                                                           |       |   |   |
| Dr. Luis R. Lopez (1)                                                                                               |       | 848,014                                                        |       | 7.73 | % |
|                                                                                                                     |       |                                                           |       |   |   |
| Douglass T. Simpson (1)                                                                                                  |       | 355,359                                                        |       | 3.25 | % |
|                                                                                                                     |       |                                                           |       |   |   |
| William H. Critchfield (1)                                                                                               |       | 207,667                                                        |       | 1.92 | % |
|                                                                                                                     |       |                                                           |       |   |   |
| Robert Tutag (1)                                                                                                         |       | 150,000                                                        |       | 1.39 | % |
|                                                                                                                     |       |                                                           |       |   |   |
| Ann L. Steinbarger (1)                                                                                                   |       | 102,667                                                        |       | 0.94 | % |
|                                                                                                                     |       |                                                           |       |   |   |
| Larry G. Rau (1)                                                                                                         |       | 52,000                                                         |       | 0.48 | % |
|                                                                                                                     |       |                                                           |       |   |   |
| Dr. Charles H. Scoggin (1)                                                                                               |       | 30,000                                                         |       | 0.28 | % |
|                                                                                                                     |       |                                                           |       |   |   |
| David Kikumoto (1)                                                                                                       |       | 30,000                                                         |       | 0.28 | % |
|                                                                                                                     |       |                                                           |       |   |   |
| Mid South Investor Fund                                                                                                  |       | 800,000                                                        |       | 7.17 | % |
|                                                                                                                     |       |                                                           |       |   |   |
| Burnham Securities                                                                                                       |       | 607,452                                                        |       | 6.67 | % |
|                                                                                                                     |       |                                                           |       |   |   |
| Randall Stern (5)                                                                                                        |       | 556,997                                                        |       | 4.99 | % |
|                                                                                                                     |       |                                                           |       |   |   |
| Medical & Biological Laboratories Co., Ltd.                                                                          |       | 1,681,340                                                      |       | 14.45 | % |
|                                                                                                                     |       |                                                           |       |   |   |
| All  current directors and current executive officers as a group (11 persons)                                            |       | 2,755,375                                                      |       | 21.95 | % |

 

36

----

----

(1)**               **Current director or officer

(2)                Contractual restrictions in the Barron Partners preferred stock purchaseagreement and warrants prohibit Barron Partners, L.P. from exercising anywarrants or converting any preferred stock if such conversion or exercise wouldcause it to exceed 4.90% beneficial ownership of Corgenix. Barron Partnersholds convertible preferred stock plus warrants to acquire up to 20,714,286shares of common stock.

(3)                Contractual restrictions in its convertible note, warrants, and purchaseagreement with Corgenix prohibit each of CAMOFI and Truk Opportunity Fund fromexercising any warrants or converting any debt if such conversion or exercisewould cause either entity to exceed 4.99% beneficial ownership of Corgenix.CAMOFI holds convertible debt and warrants to acquire up to 12,361,698 sharesof common stock. Truk Opportunity Fund holds convertible debt and warrants toacquire up to 5,982,027 shares of common stock, without taking into accountinterest on the debt, which may also be converted into shares of commonstock.  Michael E. Fein andStephen E. Saltzstein, as principals of Atoll Asset Management, LLC, theManaging Member of Truk Opportunity Fund, LLC, exercise investment and votingcontrol over the securities owned by Truk Opportunity Fund, LLC.  Both Mr. Fein and Mr. Saltzsteindisclaim beneficial ownership of the securities owned by Truk Opportunity Fund,LLC.

(4)                For purposes of this calculation, the holdings of Ascendiant CapitalGroup, LLC have been aggregated with Ascendiant Securities, L.P. Contractualrestrictions in the warrants held by the Ascendiant entities prohibit them fromexercising any warrants if such exercise would cause either entity to exceed4.99% beneficial ownership of Corgenix. The Ascendiant entities together holdwarrants to acquire up to 3,281,626 shares of common stock.

(5)                Contractual restrictions in the warrants held by Mr. Stern prohibit himfrom exercising any warrants if such exercise would cause him  to exceed 4.99% beneficial ownership ofCorgenix.  Mr. Stern holds warrants toacquire up to 740,333****shares ofcommon stock.

**EquityCompensation**

**EquityCompensation Plan Information**
| **Plan Category**                                      | ** ** | **Number of securities to  be issued upon exercise of  outstanding options,  warrants and rights  (a)** | ** ** | **Weighted average  exercise price of  outstanding options,  warrants and rights  (b)** | ** ** | **Number of securities  remaining available for  future issuance under  equity compensation  plans (excluding  excluding securities  reflected in column (a)  (c)** | ** ** |
|-------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| Equity compensation  plans approved by security holders     |       | 1,262,300                                                                                                                                                 |       | $                                                                                                                     | 0.40       |                                                                                                                                                                                                                            | 924,467    |   |
| Equity compensation  plans not approved by security holders |       | —                                                                                                                                                    |       | —                                                                                                                |       | —                                                                                                                                                                                                                          |       |
| Total                                                       |       | 1,262,300                                                                                                                                                 |       | $                                                                                                                     | 0.40       |                                                                                                                                                                                                                            | 924,467    |   |

 

**Item12.  Certain Relationships and RelatedTransactions.**

There have not been any transactions, or series ofsimilar transactions, since the beginning of the Company’s last fiscal year, orany currently proposed transaction, or series of similar transactions, to whichthe Company or any of its subsidiaries was or is to be a party, in which theamount involved exceeds $60,000 and in which any director or executive officerof the Company, nominee for election as a director, any five percent securityholder or any member of the immediate family of any of the foregoing personshad, or will have, a direct or indirect material interest.

37

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I**tem 13.  Exhibits and Reports onForm 8-K.**

**a.  Index to and Description of Exhibits**
| Exhibit  Number | ** ** | **Description of Exhibit**                                                                                                                                                                                                                                               |
|-----------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** **      | ** ** | ** **                                                                                                                                                                                                                                                               |
| 1.1             |       | Letter Agreement between the Company and Ascendiant  Securities, LLC dated January 14, 2005, as amended, filed with the Company’s  Registration Statement on Form SB-2 filed June 24, 2005 and incorporated  herein by reference.                                   |
|            |       |                                                                                                                                                                                                                                                                     |
| 3.1             |       | Articles of Incorporation, as amended, filed with  the Company’s Registration Statement on Form 10-SB filed June 29, 1998, and  incorporated herein by reference.                                                                                                   |
|            |       |                                                                                                                                                                                                                                                                     |
| 3.2             |       | Articles of Amendment to the Articles of  Incorporation, filed with the Company’s Registration Statement on Form SB-2 filed  April 6, 2006 and incorporated herein by reference.                                                                                    |
|            |       |                                                                                                                                                                                                                                                                     |
| 3.3             |       | Amended and Restated Certificate of Designations,  Preferences, Rights and Limitations of Series A Convertible Preferred Stock  for Corgenix Medical Corporation, filed with the Company’s Form 8-K filed  December 30, 2005, and incorporated herein by reference. |
|            |       |                                                                                                                                                                                                                                                                     |
| 3.4             |       | Bylaws, filed with the Company’s Registration  Statement on Form 10-SB filed June 29, 1998, and incorporated herein by  reference.                                                                                                                                  |
|            |       |                                                                                                                                                                                                                                                                     |
| 10.2            |       | Office Lease dated May 5, 2001 between Crossroads  West LLC/Decook Metrotech LLC and Corgenix, Inc., filed as exhibit 10.9 to  the Company’s Form 10-KSB filed September 28, 2001 and incorporated herein by  reference.                                            |
|            |       |                                                                                                                                                                                                                                                                     |
| 10.3            |       | Guarantee dated November 1, 1997 between William  George Fleming, Douglass Simpson and Geoffrey Vernon Callen, filed with the  Company’s Registration Statement on Form 10-SB filed June 29, 1998, and  incorporated herein by reference.                           |
|            |       |                                                                                                                                                                                                                                                                     |
| 10.4            |       | Employment Agreement dated July 1, 2005 between Luis  R. Lopez and the Company, filed as exhibit 10.7 to the Company’s Form 10-KSB  filed September 22, 2005 and incorporated herein by reference.                                                                  |
|            |       |                                                                                                                                                                                                                                                                     |
| 10.5            |       | Employment Agreement dated July 1, 2005 between  Douglass T. Simpson and the Company, filed as exhibit 10.8 to the Company’s  Form 10-KSB filed September 22, 2005 and incorporated herein by reference.                                                            |
|            |       |                                                                                                                                                                                                                                                                     |
| 10.6            |       | Employment Agreement dated July 1, 2005 between Ann  L. Steinbarger and the Company, filed as exhibit 10.10 to the Company’s Form  10-KSB filed September 22, 2005 and incorporated herein by reference.                                                            |
|            |       |                                                                                                                                                                                                                                                                     |
| 10.7            |       | Employment Agreement dated July 1, 2005 between  Taryn G. Reynolds and the Company, filed as exhibit 10.11 to the Company’s  Form 10-KSB filed September 22, 2005 and incorporated herein by reference.                                                             |
|            |       |                                                                                                                                                                                                                                                                     |
| 10.8            |       | Employment Agreement dated July 1, 2005 between  William H. Critchfield and the Company, filed as exhibit 10.9 to the  Company’s filing on Form 10-KSB filed September 22, 2005 and incorporated  herein by reference.                                              |
|            |       |                                                                                                                                                                                                                                                                     |
| 10.9            |       | Form of Indemnification Agreement between the Company  and its directors and officers, filed with the Company’s Registration  Statement on Form 10-SB/A-1 filed September 24, 1998 and incorporated herein  by reference.                                           |

 

38

----

 
| Exhibit  Number | ** ** | **Description of Exhibit**                                                                                                                                                                                                     |
|-----------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** **      | ** ** | ** **                                                                                                                                                                                                                     |
| 10.10           |       | Warrant Agreement dated June 1, 2000 between the  Company and Taryn G. Reynolds, filed as exhibit 10.27 to the Company’s Form  10-KSB filed October 2, 2000, and incorporated herein by reference.                        |
|            |       |                                                                                                                                                                                                                           |
| 10.11           |       | Consulting Agreement dated September 29, 2002  between Eiji Matsuura, Ph.D and the Company, filed as exhibit 10.32 to the  Company’s Form 10-QSB filed November 14, 2002 and incorporated herein by  reference.           |
|            |       |                                                                                                                                                                                                                           |
| 10.12           |       | License Agreement dated September 29, 2002 between  Eiji Matsuura, Ph.D and the Company, filed as exhibit 10.33 to the Company’s  Form 10-QSB filed November 14, 2002 and incorporated herein by reference.               |
|            |       |                                                                                                                                                                                                                           |
| 10.13           |       | Amended and Restated 1999 Incentive Stock Plan filed  with the Company’s filing of Proxy Statement Schedule 14A Information on  October 23, 2002 and incorporated herein by reference.                                    |
|            |       |                                                                                                                                                                                                                           |
| 10.14           |       | Amended and Restated Employee Stock Purchase Plan,  filed with the Company’s filing of Proxy Statement Schedule 14A Information  on October 23, 2002, and incorporated herein by reference.                               |
|            |       |                                                                                                                                                                                                                           |
| 10.15           |       | Warrant Agreement dated October 11, 2001 between  Phillips V. Bradford and the Company, filed as exhibit 21.4 to Company’s Form  10-QSB filed February 12, 2002 and incorporated herein by reference.                     |
|            |       |                                                                                                                                                                                                                           |
| 10.16           |       | Warrant Agreement dated October 11, 2001 between  Charles F. Ferris and the Company, filed as exhibit 21.5 to the Company’s  Form 10-QSB filed February 12, 2002 and incorporated herein by reference.                    |
|            |       |                                                                                                                                                                                                                           |
| 10.17           |       | Underlease Agreement dated October 3, 2001 between  G.V. Calen, A.G. Pirmohamed and Corgenix UK, Ltd., filed as exhibit 21.6 to  the Company’s Form 10-QSB filed February 12, 2002 and incorporated herein by  reference. |
|            |       |                                                                                                                                                                                                                           |
| 10.18           |       | Form of Securities Purchase Agreement dated May 19,  2005, filed as exhibit 2.1 to the Company’s Registration Statement on Form  SB-2 filed June 24, 2005 and incorporated herein by reference.                           |
|            |       |                                                                                                                                                                                                                           |
| 10.19           |       | Form of Secured Convertible Term Note dated May 19,  2005, filed as exhibit 10.32 to the Company’s Registration Statement on  Form SB-2 filed June 24, 2005 and incorporated herein by reference.                    |
|            |       |                                                                                                                                                                                                                           |
| 10.20           |       | Form of Registration Rights Agreement dated May 19,  2005, filed as exhibit 10.33 to the Company’s Registration Statement on Form  SB-2 filed June 24, 2005 and incorporated herein by reference.                         |
|            |       |                                                                                                                                                                                                                           |
| 10.21           |       | Form of Restricted Account Agreement dated May 19,  2005, filed as exhibit 10.34 to the Company’s Registration Statement on Form  SB-2 filed June 24, 2005 and incorporated herein by reference.                          |
|            |       |                                                                                                                                                                                                                           |
| 10.22           |       | Form of Restricted Account Side Letter dated May 19,  2005, filed as exhibit 10.35 to the Company’s Registration Statement on Form  SB-2 filed June 24, 2005 and incorporated herein by reference.                        |
|            |       |                                                                                                                                                                                                                           |
| 10.23           |       | Form of Stock Pledge Agreement dated May 19, 2005,  filed as exhibit 10.36 to the Company’s Registration Statement on Form SB-2  filed June 24, 2005 and incorporated herein by reference.                                |
|            |       |                                                                                                                                                                                                                           |
| 10.24           |       | Form of Lockup Letter dated May 19, 2005, filed as  exhibit 10.37 to the Company’s Registration Statement on Form SB-2 filed June  24, 2005 and incorporated herein by reference.                                         |
|            |       |                                                                                                                                                                                                                           |
| 10.25           |       | Form of Subsidiary Guaranty dated May 19, 2005,  filed as exhibit 10.38 to the Company’s Registration Statement on Form SB-2  filed June 24, 2005 and incorporated herein by reference.                                   |

