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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

For the transition period from           to          

Commission File Number 000-24541

CORGENIX MEDICAL CORPORATION

(Name of Small Business Issuer in its Charter)

11575 Main Street, Number 400, Broomfield, CO 80020

(Address of principal executive offices, including zip code)

(303) 457-4345

(Issuer’s telephone number, including area code)

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

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

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

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

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

The number of shares of Common Stock outstanding was 30,294,505 as of May 5, 2009.

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CORGENIX MEDICAL CORPORATION

March 31, 2009

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PART I

Item 1. Consolidated Financial Statements

CORGENIX MEDICAL CORPORATION

AND SUBSIDIARIES

Consolidated Balance Sheets

See accompanying notes to consolidated financial statements.

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CORGENIX MEDICAL CORPORATION
AND SUBSIDIARIES

Consolidated Statements of Operations and Comprehensive Loss

See accompanying notes to consolidated financial statements.

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CORGENIX MEDICAL CORPORATION
AND SUBSIDIARIES

Consolidated Statement of Stockholders’ Equity

For the nine months ended March 31, 2009

(Unaudited)

See accompanying notes to consolidated financial statements.      

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CORGENIX MEDICAL CORPORATION
AND SUBSIDIARIES

Consolidated Statements of Cash Flows

See accompanying notes to consolidated financial statements.

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CORGENIX MEDICAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.            DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Outlook

In fiscal 2009, we are focused on accelerating the market launch of our AspirinWorks assay, beginning the market launch of our Anti-AtherOx Test Kit, submission of a 510(k) Premarket Notification to the FDA for the Company’s Atherox Test Kit, completing further clinical studies for our Hyaluronic Test Kit and our Fibromyalgia Test Kit and continuing the development and strategic collaboration towards the development of a group of products to detect potential bio-terrorism agents.

Company Overview

Corgenix Medical Corporation, 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 currently sell 52 diagnostic products on a worldwide basis to hospitals, clinical testing laboratories, universities, biotechnology and pharmaceutical companies and research institutions.  In the United States and the United Kingdom, we sell directly to these customers.  Elsewhere in the world, we primarily sell to independent distributors that in turn sell to the laboratories.

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

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

·      Corgenix (UK) Ltd, incorporated in the United Kingdom in 1996 (formerly REAADS Bio-Medical Products (UK) Limited) and located in Peterborough, England. Corgenix UK manages our international distributor relationships except for distribution in North America, which is the responsibility of Corgenix, Inc.

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

Inventory

Inventories are recorded at the lower of average cost or market, using the first-in, first-out method. A provision is recorded to reduce excess and obsolete inventories to their estimated net realizable value, when necessary. No such provision was recorded for the nine months and one year ended March 31, 2009 and June 30, 2008, respectively. Components of inventories are as follows:

Recent Developments

On February 3, 2009, the Company entered into two agreements (the “Agreements”) to restructure the debt evidenced by convertible term notes that Truk Opportunity Fund, LLC, a Delaware company; Truk International Fund, LP, a Cayman Islands company (collectively, “Truk”); and CAMOFI Master LDC, a Cayman Islands company, formerly named DCOFI Master LDC, (“CAMOFI”) purchased on May 19, 2005 and December 28, 2005. The Agreements suspended all amortizing principal amount payments otherwise due under each note, beginning November 1, 2008 and ending on the earlier

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of (i) the first day of the month next succeeding the closing of any new financing transaction or (ii) May 1, 2009 (the “Repayment Date”), at which time payments would again have become due and payable on the first day of each subsequent month until December 31, 2009 (the “Maturity Date”).  Payments would be equal to the amount of principal outstanding divided by the number of months from the Repayment Date until the Maturity Date.  On the Maturity Date, the amortizing principal amount for each of the term notes and all other amounts due and owing  must be repaid in full, whether by payment of cash, or at Truk’s or CAMOFI’s option, by the conversion into common stock.

Under the Agreements, Truk and CAMOFI agreed that their security interest in the Company’s accounts receivable and inventory would only be subordinated to that of the lenders in any new financing, but that their security interest in all other assets of the Company will remain a perfected first security interest. This provision was effective upon completion of the Financing Agreement with Benefactor, summarized below. In addition, upon the closing of the Financing Agreement with Benefactor, the remaining principal balance of each outstanding term note held by Truk was increased by five percent (5%), and is being accounted for as additional interest expense.

