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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

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

For the quarterly period ended September 30, 2014

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

For the transition period from               to             

Commission File Number 000-24541

CORGENIX MEDICAL CORPORATION

(Exact name of registrant as specified in its Charter)

11575 Main Street, Number 400, Broomfield, CO 80020

(Address of principal executive offices, including zip code)

(303) 457-4345

(Registrant’s telephone number, including area code)

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

Indicate by check mark whether the registrant:  (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 guidance 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 x 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 54,965,493 as of November 3, 2014.

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CORGENIX MEDICAL CORPORATION

September 30, 2014

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PART I

Item 1. Financial Statements

CORGENIX MEDICAL CORPORATION

Condensed Balance Sheets

(Unaudited)

See accompanying notes to condensed financial statements.

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CORGENIX MEDICAL CORPORATION

Condensed Statements of Operations

(Unaudited)

Quarters ended September 30, 2014 and 2013

See accompanying notes to condensed financial statements.

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CORGENIX MEDICAL CORPORATION

Condensed Statement of Stockholders’ Equity

For the three months ended September 30, 2014

(Unaudited)

See accompanying notes to condensed financial statements.

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CORGENIX MEDICAL CORPORATION

AND SUBSIDIARIES

Condensed Statements of Cash Flows

(Unaudited)

See accompanying notes to condensed financial statements.

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CORGENIX MEDICAL CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

1.                                      DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

(a)                                 Company Overview

We are organized as a C corporation, were established in 1990, and our business includes research, development, manufacture, and marketing of in vitro diagnostic (“IVD”) products (tested outside the human body) for use in disease detection and diagnosis.

Our revenues are generated from the following:

·                  Sales of Manufactured Products—We manufacture and sell in excess of 50 diagnostic products on a worldwide basis to hospitals, clinical testing laboratories, universities, biotechnology and pharmaceutical companies and research institutions.

·                  In North America we sell our products directly through our own sales organization and through several small independent distributors.

·                  Outside of North America, effective October 1, 2010, we sell our products through the ELITech Group (“ELITech”) which serves as our international master distributor, selling our products through its wholly owned subsidiaries in addition to numerous independent distributors.

·                  Sales of OEM Products—We private label some of our IVD products for other diagnostic companies, both domestic and international, which they then resell worldwide through their own distribution networks. Our most important OEM customers include Bio-Rad Laboratories, Inc., Helena Laboratories and Diagnostic Grifols, S.A.

·                  Sales of Other Manufacturers’ (“OM”) Products—We purchase some products, on a very limited basis, from other healthcare manufacturers which we then resell. These products include other IVD products, instruments, instrument systems and various reagents and supplies, and are primarily used to support the sale of our own manufactured products.

·                  Contract Manufacturing Agreements—We provide contract manufacturing services to other diagnostic and life science companies. Our most significant Contract Manufacturing customers are BG Medicine and DiaDexus.

·                  Contract R&D Agreements—We provide contract product development services, including companion diagnostics development, to strategic partners and alliances. Our most significant Contract R &D customers include ELITech, Eli Lilly, Tulane University (“Tulane”) and the National Institutes of Health (“NIH”). The Joint Product Development Agreement with Wescor, a wholly owned subsidiary of ELITech (“Wescor”), terminated on June 30, 2014.

·                  Other Revenues—This category includes shipping and other miscellaneous revenues.

·                  For the current quarter, our four largest non-governmental customers, collectively, accounted for 33.8% of our total revenues.

Most of our products are used in clinical laboratories for the diagnosis and/or the monitoring of three important sectors of health care:

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

·                  The aspirin effect on platelets; and

·                  Liver diseases (fibrosis and cirrhosis).

We are actively developing new laboratory tests in these and other important diagnostic testing areas.

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We develop and manufacture products in several commonly utilized testing formats:

·                  Microplate Enzyme Linked ImmunoSorbent Assay (“ELISA”)—This platform is a clinical testing methodology commonly used worldwide. It is a format which must be run in laboratory conditions by trained technicians, and utilizes standard microplate reading instruments. Testing is performed on a standard 96-well plastic microplate and provides quantitative results.

·                  Lateral Flow Immunoassay (“LFI”)—This format is a rapid testing format which utilizes small strip configuration. Patient samples are applied to the end of a strip and allowed to migrate along the strip with a positive or negative indicator. Results are typically obtained in a matter of minutes and can be performed in all settings including field testing.

·                  Immmunoturbidimetry (“IT”)—IT products are configured similar to ELISA Microplate products except that instead of coating microwell plates, this technology coats microbeads or microparticles. The assay configuration is more “automatable” than microplates, designed to be run on clinical chemistry analyzers in clinical testing laboratories by trained personnel. We use the IT format as part of our development and manufacturing agreements with ELITech.

Since 1990, our sales force and distribution partners have sold over 12 million tests worldwide under the REAADS and Corgenix labels, as well as OEM products. An integral part of our strategy is to work with corporate partners to develop market opportunities and access important resources including expanding our Contract Manufacturing and Contract R&D programs. 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.