 

39

----

 
| Exhibit  Number | ** ** | **Description of Exhibit**                                                                                                                                                                                                                                                              |
|-----------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|            |       |                                                                                                                                                                                                                                                                                    |
| 10.26           |       | Form of Letter Agreement dated June 7, 2005 between  the Company and certain officers, directors and affiliated persons, filed as  exhibit 10.39 to the Company’s Registration Statement on Form SB-2 filed June  24, 2005 and incorporated herein by reference.                   |
|            |       |                                                                                                                                                                                                                                                                                    |
| 10.27           |       | Lease Agreement dated February 8, 2006 between  Corgenix Medical Corporation and York County, LLC, a California limited  liability company (as landlord), filed with the Company’s Registration  Statement on Form SB-2 filed April 6, 2006 and incorporated herein by  reference. |
|            |       |                                                                                                                                                                                                                                                                                    |
| 10.28           |       | Preferred Stock Purchase Agreement between Corgenix  Medical Corporation and Barron Partners L.P., dated December 28, 2005, filed  as exhibit 10.1 to the Company’s quarterly report on Form 10-QSB filed  February 13, 2006 and incorporated herein by reference.                 |
|            |       |                                                                                                                                                                                                                                                                                    |
| 10.29           |       | Escrow Agreement between Corgenix Medical  Corporation, Barron Partners LP and Epstein, Becker & Green, P.C., dated  December 28, 2005, filed as exhibit 10.2 to the Company’s quarterly report on  Form 10-QSB filed February 13, 2006 and incorporated herein by reference.  |
|            |       |                                                                                                                                                                                                                                                                                    |
| 10.30           |       | Registration Rights Agreement between Corgenix  Medical Corporation and Barron Partners L.P., dated December 28, 2005, filed  as exhibit 10.3 to the Company’s quarterly report on Form 10-QSB filed  February 13, 2006 and incorporated herein by reference.                      |
|            |       |                                                                                                                                                                                                                                                                                    |
| 10.31           |       | Common Stock Purchase Warrant “A” dated December 28,  2005 issued to Barron Partners, filed as exhibit 10.4 to the Company’s  quarterly report on Form 10-QSB filed February 13, 2006 and incorporated  herein by reference.                                             |
|            |       |                                                                                                                                                                                                                                                                                    |
| 10.32           |       | Common Stock Purchase Warrant “B” dated December 28,  2005 issued to Barron Partners, filed as exhibit 10.5 to the Company’s  quarterly report on Form 10-QSB filed February 13, 2006 and incorporated  herein by reference.                                             |
|            |       |                                                                                                                                                                                                                                                                                    |
| 10.33           |       | Common Stock Purchase Warrant “C” dated December 28,  2005 issued to Barron Partners, filed as exhibit 10.6 to the Company’s  quarterly report on Form 10-QSB filed February 13, 2006 and incorporated  herein by reference.                                             |
|            |       |                                                                                                                                                                                                                                                                                    |
| 10.34           |       | Common Stock Purchase Warrant #118 dated December  28, 2005 issued to Ascendiant Securities, L.L.C., filed as exhibit 10.7 to  the Company’s quarterly report on Form 10-QSB filed February 13, 2006 and  incorporated herein by reference.                                        |
|            |       |                                                                                                                                                                                                                                                                                    |
| 10.35           |       | Common Stock Purchase Warrant #119 dated December  28, 2005 issued to Ascendiant Securities, L.L.C., filed as exhibit 10.8 to  the Company’s quarterly report on Form 10-QSB filed February 13, 2006 and  incorporated herein by reference.                                        |
|            |       |                                                                                                                                                                                                                                                                                    |
| 10.36           |       | Common Stock Purchase Warrant #120 dated December  28, 2005 issued to Ascendiant Securities, L.L.C. ̧ filed as exhibit 10.9 to  the Company’s quarterly report on Form 10-QSB filed February 13, 2006 and  incorporated herein by reference.                                   |
|            |       |                                                                                                                                                                                                                                                                                    |
| 10.37           |       | Form of Barron Lockup Letter, filed as exhibit 10.3  to the Company’s Form 8-K filed December 20, 2005 and incorporated herein by  reference.                                                                                                                                      |
|            |       |                                                                                                                                                                                                                                                                                    |
| 10.38           |       | Form of Lockup Letter in connection with Secured  Convertible Term Note financing, filed as exhibit 10.7 to the Company’s Form  8-K filed December 20, 2005 and incorporated herein by reference.                                                                                  |

 

40

----

 
| Exhibit  Number | ** ** | **Description of Exhibit**                                                                                                                                                                                                                                             |
|-----------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|            |       |                                                                                                                                                                                                                                                                   |
| 10.39           |       | Registration Rights Agreement among Truk  International Fund, LP, Truk Opportunity Fund, LLC, CAMOFI Master LDC and  Corgenix Medical Corporation, filed as exhibit 10.6 to the Company’s Form 8-K  filed December 20, 2005 and incorporated herein by reference. |
|            |       |                                                                                                                                                                                                                                                                   |
| 10.40           |       | Product Development, Manufacturing and Distribution  Agreement dated May 13, 2004 between Creative Clinical Concepts, Inc. and the  Company, filed as exhibit 10.26 to the Company’s Form 10-KSB filed September  22, 2005 and incorporated herein by reference.  |
|            |       |                                                                                                                                                                                                                                                                   |
| 10.41           |       | Supply Agreement dated September 12, 2003 between  DiaDexus, Inc. and the Company, filed as exhibit 10.31 to the Company’s Form  10-KSB filed September 22, 2005 and incorporated herein by reference.                                                            |
|            |       |                                                                                                                                                                                                                                                                   |
| 10.42           |       | Distribution Agreement and OEM Supply Agreement  dated March 31, 2005 between MBL International, Inc. and the Company, filed  as exhibit 10.33 to the Company’s Form 10-KSB filed September 22, 2005 and  incorporated herein by reference.                       |
|            |       |                                                                                                                                                                                                                                                                   |
| 10.43           |       | Form of Term Note Security Agreement dated May 19,  2005, filed as exhibit 4.1 to the Company’s Registration Statement on Form  SB-2 filed June 24, 2005 and incorporated herein by reference.                                                                    |
|            |       |                                                                                                                                                                                                                                                                   |
| 10.44           |       | Form of Common Stock Purchase Warrant dated May 19,  2005, filed as exhibit 4.2 to the Company’s Registration Statement on Form  SB-2 filed June 24, 2005 and incorporated herein by reference.                                                                   |
|            |       |                                                                                                                                                                                                                                                                   |
| 10.45           |       | Form of Secured Convertible Term Note dated December  30, 2005, filed as exhibit 4.3 to the Company’s Form 8-K filed December 30,  2005 and incorporated herein by reference.                                                                                     |
|            |       |                                                                                                                                                                                                                                                                   |
| 10.46           |       | Form of AIR Warrant dated December 30, 2005, filed  as exhibit 4.4 to the Company’s Form 8-K filed December 30, 2005 and  incorporated herein by reference.                                                                                                       |
|            |       |                                                                                                                                                                                                                                                                   |
| 10.47           |       | Corgenix Medical Corporation 2005 Incentive  Compensation Plan, filed with the Company’s filing of Proxy Statement  Schedule 14A Information on October 27, 2005 and incorporated herein by  reference.                                                      |
|            |       |                                                                                                                                                                                                                                                                   |
| 21.1            |       | Subsidiaries of the Registrant, filed as Exhibit  21.1 to the Company’s Registration Statement on Form 10-SB, filed June 29,  1998.                                                                                                                               |
|            |       |                                                                                                                                                                                                                                                                   |
| 31.1*           |       | Certification pursuant to section 302 of the  Sarbanes-Oxley Act of 2002.                                                                                                                                                                                         |
|            |       |                                                                                                                                                                                                                                                                   |
| 31.2*           |       | Certification pursuant to section 302 of the  Sarbanes-Oxley Act of 2002.                                                                                                                                                                                         |
|            |       |                                                                                                                                                                                                                                                                   |
| 32.1*           |       | Certification by Chief Executive Officer pursuant to  18 U.S.C. Section 1350, or adopted pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002.                                                                                                         |
|            |       |                                                                                                                                                                                                                                                                   |
| 32.2*           |       | Certification by Principal Financial Officer  pursuant to 18 U.S.C. Section 1350, or adopted pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                     |

 

----

* Filed herewith

 

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

1.               Form 8-K filedJanuary 6, 2006 *Departure of Directors or PrincipalOfficers; Election of Directors; Appointment of Principal Officers*

2.               Form 8-K filedFebruary 15, 2006 *Regulation FD Disclosure*

3.               Form 8-K filedMarch 14, 2006 *Entry into a Material Definitive Agreement*

4.               Form 8-K filedMarch 29, 2006 *Departure of Directors or PrincipalOfficers; Election of Directors; Appointment of Principal Officers; OtherEvents*

41

----

**Item14.  Principal Accountant Fees andServices.**

TheCompany’s principal outside accountant who serves as the Company’s auditor andthe Company’s principal outside accountant for preparation of the Company’sFederal and State income tax returns is Hein & Associates LLP.   Hein & Associates LLP also was theprincipal outside accountant for preparation of the Company’s Federal and Stateincome tax returns.

The aggregate feesbilled for each of the last two fiscal years for professional services renderedby the Company’s principal accountants are as follows:

|      | ** ** | **Audit Fees  (Includes Form  QSB Reviews &  Consents)** | ** ** | **Audit-Related  Fees** | ** ** | **Tax Fees** | ** ** | **All Other Fees** | ** ** |
|------|------------|----------------------------------------------------------------------------------|------------|-------------------------|------------|-------------------|------------|------------------------------|------------|
| 2006 |       | $                                                                                | 83,225     |                    | —     |              | $          | 5,260                        |       | — |   |
| 2005 |       | $                                                                                | 53,800     |                    | —     |              | $          | 8,500                        |       | — |   |

 

The Company’s AuditCommittee (the “Committee”) is responsible for the appointment, compensation,retention and oversight of the work of the registered public accounting firm(including resolution of disagreements between management and the independentauditor regarding financial reporting) for the purpose of preparing or issuingan audit report or performing other audit, review or attest services for theCompany. The Committee pre-approves all permissible non-audit services and allaudit, review or attest engagements required under the securities laws(including the fees and terms thereof) to be performed for the Company by itsregistered public accounting firm, provided, however, that de-minimus non-auditservices may instead be approved in accordance with applicable SEC rules.

42

----

**CONSENT OF INDEPENDENT REGISTEREDPUBLIC ACCOUNTING FIRM**

We consent to theincorporation by reference in Registration Statement Nos. 333-125623,333-101528, 333-55682, and 333-69775 of Corgenix Medical Corporation on FormS-8 of our report, dated August 2, 2006, appearing in this Annual Report onForm 10-KSB of Corgenix Medical Corporation for the years ended June 30, 2006and 2005.