Simultaneously with the execution of the Agreements:

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

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

(3) the Company issued to CAMOFI 200,000 shares of the Company’s Series B Convertible Preferred Stock (“Series B”), with a liquidation preference of $50,000, which will be convertible into 800,000 shares of the Company’s common stock at the rate of $0.25; and

(4) the Company issued to Truk 36,680 shares of the Company’s Series B Convertible Preferred Stock, with a liquidation preference of $9,170, which will be convertible into 146,720 shares of the Company’s common stock at the rate of $0.25. The calculated cost of items (2) through (4) above, were charged to deferred finance costs and are being amortized over nine months through December 2009.

On March 18, 2009, we entered into a financing agreement collateralized by all of the assets of the Company (the “Financing Agreement”) with Benefactor Funding Corp., a Colorado corporation (“Benefactor”).  We used the initial proceeds of  $800,374 to retire the debt evidenced by convertible term notes that CAMOFI (referenced above) purchased on May 19, 2005 and December 28, 2005.  We also used  the proceeds to retire fifty percent of the debt evidenced by the  convertible term notes that Truk purchased on December 28, 2005, leaving the notes purchased by Truk on May 19, 2005 outstanding. As a result, the proceeds from the Financing Agreement were used to retire 92.3% of the then currently outstanding convertible debt. Our wholly owned subsidiary, Corgenix, Inc. has also entered into a financing agreement with Benefactor  on substantially similar terms as the Agreement.  The Company and Corgenix Inc. guaranty each other’s obligations to Benefactor.

Under the Financing Agreement, the Company agreed to sell all of the Company’s right, title and interest in and to specified accounts and all merchandise represented by those accounts.

Under the Financing Agreement, which also included a $250,000 advance collateralized by the Company’s inventories, the purchase price for each sold account is equal to (i) 85% of the face amount of the account (that figure is 95% for the first 60 days of the Agreement’s term) less certain fees and commissions set forth in the Agreement. The commission rate is 1.4% of the face amount of the underlying account (the “Commission”).  The Company will pay Benefactor no “fee” for the first thirty days of an account’s term, and then will pay .05% of the account’s face amount for each day thereafter (the “Benefactor Fee”). We have agreed to sell at least $300,000 in face amount of accounts receivable for each month that the Financing Agreement is in effect.  If the minimum is not met, the Company must pay, for each such month, 1.4% times $300,000 less the actual amount of receivables sold.

Pursuant to the Financing Agreement, certain recourse events and events of default will trigger early payment obligations of the Company, and Benefactor has certain rights as a secured party in case of any default or recourse event. 

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One feature that secures the Company’s obligations is the “Reserve Account.”  The operation of the Reserve Account is outlined in the Financing Agreement.

Under the Financing Agreement, we make certain covenants, representations and warranties typical of a secured financing arrangement, and have agreed to report certain information to Benefactor.

The Financing Agreement will continue in full force and effect for a period of 12 months; however the Company may terminate the Financing Agreement early at any time by giving Benefactor not less than sixty days prior written notice, and Benefactor may terminate the Financing Agreement early at any time without notice should any event of default or recourse event occur.

Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) have been omitted from these unaudited consolidated financial statements. These unaudited consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-KSB for the fiscal year ended June 30, 2008.  The results of operations for the three months and nine months ended March 31, 2009 and 2008 are not necessarily indicative of the operating results for the full year.

In the opinion of management, all adjustments, consisting only of normal recurring accruals, have been made to present fairly the Company’s financial position at March 31, 2009 and the results of operations and its cash flows for the three months and nine months ended March 31, 2009 and 2008.

Our Business

Introduction

Our business includes the research, development, manufacture, and marketing of in vitro diagnostic products for use in disease detection and prevention.  We currently sell 52 diagnostic products on a worldwide basis to hospitals, clinical testing laboratories, universities, biotechnology and pharmaceutical companies and research institutions.  We have developed and we manufacture most of our products at our Colorado facility, and we purchase what we refer to as OM Products from other healthcare manufacturers for resale by us.  All of these products are used in clinical laboratories for the diagnosis and/or monitoring of three important areas of health care:

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

·      Vascular disease (diseases associated with certain types of thrombosis or clot formation, for example antiphospholipid syndrome, deep vein thrombosis, stroke and coronary occlusion); and

·      Liver diseases (fibrosis and cirrhosis).

In addition to our current products, we are actively developing new laboratory tests in other important diagnostic testing areas.  See “— Other Strategic Relationships.”  We manufacture and market to clinical laboratories and other testing sites worldwide.  Our customers include large and emerging health care companies such as diaDexus, Inc., Bio Rad Laboratories, Inc., Instrumentation Laboratories, Helena Laboratories and Diagnostic Grifols, S.A.

