SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2001
_ 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
(Name of Small Business Issuer in its Charter)
Nevada 93-1223466
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
12061 Tejon Street, Westminster, Colorado 80234
(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 ___
-
The number of shares of Common Stock outstanding was 19,609,448 as of May 7,
2001.
Transitional Small Business Disclosure Format. Yes _ No X_
CORGENIX MEDICAL CORPORATION
March 31, 2001
TABLE OF CONTENTS
Page
--------
Part I
Financial Information
Item 1. Consolidated Financial Statements 3
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Part II
Other Information
Item 1. Legal Proceedings 16
Item 2. Changes in Securities and Use of Proceeds 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 17
Part I
Item 1. Consolidated Financial Statements
CORGENIX MEDICAL CORPORATION
AND SUBSIDIARIES
Consolidated Balance Sheets
-------------------------------------------------------------------------------
March 31, 2001 June 30, 2000
----------------- ---------------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 272,810 46,698
Accounts receivable, less allowance for
doubtful accounts of $7,000 678,896 610,591
Inventories 549,917 551,082
Prepaid expenses 8,893 511
-------- ---------
Total current assets 1,510,516 1,208,882
Equipment:
Machinery and laboratory equipment 302,949 302,949
Software, furniture, fixtures and
office equipment 1,056,648 800,055
---------- ----------
1,359,597 1,103,004
Accumulated depreciation and amortization (507,517) (469,772)
---------- ----------
Net equipment 852,080 633,232
Intangible assets:
Patents, net of accumulated
amortization of $777,362 and $721,490,
respectively 340,182 396,054
Goodwill, net of accumulated
amortization of $43,021 and $40,087,
respectively 18,567 21,501
Due from officer 12,000 12,000
Other assets 65,602 18,718
----------- ------------
Total assets $2,798,947 2,290,387
============ ============
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Current portion of notes payable $ 211,260 213,816
Current portion of capital lease obligation 36,058 19,667
Accounts payable 830,141 890,907
Accrued payroll and related liabilities 138,603 125,163
Other liabilities 143,557 289,982
Employee stock purchase plan payable 1,859 2,656
------------- ------------
Total current liabilities 1,361,478 1,542,191
Notes payable, excluding current portion 657,174 735,479
Capital lease obligation, excluding
current portion 41,781 56,189
------------ -----------
Total liabilities 2,060,433 2,333,859
------------ -----------
Stockholders' equity (deficit):
Preferred stock, $0.001 par value. Authorized
5,000,000 shares, none issued or outstanding - -
Common stock, $0.001 par value. Authorized
40,000,000 shares; issued and outstanding
19,527,203 in March and 17,416,562 in June 19,527 17,417
Additional paid-in capital 4,325,282 3,958,898
Accumulated deficit (3,617,405) (4,032,648)
Accumulated other comprehensive income 11,110 12,861
------------ -----------
Total stockholders' equity (deficit) 738,514 (43,472)
------------ -----------
Total liabilities and stockholders'
equity (deficit) $ 2,798,947 2,290,387
============= ===========
See accompanying notes to consolidated financial statements.
CORGENIX MEDICAL CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Operations and Comprehensive Income
-------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
March March 31, March 31, March 31,
31, 2001 2000 2001 2000
--------------------------------------------
(Unaudited) (Unaudited)
Net sales $1,112,251 855,635 3,063,545 2,566,259
Cost of sales 398,153 382,931 1,096,329 1,014,298
--------------------------------------------
Gross profit $ 714,098 472,704 1,967,216 1,551,961
Operating expenses:
Selling and marketing 185,339 211,369 532,801 593,658
Research and development 84,224 100,946 262,120 260,291
General and administrative 274,966 181,201 659,430 548,884
--------------------------------------------
Total expenses 544,529 493,516 1,454,351 1,402,833
Operating income(loss) $ 169,569 (20,812) 512,865 149,128
Other expense, net 41,058 42,254 110,483 106,240
--------------------------------------------
Net income (loss) $ 128,511 (63,066) 402,382 42,888
Net income (loss) per
share, basic $0.01 - 0.02 -
Net income (loss) per
share, diluted $0.01 - 0.02 -
Weighted average shares
outstanding, basic 18,485,455 17,383,680 17,775,600 17,170,836
Weighted average shares
outstanding, diluted 18,951,580 17,383,680 17,948,414 17,170,836
================================================
Net income (loss) $ 128,511 (63,066) 402,382 42,888
Other comprehensive income
- foreign currency
translation gain(loss) 10,072 - 11,110 -
------------------------------------------------
Total comprehensive
income (loss) $ 141,363 (63,066) 416,272 42,888
===============================================
See accompanying notes to consolidated financial statements.
CORGENIX MEDICAL CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
-------------------------------------------------------------------------------
Nine Months Ended
March 31, March 31,
2001 2000
---------------------
(Unaudited)
Cash flows from operating activities:
Net income $ 402,382 42,888
Adjustments to reconcile net
income to net cash provided by
(used by) operating activities
Depreciation and amortization 96,551 97,247
Changes in operating assets and liabilities:
Accounts receivable (68,305) (206,538)
Inventories 1,165 (55,593)
Prepaid expenses and other assets (55,266) (125,693)
Accounts payable (60,766) 185,959
Accrued payroll and
related liabilities 13,440 13,683
Other liabilities (146,425) 37,209
Employee stock purchase
plan payable (797) (445)
---------------------
Net cash provided by (used by)
operating activities 181,979 (11,283)
---------------------
Cash flows used by investing activities
Purchase of equipment (12,725) (22,300)
Software development costs (243,868) -
---------------------
Net cash used by investing
activities (256,593) (22,300)
Cash flows from financing activities:
Borrowings on notes payable - 92,918
Payments on notes payable (80,861) (228,873)
Payments on capital leases (25,875) -
Borrowings on capital leases 27,858 -
Cash receipts for common stock 368,494 186,742
---------------------
Net cash provided
by financing activities 289,616 50,787
---------------------
Impact of foreign currency
translation adjustment on cash 11,110 -
Net increase in
cash and cash equivalents 226,112 17,204
Cash and cash equivalents at
beginning of period 46,698 15,963
-----------------------
Cash and cash equivalents at end
of period $ 272,810 33,167
=======================
Supplemental cash flow disclosures-
cash paid for interest $ 101,548 106,240
See accompanying notes to consolidated financial statements.
CORGENIX MEDICAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Corgenix Medical Corporation (Corgenix or the Company) develops,
manufactures and markets diagnostic products for the serologic diagnosis of
certain vascular diseases and autoimmune disorders using proprietary technology.
We market our products to hospitals and free-standing laboratories worldwide
through a network of sales representatives, distributors, and private label
(OEM) agreements. Our offices and manufacturing facility are located in
Westminster, Colorado.
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries, Corgenix, Inc., Corgenix UK Limited (Corgenix
UK) and health-outfitters.com, Inc. Corgenix UK was established as a United
Kingdom company during 1996 to market the Company's products in Europe.
Transactions are generally denominated in US dollars. Corgenix UK held nominal
assets and liabilities through September 1999, and became an operating
subsidiary in October 1999.
The accompanying consolidated financial statements have been prepared,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. In the opinion of the Company, the financial statements
include all adjustments (consisting of normal recurring accruals and
adjustments) required to present fairly the Company's financial position at
March 31, 2001 and June 30, 2000 and the results of operations for each of the
three and nine month periods ended March 31, 2001 and 2000, and the cash flows
for each of the nine month periods then ended. The operating results for the
three and nine months ended March 31, 2001 are not necessarily indicative of the
results that may be expected for the year ended June 30, 2001.
2. SOFTWARE
In the year ended June 30, 2000 we began development of a web site for
selling healthcare and fitness products directly to consumers. The internal and
external costs of developing and enhancing the software, other than initial
design and other costs incurred during the preliminary project stage, have been
capitalized and will continue to be capitalized through the fourth fiscal
quarter of the current year ended June 30, 2001. To date, all products and
enhancements thereto have utilized proven technology. Such capitalized amounts
will be amortized commencing with product introduction over the greater of the
ratio of current gross revenue for a product category to the total expected
gross revenue over the life of that product category, or the straight-line
method over the remaining estimated economic life, ranging from three to six
years beginning July 1, 2001, at which point we have determined the project will
be substantially complete and placed in service. The unamortized capitalized
costs will be reduced to an amount not to exceed the future net realizable
value, determined by sales forecasts based on existing and anticipated
dealer/distributor agreements and other sales contracts. Although it is possible
that management's estimate for the future net realizable value could change in
the near future, management is not currently aware of any events that would
result in a change to its estimate which would be material to our financial
position or our results of operations.