 

***HEIN****&ASSOCIATES LLP*

Denver, Colorado

September 25, 2006

43

----

**CORGENIX MEDICALCORPORATION**

**AND SUBSIDIARIES**

ConsolidatedFinancial Statements

June30, 2006 and 2005

(WithIndependent Registered Public Accounting Firm’s Report Thereon)

44

----

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

ConsolidatedFinancial Statements

June30, 2006 and 2005
| Index to Consolidated Financial Statements                                                               |   |
|----------------------------------------------------------------------------------------------------------|--------|
|                                                                                                     |   |
| Report of Independent Registered Public Accounting  Firm                                                 |   |
|                                                                                                     |   |
| Consolidated Balance Sheets as of June 30, 2006 and  2005                                                |   |
|                                                                                                     |   |
| Consolidated Statements of Operations and  Comprehensive Loss for the years ended June 30, 2006 and 2005 |   |
|                                                                                                     |   |
| Consolidated Statements of Stockholders’ Equity for  the years ended June 30, 2006 and 2005         |   |
|                                                                                                     |   |
| Consolidated Statements of Cash Flows for the years  ended June 30, 2006 and 2005                        |   |
|                                                                                                     |   |
| Notes to Consolidated Financial Statements                                                               |   |

 

45

----

 

**Reportof Independent Registered Public Accounting Firm**

The Board ofDirectors and StockholdersCorgenix Medical Corporation:

We have auditedthe accompanying consolidated balance sheets of Corgenix Medical Corporationand subsidiaries (Company) as of June 30, 2006 and 2005, and the relatedconsolidated statements of operations and comprehensive loss, stockholders’equity and cash flows for the years then ended. These consolidated financial statements are the responsibility of theCompany’s management.  Our responsibilityis to express an opinion on these consolidated financial statements based onour audits.

We conducted ouraudits in accordance with the standards of the Public Company AccountingOversight Board (United States).  Thosestandards require that we plan and perform the audits to obtain reasonableassurance about whether the financial statements are free of materialmisstatement.  An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures inthe financial statements.  An audit alsoincludes assessing the accounting principles used and significant estimatesmade by management, as well as evaluating the overall financial statementpresentation.  We believe that our auditsprovides a reasonable basis for our opinion.

In our opinion,the consolidated financial statements referred to above present fairly, in allmaterial respects, the financial position of Corgenix Medical Corporation andsubsidiaries as of June 30, 2006 and 2005, and the results of their operationsand their cash flows for the years then ended, in conformity with U.S.generally accepted accounting principles.

**Hein& Associates LLP**

Denver, ColoradoAugust 2, 2006

46

----

**CORGENIX MEDICAL CORPORATIONAND SUBSIDIARIES**

ConsolidatedBalance Sheets

June 30, 2006 and 2005

 
| ** **                                                                                                                                                               | ** ** | **2006**   | ** ** | **2005**   | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------|------------|------------|------------|
| **Assets**                                                                                                                                                               |       |       |       |       |       |
| Current assets:                                                                                                                                                          |       |       |       |       |       |
|                                                                                                                                                                     |       |       |       |       |       |
| Cash and cash  equivalents                                                                                                                                               |       | $          | 3,118,494  |       | 1,281,965  |   |
| Accounts  receivable, less allowance for doubtful accounts of $13,097                                                                                                    |       | 1,362,768  |       | 887,645    |       |
| Inventories                                                                                                                                                              |       | 1,635,549  |       | 1,215,787  |       |
| Prepaid expenses                                                                                                                                                         |       | 64,596     |       | 51,842     |       |
| Total current  assets                                                                                                                                                    |       | 6,181,407  |       | 3,437,239  |       |
|                                                                                                                                                                     |       |       |       |       |       |
| Equipment:                                                                                                                                                               |       |       |       |       |       |
| Capitalized  software costs                                                                                                                                              |       | 122,855    |       | 122,855    |       |
| Machinery and  laboratory equipment                                                                                                                                      |       | 671,495    |       | 639,692    |       |
| Furniture,  fixtures and office equipment                                                                                                                                |       | 585,399    |       | 523,762    |       |
|                                                                                                                                                                     |       | 1,379,749  |       | 1,286,309  |       |
| Accumulated  depreciation and amortization                                                                                                                               |       | (1,113,131 | )          | (1,028,103 | )          |
|                                                                                                                                                                     |       |       |       |       |       |
| Net equipment                                                                                                                                                            |       | 266,618    |       | 258,206    |       |
|                                                                                                                                                                     |       |       |       |       |       |
| Intangible assets:                                                                                                                                                       |       |       |       |       |       |
| Patents, net of  accumulated amortization of $1,117,544 and $1,093,970 respectively                                                                                      |       | —     |       | 23,574     |       |
| License                                                                                                                                                                  |       | 27,848     |       | 18,275     |       |
|                                                                                                                                                                     |       | 27,848     |       | 41,849     |       |
| Other assets:                                                                                                                                                            |       |       |       |       |       |
| Deferred  financing costs net of amortization of $469,065 and $39,440                                                                                                    |       | 1,147,563  |       | 907,095    |       |
| Due from officer                                                                                                                                                         |       | 12,000     |       | 12,000     |       |
| Restricted cash  (note 2)                                                                                                                                                |       | 250,000    |       | 250,000    |       |
| Other                                                                                                                                                                    |       | 328,180    |       | 86,105     |       |
| Total assets                                                                                                                                                             |       | $          | 8,213,616  |       | 4,992,494  |   |
|                                                                                                                                                                     |       |       |       |       |       |
| **Liabilities  and Stockholders’ Equity**                                                                                                                           |       |       |       |       |       |
| Current liabilities:                                                                                                                                                     |       |       |       |       |       |
| Current portion  of notes payable, net of discount (note 2)                                                                                                              |       | $          | 770,151    |       | 221,176    |   |
| Current portion  of capital lease obligations                                                                                                                            |       | 15,945     |       | 22,370     |       |
| Accounts payable                                                                                                                                                         |       | 511,397    |       | 453,764    |       |
| Accrued payroll  and related liabilities                                                                                                                                 |       | 270,542    |       | 218,411    |       |
| Accrued interest                                                                                                                                                         |       | 43,914     |       | 753        |       |
| Accrued  liabilities                                                                                                                                                     |       | 364,348    |       | 113,293    |       |
| Total current  liabilities                                                                                                                                               |       | 1,976,297  |       | 1,029,767  |       |
| Notes payable, net of  discount, less current portion (note 2)                                                                                                           |       | 1,290,776  |       | 980,716    |       |
| Capital lease  obligation, less current portion                                                                                                                          |       | 5,130      |       | 22,754     |       |
| Total  liabilities                                                                                                                                                       |       | 3,272,203  |       | 2,033,237  |       |
| Commitments and  contingencies (note 4)                                                                                                                                  |       |       |       |       |       |
|                                                                                                                                                                     |       |       |       |       |       |
| Redeemable common stock,  880,282 shares issued and outstanding, aggregate redemption value of  $450,000, net of unaccreted discount and issuance costs of $0            |       | 250,000    |       | 500,000    |       |
|                                                                                                                                                                     |       |       |       |       |       |
| Stockholders’ equity:                                                                                                                                               |       |       |       |       |       |
| Convertible  Preferred stock, $0.001 par value, liquidation preference $700,000.  Authorized 5,000,000 shares, 2,000,000 shares issued and outstanding at June  30, 2006 |       | 2,000,000  |       | —     |       |
| Common stock,  $0.001 par value. Authorized 100,000,000 shares; Issued and outstanding  10,723,205 and 8,172,435 shares in 2005 and 2004, respectively                   |       | 9,895      |       | 7,292      |       |
| Additional paid-in  capital                                                                                                                                              |       | 12,060,729 |       | 7,966,172  |       |

 

47

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| ** **                                       | ** ** | **2006**   | ** ** | **2005**   | ** ** |
|--------------------------------------------------|------------|------------|------------|------------|------------|
| Accumulated deficit                              |       | (9,367,556 | )          | (5,501,144 | )          |
| Accumulated other  comprehensive loss            |       | (11,655    | )          | (13,063    | )          |
| Total  stockholders’ equity                 |       | 4,691,413  |       | 2,459,257  |       |
|                                             |       |       |       |       |       |
| Total  liabilities and stockholders’ equity |       | $          | 8,213,616  |       | 4,992,494  |   |
|                                                  |            |            |            |            |            |  |

 

See accompanying notes to consolidated financial statements.

48

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**CORGENIX MEDICAL CORPORATIONAND SUBSIDIARIES**

ConsolidatedStatements of Operations and Comprehensive Loss

Years ended June 30, 2006 and 2005

 
| ** **                                                             | ** ** | **2006**   | ** ** | **2005**  | ** ** |
|------------------------------------------------------------------------|------------|------------|------------|-----------|------------|
| ** **                                                             |       |       |       |      |       |
| Net sales                                                              |       | $          | 6,635,779  |      | $          | 5,564,835 |   |
| Cost of sales                                                          |       | 2,461,901  |       | 2,044,922 |       |
|                                                                   |       |       |       |      |       |
| Gross profit                                                           |       | 4,173,878  |       | 3,519,913 |       |
|                                                                   |       |       |       |      |       |
| Operating expenses:                                                    |       |       |       |      |       |
| Selling and  marketing                                                 |       | 1,626,165  |       | 1,499,524 |       |
| Research and  development                                              |       | 574,021    |       | 612,898   |       |
| General and  administrative                                            |       | 1,638,575  |       | 1,283,661 |       |
|                                                                   |       | 3,838,761  |       | 3,396,083 |       |
|                                                                   |       |       |       |      |       |
| Operating income                                                       |       | 335,117    |       | 123,830   |       |
|                                                                   |       |       |       |      |       |
| Other income (expense) –                                          |       |       |       |      |       |
| Loss on  extinguishment of debt                                        |       | —     |       | (361,057  | )          |
| Other Income                                                           |       | 86,232     |       | 125,000   |       |
| Interest expense                                                       |       | (1,991,866 | )          | (470,231  | )          |
|                                                                   |       |       |       |      |       |
| Net loss before  income taxes                                          |       | (1,570,517 | )          | (582,458  | )          |
| Income taxes                                                           |       | 15,895     |       | —    |       |
| Net loss                                                               |       | (1,586,412 | )          | (582,458  | )          |
| Accretion of discount  on redeemable common stock                      |       | —     |       | 64,919    |       |
| Imputed dividends on  convertible preferred stock                      |       | 2,280,000  |       | —    |       |
| Net loss attributable  to common stockholders                          |       | $          | (3,866,412 | )         | $          | (647,377 | ) |
|                                                                   |       |       |       |      |       |
| Net loss per share  basic and diluted                                  |       | $          | (0.41      | )         | (0.12      | ) |
|                                                                   |       |       |       |      |       |
| Weighted average shares  outstanding – basic and diluted          |       | 9,482,559  |       | 5,537,242 |       |
|                                                                   |       |       |       |      |       |
| Net loss                                                               |       | $          | (1,586,412 | )         | $          | (582,458 | ) |
|                                                                   |       |       |       |      |       |
| Other comprehensive  income (loss) – foreign currency translation |       | 1,408      |       | (1,699    | )          |
|                                                                   |       |       |       |      |       |
| Total comprehensive  loss                                              |       | $          | (1,585,004 | )         | $          | (584,157 | ) |

 

See accompanying notes to consolidated financial statements.