Most of our products are based on our patented and proprietary application of Enzyme Linked ImmunoSorbent Assay, or ELISA, technology, a clinical testing methodology commonly used worldwide.  Most of our current products are based on this platform technology in a delivery format convenient for clinical testing laboratories.  The delivery format, which is referred to as “Microplate,” allows the testing of up to 96 samples per plate, and is one of the most commonly used formats, employing conventional testing equipment found in virtually all clinical laboratories.  The availability and broad acceptance of ELISA Microplate products reduces entry barriers worldwide for our new products that employ this technology and delivery format.  Our products are sold as “test kits” that include all of the materials required to perform the test, except for routine laboratory chemicals and instrumentation.  A test using ELISA technology involves a series of reagent additions into the Microplate, triggering a complex immunological reaction in which a resulting color occurs.  The amount of color

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developed in the final step of the test is directly proportional to the amount of the specific marker being tested for in the patient or unknown sample.  The amount of color is measured and the results calculated using routine laboratory instrumentation.  Our technology specifies a process by which biological materials are attached to the fixed surface of a diagnostic test platform.  Products developed using this unique attachment method typically demonstrate a more uniform and stable molecular configuration, providing a longer average shelf life, increased accuracy and superior specificity than the products of our competitors.

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

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

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

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

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

2.            EARNINGS (LOSS) PER SHARE

Basic earnings (loss) per share is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding.  Diluted earnings (loss) per share is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding increased for potentially dilutive common shares outstanding during the period.  The dilutive effect of stock options and their equivalents is calculated using the treasury stock method.  During the nine months ended March 31, 2009,  stock options to purchase 40,000 shares were granted and stock options to purchase 150,000 shares were granted during the nine months ended March 31, 2008. Options and warrants to purchase common stock totaling 37,703,968 and 34,366,238 shares as of March 31, 2009 and 2008, respectively, are not included in the calculation of weighted average common shares-diluted below as their effect is anti-dilutive. Redeemable common stock is included in the common shares outstanding for purposes of calculating net income (loss) per share.

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3.            INCOME TAXES

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

The Company’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company has accrued $0 for interest and penalties as of March 31, 2009.

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

The Company did not record a provision for income taxes for the three month or nine month periods ended March 31, 2009 or 2008 as a result of operating losses and current estimated operating results for the current fiscal year. The Company has recorded valuation allowances to fully reserve its deferred tax assets, as management believes it is more likely than not that these assets will not be realized. It is possible that management’s estimates as to the likelihood of realization of its deferred tax assets could change as a result of changes in estimated operating results. Should management conclude that it is more likely than not that these deferred tax assets are, at least in part, realizable, the valuation allowance will be reduced and recognized as a deferred income tax benefit in the statement of operations in the period of change, except as noted herein.

4.             SEGMENT INFORMATION

The Company has two segments of business: North American and International operations.  North American operations transact all sales in North America (US, Canada and Mexico). International operations transact all other sales.  The following table sets forth selected financial data for these segments for the three-and nine-month periods ended March 31, 2009 and 2008.

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5.             REDEEMABLE COMMON STOCK

On July 1, 2002, as part of the Medical & Biological Laboratories Co., Ltd. (MBL) Agreement, MBL purchased shares of the Company’s common stock for $500,000.Under the MBL agreement, MBL could require the Company to repurchase at the same price in the event that a previously existing distribution agreement with RhiGene, Inc. is terminated. For no additional consideration, MBL was also issued warrants to purchase an additional 880,282 shares of Common Stock at a price of $.568 per share, which was equal to an aggregate amount of $500,000. These warrants were due to expire on July 3, 2008.Pursuant to the agreement with MBL, as long as MBL held at least 50% of the common stock purchased under the MBL agreement, MBL must give its written consent with respect to the payment of any dividend, the repurchase of any of the Company’s equity securities, the liquidation or dissolution of the Company or the amendment of any provision of the Company’s Articles of Incorporation or Bylaws which would adversely affect the rights of MBL under the stock purchase transaction documents. MBL was granted standard anti-dilution rights with respect to stock issuances not registered under the Securities Act. MBL also received standard piggyback registration rights along with certain demand registration rights.