The amount of software development costs capitalized in accordance with
Statement of Position 98-1, Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use, was $414,967 for the year ended June 30,
2000 and $243,868 for the nine months ended March 31, 2001.
3. INCOME PER SHARE
Basic and diluted income per share is presented based on the weighted
average number of common shares outstanding during the period. Diluted
earnings per share is computed on the basis of the weighted average number
of common shares outstanding plus the effect of outstanding warrants and
stock options using the "treasury stock" method unless the impact
is anti-dilutive. The difference between basic earnings per share and diluted
earnings per share is due to the effect of outstanding warrants and stock
options. For the three and nine months ended March 31, 2001, the dilutive effect
of outstanding warrants and stock options would have been 466,125 and 172,814.
The effect of outstanding warrants and stock options was anti-dilutive for the
three and nine months ended March 31, 2000. The components of basic and diluted
earnings (loss) per share are as follows:
3 months ended 3 months ended 9 months ended 9 months ended
March 31, 2001 March 31, 2000 March 31, 2001 March 31, 2000
---------------------------------------------------------------
Numerator:
Net income
(loss)available
to common
stockholders $ 128,511 (63,066) 402,382 42,888
============= ======== =========== ==========
Denominator:
Historical common
shares outstanding
for basic income
(loss) per share at
beginning of period 17,441,174 17,320,164 17,416,562 16,852,116
Weighted average
number of common
equivalent shares
issued during the
period 1,044,281 63,516 359,038 318,720
------------ --------- ---------- ----------
Denominator for
basic income (loss)
per share - weighted
average shares 18,485,455 17,383,680 17,775,600 17,170,836
Incremental common
shares attributable
to shares issuable
under equity
incentive plans
(Treasury Stock
Method) 466,125 - 172,814 -
------------ --------- ---------- ---------
Denominator for
diluted net income
(loss) per share -
weighted average
shares 18,951,580 17,383,68 17,948,414 17,170,836
Basic earnings
(loss) per share $ 0.01 - 0.02 -
------------- --------- ---------- ---------
Diluted earnings
(loss) per share $ 0.01 - 0.02 -
------------- --------- ---------- ---------
4. INCOME TAXES
The Company recognized net income in the three and nine months ended March
31, 2001. Although the Company recognized net income in the year ended June 30,
2000, it historically has incurred losses, and accordingly no net income tax
benefit has been recognized. The Company will continue to assess when it is
appropriate to release some or all of the valuation allowance for deferred
income taxes based on projecting net income in the future or tax planning
strategies.
5. REPORTABLE SEGMENTS
The Company has two segments of business: the North America and Japan
segment, which includes revenues generated by sales to customers in the United
States, Canada, Mexico and Japan, and includes all expenses in the Denver,
Colorado headquarters including corporate expenses; and the International
segment, which includes sales to customers worldwide except for those covered in
the North America and Japan segment, and includes all expenses of the Corgenix
subsidiary in the UK. The Company's other subsidiary, health-outfitters.com,
Inc. had no revenue for the three and nine months ended March 31, 2001. The
following table sets forth selected financial data for these segments for the
three and nine month periods ended March 31, 2001 and 2000. The operating
structure was one segment until October 13, 1999.
Three Months Ended March 31 Nine Months Ended March 31
N.America, N.America,
Japan Intnl. Total Japan Intnl. Total
---------- ------ ----- ---------- ------ ------
Revenues 2001 $824,863 287,388 1,112,251 2,361,667 701,878 3,063,545
2000 $580,950 274,685 855,635 2,103,960 462,299 2,566,259
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Gross 2001 $529,562 184,536 714,098 1,518,552 448,664 1,967,216
Profit 2000 $320,684 152,020 472,704 1,272,896 279,065 1,551,961
-----------------------------------------------------------------------
-----------------------------------------------------------------------
EBITDA 2001 $ 67,096 124,117 191,213 409,293 191,188 600,481
2000 ($41,306) 45,986 4,680 184,897 61,478 246,375
------------------------------------------------------------------------
------------------------------------------------------------------------
Net
income 2001 $ 13,121 115,390 128,511 235,905 166,477 402,382
(loss) 2000 ($ 92,977) 29,911 (63,066) 6,011 36,877 42,888
------------------------------------------------------------------------
------------------------------------------------------------------------
Dep & 2001 $ 30,579 - 30,579 96,551 - 96,551
Amort 2000 $ 25,492 - 25,492 97,247 - 97,247
------------------------------------------------------------------------
------------------------------------------------------------------------
Interest 2001 $ 23,396 8,727 32,123 76,837 24,711 101,548
expense 2000 $ 26,179 16,075 42,254 81,639 24,601 106,240
------------------------------------------------------------------------
------------------------------------------------------------------------
Segment 2001 $2,509,567 289,380 2,798,947 2,509,567 289,380 2,798,947
assets 2000 $1,702,765 387,843 2,090,608 1,702,765 387,843 2,090,608
------------------------------------------------------------------------
------------------------------------------------------------------------
5. Liquidity and Capital Resources
Since inception, the Company has financed its operations primarily through
private placements of common and preferred stock, raising net proceeds of
approximately $4.3 million from sales of these securities. The Company has also
received financing for operations from sales of diagnostic products and
agreements with strategic partners. Through March 31, 2001, Corgenix had
invested $193,000, (net of accumulated depreciation and amortization) in
leasehold improvements, laboratory and computer equipment and office furnishings
and equipment to support its development and administrative activities.
At March 31, 2001, the Company had cash of $273,000, working capital of
$149,000, and short and long-term notes and leases payable of $946,000, with
$247,000 due in the following twelve months and the remainder due at varying
dates through February 2006. In the nine month period ended March 31, 2001, the
Company's accounts payable decreased 15% to $830,000 from $981,000 from March
31, 2000, and accounts receivable decreased 9% to $679,000 from $750,000 from
March 31, 2000. The Company expects that cash flows from current operations will
be sufficient to fund operations at current levels. Management is aggressively
pursuing financing alternatives to provide funds for growth plans.
Item 2.
CORGENIX MEDICAL CORPORATION
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.
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 140 products
covering autoimmune disorders, vascular diseases, infectious diseases and liver
disease to the professional healthcare market. Our products are sold in the
United States, the UK and other countries through our marketing and sales
organization that includes contract sales representatives, direct sales and
marketing personnel, 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.
Accordingly, we do not operate with a 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 revenue from strategic partners. Contract revenue consists of licensing
fees, milestone payments, and royalty payments from research and development
agreements with strategic partners.
Beginning in fiscal year 1996, we began adding third-party OEM 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.
In December 1999, we formed a new wholly owned subsidiary,
heath-outfitters.com, Inc. ("health-outfitters") to focus on product strategies
for consumer healthcare.
Although we have experienced growth in revenue every year since 1990 except
for 1997, there can be no assurance that, in the future, we will sustain revenue
growth 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 milestone payments and license fees 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, (vii) changes in the mix of products that we sell, and (viii) the
acceptance of e-commerce for healthcare products by consumers. In addition,
certain factors described below in " - Forward Looking Statements and Risk
Factors " could have a significant effect on our results of operations.