49

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**CORGENIX MEDICAL CORPORATIONAND SUBSIDIARIES**

Consolidated Statements of Stockholders’ Equity

Years ended June 30, 2006 and2005

 
| ** **                                                                        | ** ** | **Preferred**      | ** ** | ** **          | ** ** | ** **                | ** ** | ** **          | ** ** | ** **     | ** ** | ** **      | ** ** | **Accumulated**   | ** ** | ** **             | ** ** |
|-----------------------------------------------------------------------------------|------------|--------------------|------------|---------------------|------------|---------------------------|------------|---------------------|------------|----------------|------------|-----------------|------------|-------------------|------------|------------------------|------------|
| ** **                                                                        | ** ** | **Stock,**         | ** ** | **Preferred**       | ** ** | **Common**                | ** ** | **Common**          | ** ** | **Additional** | ** ** | ** **      | ** ** | **Other**         | ** ** | **Total**              | ** ** |
| ** **                                                                        | ** ** | **Number of** | ** ** | **Stock**           | ** ** | **Stock,**                | ** ** | **Stock,**          | ** ** | **Paid-in**    | ** ** | **Accumulated** | ** ** | **Comprehensive** | ** ** | **Stockholders’** | ** ** |
| ** **                                                                        | ** ** | **Shares**         | ** ** | **$0.001 par** | ** ** | **Number of Shares** | ** ** | **$0.001 par** | ** ** | **Capital**    | ** ** | **Deficit**     | ** ** | **Income**        | ** ** | **Equity**             | ** ** |
| Balances at July 1, 2004                                                          | ** ** | **—**         |       | $                   | —     |                      | 5,321,319  |                | $          | 4,440          |       | $               | 5,449,100  |              | $          | (4,853,767             | )          | $ | (11,364 | ) | $ | 588,409 |   |
|                                                                              |       | ** **         |       |                |       |                      |       |                |       |           |       |            |       |              |       |                   |       |
| Issuance of common stock  for cash and exercise of stock options                  | ** ** | **—**         |       | $                   | —     |                      | 1,271,000  |                | $          | 1,271          |       | $               | 313,741    |              | $          | —                 |       | $ | — |   | $ | 315,012 |   |
| Issuance of common stock  in exchange for debt                                    | ** ** | **—**         |       | $                   | —     |                      | 885,090    |                | $          | 886            |       | $               | 220,389    |              | $          | —                 |       | $ | — |   | $ | 221,275 |   |
| Issuance of common stock  for services                                            | ** ** | **—**         |       | $                   | —     |                      | 695,026    |                | $          | 695            |       | $               | 181,341    |              | $          | —                 |       | $ | — |   | $ | 182,036 |   |
| Issuance of warrants for  services                                                | ** ** | **—**         |       | $                   | —     |                      | —     |                | $          | —         |       | $               | 390,661    |              | $          | —                 |       | $ | — |   | $ | 390,661 |   |
| Issuance of warrants in  exchange for debt                                        | ** ** | **—**         |       | $                   | —     |                      | —     |                | $          | —         |       | $               | 177,017    |              | $          | —                 |       | $ | — |   | $ | 177,017 |   |
| Beneficial conversion  feature of institutional convertible note Payable (note 3) | ** ** | **—**         |       | $                   | —     |                      | —     |                | $          | —         |       | $               | 1,306,298  |              | $          | —                 |       | $ | — |   | $ | 1,306,298 |   |
| Accretion of discount on  redeemable common stock                                 | ** ** | **—**         |       | $                   | —     |                      | —     |                | $          | —         |       | $               | —     |              | $          | (64,919                | )          | $ | — |   | $ | (64,919 | ) |
| Deferred offering costs  related to equity portion of financing                   | ** ** | **—**         |       | $                   | —     |                      | —     |                | $          | —         |       | $               | (72,375    | )                 | $          | —                 |       | $ | — |   | $ | (72,375 | ) |
| Foreign currency  translation                                                     | ** ** | **—**         |       | $                   | —     |                      | —     |                | $          | —         |       | $               | —     |              | $          | —                 |       | $ | (1,699 | ) | $ | (1,699 | ) |
| Net loss                                                                          | ** ** | **—**         |       | $                   | —     |                      | —     |                | $          | —         |       | $               | —     |              | $          | (582,458               | )          | $ | — |   | $ | (582,458 | ) |
| Balances at June 30,  2005                                                        | ** ** | **—**         |       | $                   | —     |                      | 8,172,435  |                | $          | 7,292          |       | $               | 7,966,172  |              | $          | (5,501,144             | )          | $ | (13,063 | ) | $ | 2,459,257 |   |
|                                                                              |       | ** **         |       |                |       |                      |       |                |       |           |       |            |       |              |       |                   |       |
| Issuance of preferred  stock for cash                                             | ** ** | **2,000,000**      |       | $                   | 2,000,000  |                      | —     |                | $          | —         |       | $               | 2,000,000  |              | $          | (2,000,000             | )          | $ | — |   | $ | 2,000,000 |   |
| Issuance of common stock  for services                                            | ** ** | **—**         |       | $                   | —     |                      | 595,507    |                | $          | 596            |       | $               | 104,805    |              | $          | —                 |       | $ | — |   | $ | 105,401 |   |
| Issuance of warrants for  financing costs                                         | ** ** | **—**         |       | $                   | —     |                      | **—** |                | $          | **—**     |       | $               | 360,950    |              | $          | —                 |       | $ | — |   | $ | 360,950 |   |
| Issuance of common stock  in exchange for debt and interest                       | ** ** | **—**         |       | $                   | —     |                      | 1,615 341  |                | $          | 1,614          |       | $               | 482,989    |              | $          | —                 |       | $ | — |   | $ | 484,603 |   |

 

50

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| ** **                                                                        | ** ** | **Preferred**      | ** ** | ** **          | ** ** | ** **                | ** ** | ** **          | ** ** | ** **     | ** ** | ** **      | ** ** | **Accumulated**   | ** ** | ** **             | ** ** |
|-----------------------------------------------------------------------------------|------------|--------------------|------------|---------------------|------------|---------------------------|------------|---------------------|------------|----------------|------------|-----------------|------------|-------------------|------------|------------------------|------------|
| ** **                                                                        | ** ** | **Stock,**         | ** ** | **Preferred**       | ** ** | **Common**                | ** ** | **Common**          | ** ** | **Additional** | ** ** | ** **      | ** ** | **Other**         | ** ** | **Total**              | ** ** |
| ** **                                                                        | ** ** | **Number of** | ** ** | **Stock**           | ** ** | **Stock,**                | ** ** | **Stock,**          | ** ** | **Paid-in**    | ** ** | **Accumulated** | ** ** | **Comprehensive** | ** ** | **Stockholders’** | ** ** |
| ** **                                                                        | ** ** | **Shares**         | ** ** | **$0.001 par** | ** ** | **Number of Shares** | ** ** | **$0.001 par** | ** ** | **Capital**    | ** ** | **Deficit**     | ** ** | **Income**        | ** ** | **Equity**             | ** ** |
| Beneficial conversion  feature of institutional convertible note payable (note 3) | ** ** | **—**         |       | $                   | —     |                      | —     |                | $          | —         |       | $               | 1,363,635  |              | $          | —                 |       | $ | — |   | $ | 1,363,635 |   |
| Issuance costs of  convertible preferred stock                                    | ** ** | **—**         |       |                |       |                      |       |                |       | (228,849       | )          |            |       |              |       | (228,849               | )          |
| Exercise of warrants                                                              | ** ** | **—**         |       | $                   | —     |                      | 382,738    |                | $          | 383            |       | $               | 6,537      |              | $          | —                 |       | $ | — |   | $ | 6,920 |   |
| Exercise of stock  options                                                        | ** ** | **—**         |       | $                   | —     |                      | 10,000     |                | $          | 10             |       | $               | 4,490      |              | $          | —                 |       | $ | — |   | $ | 4,500 |   |
| Cancellation of  redeemable stock upon note paydown                               | ** ** | **—**         |       | —              |       | (52,816                   | )          |                |       |           |       |            |       |              |       |                   |       |
| Foreign currency  translation                                                     | ** ** | **—**         |       | $                   | —     |                      | —     |                | $          | —         |       | $               | —     |              | $          | —                 |       | $ | 1,408 |   | $ | 1,408 |   |
| Net loss                                                                          | ** ** | **—**         |       | $                   | —     |                      | —     |                | $          | —         |       | $               | —     |              | $          | (1,586,412             | )          | $ | — |   | $ | (1,586,412 | ) |
| Dividends on convertible  preferred stock                                         | ** ** | **—**         |       | $                   |       |                      | —     |                | $          | —         |       | $               | **—** |              | $          | (280,000               | )          | $ | — |   | $ | (280,000 | ) |
| Balances 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 |   |

 

See accompanying notes to consolidated financial statements.

51

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**CORGENIX MEDICAL CORPORATIONAND SUBSIDIARIES**

ConsolidatedStatements of Cash Flows

Years ended June 30, 2006 and 2005

 
| ** **                                                                         | ** ** | **2006**  | ** ** | **2005**   | ** ** |
|------------------------------------------------------------------------------------|------------|-----------|------------|------------|------------|
| Cash flows from  operating activities:                                             |       |      |       |       |       |
| Net loss                                                                           |       | $         | (1,586,412 | )          | $          | (582,458 | ) |
| Adjustments to  reconcile net loss to net cash used in operating activities:       |       |      |       |       |       |
| Depreciation and  amortization                                                     |       | 108,474   |       | 203,350    |       |
| Accretion of  discount on notes payable                                            |       | 1,155,870 |       | 503,390    |       |
| Equity  instruments issued for services                                            |       | 105,401   |       | 182,037    |       |
| Common stock  issued for interest                                                  |       | 136,601   |       | —     |       |
| Loss on  extinguishment of debt exchanged for stock and warrants                   |       | —    |       | 177,017    |       |
| Amortization of  deferred financing costs                                          |       | 429,625   |       | 39,440     |       |
| Changes in  operating assets and liabilities:                                      |       |      |       |       |       |
| Accounts  receivable, net                                                          |       | (471,021  | )          | (54,073    | )          |
| Inventories                                                                        |       | (419,523  | )          | (233,951   | )          |
| Prepaid expenses  and other assets, net of warrants issued for finance costs       |       | (573,116  | )          | (833,643   | )          |
| Accounts payable                                                                   |       | 54,101    |       | (29,608    | )          |
| Accrued payroll  and related liabilities                                           |       | 34,121    |       | 47,433     |       |
| Accrued interest  and other liabilities                                            |       | 31,320    |       | (186,041   | )          |
| Net  cash used in operating activities                                             |       | (994,559  | )          | (767,107   | )          |
|                                                                               |       |      |       |       |       |
| Cash flows used in  investing activities:                                          |       |      |       |       |       |
| Additions to  equipment                                                            |       | (93,166   | )          | (18,392    | )          |
| Cash flows from  financing activities:                                             |       |      |       |       |       |
| Proceeds from  issuance of preferred stock, net of financing costs                 |       | 1,771,151 |       | —     |       |
| Proceeds from  issuance of common stock and exercise of stock options and warrants |       | 11,420    |       | 242,636    |       |
| Proceeds from  issuance of notes payable, net of original issue discount           |       | 1,363,635 |       | 2,420,000  |       |
| Payments on  notes payable                                                         |       | (198,833  | )          | (1,002,358 | )          |
| Payments on  capital lease obligations                                             |       | (24,049   | )          | (61,383    | )          |
|                                                                               |       |      |       |       |       |
| Net  cash provided by financing activities                                         |       | 2,923,324 |       | 1,598,895  |       |
|                                                                               |       |      |       |       |       |
| Net  increase in cash and cash equivalents                                         |       | 1,835,599 |       | 813,396    |       |
|                                                                               |       |      |       |       |       |
| Impact of exchange rate  changes on cash                                           |       | 930       |       | (385       | )          |
|                                                                               |       |      |       |       |       |
| Cash and cash  equivalents at beginning of year                                    |       | 1,281,965 |       | 468,954    |       |
|                                                                               |       |      |       |       |       |
| Cash and cash  equivalents at end of year                                          |       | $         | 3,118,494  |       | $          | 1,281,965 |   |
| Supplemental cash flow  disclosures:                                               |       |      |       |       |       |
| Cash paid for interest                                                             |       | $         | 182,104    |       | $          | 244,356 |   |
| Noncash investing and  financing activities –                                 |       |      |       |       |       |
| Equipment  acquired under capital leases                                           |       | $         | —     |       | $          | 45,400 |   |
| Issuance of  stock for debt                                                        |       | 348,003   |       | $          | 221,274    |   |
| Placement  warrants issued in connection with debt financing                       |       | $         | 360,969    |       | $          | 390,661 |   |
| Conversion of  redeemable common stock to note payable                             |       | $         | 250,000    |       | $          | — |   |
| Dividends on  convertible preferred stock                                          |       | $         | 2,280,000  |       | $          | — |   |

 

See accompanying notes to consolidated financial statements.

 

52

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**CORGENIX MEDICAL CORPORATION AND SUBSIDIARIES**

Notesto Consolidated Financial Statements

June 30, 2006 and 2005

**(1)       Summary of Significant AccountingPolicies**

***(a)***                     Business and Basis of Presentation

Corgenix (formerly known asREAADS Medical Products) develops, manufactures and markets diagnostic productsfor the serologic diagnosis of certain vascular diseases and autoimmunedisorders using proprietary technology. The Company markets its products to hospitals and free-standinglaboratories worldwide through a network of sales representatives, distributorsand private label (OEM) agreements.  TheCompany’s corporate offices and manufacturing facility are located inWestminster, Colorado.

The consolidated financialstatements include the accounts of the Company and its wholly-ownedsubsidiaries, Corgenix, Inc. and Corgenix (UK) Limited (“Corgenix UK”).  Corgenix UK was established as a UnitedKingdom company during 1996 to market the Company’s products in Europe.  Transactions are generally denominated in USdollars.

***(b)******                    ******Principles ofConsolidation***

The consolidated financial statementsinclude the financial statements of Corgenix Medical Corporation and its whollyowned subsidiaries. Inter-company balances and transactions have beeneliminated in consolidation.

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

The preparation of financialstatements in conformity with accounting principles generally accepted in theUnited States of America requires management to make estimates and assumptionsthat affect the reported amounts of assets and liabilities and disclosure ofcontingent assets and liabilities at the date of the financial statements andthe reported amounts of revenue and expenses during the reporting period.  Actual results could differ significantlyfrom those estimates.