(b)         Recent Developments

Merger Agreement

On August 27, 2014, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Centennial Medical Holdings, Inc., a Delaware corporation (“Parent”), and Centennial Integrated, Inc., a Nevada corporation and newly-formed subsidiary of Parent (“Merger Sub”), providing for the merger of Merger Sub with and into us (the “Merger”), with Corgenix Medical Corporation surviving the Merger as a wholly owned subsidiary of Parent. Parent and Merger Sub are affiliates of Water Street Healthcare Partners, LLC. The Merger Agreement was approved unanimously by our Board of Directors. The description of the Merger Agreement and related voting agreement below does not purport to be complete and is qualified in its entirety by the full text of the Merger Agreement, as filed with our Current Report on Form 8-K filed with the Securities and Exchange Commission on August 28, 2014.

At the effective time of the Merger, each share of our common stock issued and outstanding immediately prior to the effective time (other than shares (i) held by us in treasury, (ii) owned by Parent or Merger Sub or any other wholly owned subsidiary of Parent, or (iii) held by shareholders who have perfected and not withdrawn a demand for appraisal rights under Nevada law) will be cancelled and converted automatically into the right to receive $0.27 in cash (the “Merger Consideration”), without interest. Each stock option and warrant which has not been exercised will be cancelled and the holder will be entitled to receive cash equal to the aggregate number of shares of our common stock issuable upon exercise times the excess, if any, of the Merger Consideration over the per share exercise price, subject to any withholding taxes. Any holders of options or warrants with an exercise price greater than the Merger Consideration are not entitled to any payment.

Consummation of the Merger is subject to various closing conditions, including the adoption of the Merger Agreement by the holders of a majority of the outstanding shares of our common stock entitled to vote on the Merger at a meeting of shareholders, which is currently scheduled for November 20, 2014. Consummation of the Merger is not subject to a financing condition. If the Merger is not consummated by December 31, 2014, either party has the right to terminate the Merger Agreement, subject to certain conditions.

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Under the Merger Agreement, we are subject to a “no-shop” restriction on our ability to solicit offers or proposals relating to an alternative acquisition proposal or to provide information to or engage in discussions or negotiations with third parties regarding an alternative acquisition proposal. The no-shop provision is subject to a “fiduciary-out” provision that allows our Board of Directors to change its recommendation that shareholders vote in favor of the Merger if we receive an unsolicited written alternative acquisition proposal that our Board of Directors determines, after consultation with its financial advisor and outside legal counsel, would result in a transaction more favorable to our shareholders than the transactions contemplated by the Merger Agreement, and not doing so would reasonably be expected to be inconsistent with its fiduciary duties under applicable law. If such a decision were made, the Board may withdraw its recommendation in favor of the merger and then provide information to and participate in discussions with third parties. The Merger Agreement provides Parent certain rights to match any such superior proposal (as defined in the Merger Agreement). The “fiduciary-out” also allows our Board of Directors to change its recommendation that shareholders vote in favor of the Merger in case of “intervening events” or material developments lead the Board of Directors to conclude, after consultation with its financial advisor and outside counsel that in light of such intervening event, failure to take such action would reasonably be expected to be inconsistent with its fiduciary duties under applicable law. The Merger Agreement also provides Parent with certain rights to negotiate adjustments to the terms and conditions of the Merger Agreement in order to avoid such change in board recommendation.

The Merger Agreement allows the parties to terminate the Merger Agreement under certain circumstances. Parent may terminate if our Board of Directors changes its recommendation to shareholders to vote in favor of the transaction in accordance with the Merger Agreement, we breach the Merger Agreement, or if we enter into an acquisition agreement with a third party following the receipt of a superior proposal. We may terminate the Merger Agreement if we enter into an acquisition agreement with a third party following the receipt of a superior proposal or if Parent breaches the Merger Agreement. Upon termination of the Merger Agreement under specified circumstances (including upon acceptance of a superior proposal), we must pay Parent a termination fee of $324,000 and reimburse Parent for out of pocket expenses up to $400,000. The Merger Agreement also provides that Parent must pay us a “reverse termination fee” of $648,000 and reimburse us up to $400,000 for out of pocket expenses under specified circumstances.

On August 27, 2014, in connection with the Merger Agreement, Parent entered into a voting agreement with all of our executive officers and directors who are also our shareholders (the “Shareholders”) and together represented approximately 5.5% of our outstanding shares of common stock as of August 25, 2014. Under the terms of the voting agreement, each of the Shareholders agreed to vote and irrevocably appoint Parent as its proxy to vote, all of their shares (a) in favor of the approval of the Merger and adoption of the Merger Agreement; (b) against any other acquisition proposal or proposal or transaction that would reasonably be expected to prevent or delay the consummation of the Merger Agreement; (c) against any proposal that would reasonably be expected to result in a breach of the Merger Agreement by the Company; (d) in favor of any adjournment or postponement of the special meeting where Shareholder Approval is sought, as requested by Parent, and (e) in favor of any other matter necessary to approve the Merger Agreement or otherwise requested by Parent in order to consummate the Merger. Under the terms of the voting agreement, each Shareholder agreed not to exercise any appraisal rights or dissenters’ rights in connection with the Merger Agreement and the transactions contemplated by the Merger Agreement. The voting agreement terminates on the earlier of (a) the effective date of the Merger, (b) the termination of the Merger Agreement or (c) the date our Board of Directors effects a change in board recommendation pursuant to the Merger Agreement.