Results of Operations
Three Months Ended March 31, 2001 and 2000
Net sales. Net sales for the three months ended March 31, 2001 were
$1,112,000, a 29.9% increase from $856,000 in the quarter ended March 31,2000. A
component of net sales, gross product sales, increased 25.1% to $1,068,000 in
2001 from $854,000 in 2000, primarily as a result of continued growth of the
Company's customer base in the United States, enlargement of the Company's
international distribution network, and increased acceptance worldwide of
recently launched products. Cost of sales. Cost of sales in dollars for the
third quarter increased to $398,000 in 2001 from $383,000 in 2000. As a
percentage of sales, cost of sales decreased to 35.8% in the third quarter of
2001 compared to 44.7% in the third quarter of 2000 mainly due to product mix
and a larger sales base to cover fixed costs. The gross profit increased 51.0%
to $714,000 in 2001 from $473,000 in 2000. Selling and marketing. Selling and
marketing expenses decreased 12.3% to $185,000 in the third quarter of 2001 from
$211,000 in the third quarter of 2000, primarily due to allocation and
capitalization of certain costs of developing internal use software for
health-outfitters.com in 2001. As a percentage of sales, selling and marketing
expenses decreased to 16.7% in 2001 from 24.7% in 2000. Research and
development. Research and development expenses decreased 16.8% to $84,000 in the
third quarter of 2001 from $101,000 in the third quarter of 2000. As a
percentage of sales, research and development expenses decreased to 7.6% in the
third quarter of 2001 from 11.8% in the third quarter of 2000. One new product
development program was added in 2001. General and administrative. General and
administrative expenses increased 50.2% to $272,000 in the third quarter of 2001
from $181,000 in the third quarter of 2000 due in part to increased accounting,
legal and related costs. As a percentage of sales, general and administrative
expenses increased to 24.5% in 2001 from 21.1% in 2000. Net income (loss). Net
income for the third quarter in 2001 was $131,000 compared to a loss of
($63,000) in the same period in 2000.
Nine Months Ended March 31, 2001 and 2000
Net sales. Net sales for the nine months ended March 31, 2001 were
$3,064,000, a 19.4% increase from $2,566,000 in the same period in 2000. Gross
product sales increased 8.6% to $2,773,000 during the nine months ended March
31, 2001 from $2,553,000 in the same period in 2000 because of growth of the
Company's customer base worldwide and the increased acceptance of recently
launched products
Cost of sales. Cost of sales increased to $1,096,000 during the nine months
ended March 31, 2001 from $1,014,000 in the same period in 2000. As a percentage
of sales, cost of sales decreased to 35.8% in 2001 from 39.5% in 2000. This
reduction was mainly reflective of product mix and a larger sales base to cover
fixed costs. Gross profit increased 26.7% to $1,967,000 in 2001 from $1,552,000
in 2000.
Selling and marketing. Selling and marketing expenses decreased 10.3% to
$533,000 during the nine months ended March 31, 2001 from $594,000 in the same
period in 2000 due to allocation and capitalization of the costs of developing
the software for the consumer healthcare business in 2001. Research and
development.
Research and development expenses increased 1.1% to $262,000 during the
nine months ended March 31, 2001 from $260,000 in 2000. The increased expenses
were mainly due to a credit in 2000 for previously recognized expense for
outside clinical trials which were determined to be no longer necessary for the
Company.
General and administrative. General and administrative expenses increased
19.6% to $657,000 during the nine months ended March 31, 2001 from $549,000 in
the same period in 2000 largely due to increased accounting, legal and related
costs.
Net income (loss). Net income for the first nine months increased to
$405,000 in 2001 from $43,000 in the same period in 2000 primarily due to
increased product sales and an increase in gross margin.
Liquidity and Capital Resources
Since inception, we have financed our operations primarily through private
placements of common and preferred stock, raising net proceeds of approximately
$4.3 million from sales of these securities. We have also received financing for
operations from sales of diagnostic products and agreements with strategic
partners. Through March 31, 2001, we have invested $193,000, (net of accumulated
depreciation and amortization) in leasehold improvements, laboratory and
computer equipment and office furnishings and equipment to support our
development and administrative activities.
At March 31, 2001, we had cash of $273,000, working capital of $149,000,
and short and long-term notes and leases payable of $946,000, with $247,000 due
in the following twelve months and the remainder due at varying dates through
February 2006. In the third quarter of 2001, our accounts payable decreased 15%
to $830,000 from $981,000 in 2000, and our accounts receivable decreased 9% to
$679,000 from $750,000 in 2000.
We expect that cash flows from our current operations will be sufficient to
fund operations at current levels. We are aggressively pursuing financing
alternatives to provide funds for our current operations and our growth plans,
which financing alternatives may involve accessing the public equity or debt
markets. There can be no assurance that we will be able to obtain sufficient
capital from such financings to pursue our expansion plans.
Forward-Looking Statements and Risk Factors
This 10-QSB includes statements that are not purely historical and are
"forward-looking statements" within the meaning of Section 27A 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-QSB, including, without limitation,
statements regarding future product developments, statements regarding our
intent to develop a consumer products business, acquisition strategies,
strategic partnership expectations, technological developments, the development,
launch and operation of health-outfitters.com, the availability of necessary
components, research and development programs and distribution plans, are
forward-looking statements. All forward-looking statements included in this
10-QSB 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.
Certain factors that could cause actual results to differ materially from
those expected include the following:
Losses Incurred; Future Capital Needs; Risks Relating to the Professional
Products Business; Uncertainty of Additional Funding
We have incurred operating losses and negative cash flow from operations
for most of our history. Losses incurred since our inception have aggregated
$3,615,000, 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. Assuming no significant uses of cash in acquisition
activities or other significant changes, we believe that we will have sufficient
cash to satisfy our funding needs for at least the next year. If we are not able
to operate profitably and generate positive cash flows sufficient for both our
professional product business and health-outfitters.com, we may need to raise
additional capital to fund our operations. If we need additional financing to
meet our requirements, there can be no assurance that we will be able to obtain
such financing on terms satisfactory to us, if at all. Alternatively, any
additional equity financing may be dilutive to existing stockholders, and debt
financing, if available, may include restrictive covenants. If adequate funds
are not available, we might be required to limit our research and development
activities, our selling and marketing activities or our plans to develop the
health-outfitters.com business, any of which could have a material adverse
effect on the future of our business.
Dependence on Collaborative Relationships and Third Parties for Product
Development and Commercialization
We have historically entered into licensing and research and development
agreements with collaborative partners, from which we derived a significant
percentage of our revenues in past years. Pursuant to these agreements, our
collaborative partners have specific responsibilities for the costs of
development, promotion, regulatory approval and/or sale of our products. We will
continue to rely on future collaborative partners for the development of
products and technologies. There can be no assurance that we will be able to
negotiate such collaborative arrangements on acceptable terms, if at all, or
that current or future collaborative arrangements will be successful. To the
extent that we are not able to establish such arrangements, we could experience
increased capital requirements or be forced to undertake such activities at our
own expense. The amount and timing of resources that any of these partners
devotes to these activities will generally be based on progress by us in our
product development efforts. Usually, collaborative arrangements may be
terminated by the partner upon prior notice without cause and there can be no
assurance that any of these partners will perform its contractual obligations or
that it will not terminate its agreement. With respect to any products
manufactured by third parties, there can be no assurance that any third-party
manufacturer will perform acceptably or that failures by third parties will not
delay clinical trials or the submission of products for regulatory approval or
impair our ability to deliver products on a timely basis.
No Assurance of Successful or Timely Development of Additional Products
Our business strategy includes the development of additional diagnostic
products both our professional products business and health-outfitters.com. Our
success in developing new products will depend on our ability to achieve
scientific and technological advances and to translate these advances into
commercially competitive products on a timely basis. Development of new products
requires significant research, development and testing efforts. We have limited
resources to devote to the development of products and, consequently, a delay in
the development of one product or the use of resources for product development
efforts that prove unsuccessful may delay or jeopardize the development of other
products. Any delay in the development, introduction and marketing of future
products could result in such products being marketed at a time when their cost
and performance characteristics would not enable them to compete effectively in
their respective markets. If we are unable, for technological or other reasons,
to complete the development and introduction of any new product or if any new
product is not approved or cleared for marketing or does not achieve a
significant level of market acceptance, our results of operations could be
materially and adversely affected.
Competition in the Diagnostics Industry
Competition in the human medical diagnostics industry is, and is expected
to remain, significant. Our competitors range from development stage diagnostics
companies to major domestic and international pharmaceutical companies. Many of
these companies have financial, technical, marketing, sales, manufacturing,
distribution and other resources significantly greater than ours. In addition,
many of these companies have name recognition, established positions in the
market and long standing relationships with customers and distributors.