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

The Company considers allhighly liquid debt instruments purchased with maturities of three months orless at purchase to be cash equivalents.

53

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

Trade accounts receivable arerecorded at the invoiced amount and do not bear interest. The allowance fordoubtful accounts is the Company’s best estimate of the amount of probablecredit losses in the Company’s existing accounts receivable. The Companydetermines the allowance based on historical write-off experience. The Companyreviews its allowance for doubtful accounts monthly.  Past due balances over 90 days and over aspecified amount are reviewed individually for collectibility. Account balancesare charged off against the allowance after all means of collection have beenexhausted and the potential for recovery is considered remote. The Company doesnot have any off-balance-sheet credit exposure related to customers.

***(f)***                        Inventories

Inventories are recorded at thelower of cost or market, using the first-in, first-out method.  A provision is recorded to reduce excess andobsolete inventories to their estimated net realizable value, whennecessary.  No such provision wasrecorded as of and for the two years ended June 30, 2006.  Components of inventories as of June 30, areas follows:

|                 | ** ** | **2006** | ** ** | **2005** | ** ** |
|-----------------|------------|----------|------------|----------|------------|
| Raw materials   |       | $        | 294,820    |     | $          | 318,957 |   |
| Work-in-process |       | 582,091  |       | 530,106  |       |
| Finished goods  |       | 758,638  |       | 366,724  |       |
|            |       | $        | 1,635,549  |     | $          | 1,215,787 |   |

 

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

Equipment and software arerecorded at cost.  Equipment undercapital leases is recorded initially at the present value of the minimum leasepayments. No equipment was acquired under capital leases in 2006. Equipmentacquired under capital leases amounted to $45,400 in 2005. Depreciation andamortization expense, which totaled $108,474 and $203,350 for the years endedJune 30, 2006 and 2005, respectively, is calculated primarily using thestraight-line method over the estimated useful lives of the respectiveassets which range from 3 to 7 years. Capitalized software costs are related tothe Company’s web site development, which were amortized over three years,beginning in October 2002.

***(h)***                     Intangible Assets

Intangible assets consist ofpurchased patents and goodwill. Purchased patents are amortized using thestraight-line method over the shorter of 15 years or the remaining life of thepatent.The Company adopted the provisions of Statement of Financial AccountingStandards (SFAS) No. 142, Goodwill and Other Intangible Assets (SFAS No. 142)on July 1, 2002.  Pursuant to SFAS No. 142,goodwill and intangible assets acquired in a purchase business combination anddetermined to have indefinite lives are not amortized, but instead are testedfor impairment at least

54

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annuallyin accordance with the provisions of this statement.  Identifiable intangibles with estimateduseful lives continue to be amortized over their respective estimated usefullives and reviewedfor impairment in accordance with SFAS No. 144, Accounting for Impairment orDisposal of Long Lived Assets.

***(i)***                        Advertising Costs

Advertising costs are expensedwhen incurred. Advertising costs included in selling and marketing expensestotaled $57,801 and $50,681 in fiscal 2006 and 2005, respectively.

***(j)***                        Income Taxes

Income taxes are accounted forunder the asset and liability method. Deferred tax assets and liabilities arerecognized for net operating loss and other credit carryforwards and the futuretax consequences attributable to differences between the financial statementcarrying amounts of existing assets and liabilities and their respective taxbases.  Deferred tax assets andliabilities are measured using enacted tax rates expected to apply to taxableincome in the years in which the tax effect of transactions are expected to berealized.  The effect on deferred taxassets and liabilities of a change in tax rates is recognized in theconsolidated statements of operations in the period that includes the enactmentdate.

Deferred tax assets are reducedby a valuation allowance for the portion of such assets for which it is morelikely than not the amount will not be realized.  Deferred tax assets and liabilities areclassified as current or noncurrent based on the classification of theunderlying asset or liability giving rise to the temporary difference or theexpected date of utilization of the carry forwards.

***(k)***                     Revenue Recognition

Revenue is recognized uponshipment of products. Sales discounts and allowances are recorded at the timeproduct sales are recognized and are offset against sales revenue.

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

Research and development costsand any costs associated with internally developed patents, formulas or otherproprietary technology are expensed as incurred.  Research and development expense for theyears ended June 30, 2006 and 2005 totaled $574,021 and $612,898 respectively. Revenuefrom research and development contracts represents amounts earned pursuant toagreements to perform research and development activities for third parties andis recognized as earnedunder the respective agreement. Because research and development services areprovided evenly over the contract period, revenue is recognized ratably overthe contract period. Research and development agreements in effect in 2006 and2005 provided for fees to the Company based

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on timeand materials in exchange for performing specified research and developmentfunctions. Contract research and development revenues were $62,934 and $75,321for the years ended June 30, 2006 and 2005, respectively.  Research and development contracts aregenerally short term with options to extend, and can be cancelled underspecific circumstances.

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

The Company reviews long-livedassets, including intangibles, for impairment whenever events or changes incircumstances indicate that the carrying amount of such assets may not be recoverable.Events relating to recoverability may include significant unfavorable changesin business conditions, recurring losses, or a forecasted inability to achievebreak-even operating results over an extended period.  The Company evaluates the recoverability oflong-lived assets based upon forecasted undiscounted cash flows.  Should an impairment in value be indicated,the carrying value of intangible assets will be adjusted, based on estimates offuture discounted cash flows resulting from the use and ultimate disposition ofthe asset.

***(n)***                     Stock-Based Compensation

The Company accounts for itsstock plans in accordance with the provisions of Accounting Principles Board(APB) Opinion No. 25, *Accounting for StockIssued to Employees*, SFAS No.148, *Accounting forStock-Based Compensation-Transition and Disclosure,* and relatedinterpretations.  As such, compensationexpense is recorded on the date of grant only if the current market price ofthe underlying stock exceeds the exercise price.  SFAS No. 123, *Accountingfor Stock-Based Compensation*, permits entities to recognize asexpense over the vesting period the fair value of all stock-based awards on thedate of grant.  Alternatively, SFAS No.123 also allows entities to continue to apply the provisions of APB Opinion No.25 and provide pro forma net loss disclosures for employee stock option grantsas if the fair-value-based method defined in SFAS No. 123 had beenapplied.  The Company has elected tocontinue to apply the provisions of APB Opinion No. 25 and provide the proforma disclosures required by SFAS No. 123.

Had the Company determined compensation cost based on thefair value at the date of grant for its stock options under SFAS No. 123, theCompany’s net loss would have been increased to the pro forma amounts indicatedas follows:
|                                                                                                                        | ** ** | **2006** | ** ** | **2005** | ** ** |
|------------------------------------------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|
| Net loss attributable  to common shareholders as reported                                                              |       | $        | (3,866,412 | )        | $          | (647,377 | ) |
| Deduct total  stock-based employee compensation expense determined under fair-value method  for all awards, net of tax |       | (120,162 | )          | (43,958  | )          |
| Pro forma net loss                                                                                                     |       | $        | (3,986,574 | )        | $          | (691,335 | ) |
| Net loss per share,  basic and diluted as reported                                                                     |       | $        | (0.41      | )        | $          | (0.12 | ) |
| Net loss per share, basic and diluted pro forma                                                                        |       | $        | (0.42      | )        | $          | (0.12 | ) |

 

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Fair value was determinedusing the Black Scholes option – pricing model with the following assumptions:no expected dividends, volatility of 111.5% to 159.9% in fiscal 2006 (159.9% infiscal 2005), risk-free interest rate of 3.30 % to 4.39%in fiscal 2006 (3.30%in fiscal 2005) and expected lives of five to seven years in both fiscal 2006and 2005.

The weighted average fair value per option of the 220,000options granted during the year ended June 30, 2006 was $0.406. 640,000 stockoptions were granted during the year ended June 30, 2005.

***(o)***                     Earnings Per Share

Basic earnings (loss) per shareis computed by dividing net loss attributable to common stockholders by theweighted average number of common shares outstanding.  Diluted earnings (loss) per share is computedby dividing net loss attributable to common stockholders by the weightedaverage number of common shares outstanding increased for potentially dilutivecommon shares outstanding during the period. The dilutive effect of stock options and their equivalents is calculatedusing the treasury stock method.  Stockoptions to purchase 220,000 shares were granted in fiscal 2006. Stock optionsto purchase 640,000 shares were granted in fiscal 2005. Options and warrants topurchase common stock totaling 32,923,526 and 20,453,580 shares for fiscalyears 2006 and 2005 respectively, are not included in the calculation ofweighted average common shares-diluted below as their effect is anti-dilutive.Redeemable common stock is included in the common shares outstanding forpurposes of calculating net income (loss) per share.
|                                                               | ** ** | **2006**  | ** ** | **2005**  | ** ** |
|---------------------------------------------------------------|------------|-----------|------------|-----------|------------|
|                                                          |       |      |       |      |       |
| Net loss attributable  to common stockholders                 |       | $         | (3,866,412 | )         | $          | (647,377 | ) |
|                                                          |       |      |       |      |       |
| Common and  common equivalent shares outstanding:             |       |      |       |      |       |
| Historical  common shares outstanding at beginning of year    |       | 8,172,435 |       | 5,321,319 |       |
| Weighted average  common equivalent shares issued during year |       | 1,310,124 |       | 215,923   |       |
|                                                          |       |      |       |      |       |
| Weighted average  common shares – basic and diluted      |       | 9,482,559 |       | 5,537,242 |       |
|                                                          |       |      |       |      |       |
| Net loss per share – basic and diluted                   |       | $         | (.41       | )         | $          | (.12 | ) |

 

***(p)****                    ****Warrants***

The Company has recordedcontingent stock purchase warrants in accordance with Emerging Issues TaskForce Bulletin 96-18: *Accounting for EquityInstruments That Are Issued to Other Than Employees for Acquiring, or in Conjunctionwith Selling, Goods or Services*. At the grant

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date, the minimum number ofwarrants which may eventually be issued are recorded at their fair value, whichis adjusted in subsequent periods for revisions of the minimum number ofwarrants to be issued and the then current fair value of the warrants.

***(q)***                     Foreign Currency Transactions

The accounts of the Company’s foreignsubsidiary are generally measured using the local currency as the functionalcurrency.  For those operations, assetsand liabilities are translated into U.S. dollars at period-end exchangerates.  Income and expense accounts aretranslated at average monthly exchange rates. Adjustments resulting from suchtranslation are accumulated in other comprehensive income as a separate componentof stockholders’ equity.

***(r)******                ******Liquidity***

The Company’sfuture capital requirements will depend on a number of factors, including theability to complete new equity or debt financing, the possible redemption ofcommon stock, the profitability or lack thereof, the rate at which it grows itsbusiness and its investment in proprietary research activities, the ability ofits current and future strategic partners to fund outside research anddevelopment activities, its 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.  The Company’s principal sourcesof liquidity have been cash raised from the private sale of secured convertibleterm notes and the sale of redeemable common and common stock, convertiblepreferred stock, a Bridge Note, and long- term debt financing.   The Company announced in January 2005, theengagement of Ascendiant Securities for investment banking services.Ascendiant, together with Burnham Securities, arranged the financing thefinancing that closed on May 19, 2005, which is described in detail herein. Inconnection with this financing, the Company refinanced approximately $970,000of debt, including loans from Vectra Bank, SBA and Genesis Bioventures. Inaddition, on December, 28, 2005 the Company completed two separate privateplacement financings with certain institutional and other accredited investors.The first financing was a private placement to Barron Partners, L.P., orBarron, a New York based private partnership, consisting of two million sharesof Series A Convertible Preferred Stock. These shares were sold at $1.00 pershare for gross proceeds of $2,000,000.The second financing was a privateplacement financing with certain institutional investors that had previouslyinvested in the Company in May 2005, including Truk International Fund, LP,Truk Opportunity Fund, LLC and CAMOFI Master LDC (f/k/a DCOFI Master LDC),representing net proceeds to the Company of $1,363,382. The Company believesthat its current availability of cash, working capital, future proceeds fromthe issuance of common stock and debt financing and expected cash flows fromoperations resulting from, if necessary, further expense reductions, will beadequate to meet its ongoing needs for at least

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the next twelvemonths.  At June 30, 2006, cash on handamounted to $3,118,494 compared to $1,281,965 at June 30, 2005.  This estimate of the Company’s future capitalrequirements is a forward-looking statement that is based on assumptions thatinvolve varying risks and uncertainties. Actual results may differsignificantly from the Company’s estimates. There are no assurances the Companywould be able to make required payments under certain of its agreementsdescribed above if they become due.