On March 31, 2005, the Company’s distribution agreement with RhiGene expired, and the Company signed a new distribution and OEM Supply Agreement with MBL International, Inc. (“MBLI”), a wholly owned subsidiary of MBL, which grants the Company non-exclusive rights to distribute MBL’s complete diagnostic line of autoimmune testing products in the U.S. and exclusive distribution rights to the OEM label products worldwide excluding the U.S., Japan, Korea and Taiwan. In addition, on August 1, 2005 the Company and MBL executed an Amendment to the 2002 Common Stock Purchase Agreement and Common Stock Purchase Warrant wherein one-half, or 440,141, of the original redeemable shares were exchanged for a three-year promissory note payable with interest at prime (5.00% as of June 30, 2008) plus two percent with payments having commenced in September, 2005. The shares exchanged for the promissory note will be returned to the Company quarterly on a pro rata basis as payments are made on the promissory note. As of March 31, 2009, a total of 440,161 shares have been returned to the Company. The remaining 440,141 shares not covered by the promissory note were originally due to be redeemed by the Company at $0.568 per share on August 1, 2008 for any shares still owned at that time by MBL but only to the extent that MBL had not realized at least $250,000 in gross proceeds upon the sales of its redeemable shares in the open market for the time period August 1, 2007 through August 1, 2008. Finally, the warrants originally issued to MBL to purchase 880,282 shares were initially extended to August 31, 2008 and re-priced from $0.568 per share to $0.40 per share.

As of July 15, 2008, the Company reached agreement with MBL to amend certain provisions of our February 1, 2005 Exclusive Distribution Agreement,  entered into a Memorandum of Understanding Regarding Aspirin Works Distribution Rights in Japan, and executed a Second Amendment to Common Stock Purchase Agreement and Warrant. These new agreements and amendments add certain products and transfer prices, call for the discussion of terms whereby MBL

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would be granted a worldwide OEM agreement for certain of the products in a designated territory, call for the payment by Corgenix of royalties on certain proprietary products, which include proprietary technology of MBL, and call for the negotiation of terms of an exclusive distribution agreement for sales of AspirinWorks in Japan. In addition, the Company and MBL, pursuant to the Second Amendment to Common Stock Purchase Agreement and Warrant, agreed that the warrant term will be extended to August 1, 2010 and that one-half, or 220,070, of the remaining 440,171 redeemable shares  were  exchanged for a two-year promissory note payable with interest at prime (3.25% as of March 31, 2009) plus two percent with payments having commenced September 1, 2008. The applicable prime rate is adjusted on a monthly basis. Based on our recalculations of the fair value of the extended term warrants, we determined that the newly calculated value of said warrants did not materially increase in value as a result of this modification, and therefore, no adjustment to our financial statements was considered necessary. The shares exchanged for the promissory note will be returned to the Company quarterly on a pro rata basis as payments are made on the promissory note. The companies further agree that beginning September 1, 2008, and continuing through August 1, 2010 (the maturity date of the Second Promissory Note), MBL will attempt to sell on the open market, the remaining 220,071 shares not subject to the Second Promissory Note, at a price of $0.62 or greater. At the close of business on August 1, 2010, MBL will then have the right to sell, and Corgenix will have the obligation to purchase, any remaining stock then held by MBL, at a price of $0.568 per share.

6.            EQUITY

(a) Employee Stock Purchase Plan

Effective January 1, 1999, the Company adopted an Employee Stock Purchase Plan to provide eligible employees an opportunity to purchase shares of its common stock through payroll deductions, up to 10% of eligible compensation. On April 26, 2007, Shareholders approved the Company’s Second Amended and Restated Employee Stock Purchase Plan. These plans fully comply with Section 423 of the Internal Revenue Code of 1986. Each quarter, participant account balances are used to purchase shares of stock at the lesser of 85% of the fair value of shares on the first business day (grant date) and last business day (exercise date) of each quarter. No right to purchase shares shall be granted if, immediately after the grant, the employee would own stock aggregating 5% or more of the total combined voting power or value of all classes of stock. A total of 600,000 common shares have been registered with the Securities and Exchange Commission (SEC) for purchase under the two plans. In the quarter ended March 31, 2009, 27,673 shares were issued under the plans. In the quarter ended March 31, 2008, 11,724 shares were issued under the plans.

(b) Incentive Stock Option Plan

Stock Options as of March 31, 2009

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

The following table summarizes stock options outstanding as of March 31, 2009, and changes during the nine months then ended:

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The total intrinsic value as of March 31, 2009 measures the difference between the market price as of March 31, 2009 and the exercise price. No options were exercised during the nine months ended March 31, 2009 and March 31, 2008. Consequently, no cash was received, nor did the Company realize any tax deductions related to exercise of stock options during the periods.