Moreover, the diagnostics industry has recently experienced a period of
consolidation, during which many of the large domestic and international
pharmaceutical companies have been acquiring mid-sized diagnostics companies,
further increasing the concentration of resources. There can be no assurance
that technologies will not be introduced that could be directly competitive with
or superior to our technologies.
Governmental Regulation of Diagnostics Products
The testing, manufacture and sale of our products is subject to regulation
by numerous governmental authorities, principally the FDA and certain foreign
regulatory agencies. Pursuant to the Federal Food, Drug, and Cosmetic Act, and
the regulations promulgated thereunder, the FDA regulates the preclinical and
clinical testing, manufacture, labeling, distribution and promotion of medical
devices. We are not able to commence marketing or commercial sales in the United
States of new diagnostic products under development until we receive clearance
from the FDA. The testing for, preparation of and subsequent FDA regulatory
review of required filings can be a lengthy, expensive and uncertain process.
Noncompliance with applicable requirements can result in, among other
consequences, fines, injunctions, civil penalties, recall or seizure of
products, repair, replacement or refund of the cost of products, total or
partial suspension of production, failure of the government to grant premarket
clearance or premarket approval for devices, withdrawal of marketing clearances
or approvals, and criminal prosecution.
There can be no assurance that we will be able to obtain necessary
regulatory approvals or clearances for our diagnostic products on a timely
basis, if at all, and delays in receipt of or failure to receive such approvals
or clearances, the loss of previously received approvals or clearances,
limitations on intended use imposed as a condition of such approvals or
clearances or failure to comply with existing or future regulatory requirements
could have a material adverse effect on our diagnostics business.
Dependence on Distribution Partners for Sales of Diagnostic Products in
International Markets
We have entered into distribution agreements with collaborative partners in
which we have granted distribution rights for certain of our products to these
partners within specific international geographic areas. Pursuant to these
agreements, our collaborative partners have certain responsibilities for market
development, promotion, and sales of the products. If any of these partners
fails to perform its contractual obligations or terminates its agreement, this
could have a material adverse effect on our business, financial condition and
results of operations.
Governmental Regulation of Manufacturing and Other Activities
As a manufacturer of medical devices for marketing in the United States, we
are required to adhere to applicable regulations setting forth detailed good
manufacturing practice requirements, which include testing, control and
documentation requirements. We must also comply with Medical Device Report
("MDR") requirements, which require that a manufacturer report to the FDA any
incident in which its product may have caused or contributed to a death or
serious injury, or in which its product malfunctioned and, if the malfunction
were to recur, it would be likely to cause or contribute to a death or serious
injury. We are also subject to routine inspection by the FDA for compliance with
QSR requirements, MDR requirements and other applicable regulations. The FDA has
recently implemented new QSR requirements, including the addition of design
controls that will likely increase the cost of compliance. Labeling and
promotional activities are subject to scrutiny by the FDA and, in certain
circumstances, by the Federal Trade Commission. We may incur significant costs
to comply with laws and regulations in the future, which may have a material
adverse effect upon our business, financial condition and results of operations.
Regulation Related to Foreign Markets
Distribution of diagnostic products outside the United States is subject to
extensive government regulation. These regulations, including the requirements
for approvals or clearance to market, the time required for regulatory review
and the sanctions imposed for violations, vary from country to country. We may
be required to incur significant costs in obtaining or maintaining foreign
regulatory approvals. In addition, the export of certain of our products that
have not yet been cleared for domestic commercial distribution may be subject to
FDA export restrictions. Failure to obtain necessary regulatory approval or the
failure to comply with regulatory requirements could have a material adverse
effect on our business, financial condition and results of operations.
Uncertain Availability of Third Party Reimbursement for Diagnostic
Products
In the United States, health care providers that purchase diagnostic
products, such as hospitals and physicians, generally rely on third party
payors, principally private health insurance plans, federal Medicare and state
Medicaid, to reimburse all or part of the cost of the procedure. Third party
payors are increasingly scrutinizing and challenging the prices charged for
medical products and services and they can affect the pricing or the relative
attractiveness of the product. Decreases in reimbursement amounts for tests
performed using our diagnostic products, failure by physicians and other users
to obtain reimbursement from third party payors, or changes in government and
private third party payors' policies regarding reimbursement of tests utilizing
diagnostic products, may affect our ability to sell our diagnostic products
profitably. Market acceptance of our products in international markets is also
dependent, in part, upon the availability of reimbursement within prevailing
health care payment systems.
Uncertainty of Protection of Patents, Trade Secrets and Trademarks
Our success depends, in part, on our ability to obtain patents and license
patent rights, to maintain trade secret protection and to operate without
infringing on the proprietary rights of others. There can be no assurance that
our issued patents will afford meaningful protection against a competitor, or
that patents issued to us will not be infringed upon or designed around by
others, or that others will not obtain patents that we would need to license or
design around. We could incur substantial costs in defending the Company or our
licensees in litigation brought by others. Our business could be adversely
affected.
Risks Regarding Potential Future Acquisitions
Our growth strategy includes the desire to acquire complementary companies,
products or technologies. There is no assurance that we will be able to identify
appropriate companies or technologies to be acquired, to negotiate satisfactory
terms for such an acquisition, or to obtain sufficient capital to make such
acquisitions. Moreover, because of limited cash resources, we will be unable to
acquire any significant companies or technologies for cash and our ability to
effect acquisitions in exchange for our capital stock may depend upon the market
prices for our Common Stock. If we do complete one or more acquisitions, a
number of risks arise, such as short-term negative effects on our reported
operating results, diversion of management's attention, unanticipated problems
or legal liabilities, and difficulties in the integration of potentially
dissimilar operations. The occurrence of some or all of these risks could have a
material adverse effect on our business, financial condition and results of
operations.
Dependence on Suppliers
The components of our products include chemical and packaging supplies that
are generally available from several suppliers, except certain antibodies, which
we purchases from single suppliers. We mitigate the risk of a loss of supply by
maintaining a sufficient supply of such antibodies to ensure an uninterrupted
supply for at least three months. We have also qualified second vendors for all
critical raw materials and believe that we can substitute a new supplier with
respect to any of these components in a timely manner. However, there can be no
assurances that we will be able to substitute a new supplier in a timely manner
and failure to do so could have a material adverse effect on our business,
financial condition and results of operations.
Limited Manufacturing Experience with Certain Products
Although we have manufactured over twelve million diagnostic tests based on
our proprietary applications of ELISA technology, certain of our diagnostic
products in consideration for future development, incorporate technologies with
which we have little manufacturing experience. Assuming successful development
and receipt of required regulatory approvals, significant work may be required
to scale up production for each new product prior to such product's
commercialization. There can be no assurance that such work can be completed in
a timely manner and that such new products can be manufactured cost-effectively,
to regulatory standards or in sufficient volume.
Seasonality of Products; Quarterly Fluctuations in Results of Operations
Our revenue and operating results have historically been minimally subject
to quarterly fluctuations. There can be no assurance that such seasonality in
our results of operations will not have a material adverse effect on our
business.
Dependence on Key Personnel
Because of the specialized nature of our business, our success will be
highly dependent upon our ability to attract and retain qualified scientific and
executive personnel. In particular, we believe our success will depend to a
significant extent on the efforts and abilities of Dr. Luis R. Lopez and
Douglass T. Simpson, who would be difficult to replace. There can be no
assurance that we will be successful in attracting and retaining such skilled
personnel, who are generally in high demand by other companies. The loss of,
inability to attract, or poor performance by key scientific and executive
personnel may have a material adverse effect on our business, financial
condition and results of operations.
Product Liability Exposure and Limited Insurance
The testing, manufacturing and marketing of medical diagnostic devices
entails an inherent risk of product liability claims. To date, we have
experienced no product liability claims, but any such claims arising in the
future could have a material adverse effect on our business, financial condition
and results of operations. Our product liability insurance coverage is currently
limited to $2 million. Potential product liability claims may exceed the amount
of our insurance coverage or may be excluded from coverage under the terms of
our policy or limited by other claims under our umbrella insurance policy.
Additionally, there can be no assurance that our existing insurance can be
renewed by us at a cost and level of coverage comparable to that presently in
effect, if at all. In the event that we are held liable for a claim against
which we are not insured or for damages exceeding the limits of our insurance
coverage, such claim could have a material adverse effect on our business,
financial condition and results of operations.