The Eli Lilly Agreement

On August 15, 2014, we entered into a Technology Transfer, License and Product Development Agreement (the “Lilly Agreement”) with Eli Lilly and Company, an Indiana corporation (“Eli Lilly”). Under the terms of the Lilly Agreement, Corgenix and Eli Lilly will work together to conduct a study to determine the feasibility of developing and manufacturing certain diagnostic test kits for the measurement of certain materials. Each party grants rights to use its respective technology to the other party under the terms of the Lilly Agreement. The Lilly Agreement continues in effect indefinitely unless and until terminated by either party in accordance with its terms. A copy of the Lilly Agreement, in redacted form pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended, is filed as Exhibit 10.1 to the Company’s Form 8-K filed with the Securities Exchange Commission on August 20, 2014. The foregoing description of the Lilly Agreement does not purport to be complete and is qualified in its entirety by the full text of the Agreement, as filed.

NIH Ebola Grant

On June 26, 2014, we were awarded a three-year, $2.9 million National Institutes of Health (“NIH”) grant to advance the development of Ebola diagnostic tests. Collaborating with us on the program are members of the Viral Hemorrhagic Fever Consortium (“VHFC”), a collaboration of academic and industry members headed by Tulane University and partially funded with the support from the NIH.

We have been working to develop Ebola diagnostic products pursuant to this and a previous NIH grant awarded to Corgenix and the VHFC in 2010. At this time, we have developed a prototype rapid diagnostic test (RDT) substantially ahead of our originally anticipated schedule, and it has been tested on a very limited sampling of clinical specimens in West Africa, and also tested under controlled laboratory conditions here in the U.S.  Thus far, we believe the preliminary results have been encouraging. We are continuing to do additional testing, both clinical and analytical, which may be required before we can secure clearances or approvals from regulatory agencies such as the U.S. Food and Drug Administration (FDA), the World Health Organization (WHO), and others. Such regulatory clearances or approvals would be required before we would be able to use or sell this test.

Based on results to date, we have begun the process of applying for an Emergency Use Authorization (EUA) with the FDA. This application is an iterative process and will likely require several submissions to complete the process. We cannot predict how long this might take, or whether other countries will grant similar approvals.

Other companies are also working to develop rapid diagnostic tests for Ebola that would likely compete with any product or products that we might bring to the market, and those other products could be preferred over any product or products we might offer. We do not know the relative performance of our Ebola product as compared to other Ebola products, or what the market for our product might be. Further, we cannot predict when our Ebola product might secure regulatory approval or clearance.  If we do receive regulatory approval or clearance and orders for our Ebola products during the current outbreak of Ebola, we believe this could have a material impact on our results. We cannot predict when the next Ebola outbreak might occur or whether any of our products, if cleared or approved, will be the product of choice at that time or be able to generate significant revenues, if any.

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(c)                                  Basis of Presentation

Financial Statement Preparation

The unaudited condensed financial statements have been prepared by Corgenix according to the rules and regulations of the Securities and Exchange Commission (SEC) for interim financial information and, therefore, certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been omitted. The Company has evaluated subsequent events through the date the financial statements were issued.

In the opinion of management, the accompanying unaudited condensed financial statements for the periods presented, reflect all adjustments, which are normal and recurring, necessary to fairly state the financial position, results of operations and cash flows. These unaudited condensed financial statements should be read in conjunction with the audited financial statements included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2014 filed with the SEC on September 10, 2014.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

2.                                      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company’s significant accounting policies were described in Note 1 to the audited financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2014. There have been no significant changes to these policies and no recent accounting pronouncements or changes in accounting pronouncements during the three months ended September 30, 2014 that are of significance or potential significance to the Company.

3.                                      INVENTORIES

Inventories consist of raw materials, work in process, finished goods and laboratory instruments and parts held for sale, and are recorded at the lower of average cost or market, using the first-in, first-out method. If necessary, a provision is recorded to reduce excess and obsolete inventories to their estimated net realizable value. No such provision was recorded as of September 30, 2014 or June 30, 2014. Components of inventories as of September 30, 2014 and June 30, 2014 are as follows:

4.                                     EARNINGS (LOSS) PER SHARE

Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding. Diluted earnings (loss) per share is computed by dividing net income (loss) 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. Options and warrants to purchase common stock, totaling 15,984,394 shares for the three months ended September 30, 2014 were not included in the calculation of weighted average diluted common shares below as their effect would be to lower the net loss per share and thus be anti-dilutive. Options and warrants to purchase common stock, totaling 11,270,000 shares for the three months ended September 30, 2013 were not included in the calculation of weighted average diluted common shares below as their effect would also be to lower the net income per share and thus be anti-dilutive.