Total estimated unrecognized compensation cost from unvested stock options as of March 31, 2009, was approximately $113,864, which is expected to be recognized over a weighted average period of  59.4 months.

The weighted average per share fair value range of stock options granted during the nine-month periods ending March 31, 2009 was $0.046 and for the nine-month period ended March 31, 2008 was $0.022-$0.34. The fair value was estimated as of the grant date using the Black-Scholes option pricing model with the following assumptions:

In addition to the stock options discussed above, the Company recognized share-based compensation expense related to Restricted Stock awards of $3,333 and $8,888 for the three and nine month periods ended March 31, 2009 and $3,333 and $9,999 for the same periods ended March 31, 2008. The following table summarizes non-vested restricted stock and the related activity as of and for the three months ended March 31, 2009:

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As of March 31, 2009, there were also 35,206,868 warrants issued to institutional investors, consultants, and employees outstanding and exercisable ranging in prices from $.23 to $.50 per share with a weighted average exercise price of $.37 per share. Of these warrants, none were newly or incrementally issued in the current quarter or nine month period ended March 31, 2009. No warrants were newly or incrementally issued in the quarter ended March 31, 2008, whereas 4,446,999 warrants were newly or incrementally issued in the nine month period ended March 31, 2008.

On September 8, 2008, the Board of Directors granted an equity award of 206,000 shares of common stock to the five officers of the Company in recognition of the Company’s achievements for the prior two years, as no stock options had been granted since August, 2007. The closing price of the company’s stock on September 8 was $0.20 and the value of the stock awards amounted to $41,200.

7.            RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In November 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combination (FAS 141(R)) and SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51 (FAS 160). FAS 141(R) will change how business acquisitions are accounted for and will impact financial statements both on the acquisition date and in subsequent periods. FAS 160 will change the accounting and reporting for minority interests, which will be recharacterized as noncontrolling interests and classified as a component of equity. FAS 141(R) and FAS 160 are effective for both public and private companies for fiscal years beginning on or after December 15, 2008 (fiscal 2010 for the Company). FAS 141(R) will be applied prospectively. FAS 160 requires retroactive adoption of the presentation and disclosure requirements for existing minority interests. All other requirements of FAS 160 will be applied prospectively. Early adoption is prohibited for both standards. Management is currently evaluating the requirements of FAS 141(R) and FAS 160 and has not yet determined the impact on its financial statements.

Fair Value Measurements

As of July 1, 2008, we adopted FASB Statement of Financing Accounting Standards No. 157, “Fair ValueMeasurements (“SFAS 157”). SFAS 157 established a framework for measuring fair value in GAAP and clarified the definition of fair value within that framework. SFAS 157 does not require any new fair value measurements in GAAP. SFAS 157 introduced, or reiterated a number of key concepts which form the foundation of the fair value measurement approach to be utilized for financial reporting purposes. The fair value of our financial instruments reflect the amounts that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). SFAS 157 also established a fair value hierarchy that prioritizes the use of inputs used in valuation techniques into the following three levels:

Level 1-quoted prices in active markets for identical assets and liabilities.

Level 2-observable inputs other than quoted prices in active markets for identical assets and liabilities.

Level 3-unobservable inputs.

The adoption of  SFAS 157 did not have a material effect on our financial condition and results of operations, but SFAS 157 introduced new disclosures about how we value certain assets and liabilities. Much of the disclosure requirement is focused on the inputs used to measure fair value, particularly in instances where the measurement uses significant unobservable (Level 3) inputs. Our financial instruments are valued using quoted prices in active markets or based upon other

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observable inputs. The following table sets forth the fair value of our financial assets that were measured on a recurring basis as of March 31, 2009 (in thousands):

8.            INTANGIBLE ASSETS

Intangible assets consist of purchased licenses. Purchased licenses are amortized using the straight-line method over the shorter of 15 years or the remaining life of the license. The Company adopted the provisions of Statement of Financial Accounting Standards (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 and determined to have indefinite lives and licenses acquired with no definite term are not amortized, but instead are tested for impairment at least annually in accordance with the provisions of this statement. Identifiable intangibles with estimated useful lives continue to be amortized over their respective estimated useful lives and reviewed for impairment in accordance with SFAS No. 144, Accounting for Impairment or Disposal of Long Lived Assets.