Risks Related to the Consumer Products Business
New Business Strategy
We established a new wholly owned subsidiary, health-outfitters.com, Inc.,
in December 1999. This subsidiary will focus on sales of consumer healthcare
products primarily through e-commerce using our website,
www.healthoutfitters.com. We do not have any experience in managing internet
businesses, and we may not be able to successfully develop this new business.
The demands of attempting to grow this new business may prevent management from
devoting time and attention to our traditional diagnostic business, and that
traditional business may decline.
The e-commerce healthcare market is a relatively new and unproven business.
Whether we succeed depends upon broad acceptance of internet-based healthcare
product purchasing, as well as our ability to generate brand awareness and
vendor relationships.
Competition in the e-commerce industry is, and is expected to remain,
significant. The competitors for the new business range from development stage
internet companies to divisions of larger companies. Many of these companies
have financial, marketing, sales, manufacturing, distribution and other
resources significantly greater than those of us. In addition, many of these
companies have name recognition, established positions in the market and
existing relationships with customers and distributors.
Other Risks
Limited Public Market; Possible Volatility in Stock Prices; Penny Stock
Rules
There has, to date, been no active public market for our Common Stock, and
there can be no assurance that an active public market will develop or be
sustained. Although our Common Stock has been traded on the OTC Bulletin
Board(R) since February 1998, the trading has been sporadic with insignificant
volume.
Moreover, the over-the-counter markets for securities of very small
companies historically have experienced extreme price and volume fluctuations
during certain periods. These broad market fluctuations and other factors, such
as new product developments and trends in our industry and the investment
markets and economic conditions generally, as well as quarterly variation in our
results of operations, may adversely affect the market price of our Common
Stock. In addition, our Common Stock is subject to rules adopted by the
Securities and Exchange Commission regulating broker-dealer practices in
connection with transactions in "penny stocks." As a result, many brokers are
unwilling to engage in transactions in our Common Stock because of the added
disclosure requirements.
Risks Associated with Exchange Rates
Our financial statements are consolidated in US dollars. At the end of each
fiscal quarter and the fiscal year, we convert the financials statements of
Corgenix UK, which operates in pounds sterling, into US dollars, and consolidate
them with results from Corgenix, Inc. We may, from time to time, also need to
exchange currency from US dollars to pounds sterling, or from pounds sterling to
US dollars. Foreign exchange rates are volatile and can change in an unknown and
unpredictable fashion. Should the foreign exchange rates change to levels
different than anticipated by us, our business, financial condition and results
of operations may be materially adversely affected.
CORGENIX MEDICAL CORPORATION
Part II
Other Information
Item 1. Legal Proceedings
Corgenix is not a party to any material litigation or legal proceedings.
Item 2. Changes in Securities and Use of Proceeds
On January 18, 2001 and February 26, 2001, the Company sold a total of
1,995,000 shares of its Common Stock at $.17544 per share for a total of
$350,000 to three accredited investors. The sale was made in reliance upon the
exemption from the registration requirements of the Securities Act of 1933, as
amended, provided by Section 4 (2) of the Securities Act. The shares were not
registered under federal or state securities laws, and, therefore, will be
"restricted securities" as such term is defined in Rule 144 promulgated under
the Securities Act. The Company intends to use the proceeds of the private
placement to acquire capital equipment, reduce short-term debt, accelerate
research and development of new products and for general working capital.
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Registrant's annual meeting of stockholders was held on January 16,
2001.
(b) The following directors were elected for the ensuing year at the annual
meeting: Luis R. Lopez, M.D., Douglass T. Simpson, Brian E. Johnson.
(c) The matters voted upon at the annual meeting, the number of votes cast
for, against, or withheld, as well as the number of abstentions and
non-votes as to each such matter were as follows:
1. The election of Luis R. Lopez, M.D., as a director: 13,051,825 votes
for; 0 votes against; 154,739 votes withheld; 0 abstentions;
4,234,610 non-votes.
2. The election of Douglass T. Simpson as a director: 13,050,325 votes for;
0 votes against; 156,239 votes withheld; 0 abstentions; 4,234,610
non-votes.
3. The election of Brian E. Johnson as a director: 13,031,325 votes for; 0
votes against; 175,239 votes withheld; 0 abstentions; 4,234,610
non-votes.
4. Approval of the amendment to the Registrant's Articles of
Incorporation authorizing an increase in the number of authorized
shares of common stock from 20,000,000 to 40,000,000: 12,817,726
votes for; 326,156 votes against; 0 votes withheld; 62,682
abstentions; 4,234,610 non-votes.
Item 5. Other Information
On March 1, 2001, we entered into an employment agreement with William H.
Critchfield ("Mr. Critchfield") whereby Mr. Critchfield will serve as Vice
President and Chief Financial Officer of Corgenix.
On March 19, 2001, Mr. Brian Johnson resigned from the Board, and in
accordance with Nevada law and our Articles of Incorporation, as amended, Mr.
Jack Payne was appointed to complete the unexpired term.
Item 6. Exhibits and Reports on Form 8-K
none
Exhibit
Number Description of Exhibit
------- ----------------------
2.1 Agreement and Plan of Merger dated as of May 12, 1998 by
and among Gray Wolf Technologies, Inc., Gray Wolf
Acquisition Corp. and REAADS Medical Products, Inc. (filed
as Exhibit 2.1 to the Company's Registration Statement on
Form 10-SB filed June 29, 1998, and incorporated herein by
reference).
2.2 First Amendment to Agreement and Plan of Merger dated as
of May 22, 1998 by and among Gray Wolf Technologies, Inc.,
Gray Wolf Acquisition Corp. and REAADS Medical Products,
Inc. (filed as Exhibit 2.2 to the Company's Registration
Statement on Form 10-SB filed June 29, 1998, and
incorporated herein by reference).
2.3 Second Amendment to Agreement and Plan of Merger dated as of June 17,
1998 by and among the Company and TransGlobal Financial Corporation
(filed as Exhibit 2.3 to the Company's Registration Statement on Form
10-SB filed June 29, 1998, and incorporated herein by reference).
3.1 Articles of Incorporation, as amended (filed as Exhibit 3.1 to the
Company's Registration Statement on Form 10-SB filed June 29, 1998, and
incorporated herein by reference).
3.2* Certificate of Amendment of the Articles of Incorporation.
3.3 Bylaws (filed as Exhibit 3.2 to the Company's Registration
Statement on Form 10-SB filed June 29, 1998, and incorporated
herein by reference).
3.4 Articles of Incorporation of health-outfitters.com, Inc.
dated November 16, 1999 (filed as Exhibit 3.3 to the
Company's filing on Form 10-QSB for the fiscal quarter
ended December 31, 1999).
3.5 Bylaws of health-outfitters.com, Inc. dated November 16,
1999 (filed as Exhibit 3.4 to the Company's filing on Form
10-QSB for the fiscal quarter ended December 31, 1999).
10.1 Manufacturing Agreement dated September 1, 1994 between
Chugai Pharmaceutical Co., Ltd. and REAADS Medical
Products, Inc. (filed as Exhibit 10.1 to the Company's
Registration Statement on Form 10-SB filed June 29, 1998,
and incorporated herein by reference).
10.2 Amendment to the Manufacturing Agreement dated as of
January 17, 1995 between Chugai Pharmaceutical Co., Ltd.
and REAADS Medical Products, Inc.(filed as Exhibit 10.2 to
the Company's Registration Statement on Form 10-SB filed
June 29, 1998, and incorporated herein by reference).
10.3 Amendment Agreement dated November 17, 1997 between Chugai
Diagnostic Science, Co., Ltd. and REAADS Medical Products,
Inc.(filed as Exhibit 10.3 to the Company's Registration
Statement on Form 10-SB filed June 29, 1998, and
incorporated herein by reference).
10.4 Office Lease dated February 6, 1996 between Stream
Associates, Inc. And REAADS Medical Products, Inc. (filed
as Exhibit 10.9 to the Company's Registration Statement on
Form 10-SB filed June 29, 1998, and incorporated herein by
reference).