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*                                         Less than $0.01per share

5.                             FAIR VALUE MEASUREMENT

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). The Company uses 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 Company’s financial instruments are valued using quoted prices in active markets or based upon other observable inputs. The following table sets forth the fair value of the Company’s financial assets that were measured on a recurring basis:

As of September 30, 2014:

As of June 30, 2014:

6.                                      STOCKHOLDERS’ EQUITY

(a)                                 Common Stock

On July 28, 2011, we entered into a First Amended Joint Product Development Agreement (the “2011 Development Agreement”) with ELITech and Wescor. Each party is responsible for its own costs, expenses and liabilities incurred under the 2011 Development Agreement. However, ELITech and Wescor will be responsible for expenses related to the development of new Corgenix Assays and systems. Pursuant to the 2011 Development Agreement, each month we will notify Wescor of the amount of their stock purchase commitment, which is equal to sixty-six and 7/10 percent (66.7%) of the amount of each monthly R & D invoice at a per share price of $0.15. Wescor must purchase such shares within thirty (30) days of each notification. For the quarters ended September 30, 2014 and September 30, 2013, we generated $0 and $122,727 respectively, in R & D revenue from Wescor, and issued 109,832 and 283,151 shares, respectively under this arrangement. The 109,832 shares issued in the current quarter were issued pursuant to R & D invoices billed to Wescor in May and June, 2014. Also, pursuant to the 2011 Development Agreement, as of September 30, 2014 and September 30, 2013 there was $0 and $93,471, respectively, in accounts receivable for ELITech/Wescor-

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funded research and development and $0 and $62,345 due from Wescor with respect to stock purchase commitments owing from Wescor for zero and 415,633 shares, respectively, to be issued subsequent to September 30, 2014 and September 30, 2013, respectively. The $62,345 stock purchase commitment as of September 30, 2013 was not recorded as of September 30, 2013. As of June 30, 2014, the 2011 Development Agreement has expired by its terms.

As a result of ELITech’s earlier investment and these transactions, ELITech, including warrants issued to them, beneficially owned 45.3% of the Company’s outstanding shares as of September 30, 2014, and, thus is considered a related party.

(b)                                 Employee Stock Purchase Plan

On January 17, 2012, the stockholders voted to approve the Third Amended & Restated Employee Stock Purchase Plan (the “Third ESPP”), effective January 1, 2012. A total of 500,000 common shares were registered for purchase with the SEC under the Third ESPP.

On December 17, 2013, the stockholders approved the Fourth Amended and Restated Employee Stock Purchase Plan (the “Fourth ESPP”). A total of 500,000 common shares were registered for purchase with the SEC under the Fourth ESPP.

For the three months ended September 30, 2014 and September 30, 2013, shares issued under the Third and Fourth ESPPs amounted to 2,118 and 14,270, respectively. For the three month periods ended September 30, 2014 and September 30, 2013, the benefits expense recognized for the 15% discount on shares purchased under the ESPPs amounted to $678 and $2,568, respectively.

(c)                              Incentive Stock Option Plan

Stock Options as of September 30, 2014

Our 2007 and 2011 Incentive Compensation Plans (the “Plans”) provide for two separate components. The Stock Option Grant Program, administered by the Compensation Committee (the “Committee”) appointed by our 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 September 30, 2014, and changes during the three months then ended:

The aggregate intrinsic value of outstanding options as of September 30, 2014 measures the difference between the market price as of September 30, 2014 ($0.26) and the exercise price of the respective options. Options for 5,000 shares were exercised during the three months ended September 30, 2014.

As of September 30, 2014, the estimated unrecognized compensation cost of unvested stock options amounted to $109,868, which is expected to be recognized over a weighted average period of 74 months.

There were no stock options granted during the three months ending September 30, 2014. The weighted average per share fair value of stock options granted during the three months ending September 30, 2013 was $0.20. The fair value was estimated as of the grant date using the Black-Scholes option pricing model with the following assumptions:

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7.                                      REVOLVING LINE OF CREDIT

Under the LSQ Revolving Credit and Security Agreement dated July 14, 2011 between the Company and LSQ (the “LSQ Agreement”), LSQ provided a line of credit (“Line”) to the Company under which LSQ agreed to make loans to the Company in the maximum principal amount outstanding at any time of $1,500,000. Interest accrued on the average outstanding principal amount of the loans under the Line at a rate equal to 0.043% per day (15.7% APR). Loans under the Line were permitted to be repaid and such repaid amounts re-borrowed until the maturity date. In addition, pursuant to the terms of the LSQ Agreement, we granted to LSQ a security interest in all of our personal property to secure the repayment of the loans under the Line and all other of our obligations to LSQ, whether under the LSQ Agreement or otherwise. The LSQ Agreement was terminated effective October 27, 2013. For the quarter ended September 30, 2013, LSQ funded a total of $2,121,139, of which $1,080 was outstanding as of September 30, 2013. Fees paid to LSQ for interest and other services for the quarter ended September 30, 2013 totaled $440. On August 28, 2013, the Company entered into a Business Loan Agreement (the “Loan Agreement”) effective August 15, 2013 between the Company and Bank of the West (the “Bank”). This Loan Agreement replaced the LSQ Agreement noted above.

Pursuant to the terms of the Loan Agreement, the Bank is providing a revolving line of credit (the “Revolver”) to the Company not to exceed $1,500,000. Interest accrues at a variable one month LIBOR (currently 0.18%) plus 4.00% per annum. Interest payments are due monthly. As of September 30, 2014, the annual interest rate was 4.15%.

Unless terminated by the Company or accelerated by the Bank in accordance with the terms of the Loan Agreement, the Revolver will terminate and all loans there under must be repaid on November 5, 2014. The Bank has agreed to an extension of the Revolver until February 5, 2015.