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

The License Agreement imposes caps on the total amount of cash, common stock, and warrant payments from us to CCC from the date of execution through to and including the third anniversary payment. Under that cap limitation, the total of all anniversary payments will not exceed $200,000 in cash, with each anniversary cash payment determined by multiplying $50,000 by an anniversary ratio which is the ratio of cumulative revenue at the respective anniversary date divided by the cumulative sales target for the same period of time. Likewise, the total of all anniversary common stock payments will not exceed $300,000 in value of shares of common stock (as valued on the date of issue), with the number of shares for each anniversary stock issuance determined by dividing 75,000 by the closing stock price as of the respective anniversary date and multiplying that result by the anniversary ratio noted above. Finally, the total of all anniversary warrant payments will not exceed 300,000 warrants, with the value of each anniversary warrant issuance determined by multiplying 75,000 (the number of warrants to be issued) by a newly calculated Black Scholes value per warrant as of the fiscal quarter end. As of March 31, 2009, the Company had accrued a total of $8,283 payable to CCC as a result of the anniversary calculations.

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

9.            DUE TO FACTOR

On March 17, 2009, the Company entered into an agreement with Benefactor Funding Corp. (“Benefactor”) whereby Benefactor agreed to factor the company’s domestic accounts receivable invoices. The term of the agreement is for one year but can be terminated by the Company with 60 days written notice. In accordance with the terms of the agreement, Benefactor will purchase the invoices that it approves for an initial payment of 85% (95% for the first 60 days of the agreement) of the amount of the invoice with the remaining 15% paid upon collection, less any deductions from the customer. Benefactor charges a fee of 1.4% of the gross amount of the invoice and a maintenance fee equal to ..05% per day (annual rate of 18.25%) on the unpaid invoice amounts outstanding in excess of 30 days from the purchase date. The Company has agreed, beginning March 17, 2009, to factor with Benefactor a minimum of $300,000 of invoices monthly. The Company is responsible for any invoices which are unpaid after 91 days or are subject to other defaults by the customer and this obligation is collateralized by the Company with a security interest granted to Benefactor on all assets. As of March 31, 2009, Benefactor had advanced the Company $676,041 against invoices totaling $711,623. Fees paid to Benefactor for interest and other services for the quarter and nine months ended March 31, 2009 totaled $19,618. The receivables are

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considered recourse and are presented at gross value in the accompanying consolidated balance sheets.

In addition to the advances made by the factor on accounts receivable, on March 17, 2009, Benefactor advanced the company $250,000, collateralized by the inventories of the company with a face value of $294,118. Benefactor charged a fee of 1.3% of the face value of the inventory and will charge a maintenance fee equal to .043% per day (annual rate of 15.70%) on the unpaid advance in excess of 30 days from the initial advance.

10.          NOTES PAYABLE

Notes payable consist of the following at March 31, 2009 and June 30, 2008:

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

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Item 2.

Management’s Discussion and Analysis of
Financial Condition and Results of Operations

The following discussion should be read in conjunction with the consolidated financial statements and accompanying notes included elsewhere herein.

Forward-Looking Statements

This 10-Q includes statements that are not purely historical and are “forward-looking statements” within the meaning of Section 21E of the Securities Act of 1934, as amended, including statements regarding our expectations, beliefs, intentions or strategies regarding the future.  All statements other than historical fact contained in this 10-Q, including, without limitation, statements regarding future capital requirements, acquisition strategies, strategic partnership expectations, technological developments, the development, the availability of necessary components, research and development programs and distribution plans, are forward-looking statements.  All forward-looking statements included in this 10-Q are based on information available to us on the date hereof, and we assume no obligation to update such forward-looking statements.  Although we believe that the assumptions and expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to have been correct or that we will take any actions that may presently be planned.

General

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

We manufacture products for inventory based upon expected sales demand, shipping products to customers, usually within 24 hours of receipt of orders if in stock.  Accordingly, we do not operate with a significant customer order backlog.

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

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

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

Recently Issued Accounting Pronouncements

In November 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combination (FAS 141(R)) and SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51 (FAS 160). FAS 141(R) will change how business acquisitions are accounted for and will impact financial statements both on the acquisition date and in subsequent periods. FAS 160 will change the accounting and reporting for minority interests, which

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will be recharacterized as noncontrolling interests and classified as a component of equity. FAS 141(R) and FAS 160 are effective for both public and private companies for fiscal years beginning on or after December 15, 2008 (fiscal 2010 for the Company). FAS 141(R) will be applied prospectively. FAS 160 requires retroactive adoption of the presentation and disclosure requirements for existing minority interests. All other requirements of FAS 160 will be applied prospectively. Early adoption is prohibited for both standards. Management is currently evaluating the requirements of FAS 141(R) and FAS 160 and has not yet determined the impact on its financial statements.