***(s)******           Recently IssuedAccounting Pronouncements***

*FAS 123R Disclosure.*  In December 2004, the FASBissued SFAS No. 123(R), Share-Based Payment, which is a revision ofSFAS No. 123, Accounting for Stock-Based Compensation. SFASNo. 123(R) will be effective for the Company beginning January 1,2006, and supersedes APB Opinion No. 25, Accounting for Stock Issued toEmployees, and amends SFAS No. 95, Statement of Cash Flows. SFASNo. 123(R) requires all share-based payments to employees, includinggrants of employee stock options, to be recognized in the income statementbased on their fair values. Pro-forma disclosure is no longer an alternative.The Company does not expect the adoption of FAS 123(R) will have amaterial impact on the Company’s financial statements.

*FAS 154 Disclosure.*  In June 2005, the FASBissued SFAS No. 154, Accounting Changes and Error Corrections, a replacementof APB Opinion No. 20 and SFAS No. 3. The statement applies to allvoluntary changes in accounting principles, and changes the requirements foraccounting for and reporting of a change in accounting principle. The Companydoes not believe that the adoption of SFAS No. 154 will have a materialimpact on the Company’s financial statements.

*FAS 155 Disclosure. *In February 2006,the FASB issued SFAS No. 155 “Accounting for Certain Hybrid FinancialInstruments”. This Statement amends FASB Statements No. 133, Accounting forDerivative Instruments and Hedging Activities, and No. 140, Accounting forTransfers and Servicing Financial Assets and Extinguishments of Liabilities.This Statement resolves issues addressed in Statement 133 Implementation IssueNo. D1, “Application of Statement 133 to Beneficial Interests in SecuritizedFinancial Assets.” SFAS No. 155 permits fair value remeasurement for any hybridfinancial instrument that contains an embedded derivative that otherwise wouldrequire bifurcation, clarifies which interest-only strips and principal-onlystrips are not subject to the requirements of Statement 133, and establishes arequirement to evaluate interests in securitized financial assets to identifyinterests that are freestanding derivatives or that are hybrid financialinstruments that contain an embedded derivative requiring bifurcation. It alsoclarifies that concentrations of credit risk in the form of subordinatin arenot embedded derivatives and amends Statement 140 to elimininate the prohibitionon a qualifying 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.

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*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 January 1, 2007. The Company does not believe that theadoption 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 January 1,2007. At this time, we have not completed our review and assessment of theimpact of adoption of FIN 48.

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**(2)**                     Notes Payable

Notes payable consist of thefollowing at June 30, 2006 and 2005:
| ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | ** ** | **June 30, 2006** | ** ** | **June 30, 2005** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------|------------|-----------------------------|------------|
| Secured,  amortizing convertible term note payable to institutional investors, net of  discount of $527,425, with interest at the greater of 12% or prime plus 3%  (12% as of June 30, 2006), interest only from June 1, 2005 through October 1,  2005 and then due in monthly installments of $55,667 plus interest through  May 19, 2008, collateralized by commercial security agreements and a partial  guaranty by an officer of the company. See discussion of terms below. |       | $                           | 695,740    |                        | $          | 451,892 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |       |                        |       |                        |       |
| Secured,  amortizing convertible term note payable to institutional investors, net of  discount of $1,034,813, with interest at the greater of 12% or prime plus 3%  (12% as of June 30, 2006), interest only from December 28, 2005 through  June1, 2006 and then due in monthly installments of $50,000 plus interest  through December 28, 2008, collateralized by commercial security agreements.  See discussion of terms below                                              |       | 415,187                     |       | —                      |       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |       |                        |       |                        |       |
| Secured,  non-amortizing convertible term note payable to institutional investors, with  interest at the greater of 12% or prime plus 3% (12% as of June 30, 2006),  interest only payments commencing June 1, 2005 until May 19, 2008, collaterialized  by commercial security agreements. See discussion of terms below.                                                                                                                                                        |       | 500,000                     |       | 500,000                     |       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |       |                        |       |                        |       |
| Secured,  restricted, non-amortizing convertible term note payable to institutional  investors, with interest at prime (8.25% at June 30, 2006), 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. See discussion of terms below.                                                                                           |       | 250,000                     |       | 250,000                     |       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |       |                        |       |                        |       |
| Note  payable, unsecured, to redeemable common stockholders, with interest at prime  plus 2.0% (10.25% at June 30, 2006) due in monthly installments with  principal payments ranging from $5,000 to $10,000 plus interest through  August 2008.                                                                                                                                                                                                                                  |       | 200,000                     |       | —                      |       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |       |                        |       |                        |       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |       | 2,060,927                   |       | 1,201,892                   |       |
| Current portion, net of  current portion of discount                                                                                                                                                                                                                                                                                                                                                                                                                              |       | (770,151                    | )          | (221,176                    | )          |
| Notes  payable, excluding current portion                                                                                                                                                                                                                                                                                                                                                                                                                                         |       | $                           | 1,290,776  |                        | 980,716    |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |            |                             |            |                             |            |  |  |

 

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The convertible notes payablerestrict the payment of dividends on the Company’s common stock.

On May 19, 2005, weentered into a series of agreements with Truk Opportunity Fund, LLC, a Delawarelimited liability company, Truk International Fund, LP, a Cayman Islandscompany, and DCOFI Master LDC, a Cayman Islands company, which has subsequentlychanged its name to CAMOFI Master LDC, a Cayman Islands company (together, the“Debt Investors”), pursuant to which we issued secured convertible term notesin the aggregate principal amount of $2,420,000 due May 19, 2008, together with6,840,000 common stock purchase warrants. In this financing, $250,000 is heldin a restricted cash account.  However,that amount will be released if the Company’s common stock trades a minimumdaily value of $25,000 at an average closing price per share of $0.40 orgreater for 22 consecutive trading days. We also entered into a registration rights agreement whereby, amongother things, we agreed to file a registration statement, with the SEC, toregister the resale of the shares of common stock that we will issue uponexercise of the warrants held by the Debt Investors and upon conversion oftheir notes. We agreed to keep the registration statement effective until thedate when all of the shares registered hereunder are sold or the date on whichthe shares registered hereunder can be sold without registration and withoutrestriction as to the number of shares that may be sold. The notes areconvertible into shares of our common stock at a conversion rate of $0.30 pershare and the exercise price of the warrants is $0.23 per share, each subjectto adjustments as specified in the applicable agreements. The warrants may beexercised until May 19, 2012. The estimated relative fair value of the warrantsupon issuance of the convertible notes payable was calculated as $935,482 usingthe Black-Scholes option-pricing model with the following assumptions: noexpected dividend yield, volatility of 159.9%, risk-free interest rate of 3.30%and an expected life of seven years. The gross proceeds of the securedconvertible term notes of $2,420,000 were allocated $1,484,518 to notes payableand $935,482 to the related warrants. The market value of the Company’s commonstock was in excess of the effective conversion price after allocation,resulting in a beneficial conversion feature (discount) of $370,816. Asrequired by Accounting Principles Board Opinion 14, “Accounting for 

 

Convertible Debt and DebtIssued with Stock Purchase Warrants”, Emerging Issues Task Force Bulletins98-5, “Accounting for Convertible Securities with Beneficial Conversion Featuresof Contingently Adjustable Conversion Ratios” and 00-27, “Application of Issue98-5 to Certain Convertible Instruments”, the portion of the proceeds equal tothe total discount attributed to both the warrants and the beneficialconversion feature was credited to additional paid in capital. The convertibledebt was recorded net of the $1,306,298 total discount, which is being accretedto interest expense over the 36-month term of the notes payable.

 

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On June 7, 2005, the Company and former preferred stockholders,including three executive officers of the Company, agreed in principal to atransaction whereby the Company issued 885,090 shares of the Company’s commonstock (“Shares”) and 885,090 warrants to acquire additional shares ofcommon stock (“Warrants”) in full satisfaction of all amounts owed bythe Company to them pursuant to the terms of their respective promissory notes.

Thesecond convertible debt financing, also completed on December 28, 2005,was a private placement financing with certain institutional investors that hadpreviously invested in the Company, including Truk International Fund, LP, TrukOpportunity Fund, LLC and CAMOFI Master LDC (f/k/a DCOFI Master LDC),representing net proceeds to the Company of $1,363,635. This financing was madepursuant to the exercise of an additional investment right by suchinstitutional investors that was granted to them pursuant to a financing onsubstantially similar terms completed on May 19, 2005.

Thisprivate placement included $1,500,000 in aggregate principal amount of SecuredConvertible Term Notes due 2008. Warrants to acquire approximately 3,800,000shares of the Company’s common stock, at $0.23 per share, were also issued tothe investors (the AIR Warrants). The estimated fair value of the warrants uponissuance was calculated as $1,647,382 using the Black-Scholes option-pricingmodel with the same assumptions as noted in the Barron financing warrantsabove. Since the calculated value of the warrants exceeded the $1,500,000convertible debt, the entire amount was attributed to discount on the notespayable and will be accreted over the 36-month period of the debt.

Theinterest rate on the Secured Convertible Term Notes is the greater of(i) prime rate plus 3% or (ii) 12%, except for the portion of thenote proceeds that is held in the restricted cash account, which amount accruesinterest at the prime rate. However, (i) if the Company has registered theshares of common stock underlying the Secured Convertible Term Notes and theAIR Warrants, and that registration is declared effective, and (ii) themarket price of the common stock for the five consecutive trading dayspreceding the last business day of each month exceeds the conversion price (asadjusted) by 25%, then the interest rate for the next calendar month is reducedby 25 basis points for each incremental 25% increase in the market price abovethe fixed conversion price.

Amortizingpayments of the principal amount begin on June 1, 2006 and such paymentsare due on the first day of each month thereafter until the maturity date inDecember 2008, at which time any outstanding principal shall be due andpayable. Interest payments began January 1, 2006, and such interestpayments are due on the first day of each subsequent month until the principalamount is paid in full.

TheSecured Convertible Term Notes may be prepaid, but any prepayment must be 125%of the portion of the principal amount to be prepaid, together with accrued butunpaid interest thereon and any other sums due. The holders of the SecuredConvertible Term Notes may accelerate all sums of principal, interest and otherfees then remaining unpaid upon the occurrence of an event of default (asdefined in

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theSecured Convertible Term Notes) beyond any applicable grace period. In the eventof such acceleration, the amount due and owing the holder shall be 125% of theoutstanding principal amount (plus accrued and unpaid interest and fees, ifany). As part of the financing terms, a blanket lien filed in connection withthe May 19, 2005 financing covering all of the Company’s assets extends tothis financing.

Thenumber of shares of common stock to be issued upon conversion of a SecuredConvertible Term Note is determined by dividing that portion of the principalamount, interest and fees to be converted by the then applicable conversionprice, which is initially set at $0.30. The conversion price may be adjusted toaccount for certain events, such as stock splits, combinations, dividends andshare issuances below the then current conversion price.

Theconversion right as contained in the Secured Convertible Term Notes providethat a holder will not convert an amount of a Note that would be convertibleinto shares of common stock to the extent that the number of shares held by theholder, when added to the number of shares of common stock beneficially ownedby such holder or issuable if the holder exercised one or more of its AIRWarrants immediately prior to conversion, would exceed 4.99% of the Company’sissued and outstanding common stock.

TheCompany also issued AIR Warrants to acquire approximately 3,800,000 shares ofthe Company’s common stock. The AIR Warrants are exercisable for seven yearsfrom the date of issuance at an exercise price of $0.23 per share. The exerciseprice is also subject to adjustment upon the occurrence of certain specifiedevents, including issuance of additional shares of common stock or subdivisionor combining of shares of common stock.

Thetransaction also included a Registration Rights Agreement in which the Companyagreed to file a registration statement on Form SB-2, covering the shares ofcommon stock issuable upon the exercise of the AIR Warrants and the conversionof the Secured Convertible Term Notes. The Form SB-2 was declared effective onApril 21, 2006.

TheCompany evaluated the embedded conversion features in both the Series APreferred Stock and the Secured Convertible Term Notes and concluded that thefeature does not require classification as a derivative instrument because thefeatures would be classified in equity if they were freestanding instruments inaccordance with EITF 00-19 *Accounting for DerivativeFinancial Instruments Indexed to, and Potentially Settled In, a Company’s OwnStock*, and, therefore, meet the scope exception found in SFAS 133, *Accounting for Derivative Instruments and Hedging Activities*.  The Company also evaluated the warrants andconcluded that the warrants also meet the scope exception found in SFAS 133and, therefore, are appropriately classified in equity. Finally, the Companyevaluated the freestanding registration rights agreements and concluded thatthey do meet the definition of a derivative instrument under SFAS 133.  The fair value of these derivativeliabilities are immaterial based on a

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probability-weighted,discounted cash flow evaluation of its terms. In Issue 05-4, *The Effect of a LiquidatedDamages Clause on a Freestanding Financial Instrument Subject to Issue No.00-19*, the EITF has been deliberating the appropriate accountingtreatment when a registration rights agreement exists, but has not yet reacheda consensus.  Once a consensus is reachedby the EITF, it is possible that the transition based on that consensus mayhave a material effect on the Company’s financial statements.