The Loan Agreement contains certain representations, warranties, covenants and events of default typical in financings of this type, including, for example, limitations on assuming additional debt, making investments, or the sale of Company assets or other changes in the ownership of the Company. As of September 30, 2014, the Company was in compliance with the financial covenants of the Revolver.

In addition, pursuant to the terms of the Loan Agreement, the Company granted to the Bank a security interest in all of the Company’s assets to secure the repayment of the loans under the Revolver and to secure all other obligations of the Company to the Bank.

The Company will use any money it receives under the Loan Agreement for general short term working capital purposes.

The Revolver was activated on October 30, 2013. During the quarter ended September 30, 2014, the Company did not request any funding from the Bank under the Revolver. Consequently, there were no fees paid to the Bank for interest or other services for the same period.

8.                                      RELATED PARTY TRANSACTIONS

The ELITech Group, a French diagnostic company, via its wholly owned subsidiaries, ELITech-UK (our master international distributor) and Wescor (located in Logan, Utah) (the “ELITech Group”) combined, are considered to be a related party, beneficially owning 45.3% of the Company’s outstanding shares, and, as of September 30, 2014, was one of the Company’s four largest non-governmental customers.  For the three months ended September 30, 2014 and September 30, 2013, we generated $0 and $122,727, respectively, in R & D revenue from Wescor. In addition, the Company’s international product sales (including shipping) to ELITech-UK for the three month periods ended September 30, 2014 and September 30, 2013 amounted to $174,817 and $141,856, respectively. In total, for the three months ended September 30, 2014 and September 30, 2013 the ELITech Group (ELITech-UK and Wescor) represented approximately 7.9% and 8.0%, respectively, of total revenues. As of September 30, 2014 and September 30, 2013, the accounts receivable from the ELITech Group amounted to $128,368 and $208,361, respectively, which represented approximately

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10.3% and 13.7%, respectively, of total trade accounts receivable. The Joint Product Development Agreement with Wescor terminated on June 30, 2014.

9.                                      CONCENTRATION OF CREDIT RISK

The Company’s customers, with the exception of the ELITech Group, are principally located in the U.S. The Company performs periodic credit evaluations of its customers’ financial condition but generally does not require collateral for receivables. For the quarter ended September 30, 2014, our four largest non-governmental customers accounted for 33.8% of our total revenues and 21.4% of total trade receivables at quarter-end. For the quarter ended September 30, 2013, our four largest non-governmental customers accounted for 53.1% of our total revenues and 42.0% of total trade receivables at quarter-end.

10.                               COMMITMENTS AND CONTINGENCIES

Litigation

Currently, we are aware of two purported class action complaints that have been filed in connection with the merger.  One complaint was filed in the Second Judicial District Court of the State of Nevada on September 4, 2014 — Rauenzhan v. Corgenix, et al., No. CV14-01907.  An amended complaint was filed in the Rauenzhan lawsuit on October 14, 2014.  One complaint was filed in the First Judicial District Court of the State of Nevada on October 14, 2014 — Bradford, et al. v. Corgenix, et al., No. 14TRT000681B.  Counsel for the plaintiffs in the Rauenzhan and Bradford actions have agreed to consolidate the actions in the Second Judicial District Court. However, as of November 6, 2014, a consolidated Second Amended Class Action Complaint has not been filed.  The complaints name as defendants us, each member of our board of directors, Buyer and Merger Sub.  The complaints generally allege that the board of directors breached its fiduciary duties and that we, Buyer, the Merger Sub aided and abetted those purported breaches, in connection with the proposed merger. The complaints challenge the Merger Consideration as inadequate, and make a variety of other allegations, including the following:

·                  given the recent trading price of our Common Stock and potential future growth, the value of our Common Stock is greater than the consideration offered to shareholders in the proposed merger;

·                  the proposed merger is the result of a flawed process marred by conflicts of interest of our board and senior management;

·                  the “no solicitation” and termination fee provisions of the Merger Agreement preclude us from soliciting, and otherwise restrict our ability to consider, competing offers; and

·                  our definitive proxy statement, filed on October 21, 2014 with the SEC, omits and/or misrepresents material information.

The plaintiffs in these cases seek an order certifying a proposed class of our shareholders, certifying the plaintiffs as the class representatives, granting injunctive relief against the consummation of the merger, or, if the merger is consummated, rescinding the merger and awarding damages, directing the defendants to account for all damages caused by them and all profits or special benefits obtained by them as a result of their alleged breaches of fiduciary duties and an award of costs, expenses and reasonable attorneys’ fees, and accountants’ and experts’ fees.

We notified our carriers of our applicable insurance policies (the “D&O Insurance”) regarding these claims. The D&O Insurance provides coverage for defense costs incurred in connection with the claims, but is subject to a substantial deductible, depending on the claim.  The D&O Insurance may not cover any amount of any judgment or settlement representing the amount by which the Merger Consideration or price is increased.

The defendants believe the claims asserted are without merit.  Buyer has repeatedly indicated that the Merger Consideration is the highest amount Buyer is willing to pay to acquire our company and that it is not willing to increase the amount of the Merger Consideration.