Critical Accounting Policies

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”) and our significant accounting policies are summarized in Note 1 to the accompanying consolidated financial statements. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts of assets, liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ significantly from those estimates.

We maintain an allowance for doubtful accounts based on its historical experience and provide for any specific collection issues that are identified. Such allowances have historically been adequate to provide for our doubtful accounts but involve a significant degree of management judgment and estimation. Worse than expected future economic conditions, unknown customer credit problems and other factors may require additional allowances for doubtful accounts to be provided for in future periods.

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

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

When assets are sold, retired or otherwise disposed of, the cost and related accumulated depreciation are eliminated from the accounts and a gain or loss is recognized. Repair and maintenance costs are expensed as incurred.

We evaluate the realizability of our long-lived assets, including property and equipment, whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Revenue from sale of products is recognized upon shipment of products.

Revenue from research and development contracts represents amounts earned pursuant to agreements to perform research and development activities for third parties and is recognized as earned under the respective agreement. Because research and development services are provided evenly over the contract period, revenue is recognized ratably over the contract period. Research and development and advertising costs are expensed when incurred.

Inventories are recorded at the lower of cost or market, using the first-in, first-out method.

Results of Operations

Three Months Ended March 31, 2009 compared to 2008

Net sales. Net sales for the quarter ended March 31, 2009 were $2,032,024, a 4.2% increase from $1,950,829 for the quarter ended March 31, 2008. Total North American sales increased $28,199 or 2.0% to $1,440,751 while total sales to international distributors increased $52,996 or 9.8% to $591,273 from $538,277 year to year. With respect to the Company’s major revenue categories and product lines, North American direct product-only sales decreased $54,236 or 4.7% to $1,109,178, whereas international direct product-only sales increased $43,018 or 12.0% to $401,305.  Worldwide category results were as follows: Phospholipids kit sales increased $20,480 or 2.2% to $966,397 for the period. Coagulation kit sales decreased $31,262 or 7.4% to $388,398. HA kit sales decreased $32,598 or 12.2% to $234,397, and Autoimmune kit sales

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increased $18,259 or 50.5% to $54,401. Additionally, worldwide OEM/contract manufacturing revenues increased $88,019, or 48.5% to $269,497. Overall, worldwide non-product revenue increased $4,395, or 1.8% to $252,045. Finally, AspirinWorks sales increased 10.8% to $37,598.

Cost of sales.  Cost of sales, as a percentage of sales, increased to 43.7% for the quarter ended March 31, 2009 from 41.6% in 2008. The increase was primarily attributable to increases in raw material, labor and overhead costs.

Selling and marketing.  For the quarter ended March 31, 2009, selling and marketing expenses decreased 6.4% to $468,251 from $500,235 for the quarter ended March 31, 2008. The decrease vs. the prior year was primarily due to decreases in advertising, sales commissions, labor-related expense,  royalties, and trade show expenses, partially offset by increases in  Corgenix UK selling and marketing expenses, retention kits, and travel.

Research and development. Research and development expenses increased 4.0% to $172,513 for the quarter ended March 31, 2009, from $165,932 for the quarter ended March 31, 2008. The increase vs. the prior year primarily involved increases in labor-related expenses and clinical studies expense, partially offset by decreases in laboratory supplies, and product testing expense, .

General and administrative. For the quarter ended March 31, 2009, general and administrative expenses increased $27,628 or 5.2% to $563,963 from $536,335 for the quarter ended March 31, 2008. The increase vs. the prior year was primarily attributable to increases in Corgenix-UK general and administrative expenses, labor-related expenses, board of director fees, aborted financing costs, travel, outside services, and patent renewal fees, partially offset by decreases in consulting fees and legal expenses. As part of managements’ cost control program, the Company is making a concerted effort to reduce our on-going general and administrative expenses.

Interest expense. Interest expense increased $172,827, or 57.3% to $474,247 for the quarter ended March 31, 2009, from $301,420 for the quarter ended March 31, 2008 due primarily to the accelerated write off of 92.3% of the unaccreted discount and unamortized deferred financing costs related to the convertible notes due to the March 2009 payoffs which resulted from the Benefactor financing mentioned above.