10.10 Guarantee dated November 1, 1997 between William George Fleming,
Douglass Simpson and Geoffrey Vernon Callen (filed as Exhibit 10.10 to
the Company's Registration Statement on Form 10-SB filed June 29, 1998,
and incorporated herein by reference).
10.11 Employment Agreement dated May 22, 1998 between Luis R. Lopez and the
Company (filed as Exhibit 10.11 to the Company's Registration Statement
on Form 10-SB filed June 29, 1998, and incorporated herein by
reference).
10.12 Employment Agreement dated May 22, 1998 between Douglass T. Simpson and
the Company (filed as Exhibit 10.12 to the Company's Registration
Statement on Form 10-SB filed June 29, 1998, and incorporated herein by
reference).
10.13 Employment Agreement dated May 22, 1998 between Ann L. Steinbarger and
the Company (filed as Exhibit 10.13 to the Company's Registration
Statement on Form 10-SB filed June 29, 1998, and incorporated herein by
reference).
10.14 Employment Agreement dated May 22, 1998 between Taryn G. Reynolds and
the Company (filed as Exhibit 10.14 to the Company's Registration
Statement on Form 10-SB filed June 29, 1998, and incorporated herein by
reference).
10.15 Employment Agreement dated May 22, 1998 between Catherine (O'Sullivan)
Fink and the Company (filed as Exhibit 10.15 to the Company's
Registration Statement on Form 10-SB filed June 29, 1998, and
incorporated herein by reference).
10.16 Consulting Contract dated May 22, 1998 between Wm. George
Fleming, Bond Bio-Tech, Ltd. and the Company (filed as
Exhibit 10.16 to the Company's Registration Statement on
Form 10-SB filed June 29, 1998, and incorporated herein by
reference).
10.17 Stock Purchase Agreement dated September 1, 1993 between
Chugai Pharmaceutical Co., Ltd. and REAADS Medical
Products, Inc. (filed as Exhibit 10.17 to the Company's
Registration Statement on Form 10-SB filed June 29, 1998,
and incorporated herein by reference).
10.19 Note dated January 6, 1997 between REAADS Medical Products, Inc. and
Eagle Bank (filed as Exhibit 10.19 to the Company's Registration
Statement on Form 10-SB filed June 29, 1998, and incorporated herein by
reference).
10.20 Deed of Guarantee Sterling and Currency dated May 14, 1997 by REAADS
Bio-Medical Products (UK) Limited (filed as Exhibit 10.20 to the
Company's Registration Statement on Form 10-SB filed June 29, 1998, and
incorporated herein by reference).
10.23 Consulting Agreement dated January 18, 2000 between AR Medical Supply,
Inc. and the Company (filed as Exhibit 10.23 to the Company's filing on
Form 10-QSB for the fiscal quarter ended March 31, 2000).
10.24 Form of Indemnification Agreement between the Company and its directors
and officers (filed as Exhibit 10.24 to the Company's Registration
Statement on Form 10-SB/A-1 filed September 24, 1998, and by reference
incorporated herein)
10.27 Warrant agreement dated June 1, 2000 between the Company
and Taryn G. Reynolds.
10.28 Consulting Agreement dated November 14, 2000 between Leland P. Snyder
and the Company (filed as Exhibit 10.28 to the Company's filing on Form
10-QSB for the fiscal quarter ended December 31, 2000).
10.30* Employment Agreement dated March 1, 2001 between William Critchfield
and the Company.
21.1 Amended Subsidiaries of the Registrant (filed as Exhibit 21.1 to the
Company's Registration Statement on Form 10-SB filed June 29, 1998).
-------------------------------
* Filed herewith.
(b) Reports on Form 8-K.
None
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CORGENIX MEDICAL CORPORATION
May 11, 2001 By: /s/ Luis R. Lopez
Luis R.Lopez, M.D.
Chairman and Chief Executive Officer
Exhibit 3.2
------------
CERTIFICATE OF AMENDMENT
OF THE
ARTICLES OF INCORPORATION OF
CORGENIX MEDICAL CORPORATION
The undersigned, being the President and Secretary of CORGENIX MEDICAL
CORPORATION, do hereby certify:
That the Board of Directors at a meeting duly convened and held on the 3rd
day of November, 2000, adopted a resolution to amend the Corporation's Articles
of Incorporation, to be effective upon the approval of the shareholders of the
Corporation, and the filing with the Secretary of State of Nevada, and
That the shareholders of the Corporation, at an annual meeting held on the
16th day Of January, 2001, approved the amendment to the Corporation's Articles
of Incorporation, as follows:
1. Article FOURTH of the Articles of Incorporation of CORGENIX MEDICAL
CORPORATION, which sets forth the number of shares of capital stock the
Corporation has the authority to issue us hereby amended to read in its
entirety as follows:
"FOURTH. The total number of shares of all classes of capital stock which
the Corporation shall have the authority to issue is Forty-Five Million
(45,000,000) shares divided into two (2) classes, of which Forty Million
(40,000,000) shares, par value $.001 per share, shall be designated Common
Stock, and Five Million (5,000,000) shares, par value $.001 per share,
shall be designated Preferred Stock. The Board of Directors is expressly
vested with the authority to issue the Common Stock and the Preferred
Stock from time to time, in one or pore classes and in one or more series
of any such classes subject to the following provisions:
A. All classes of Capital Stock.
The following provisions shall apply to all classes of the Corporation's
capital stock:
Section 1. Acquisition, Redemption and Other Disposition. The
Corporation shall have the power to acquire (by purchase, redemption,
or otherwise), hold, own, pledge, sell. transfer, assign, reissue,
cancel, or otherwise dispose of the shares of the Corporation in the
manner and to the extent now or hereafter permitted by the laws of
the State of Nevada (but such power shall not imply an obligation on
the part of the owner or holder of any share to sell or otherwise
transfer such share to the Corporation), including the power to
purchase, redeem, or otherwise acquire the it's own shares, directly
or indirectly, and without pro rata treatment of the owners or
holders of any class or series of shares, unless, after giving effect
thereto, the Corporation would not be able to pay its debts as they
become due in the usual course of business or the Corporation's total
assets would be less than its total liabilities (and without regard
to any amounts that would be needed, if the Corporation were to be
dissolved at the time of the purchase, redemption, or other
acquisition, to satisfy the preferential rights upon dissolution of
stockholders whose preferential rights are superior to those of the
holders of the shares of the Corporation being purchased, redeemed,
or otherwise acquired, unless otherwise expressly provided with
respect to a series of Preferred Stock). Shares of the Corporation
purchased, redeemed, or otherwise acquired by it shall constitute
authorized but unissued shares, unless prior to any such purchase,
redemption, or other acquisition, or within thirty (30) days
thereafter, the Board of Directors adopts a resolution providing that
such shares constitute authorized and issued but not outstanding
shares;
Section 2. Reissuance. Preferred Stock of any series that has been
redeemed (whether through the operation of a retirement or sinking
fund or otherwise) or purchased by the Corporation, or which, if
convertible, have been converted into shares of the Corporation of
any other class or series, may be reissued as a part of such series
or of any other series of Preferred Stock, subject to such
limitations (if any) as may be fixed by the Board of Directors with
respect to such series of Preferred Stock in accordance with the
provisions of Article FOURTH, Subsection C, of these Articles of
Incorporation; and
Section 3. Disposition, Issuance and Sale. The Board of Directors of
the Corporation may dispose of, issue, and sell shares in accordance
with, and in such amounts as may be permitted by, the laws of the
State of Nevada and the provisions of these Articles of Incorporation
and for such consideration, at such price or prices, at such time or
times and upon such terms and conditions (including the privilege of
selectively repurchasing the same) as the Board of Directors shall
determine, without the authorization or approval by any stockholders
of the Corporation. Shares may be disposed of, issued, and sold to
such persons, firms, or corporations as the Board of Directors may
determine, without any preemptive or other right on the part of the
owners or holders of other shares of the Corporation of any class or
kind to acquire such shares by reason of their ownership of such
other shares.