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 and in the Annual Report on Form 10-K for the year ended June 30, 2014.

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(a)                                 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 Exchange Act of 1934, as amended (the “Exchange Act”), 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 guidance, acquisition strategies, strategic partnership expectations, technological developments, 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.

We have incurred operating losses and negative cash flow from operations for most of our history. There can be no assurance that we will be able to generate positive cash flows to fund our operations in the future or to pursue our strategic objectives. 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. For more discussion about each risk factor , see Part 1, Item 1A “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended June 30, 2014.

(b)                                 General

Since our 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 over 50 products covering aspirin effect on platelets, vascular diseases, infectious diseases and liver disease. Our products are sold in the United States, and other North American countries through our marketing and sales organization that includes direct sales representatives and contract sales representatives, and internationally through our Master Distributor (ELITech), and to several significant OEM partners.

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

We generate revenues primarily from sales of products and contract revenues from strategic partners. Contract revenues consist of sales of contract manufactured products from other companies and service fees from research and development agreements with strategic partners.

In August 2014, we announced the execution of a Merger Agreement for the sale of the Company for $0.27 per share, subject to shareholder approval among other conditions. For a summary of the Merger Agreement, see Note 1 (b) to the Condensed Financial Statements.

(c)                                  Results of Operations

Three months ended September 30, 2014 compared to three months ended September 30, 2013

Total revenues. Total revenues for the current quarter decreased $653,406 or 22.7% versus the prior year. This decrease was primarily due to a 37.5% decrease in our Aspirin Works sales and a 76.0% decrease in our contract manufacturing revenues. As can be read from the two tables below, the principal reasons for the decrease in total revenues for the Company for the current period were primarily due to a decrease in North American revenues for the period brought about mainly decreases in contract manufacturing and Aspirin Works sales, partially offset by revenue increases in the Company’s other product and service areas. The first quarter weakness in Aspirin Works sales and for our contract manufactured end products resulted from a slow down in demand from a major customer.

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Cost of revenues.  Total cost of revenues, as a percentage of total revenues, decreased to 51.4% for the quarter ended September 30, 2014 versus 53.8% for the quarter ended September 30, 2013. This decrease for the quarter was due to lower cost of goods sold for our manufactured goods in addition to lower cost of revenues related to grants and contract research and development revenues. The reduction in the cost of goods sold for our core products was primarily attributable to the continuing effort to better manage the Company’s raw materials purchasing practices in addition to the continuing benefits being derived from the increased automation of the Company’s manufacturing processes. The improvement in the cost of revenues related to our contract research and development and grants in the current period, was primarily due to the June 30, 2014 expiration of the ELITech joint product development agreement.

Quarter ended September 30, 2014

Quarter ended September 30, 2013

Selling and marketing expenses.  For the quarter ended September 30, 2014, selling and marketing expenses decreased $31,496, or 6.5%, to $452,188 from $483,684 for the quarter ended September 30, 2013. The $31,496 decrease resulted primarily from decreases of $22,563 in trade show and travel and entertainment-related expenses, $13,553 in labor-related expenses, and $11,683 in advertising expense, partially offset by a net increase of $16,303 in other selling and marketing expenses.

Research and development expenses. Gross research and development expenses, prior to the reclassification of a portion of said expenses to cost of revenues, increased $108,684, or 28.9%, to $485,077 for the quarter ended September 30, 2014, from $376,393 for the quarter ended September 30, 2013. The $108,684 increase resulted primarily from increases of $24,644 in laboratory supplies expense, $34,213 in labor-related expenses, and $10,003 in travel-related expenses, plus a net increase of $39,824 in other research and development expenses.

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General and administrative expenses. For the quarter ended September 30, 2014, general and administrative expenses increased $602,012, or 111.4%, to $1,142,522 from $540,510 for the quarter ended September 30, 2013. The substantial increase was primarily a result of an increase of $604,992 in merger transaction costs, partially offset by a net decrease of $2,979 in other general and administrative expenses.

(d)                                 Adjusted EBITDA

The Company’s earnings (loss) before interest, taxes, depreciation, amortization, and non cash expense associated with stock based compensation (“Adjusted EBITDA”) decreased $866,387, to a negative EBITDA of $678,937 for the quarter ended September 30, 2014 compared with Adjusted EBITDA of $187,450 for the quarter ended September 30, 2013. The primary reason for the decrease in Adjusted EBITDA for the current fiscal year was the net loss incurred in the current period. 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 income (loss) as shown on the accompanying Statement of Operations can be made by eliminating depreciation and amortization expense, corporate stock based compensation expense, interest expense, and income tax expense, if any, from the net income (loss) and further eliminating any interest income from said net income (loss) as in the following table:

(e)                                  Financing Agreements

Under the LSQ Revolving Credit and Security Agreement dated July 14, 2011 between the Company and LSQ (the “LSQ Agreement”), LSQ provided a line of credit (“Line”) to the Company under which LSQ agreed to make loans to the Company in the maximum principal amount outstanding at any time of $1,500,000. Interest accrued on the average outstanding principal amount of the loans under the Line at a rate equal to 0.043% per day (15.7% APR). Loans under the Line were permitted to be repaid and such repaid amounts re-borrowed until the maturity date. In addition, pursuant to the terms of the LSQ Agreement, we granted to LSQ a security interest in all of our personal property to secure the repayment of the loans under the Line and all other of our obligations to LSQ, whether under the LSQ Agreement or otherwise. The LSQ Agreement was terminated effective October 27, 2013. For the quarter ended September 30, 2013, LSQ funded a total of $2,121,139, of which $1,080 was outstanding as of September 30, 2013. Fees paid to LSQ for interest and other services for the quarter ended September 30, 2013 totaled $440. On August 28, 2013, the Company entered into a Business Loan Agreement (the “Loan Agreement”) effective August 15, 2013 between the Company and Bank of the West (the “Bank”). This Loan Agreement replaced the LSQ Agreement noted above.