Aggregate maturities of notes payableby year, as of June 30, 2006, are as follows:

| Years ending June 30:                     |   |       |      |
|------------------------------------------------|--------|------------|-----------|
| 2007                                           |   | $          | 1,376,505 |   |
| 2008                                           |   | 1,986,660  |      |
| 2009                                           |   | 260,000    |      |
| Less unaccreted  discount on convertible notes |   | (1,562,238 | )         |
| Net maturities                                 |   | $          | 2,060,927 |   |

 

**(3)**                     Equity

***(a)***               Employee Stock Purchase Plan

Effective January 1, 1999, theCompany adopted an Employee Stock Purchase Plan to provide eligible employeesan opportunity to purchase shares of its common stock through payrolldeductions, up to 10% of eligible compensation. The plan is registered under Section 423 of the Internal Revenue Code of1986.  Each quarter, participant accountbalances are used to purchase shares of stock at the lesser of 85% of the fairvalue of shares on the first business day (grant date) and last business day(exercise date) of each quarter.  Noright to purchase shares shall be granted if, immediately after the grant, theemployee would own stock aggregating 5% or more of the total combined votingpower or value of all classes of stock. A total of 200,000 common shares have been registered with theSecurities and Exchange Commission (SEC) for purchase under the plan.  In fiscal 2006 30,509 shares were issued underthe plan. In fiscal 2005 16,145 shares were issued under the plan.

Compensation expense recognizedfor the 15% discount on shares purchased under this plan amounted to $1,697 and$1,329 in fiscal 2006 and 2005, respectively.

 

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***(b)***               Incentive Stock Option Plan

In October 1999 and July 2000the Company reserved a total of 200,000 shares of its common stock for anincentive stock option plan (Plan) for employees, directors andconsultants.  Options are granted at thediscretion of the board of directors with an exercise price equal to or greaterthan the market value of the Company’s common stock on the grant date.  At the December 2002 annual stockholdersmeeting, the Company and its stockholders adopted the Amended and Restated 1999Incentive Stock Plan whereby 800,000 shares of Corgenix common stock werereserved for issuance under this plan. In April 2005, the Company’s Board ofDirectors approved the 2005 Incentive Compensation Plan whereby 1,500,000shares of Corgenix common stock were reserved for issuance under this plan. The2005 plan was adopted by the stockholders at its December 2005 annualstockholders meeting.

Detail of stock option activityfor the two-year period ended June 30, 2006 is as follows:
|                                       | ** ** | **Number of  shares** | ** ** | **Range of  exercise  prices** | ** ** | **Weighted  average  exercise  price** | ** ** |
|---------------------------------------|------------|----------------------------|------------|-------------------------------------|------------|----------------------------------------|------------|
|                                  |       |                       |       |                                |       |                                   |       |
| Outstanding at  July 1, 2004          |       | 448,300                    |       | $                                   | 0.001-3.28 |                                   | $          | 0.509 |   |
| Granted at  market price              |       | —                     |       | —                              |       | —                                 |       |
| Granted at  greater than market price |       | 640,000                    |       | 0.30                                |       | 0.30                                   |       |
| Granted at lower  than market price   |       | —                     |       | —                              |       | —                                 |       |
| Exercised                             |       | (11,000                    | )          | 0.001                               |       | 0.001                                  |       |
| Canceled                              |       | —                     |       | —                              |       | —                                 |       |
|                                  |       |                       |       |                                |       |                                   |       |
| Outstanding at  June 30, 2005         |       | 1,077,300                  |       | $                                   |       |                                   | 0.406      |   |
| Granted at  market price              |       | 220,000                    |       | 0.30-0.46                           |       | 0.406                                  |       |
| Granted at  greater than market price |       | —                     |       | —                              |       | —                                 |       |
| Granted at lower  than market price   |       | —                     |       | —                              |       | —                                 |       |
| Exercised                             |       | (10,000                    | )          | 0.45                                |       | 0.45                                   |       |
| Canceled                              |       | (25,000                    | )          | 0.30                                |       | 0.30                                   |       |
|                                  |       |                       |       |                                |       |                                   |       |
| Outstanding at  June 30, 2006         |       | 1,262,300                  |       |                                |       | 0.404                                  |       |
|                                  |       |                       |       |                                |       |                                   |       |
| Options exercisable at  June 30, 2006 |       | 798,300                    |       |                                |       | 0.445                                  |       |
|                                       |            |                            |            |                                     |            |                                        |            |  |  |

 

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The following table summarizesinformation about stock options issued to employees and directors that areoutstanding at June 30, 2006:

| 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                       |       | 39.9 |   | 0.001 |   | 15,000 |   | $ | 0.001 |   |
|                               |       |                         |       |   |   |   |   |   |   |   |   |
| 0.625 – 1.375                 |       | 94,100                       |       | 24.2 |   | 0.84 |   | 94,100 |   | 0.84 |   |
| 0.30-0.45                          |       | 1,149,600                    |       | 63.5 |   | 0.34 |   | 685,600 |   | 0.38 |   |
| 3.28                               |       | 3,600                        |       | 8.0 |   | 3.28 |   | 3,600 |   | 3.28 |   |
|                               |       |                         |       |   |   |   |   |   |   |   |   |
|                               |       | 1,262,300                    |       | 59.74 |   | $ | 0.38 |   | 798,300 |   | $ | 0.445 |   |
|                                    |            |                              |            |  |  |  |  |  |  |  |  |  |  |

 

As of June 30, 2006, there were also31,876,226 warrants issued to institutional investors, consultants, andemployees outstanding and exercisable ranging in prices from****$.23 to $1.25 per****share with aweighted average exercise price of $.38 per share.****Ofthese warrants, 20,457,140 were issued in fiscal 2006 and 11,013,013 wereissued in fiscal 2005.. Fair value was determined using the Black Scholesoption – pricing model with the following assumptions: no expected dividends,volatility of 111.5% to 159.9% in fiscal 2006 (159.9% in fiscal 2005),risk-free interest rate of 3.30 % to 4.39% in fiscal 2006 (3.30% in fiscal2005) and expected lives of seven years in fiscal 2006 and 2005.

***(c)***                Preferred Stock

OnDecember 28, 2005 the Company issued to Barron Partners, L.P., or Barron, a NewYork based private partnership, two million shares of Series A ConvertiblePreferred Stock. The shares of Series A Convertible Preferred Stock were soldat $1.00 per share for gross proceeds of $2,000,000.  Each share of preferred stock is convertibleinitially into 2.8571428571 shares of the Company’s common stock. In addition,Corgenix issued warrants to Barron to acquire up to an additional 15,000,000shares of Corgenix common stock, of which 5,000,000 are exercisable at $0.40per share, 5,000,000 are exercisable at $0.50, and 5,000,000 are exercisable at$0.60. The warrants are exercisable for five years from the date of issuance.

Theexercise prices of the warrants, and the conversion rate and price of theshares of preferred stock, are subject to adjustment upon the occurrence ofcertain specified events, including issuance of additional shares of commonstock or subdivision or combining of shares of common stock.

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Theconversion right as contained in the preferred stock certificate ofdesignations and the exercise rights contained in the warrants provide that aholder will not convert an amount of preferred stock or exercise warrants tothe extent that the number of shares held by the holder, when added to the numberof shares of common stock beneficially owned by such holder or issuable if theholder exercised one or more of its warrants immediately prior to conversion,would exceed 4.9% of the Company’s issued and outstanding common stock.

Thetransaction with Barron also included a Registration Rights Agreement in whichthe Company agreed to file a registration statement on Form SB-2 covering theshares of common stock issuable upon the exercise of the warrants or theconversion of the preferred stock, which was declared effective on April 21,2006.

Atthe closing, the Company reimbursed Barron $15,000 for due diligence expenses.In addition, Ascendiant Securities, LLC acted as a financial advisor to theCompany. As compensation for its services, the Company paid to Ascendiant asuccess fee equal to 8% of the initial gross proceeds ($160,000), which fee waspaid from escrow when those funds were released to Corgenix from escrow.  If and when the Barron warrants areexercised, then Corgenix would pay Ascendiant 8% of those gross proceeds. Threewarrants were issued to Ascendiant, each for the purchase of up to 552,380shares, or 8% of the securities issued in the transaction, at $.40, $.50, and$.60 with net exercise rights.  Theestimated fair value of the warrants upon issuance exceeded the $2,000,000investment in the convertible preferred stock. The estimated fair value of thewarrants was calculated using the Black-Scholes option-pricing model with thefollowing assumptions: no expected dividend yield, 111.5% volatility, risk freeinterest rate of 4.39% and an expected life of five years. Since theconvertible preferred stock was immediately convertible, the entire value ofthe calculated discount (value of the warrants) was deemed to be imputeddividends on the convertible preferred stock.

Asconstituted on December 28, 2005, the Company had 40 million shares ofcommon stock authorized, of which approximately 9.3 million shares were issuedand outstanding, and approximately 30.7 million were reserved for issuance toaccommodate the exercise or conversion of warrants, options, and convertibledebt that is currently outstanding. If all of the shares of preferred stock andwarrants issued to Barron in the recent financing were converted or exercisedat that point, then approximately 20.7 million shares of common stock would beneeded to satisfy such activity.

Aspecial meeting of the shareholders of the Company was held on March 24,2006 to vote upon an amendment to the articles of incorporation increasingthe number of authorized shares of Common Stock from 40 million to 100 million(the “Share Increase Amendment”).  TheShare Increase Amendment was adopted by the Company’s shareholders at thespecial meeting.  As a result, the$2,000,000 plus accrued interest was released to the Company, and the preferredstock certificates were issued from escrow to Barron. In addition, because theShare Increase Amendment was adopted and approved by the Company’sshareholders, the Company has reserved and keeps available shares of commonstock for the purpose of enabling the Company to issue the shares of commonstock underlying the preferred stock and warrants issued to Barron.

Aspreviously disclosed, the Company has been and plans to continue to use the netproceeds, after transaction fees and expenses, for key strategic initiatives,working capital and other general corporate purposes.

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Corgenixgranted to Barron the right to participate in any subsequent financings by theCompany on a pro rata basis at one hundred percent (100%) of the offeringprice; provided that any such right to participate shall be effective if andonly if the right of first refusal in favor of the Company’s currentconvertible debt investors has not been exercised.

Nowthat the funds in escrow have been released to the Company due to shareholderapproval of the Share Increase Amendment, the agreements with Barron state thatif the Company’s EBITDA for the audited fiscal year ended June 30, 2006,as calculated based upon the audited financial statements filed with theCompany’s Form 10-KSB filed with the Securities and Exchange Commission, isless than $1,150,000, then the Company must issue to Barron such number ofadditional shares of preferred stock equal to 2,000,000 multiplied by thepercentage by which EBITDA is less than $1,150,000, expressed as a positivenumber; provided that in no event will the number of additional shares ofpreferred stock issued due to this EBITDA adjustment exceed 14% of the numberof shares of Preferred Stock originally issued to Barron, or 280,000 shares.For example if EBITDA is $920,000 (20% decline) then the Company would issue tothe Investor an additional 14% (i.e., 280,000) shares of preferred stock;provided that at the time Barron continues to hold all 2,000,000 shares of preferredstock originally issue on the Closing. EBITDA is defined in the Preferred Stock Purchase Agreement as netincome of the Company, before interest, taxes, depreciation, amortization andone time charges, including, but not limited to, loss on the extinguishment ofdebt.  EBITDA for the fiscal year endedJune 30, 2006 was $443,591, therefore we must issue 280,000 shares ofpreferred stock within 5 business days after this annual report is filed withthe SEC. The preferred shares have been recorded as a dividend as of June 30,2006.

TheCompany agreed that a majority of the members of the board of directors, and amajority of the compensation and audit committees, would be qualifiedindependent directors, as defined by the NASD, within 90 days after December 28,2005. As of March 30, 2006, these requirements have been fulfilled.