B. Common Stock. The following provisions shall apply to the Common Stock:
Section 1. Voting Rights. Except as otherwise provided by the
General Corporation Law of Nevada and subject to such stockholder
disclosure and recognition procedures (which may include voting
prohibition sanctions) as the Corporation may by action of its Board
of Directors establish, shares of Common Stock shall have unlimited
voting rights and each outstanding share of Common Stock shall, when
validly issued by the Corporation, entitle the record holder
thereof to one vote at all stockholders' meetings on all matters
submitted to a vote of the stockholders of the Corporation;
Section 2. Dividends and Distributions. Shares of Common Stock shall
be equal in every respect insofar as their relationship to the
Corporation is concerned, but such equality of rights shall not imply
equality of treatment as to redemption or other acquisition of shares
by the Corporation. Subject to the rights of the holders of any
outstanding series of Preferred Stock, the holders of Common Stock
shall be entitled to share ratably in such dividends or other
distributions (other than purchases, redemptions, or other
acquisitions of shares by the Corporation), if any, as are declared
and paid from time to time on the Common Stock at the discretion of
the Board of Directors; and
Section 3. Liquidation, Dissolution or Winding Up. In the event of
any liquidation, dissolution, or winding up of the Corporation,
either voluntary or involuntary, after payment shall have been made
to the holders of a~ outstanding series of Preferred Stock of the
full amount to which they shall be entitled, the holders of Common
Stock shall be entitled, to the exclusion of the holders of Preferred
Stock of any and all series, to share, ratably according to the
number of shares of Common Stock held by them, in all remaining
assets of the Corporation available for distribution to its
stockholders.
C. Preferred Stock. The following provisions shall apply to the Preferred
Stock:
Section 1. Issuance. The Board of Directors is hereby expressly
authorized to provide, out of the unissued shares of Preferred Stock,
for one or more series of Preferred Stock. Before any shares of any
such series are issued, the Board of Directors shall fix, and hereby
is expressly empowered to fix, by adopting and filing in accordance
with the General Corporation Law of Nevada, a Certificate of
Designation, after adopting a resolution or resolutions providing for
the issue of such Preferred Stock, and in such resolution or
resolutions providing for the issue of shares of each such class and
of each particular series of any such class. The Board of Directors
is also expressly vested with authority to fix the number of shares
constituting any such series of any such class and to fix the terms
of such Preferred Stock or series of Preferred Stock, including
without limitation the following:
(i) the designation of such series, the number of shares to
constitute such series and the stated value thereof if
different from the par value thereof;
(ii) whether the shares of such series shall have voting rights,
and, if so, the terms of such voting rights, which may be
general or limited, may include multiple votes per share
and may include the right, under specified circumstances,
to elect additional directors;
(iii) the dividends, if any, payable on such series, whether any
such dividends shall be cumulative, and, if so, from what
dates, the conditions and dates upon which such dividends
shall be payable, the preference or relation which such
dividends shall bear to the dividends payable on any shares
of stock of any other class or any other series of
Preferred Stock;
(iv) whether the shares of such series shall be subject to
redemption by the Corporation and, if so, the times, prices
and other conditions of such redemption;
(v) the amount or amounts payable upon shares of such series
upon, and the rights of the holders of such series in, the
voluntary or involuntary liquidation, dissolution or
winding up, or upon any distribution of the assets, of the
Corporation;
(vi) whether the shares of such series shall be subject to the
operation of a retirement or sinking fund and, if so, the
extent to and manner in which any such retirement or
sinking fund shall be applied to the purchase or redemption
of the shares of such series for retirement or other
corporate purposes and the terms and provisions relative to
the operation thereof;
(vii) whether the shares of such series shall be convertible
into, or exchangeable for, shares or stock of any other
class or any other series of Preferred Stock or any other
securities (whether or not issued by the Corporation) and,
if so, the price or prices or the rate or rates of
conversion or exchange and the method, if any, of adjusting
the same, and any other terms and conditions of conversion
or exchange;
(viii) the limitations and restrictions, if any, to be effective
while any shares of such series are outstanding upon the
payment of dividends or the making of other distributions
on, and upon the purchase, redemption or other acquisition
by the Corporation of, the Common Stock or shares of stock
of any other class or any other series of Preferred Stock;
(ix) the conditions or restrictions, if any, upon the creation
of indebtedness of the Corporation or upon the issue of any
additional stock, including additional shares of such
series or of any other series of Preferred Stock or of any
other class of stock; and
(x) any other powers, preferences and relative, participating,
optional and other special rights, and any qualifications,
limitations and restrictions thereof.
Except to the extent otherwise expressly provided in these Articles
of Incorporation or required by law (i) no share of Preferred Stock shall have
any voting rights other than those which shall be fixed by the Board of
Directors pursuant to this Article FOURTH and ('u) no share of Common Stock
shall have any voting rights with respect to any amendment to the terms of any
series of Preferred Stock, provided however, that in the case of this clause
(ii) the terms of such series of Preferred Stock, as so amended, could have been
established without any vote of any shares of Common Stock."
The number of shares of the Corporation outstanding and entitled to
vote on this Certificate of Amendment to the Articles of Incorporation is
Seventeen Million, Four Hundred Forty One Thousand, One Hundred Seventy Four
(17,441,174), and the said changes and Certificate of Amendment have been
consented to and approved by a majority vote of the stockholders holding at
least a majority of each class of stock outstanding and entitled to vote
thereon.
IN WITNESS WHEREOF, the undersigned have executed this Certificate of
Amendment this 16th day of January, 2001, and affirm that this Certificate of
Amendment is the act and deed of the Corporation and the statements made herein
are true under the penalties of perjury.
/s/Douglass T. Simpson
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Douglass T. Simpson
President
/s/ Taryn G. Reynolds
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Taryn G. Reynolds
Secretary
Exhibit 10.30
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MANAGEMENT AGREEMENT
This agreement is made and entered into as of March 1, 2001 between Corgenix
Medical Corporation. Nevada corporation (the "Company"), and William Critchfield
(the "Executive").
The Company currently employs or intends to employ the Executive in the position
of Vice President, Chief Financial Officer ("CFO"). The Company and the
Executive desire to enter into an Employment Agreement setting forth the terms
of the Executive's employment in such capacities by the Company. In
consideration of the mutual promise contained herein, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. Employment: Position; Term. The Company and the Executive hereby agree to the
Executive's employment by the Company in the position of Vice President,
Chief Financial Officer (the "Position"). Subject to Section 4, the term of
this employment shall be for thirty-six (36) months, beginning March 1, 2001
and it shall be continuously renewed and extended, unless otherwise
terminated as provided for herein, so that it shall be effective for
thirty-six (36) months from any date, irrespective of the anniversary date of
this Agreement.
2. Duties: Responsibilities and Authority, In his capacities in the Position,
the Executive shall have the primary executive responsibility for the
financial management of the business of the Company, which shall be conducted
in accordance with policies established by the Company's board of directors
(the "Board"). In his capacities in the Position, the Executive shall report
to and be subject to the direction and control of the President. The
Executive shall devote his full professional and managerial time and effort
to the performance of his duties as Vice President, Chief Financial Officer
of the Company and he shall not engage in any other business activity or
activities which, in the mutual judgement of the Executive and the Board, do,
in fact, conflict with the performance of his duties under this Agreement,
unless agreed to in writing by the Board and attached to this agreement.
Furthermore, subject to the specific direction of the President and general
direction and control of the Board, the Executive shall be in complete charge
of all financial operations of the Company and shall have full authority and
responsibility for formulating policies and administering the financial
affairs of the Company in all respects. Both the Company and the Executive
acknowledge that the services to be provided by Executive are critical to the
Company's business.
3. Compensation.
(a) Salary and incentive compensation. For services rendered under this
Agreement, the Company shall pay the Executive a monthly salary of $10,416
paid semi-monthly at the rate of $5,208 beginning March 1, 2001. In
addition, each year during the term of this Agreement, the Executive shall
be eligible to receive additional incentive compensation as shall be
determined by the President and approved by the Board.
(b) Annual review. The Executive's salary shall be reviewed annually beginning
with the first anniversary of the date first written above, and it may be
increased (but not decreased) as the President and Board deems
appropriate.
(c) Automobile expense reimbursement. The Company shall reimburse the
Executive in the amount of $500.00 per month for reasonable and necessary
automobile expenses to be incurred by the Executive in connection with his
employment by the Company.