Pursuant to the terms of the Loan Agreement, the Bank is providing a revolving line of credit (the “Revolver”) to the Company not to exceed $1,500,000. Interest accrues at a variable one month LIBOR (currently 0.18%) plus 4.00% per annum. Interest payments are due monthly. As of September 30, 2014, the annual interest rate was 4.15%.

Unless terminated by the Company or accelerated by the Bank in accordance with the terms of the Loan Agreement, the Revolver will terminate and all loans there under must be repaid on November 5, 2014. The Bank has agreed to an extension of the Revolver until February 5, 2015.

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The Loan Agreement contains certain representations, warranties, covenants and events of default typical in financings of this type, including, for example, limitations on assuming additional debt, making investments, or the sale of Company assets or other changes in the ownership of the Company. As of September 30, 2014, the Company was in compliance with the financial covenants of the Revolver.

In addition, pursuant to the terms of the Loan Agreement, the Company granted to the Bank a security interest in all of the Company’s assets to secure the repayment of the loans under the Revolver and to secure all other obligations of the Company to the Bank.

The Company will use any money it receives under the Loan Agreement for general short term working capital purposes.

The Revolver was activated on October 30, 2013. During the quarter ended September 30, 2014, the Company did not request any funding from the Bank under the Revolver. Consequently, there were no fees paid to the Bank for interest or other services for the same period.

(f)                                   Liquidity and Capital Resources

At September 30, 2014, our working capital decreased by $673,802 to $4,496,413 from $5,170,215 at June 30, 2014, and concurrently, our current ratio (current assets divided by current liabilities) decreased from 5.6 to 1 at June 30, 2014 to 4.2 to 1 at September 30, 2014. The decrease in working capital is primarily attributable to the net loss for the current quarter.

At September 30, 2014, trade and other receivables were $1,258,973 versus $1,982,200 at June 30, 2014. At September 30, 2014, inventories were $2,051,263 versus $1,782,235 at June 30, 2014. Accounts payable, accrued payroll and other accrued expenses increased by a combined $295,237 to $1,348,499 from $1,037,769 at June 30, 2014.

For the three months ended September 30, 2014, cash provided by operating activities amounted to $162,982 versus cash used by operations of $5,553 for the three months ended September 30, 2013. The increase in the cash provided by operations for the current quarter resulted primarily from the decrease in accounts receivable and increase in accounts payable and other accrued liabilities, which were partially offset by the net loss for the period plus the increase in inventories and decrease in accrued payroll and related liabilities.

Net cash used by investing activities was $48,766 for the three months ended September 30, 2014, compared to net cash used by investing activities for the three months ended September 30, 2013 totaling $43,840. The slight increase was primarily due to increased purchases of manufacturing equipment and leasehold improvements for the current period.

Net cash used by financing activities amounted to $8,519 for the three months ended September 30, 2014 compared to net cash provided by financing activities for the three months ended September 30, 2013 totaling $236,596. The decrease was primarily due to no net proceeds received on the revolving line of credit in the current period in addition to lower proceeds from the issuance of common stock.

In summary, the $162,982 in cash provided by operating activities more than offset the cash used by financing and investing activities, resulting in a net increase in cash amounting to $105,697 for the current period.

We have incurred operating losses and negative cash flow from operations for most of our history. Losses incurred since our inception, net of accreted dividends on redeemable common and redeemable preferred stock, have aggregated $14,329,098 and there can be no assurance that we will be able to generate positive cash flows to fund our operations in the future or to pursue our strategic objectives. Historically, we have financed our operations primarily through long-term debt, factoring of accounts receivables, and the sales of common stock, redeemable common stock, and preferred stock. We have also financed operations through sales of diagnostic products and agreements with strategic partners. We have developed and are continuing to modify an operating plan intended to eventually achieve sustainable profitability, positive cash flow from operations, and an adequate level of financial liquidity. Key components of this plan include consistent revenue growth and the cash to be derived from such growth, as well as the expansion of our strategic alliances with other biotechnology and diagnostic companies, securing diagnostic-related government contracts and grants, improving operating efficiencies to reduce our cost of sales as a percentage of sales, thereby improving gross margins, and lowering our overall operating expenses. If our sales were to decline (as they did this quarter), are flat, or achieve very slow growth, we would undoubtedly incur operating losses and a decreasing level of liquidity for that period of time.