**(4)**                     Commitments and Contingencies

***(a)***                     Leases

The Company is obligated undervarious noncancellable operating and capital leases primarily for its operatingfacilities and certain office equipment. The leases generally require the Company to pay related insurance costs,maintenance costs and taxes.  Rentexpense on operating leases is reflected on a straight-line basis over thelease term. Future minimum lease payments under noncancelable leases, withinitial or remaining terms in excess of one year, as of June 30, 2006, areas follows:
|                                      | ** ** | **Capital** | ** ** | **Operating** | ** ** |
|--------------------------------------|------------|-------------|------------|---------------|------------|
| ** **                           | ** ** | **Leases**  | ** ** | **Leases**    | ** ** |
| Years ending  June 30:               |       |        |       |          |       |
| 2007                                 |       | $           | 19,382     |          | 243,570    |   |
| 2008                                 |       | 5,328       |       | 360,299       |       |
| 2009                                 |       | —      |       | 385,292       |       |
| 2010                                 |       | —      |       | 389,173       |       |
| 2011                                 |       | —      |       | 398,987       |       |
| Thereafter                           |       | —      |       | 477,653       |       |
| Total future minimum  lease Payments |       | 24,710      |       | $             | 2,254,974  |   |
|                                      |            |             |            |               |            |  |  |

 

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| Less amounts representing  interest              |   | (3,635  | )      |
|--------------------------------------------------|--------|---------|--------|
| Present value of  minimum capital lease payments |   | 21,075  |   |
| Less current  portion                            |   | (15,945 | )      |
| Capital lease  obligations less current portion  |   | $       | 5,130  |   |
|                                                  |        |         |        |  |

 

Rent expense totaled $271,915and $248,880 for the years ended June 30, 2006 and 2005, respectively.

***(b)***                     Employment Agreements

The Company has employmentagreements with five key employees, all of whom are also stockholders.  In addition to salary and benefit provisions,these agreements include defined commitments by the Company should theemployees terminate their employment with or without cause.

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

OnJuly 1, 2002, as part of the Medical & Biological Laboratories Co., Ltd.(MBL) Agreement, MBL purchased shares of the Company’s common stock for$500,000, which MBL can require the Company to repurchase at the same price inthe event that a previously existing distribution agreement with RhiGene, Inc.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 fairvalue of the warrant upon issuance was calculated as $401,809 using the Black-Scholesoption-pricing model with the following assumptions:  no expected dividend yield, 143% volatility,risk free interest rate of 4.2% and an expected life of five years**.**The gross proceeds of $500,000 were allocated $277,221 toredeemable common stock and $222,779 to the related warrants based on therelative fair values of the respective instruments to the fair value of theaggregate transaction. Issuance costs and the discount attributed to theredeemable common stock upon issuance were accreted over the 33-month period tothe first date whereupon the put option may be exercised, which was theexpiration date of the distribution agreement between the Company and RhiGene,Inc. (March 31, 2005). Furthermore, pursuant to the agreement with MBL, as longas MBL holds at least 50% of the common stock purchased under the MBLagreement, MBL must give its written consent with respect to the payment of anydividend, the repurchase of any of the Company’s equity securities, theliquidation or dissolution of the Company or the amendment of any provision ofthe Company’s Articles of Incorporation or Bylaws which would adversely affectthe rights of MBL under the stock purchase transaction documents.  MBL was granted standard anti-dilution rightswith respect to stock issuances not registered under the Securities Act.  MBL also received standard piggybackregistration rights along with certain demand registration rights.

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On March 31, 2005 our distribution agreement withRhiGene expired, and the Company signed a new distribution and OEM SupplyAgreement with MBL International, Inc. (“MBLI”), a wholly owned subsidiary ofMBL, which grants the Company non-exclusive rights to distribute MBL’s completediagnostic line of autoimmune testing products in the United States andexclusive distribution rights to the OEM Label products worldwide excluding theUnited States, Japan, Korea and Taiwan. In addition, on August 1, 2005 the Company and MBL executed an Amendmentto the Common Stock Purchase Agreement and Common Stock Purchase Warrantwherein one-half or 440,141of the original redeemable shares are exchanged fora three-year promissory note payable with interest at prime (6% as of June 30,2005) plus two percent with payments commencing before September 1, 2005.  The shares being exchanged for the promissorynote will be returned to the Company quarterly on a pro rata basis as paymentsare made on the promissory note. As of June 30, 2006, 52,816 redeemable shareshave been returned to the Company under this agreement The remaining 440,141shares will be redeemable by the Company at $0.568 per share as of August 1,2008 for any shares still owned at that time by MBL and only to the extent thatMBL has not realized at least $250,000 in gross proceeds upon the sales of itsredeemable shares in the open market for the time period August 1, 2005 throughAugust 30, 2008.  Finally, the warrantsoriginally issued to MBL to purchase 880,282 shares have been extended toAugust 31, 2008 and re-priced from $0.568 per share to $0.40 per share.

**(5)**                     Income Taxes

Income tax expense differedfrom the amounts computed by applying the U.S. federal income tax rate of 35%to pretax income as a result of the following:

|                                                             | ** ** | **2006** | ** ** | **2005** | ** ** |
|-------------------------------------------------------------|------------|----------|------------|----------|------------|
| Computed  expected tax benefit                              |       | $        | (580,000   | )        | (203,860   | ) |
| Reduction  (increase) in income taxes resulting from:       |       |     |       |     |       |
| Permanent differences                                       |       | 475,000  |       | 257,051  |       |
| Impact of foreign loss not deductible in the United  States |       | —   |       | —   |       |
| Change in valuation allowance                               |       | 192,000  |       | 314,300  |       |
| Section 382 Limitation Freeup                               |       | (92,000  | )          | (169,600 | )          |
| Other                                                       |       | 5,000    |       | (197,891 | )          |
|                                                        |       | $        | —     |     | —     |   |

 

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Deferred tax assets related tothe Company’s operations are comprised of the following at June 30, 2006.
| Deferred tax assets  (liabilities):                                              |   |       |   |
|----------------------------------------------------------------------------------|--------|------------|--------|
| Current-                                                                         |   |       |   |
| Salary and vacation related accruals                                             |   | $          | 59,000 |   |
| Bad debt allowance                                                               |   | 11,000     |   |
| Section 263A inventory capitalization                                            |   | 16,000     |   |
| Non-Current-                                                                     |   |       |   |
| Tax effect of net operating loss carryforward and R  & D credit carryforward |   | 1,500,000  |   |
| Long-lived assets                                                                |   | (13,000    | )      |
| Net deferred tax  assets                                                         |   | 1,573,000  |   |
| Less valuation  allowance                                                        |   | (1,573,000 | )      |
|                                                                             |   |       |   |
| Net deferred tax assets                                                          |   | —     |   |
|                                                                                  |        |            |        |  |

 

At June 30, 2006, the Companyhas a net operating loss carry forward for income tax purposes of approximately$2,900,000 expiring during the period from 2013 to 2026.  Research and experimentation tax credit carryforwards approximate $430,000.The utilization of net operating losses may alsobe limited due to a change in ownership under Internal Revenue Code Section382.

A valuation allowance in theamount of the deferred tax asset has been recorded due to management’sdetermination that it is not more likely than not that the tax assets will beutilized.

**(6)**                     Related Party Transactions

On May 22, 1998 and March 1,1999, three executive officers loaned the Company a total of $57,225 which hasbeen in default for a considerable time period. As previously mentioned, onJune 7, 2005, the Company and three executive officers of the Company agreed inprincipal to a transaction whereby the Company issued shares of the Company’scommon stock (“Shares”) and warrants to acquire additional shares ofcommon stock (“Warrants”) in exchange for the respective executiveofficer’s agreement to accept the Shares and Warrants in full satisfaction ofall amounts owed by the Company to them pursuant to the terms of theirrespective promissory notes.  The Sharesand Warrants exchanged for the debt owing to the executive officers were asfollows:

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| Executive  Officer  | ** ** | **Principal and Interest Owed  to Officer** | ** ** | **Shares  Exchanged** | ** ** | **Warrants  Exchanged** | ** ** |
|---------------------|------------|-----------------------------------------------------------------|------------|-----------------------|------------|-------------------------|------------|
| Dr. Luis R. Lopez   |       | $                                                               | 42,269     |                  | 169,076    |                    | 169,074    |   |
|                |       |                                                            |       |                  |       |                    |       |
| Douglass T. Simpson |       | $                                                               | 17,159     |                  | 68,636     |                    | 68,636     |   |
|                |       |                                                            |       |                  |       |                    |       |
| Taryn  G. Reynolds  |       | $                                                               | 139,929    |                  | 559,716    |                    | 559,714    |   |

 

**(7)**                     Concentration of Credit Risk

The Company’s customers areprincipally located in the United States, although there are a few significantforeign customers. The Company performs periodic credit evaluations of itscustomers’ financial condition but generally does not require collateral forreceivables.The Company’s largest customer, a company headquartered in theUnited States, represented approximately 5.2% and 3.9% of sales in the yearsended June 30, 2006 and 2005, respectively, and approximately .8% and 3.7% ofaccounts receivable at June 30, 2006 and 2005, respectively.

**(8)**                     Reportable Segments

The Company has two segments ofbusiness, North American and international operations.  North American operations transacts all salesin North America (US, Canada and Mexico). International operations transactsall other sales. The following table sets forth selected financial data forthese segments for the years ended June 30, 2006 and 2005.

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| ** **                           | ** ** | **Year ended June 30, 2006** | ** **   |
|--------------------------------------|------------|--------------------------------------------------|--------------|
| ** **                           | ** ** | **North America**                           | *** *** | **International** | ** ** | **Total** | ** ** |
|                                 |       |                                             |         |   |   |   |   |
| Net sales –  external customers |       | $                                                | 5,958,442    |   | 1,688,280 |   | 7,646,722 |   |
| Net sales –  intercompany       |       | (1,010,943                                       | )            | — |   | (1,010,943 | ) |
| Total net sales                      |       | $                                                | 4,947,499    |   | 1,688,280 |   | 6,635,779 |   |
|                                 |       |                                             |         |   |   |   |   |
| Depreciation and  amortization       |       | $                                                | 105,390      |   | 3,084 |   | 108,474 |   |
|                                 |       |                                             |         |   |   |   |   |
| Interest expense                     |       | $                                                | 1,987,926    |   | 3,940 |   | 1,991,866 |   |
|                                 |       |                                             |         |   |   |   |   |
| Net income  (loss)                   |       | $                                                | (2,171,721   | ) | 585,309 |   | (1,586,412 | ) |
| Segment assets                       |       | $                                                | 7,625,303    |   | 588,313 |   | 8,213,616 |   |

 
| ** **                          | ** ** | **Year ended June 30, 2005** | ** **   |
|-------------------------------------|------------|------------------------------|--------------|
| ** **                          | ** ** | **North America**       | *** *** | **International** | ** ** | **Total** | ** ** |
| Net sales – external customers |       | $                            | 4,986,472    |   | 1,498,010 |   | 6,484,482 |   |
| Net sales – intercompany       |       | (919,647                     | )            | — |   | (919,647 | ) |
| Total net sales                     |       | $                            | 4,066,825    |   | 1,498,010 |   | 5,564,835 |   |
|                                |       |                         |         |   |   |   |   |
| Depreciation and amortization       |       | $                            | 201,075      |   | 2,275 |   | 203,350 |   |
|                                |       |                         |         |   |   |   |   |
| Interest expense                    |       | $                            | 465,802      |   | 4,429 |   | 470,231 |   |
|                                |       |                         |         |   |   |   |   |
| Net income (loss)                   |       | $                            | (1,064,199   | ) | 481,741 |   | (582,458 | ) |
| Segment assets                      |       | 4,553,888                    |         | 438,606 |   | 4,992,494 |   |

 

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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                                 |
|--------------------|--------------------------------------------------------------|
|               |                                                         |   |
| September 29, 2006 |                                                         |   |
|               |                                                         |   |
|               | By:                                                          | /s/ William H. Critchfield |   | By: | /s/ Douglass T |   |   |
|               | William H. Critchfield                                       | Douglas |   |
|               | Senior Vice President and Chief                              | President and Chief Executive Officer |   |
|               | Financial Officer                                            |   |   |
|               |                                                         |   |
|               | By:                                                          | /s/ Luis R. Lopez |   |   |
|               | Luis R. Lopez                                                |   |
|               |   Chief Medical Officer and Chairman of  the Board |   |
|               |                                                         |   |
|               | By:                                                          | /s/ Robert Tutag |   |   |
|               | Robert Tutag                                                 |   |
|               | Director                                                     |   |
|               |                                                         |   |
|               | By:                                                          | /s/ Charles H. Scoggin |   |   |
|               | Charles H. Scoggin                                           |   |
|               | Director                                                     |   |
|               |                                                         |   |
|               | By:                                                          | /s/ Larry G. Rau |   |   |
|               | Larry G. Rau                                                 |   |
|               | Director                                                     |   |
|               |                                                         |   |
|               | By:                                                          | /s/ Dennis Walcewski |   |   |
|               | Dennis Walcewski                                             |   |
|               | Director                                                     |   |
|                    |                                                              |  |  |  |  |  |  |  |  |  |  |  |

 

 

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