(d) Benefits and Vacation. The Executive shall be eligible to participate in
such insurance programs (health, disability, or life) or such other
health, dental, retirement, or similar employee benefits programs as the
Board may approve, on as basis at least as favorable,as well as
comparable to that available to other officers and executive employees
of the Company. The Executive may participate in stock option programs
of the Company upon such terms as the administrators of such programs
in their discretion determine. The Executive shall be entitled to paid
time off from work at the discretion of the President. The value of any
unused vacation time shall not be paid to the Executive upon termination
of his employment for any reason.
(e) Reimbursement of Expenses. The Company shall reimburse the Executive for
all reasonable out-of pocket expenses incurred by the Executive in
connection with the business of the Company and in the performance of his
duties under this Agreement upon the Executive's presentation to the
Company of an itemized accounting of such expenses with reasonable
supporting data.
4. Termination. Either party may terminate the Executive's employment under this
Agreement, without cause, upon one (1) month's written advance notice to the
other party. The Company may terminate the Executive's employment for "Cause"
(as hereinafter defined) immediately upon written notice stating the basis
for such termination. "Cause" for termination of the Executive's employment
shall only be deemed to exist if the Executive has breached this Agreement,
exhibited willful disobedience of directions of the Board, or committed gross
malfeasance in performance of his duties hereunder or acts resulting in an
indictment charging the Executive with commission of a felony; provided that
the commission of acts resulting in such an indictment shall constitute Cause
only if a majority of the directors who are not also subject to any such
indictment determine that the Executive's conduct has substantially adversely
affected the Company or its reputation. A material failure to perform his
duties hereunder that results from the disability of the Executive shall not
be considered Cause for his termination.
5. Death. In the event of the death of the Executive, except with respect to any
benefits which have accrued and have not been paid to the Executive
hereunder, the provisions of this Employment Agreement shall terminate
immediately. However, the Executive's estate shall have the right to receive
compensation due to the Executive as of and to the date of his death and,
furthermore, to receive an additional amount equal to one twelfth (1/12) of
the Executive's annual compensation then in effect as specified in Section 3,
above.
6. Severance Pay. In the event that the Executive's employment is terminated by
the Company other than "for cause", the Executive shall be entitled to
receive his then current compensation, payable at the company's regular
payment intervals, and all employee benefits, for twelve (12) months
following the date of the Executive's termination by the Company. If the
Executive truly voluntarily resigns his employment hereunder, or if his
employment is terminated for Cause, the Executive shall not be entitled to
any severance pay or other compensation beyond the date of termination of his
employment.
7. Change of Control Payment. "Change in Control" shall mean a change in
ownership or control of the Company effected through any of the following
transactions:
(i) the acquisition, directly or indirectly by any person or group other than
a trustee or other fiduciary holding securities under an employee benefit
plan of the Company, of beneficial ownership of securities possessing
more than thirty percent (30%) of the total combined voting power of the.
Company's outstanding securities, excluding an initial or secondary
public offerings;
(ii)a stockholder-approved merger or consolidation to which the Company
is a party and in which (A) the Company is not the surviving entity or
(B)securities possessing more than thirty percent (30%) of the total
combined voting power of the Company's outstanding securities are
transferred to a person or persons different from the persons holding
those securities immediately prior to such transaction.
In the event of a change of control, as set forth in this Paragraph 6, the
Executive shall be entitled to receive a lump sum payment equal to sixty (60)
months of his then current compensation and all employee benefits.
8. Covenant Not to Compete. During the continuance of his employment hereunder
and for a period of twelve (12) months after termination of his employment
hereunder, the Executive shall not, anywhere in the United States, engage in
any business which competes directly with the Company. The Company and the
Executive both acknowledge the importance and value of the Executive's
services to the Company.
9. Acceleration of Vesting.
(i) In the event of a Change in Control of the Company, all awards due to
the Executive outstanding under the Company's 1999 Incentive Stock Plan
(or other incentive stock plans) as of the day before the consummation
of such Change in Control shall automatically accelerate so that each
Stock Option shall become fully exercisable with respect to the total
number of shares subject to such stock option and may be exercised for
any or all of those shares as fully-vested shares of common stock as of
such date, without regard to the conditions expressed in the agreements
relating to such stock option.
(ii) In the event that the Executive's employment is terminated by the
Company other than "for cause", all awards due to the Executive
outstanding under the Company's 1999 Incentive Stock Plan (or other
incentive stock plans) shall automatically accelerate so that each Stock
Option shall become fully exercisable with respect to the total number of
shares subject to such stock option and may be exercised for any or all of
those shares as fully-vested shares of common stock as of such date,
without regard to the conditions expressed in the agreements relating to
such stock option.
10. Trade Secrets and Confidential Information. During his employment
by the Company, and for a period of five years thereafter, the Executive
shall not, directly or indirectly, use, disseminate, or disclose for any
purpose other than for the purposes of the Company's business, any of the
Company's confidential information or trade secrets, unless such disclosure
is compelled in a judicial proceeding: The Executive acknowledges access to,
and receipt of, such confidential information. Upon termination of his
employment, all documents, records, notebooks, and similar repositories of
records containing information relating to any trade secrets or confidential
information then in the Executive's possession or control, whether prepared
by him or by others, shall be left with the Company or returned to the
Company upon request. The Executive shall notify future employers of the
existence of this confidentiality provision.
11. Severability. It is the desire and intent of the parties that the provisions
of Sections 8 and 10 shall be enforced to the fullest extent permissible
under the laws and public policies applied in each jurisdiction in which
enforcement is sought. Accordingly, if any particular sentence or portion of
either Section 8 or 10 shall be adjudicated to be invalid or unenforceable,
the remaining portions of such section nevertheless shall continue to be
valid and enforceable as though the invalid portions were not a part thereof.
In the event that any of the provisions of Section 8 relating to the
geographic areas of restriction or the period of restriction shall be deemed
to exceed the maximum area or period of time which a court of competent
jurisdiction would deem enforceable, the geographic areas and times shall,
for the purposes of this Agreement, be deemed to be the maximum areas of time
periods which a court of competent jurisdiction would deem valid and
enforceable in any state in which such court of competent jurisdiction shall
be convened.
12. Injunctive Relief. The Executive agrees that any violation by him of the
agreements contained in sections 8 and 10 are likely to cause irreparable
damage to the Company, and therefore agrees that if there is a breach or
threatened breach by the Executive of the provisions of said sections, the
Company shall be entitled to an injunction restraining the Executive from
such breach. Nothing herein shall be construed as prohibiting the Company
from pursuing any other remedies for such breach or threatened breach.
13. Miscellaneous.
(a) Notices. Any notice required or permitted to be given under this
Agreement shall be directed to the appropriate party in writing and
mailed or delivered,
to the Company:
10261 Tejon Street
Westminster CO 80234
Attn: President
to the Executive:
William Critchfield
4497 Coolidge Place
Boulder, CO 80303
(b) Binding effect. This Agreement is a personal service agreement and may not
be assigned by the Company or the Executive, except that the Company may
assign this Agreement to a successor by merger, consolidation, sale of
assets or other reorganization. Subject to the forgoing, this Agreement
shall be binding upon and inure to the benefit of the parties hereto and
their respective successors, assigns, and legal representatives.
(c) Amendment. This Agreement may not be amended except by an instrument in
writing executed by each of the parties hereto.
(d) Applicable Law. This Agreement shall be governed by the laws of the State
of Colorado, and the venue of any action or proceeding under this
Agreement shall take place in the City and County of Denver, Colorado.
(e) Counterparts. This instrument may be executed in one or more
counterparts, each of which shall be deemed as original.
(f) Arbitration. Should any dispute arise concerning the terms and conditions
of this Agreement, or the breach thereof, and such dispute cannot be first
resolved informally, the parties hereto agree to submit any dispute
arising out of, or relating to, this Agreement, or the breach thereof, to
binding arbitration governed by the American Arbitration Association.
(g) Entire Agreement. This Agreement supersedes and replaces all prior
agreements between the parties related to the employment of the
Executive by the Company.
(h) Advice of Counsel. Executive acknowledges that he has had the opportunity
to seek the advice of counsel relating to this Agreement prior to
execution of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
Corgenix Medical Corporation Executive
/s/ Douglass T. Simpson /s/ William Critchfield
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Douglass T. Simpson William Critchfield
President