We believe that we have sufficient working capital for our existing operations. However, we can provide no assurance that we will be able to secure additional funding for our future operations.  A sustained period of unprofitable operations may strain our liquidity and make it difficult to maintain compliance with our financing arrangements. While we may seek additional sources of

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working capital in response, we can provide no assurance that we will be able to secure this funding if necessary. We may sell additional equity or borrow additional amounts to improve or preserve our liquidity or expand our existing business. We can provide no assurance that we will be able to secure the funding necessary for additional working capital needs at reasonable terms, if at all.

(g)                                 Off -Balance Sheet Arrangements

None.

(h)                                 Contractual Obligations and Commitments

On February 8, 2006, we entered into a Lease Agreement (the “Lease”) with York County, LLC, a California limited liability company (“York”) pursuant to which we leased approximately 32,000 rentable square feet (the “Property”) of York’s approximately 102,400 square foot building, commonly known as Broomfield One and located at 11575 Main Street, Broomfield, Colorado 80020. In 2008, the Property was sold to The Krausz Companies, Inc. a California corporation, aka KE Denver One, LLC (the “Landlord”), and is part of Landlord’s multi-tenant real property development known as the Broomfield Corporate Center. We use the Property for our headquarters, laboratory research and development facilities and production facilities. The Lease was amended on several occasions, as previously reported.

On April 11, 2011, we entered into Lease Amendment No. 5 (the “Fifth Lease Amendment”) with the Landlord. The Fifth Lease Amendment extends the term of the Lease to April 30, 2019 and removes any option to further extend the Lease.

The Fifth Lease Amendment also adjusts the base rent (“Base Rent”) payable under the Lease.

·                  For the period of May 1, 2013 through April 30, 2014, Base Rent was $254,720.00 per annum payable in monthly installments of $21,226.67 per month.

·                  For the period of May 1, 2014 through April 30, 2015, Base Rent will be $277,120.00 per annum payable in monthly installments of $23,093.33 per month.

·                  For the period of May 1, 2015 through April 30, 2016, Base Rent will be $288,204.00 per annum payable in monthly installments of $24,017.00 per month.

·                  For the period of May 1, 2016 through April 30, 2017, Base Rent will be $299,732.99 per annum payable in monthly installments of $24,977.75 per month.

·                  For the period of May 1, 2017 through April 30, 2018, Base Rent will be $311,722.31 per annum payable in monthly installments of $25,976.86 per month.

·                  For the period of May 1, 2018 through April 30, 2019, Base Rent will be $324,191.20 per annum payable in monthly installments of $27,015.93 per month.

The Fifth Lease Amendment also establishes an amount to be paid to Landlord by us in the event of a default by us under the Lease. The payment due upon default by us will be $180,000 multiplied by a fraction, the numerator of which is equal to the number of months remaining in the term of the Lease, and the denominator of which is 96.

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

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

Not required for smaller reporting companies.

Item 4.

Controls and Procedures

Under the supervision and with the participation of our President and Chief Executive Officer and our Chief Financial Officer, our management has evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered

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by this report as defined in Rule 13a-15(b) or Rule 15(d)-15(e) under the Exchange Act. Based on that evaluation, the President and Chief Executive Officer and the Chief Financial Officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures are effective and ensure that information required to be disclosed in our Exchange Act reports is (1) recorded, processed, summarized and reported in a timely manner, and (2) accumulated and communicated to management, including our President and Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

There were no changes in our internal control over financial reporting that occurred during the period covered by this report that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II

Other Information

Item 1.                               Legal Proceedings

For information related to the Company’s legal proceedings, see Note 10 “Commitments and Contingencies” under Part I, Item 1 of this quarterly report on Form 10-Q.

Item 1A.                      Risk Factors

Not required for smaller reporting companies.

Item 2.                               Unregistered Sales of Equity Securities and Use of Proceeds

On July 28, 2011, we entered into a First Amended Joint Product Development Agreement (the “2011 Development Agreement”) with ELITech and Wescor. Pursuant to this agreement, each month we will notify Wescor of the amount of their stock purchase commitment, which is equal to sixty-six and 7/10 percent (66.7%) of the amount of each monthly R & D invoice at a per share price of $0.15. Wescor must purchase such shares within thirty (30) days of each notification. For the quarter ended September 30, 2014 and September 30, 2013, we issued 109,832 and 283,151 shares respectively, under this arrangement. The proceeds have been used for general working capital purposes. The shares and issued under the 2011 Development Agreement have not been registered under the Securities Act of 1933, as amended (the “Securities Act”). The offer of such securities is exempt from the registration requirements of the Securities Act, pursuant to Section 4 (a) (2) of the Securities Act for transactions not involving a public offering and Rule 506 promulgated by the United States Securities and Exchange Commission under the Securities Act. A Form D was filed by the Company reporting information regarding the sale of the securities. The 2011 Development Agreement expired on June 30, 2014.

On August 5 and August 6, 2014, a total of 2,457,273 warrants were exercised on a cashless basis, in exchange for 1,150,863 shares of common stock. The cashless exercises were exempt from registration under Rule 144 of the Securities Act of 1933, as amended.

Item 3.                               Defaults Upon Senior Securities

None

Item 4.                               Mine Safety Disclosures

Not applicable

Item 5.                               Other Information

None

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Item 6.                               Exhibits

a.              Index to and Description of Exhibits.

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SIGNATURES

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

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