Nine months Ended March 31, 2009 compared to 2008

Net sales. Net sales for the nine months ended March 31, 2009 were $6,028,946, a 6.6% decrease from $6,455,055 for the nine months ended March 31, 2008. As a result of the overall global economic recession, total North American sales decreased $478,986 or 10.0% to $4,300,270 while total sales to international distributors increased  $52,877 or 3.2% to $1,728,676 from $1,675,799 year to year. With respect to the Company’s major revenue categories and product lines, North American direct product-only sales decreased $240,268 or 7.0% to $3,183,786 whereas international direct product-only sales increased $32,432 or 2.6% to $1,284,037. Worldwide category results were as follows: Phospholipids kit sales decreased $60,694 or 2.2% to $2,806,016 for the period. Coagulation kit sales decreased $150,111 or 10.9% to $1,232,458. HA kit sales decreased $97,132 or 11.1% to $777,388, while Autoimmune kit sales increased $48,134 or 53.6% to $137,875. Additionally, worldwide OEM/contract manufacturing revenues decreased $291,555, or 25.6% to $846,547. Overall, worldwide non-product revenue increased $73,283 or 11.4% to $714,577. Finally, AspirinWorks sales decreased 2.4% to $108,416. Sales of products manufactured for us by other companies, primarily sold by Corgenix UK Ltd,  while still relatively small, are expected to continue to increase during fiscal 2009, as they continue to expand their product offerings. Net sales and revenues have not been materially impacted by inflation and changing prices over the past two years.

Cost of sales.  Cost of sales, as a percentage of sales, decreased slightly to 43.5% for the nine months ended March 31, 2009 from 43.8% in 2008. This decrease was primarily attributable to an unexpected scrapping of numerous production lots of one of our larger product lines which occurred in the prior year’s first fiscal nine months.

Selling and marketing.  For the nine months ended March 31, 2009, selling and marketing expenses decreased 7.8% to $1,404,555 from $1,524,014 for the nine months ended March 31, 2008. The decrease vs. the prior year was primarily due to decreases in consulting fees, conventions and seminars expense, labor-related expenses, trade show expense, and royalties, partially offset by increases in Corgenix UK selling & marketing expenses, sales commissions, and travel.

Research and development. Research and development expenses increased 19.7% to $572,210 for the nine months ended March 31, 2009, from $478,197 for the nine months ended March 31, 2008. This increase over the prior year primarily

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involved increases in clinical studies expenses, and labor-related expenses, partially offset by decreases in legal fees, outside services, laboratory supplies, and product testing.

General and administrative. For the nine months ended March 31, 2009, general and administrative expenses increased $177,711 or 12.2% to $1,639,007 from $1,461,296 for the nine months ended March 31, 2008. This increase over the prior year was primarily attributable to increases in Corgenix UK general and administrative expenses, labor-related costs, board of director fees, travel, aborted financing costs, outside services, and patent renewal fees, partially offset by decreases in consulting fees, and legal fees.

Interest expense. Interest expense decreased $344,850 or 26.8% to $942,944 for the nine months ended March 31, 2009, from $1,287,794 for the nine months ended March 31, 2008 due primarily to the additional discount and acceleration of the discount amortization on the convertible notes due to the contingent conversion feature, which occurred in the prior year’s first fiscal nine months, mitigated by the accelerated write off of 92.3% of the unaccreted discount and unamortized deferred financing costs related to the convertible notes due to the March 2009 payoffs which resulted from the Benefactor financing mentioned above.

EBITDA

The Company’s earnings before interest, taxes, depreciation, amortization and non cash expense associated with stock-based compensation (“Adjusted EBITDA”) decreased $128,884 or 19.1% to $547,237   for the nine months ended March 31, 2009 compared with $676,121 for the corresponding nine month period in fiscal 2008. Although adjusted EBITDA is not a GAAP measure of performance or liquidity, the Company believes that it may be useful to an investor in evaluating the Company’s ability to meet future debt service, capital expenditures and working capital requirements. However, investors should not consider these measures in isolation or as a substitute for operating income, cash flows from operating activities or any other measure for determining the Company’s operating performance or liquidity that is calculated in accordance with GAAP. In addition, because adjusted EBITDA is not calculated in accordance with GAAP, it may not necessarily be comparable to similarly titled measures employed by other companies. A reconciliation of Adjusted EBITDA to net earnings (loss) can be made by adding depreciation and amortization expense, corporate stock-based compensation expense, interest expense, and income tax expense to net income (loss) as in the following table: