UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

For the quarterly period ended March 31, 2010

For the transition period from           to           

Commission File Number 000-24541

CORGENIX MEDICAL CORPORATION

(Name of Small Business Issuer in its Charter)

11575 Main Street, Number 400, Broomfield, CO 80020

(Address of principal executive offices, including zip code)

(303) 457-4345

(Issuer’s telephone number, including area code)

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

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

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

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

The number of shares of Common Stock outstanding was 31,037,819 as of May 7, 2010.

CORGENIX MEDICAL CORPORATION

March 31, 2010

TABLE OF CONTENTS

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PART I

Item 1. Consolidated Financial Statements

CORGENIX MEDICAL CORPORATION

AND SUBSIDIARIES

Consolidated Balance Sheets

(Unaudited)

See accompanying notes to consolidated financial statements.

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CORGENIX MEDICAL CORPORATION
AND SUBSIDIARIES

Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

*Less than $0.01 per share

See accompanying notes to consolidated financial statements.

4

CORGENIX MEDICAL CORPORATION
AND SUBSIDIARIES

Consolidated Statement of Stockholders’ Equity

For the nine months ended March 31, 2010

(Unaudited)

See accompanying notes to consolidated financial statements.

5

CORGENIX MEDICAL CORPORATION
AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)

See accompanying notes to consolidated financial statements.

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CORGENIX MEDICAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.                                     DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

(a)                                 Outlook

In fiscal 2010, we continue to be focused on accelerating the market launch of our AspirinWorks assay, beginning the market launch of our Anti-AtherOx Test Kit, submission of a 510(k) Premarket Notification to the FDA for our AtherOx Test Kit, completing further clinical studies for our Hyaluronic Test Kit, and a Fibromyalgia test kit, and continuing the development and strategic collaboration towards the development of a group of products to detect potential bio-terrorism agents.

(b)                                 Recent Developments

On March 15, 2010, Corgenix UK Limited, a corporation incorporated in the United Kingdom (“Corgenix UK”) and a wholly owned subsidiary of Corgenix Medical Corporation (the “Company”), entered into a financing agreement with Faunus Group International. Inc. ,(“FGI”) (see also Note 6).

As previously disclosed, on September 30, 2009, we, along with our wholly owned subsidiary, Corgenix, Inc., entered into a Financing Agreement, an Addendum to Financing Agreement, a Loan and Security Agreement and a Promissory Note (collectively, the “Summit Agreements”) with Summit Financial Resources, L.P., a Hawaii limited partnership (“Summit”).  We are jointly and severally liable for all obligations pursuant to the Summit Agreements. The Summit Agreements provide us and our subsidiary with a maximum credit line of $1,750,000 pursuant to an account factoring relationship, coupled with a secured line of credit (see also Note 6).

(c)                                  Company Overview

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

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

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

·                 Liver diseases (fibrosis and cirrhosis).

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

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

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

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

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

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

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

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

(2)                                 Summary of Significant Accounting Policies

(a)                                 Application of New Accounting Standards

In June 2009, the Financial Accounting Standards Board (“FASB”) issued FASB ASC 105, Generally Accepted Accounting Principles (“GAAP”), which establishes the FASB Accounting Standards Codification as the sole source of authoritative generally accepted accounting principles. Pursuant to the provisions of FASB ASC 105, we have updated references to GAAP in our financial statements issued for the period ending March 31, 2010. The adoption of FASB ASC 105 did not impact our financial position or our results of operations.

(b)                                 Principles of Consolidation

The consolidated financial statements include the accounts of Corgenix Medical Corporation and its wholly-owned subsidiaries, Corgenix, Inc. and Corgenix (UK) Limited (“Corgenix UK”). Corgenix UK was established as a United Kingdom company during 1996 to market our products in Europe. Transactions are generally denominated in U.S. dollars, but also invoices in Euros and British Pound Sterline. All amounts are converted into U.S. dollars upon consolidation of our financial statements..

(c)                                  Use of Estimates

The preparation of our financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ significantly from those estimates. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) have been omitted from these unaudited consolidated financial statements. These unaudited consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year  ended June 30, 2009.  The results of operations for the three and nine months ended March 31, 2010 and March 31, 2009 are not necessarily indicative of the operating results for the full year. In the opinion of management, all adjustments, consisting only of normal recurring accruals, have been made to present fairly our financial position at March 31, 2010 and the results of operations and our cash flows for the three and nine months ended March 31, 2010 and 2009.

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(d)                                 Cash and Cash Equivalents

We consider all highly liquid debt instruments purchased with original maturities of three months or less at purchase to be cash equivalents.

(e)                                  Trade Accounts Receivable

Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is our best estimate of the amount of probable credit losses in our existing accounts receivable. We determine the allowance based on historical write-off experience. We review our allowance for doubtful accounts monthly. Past due balances over 90 days and over a specified amount are reviewed individually for collectability. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. We do not have any off-balance sheet credit exposure related to customers.

We have adhered to the guidance set forth in the Sale of Accounts Receivable Topic of the Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”), which provides standards for distinguishing transfers of financial assets that are sales from transfers that are secured borrowings.

On March 15, 2010, Corgenix UK entered into a financing agreement with FGI.  Under the Agreement, Corgenix UK agrees to sell all of Corgenix UK’s right, title and interest in and to specified accounts receivable and all merchandise represented by those accounts.  In exchange, FGI will advance funds to the Company. The Company will use the funds for working capital purposes and to continue to fund the operations of Corgenix UK.  The Company, and Corgenix, Inc., a wholly owned subsidiary of the Company, have guaranteed Corgenix UK’s obligations to FGI.

The purchase price for each account sold to FGI is 85% of the face amount of the account, less certain fees set forth in the Agreement.  An administrative fee of 1.15% of the average monthly balance of the purchased accounts (the “Administrative Fee”) will be payable monthly.  The Company will pay FGI a one-time facility fee of US$10,000 upon funding, and has already paid a US$10,000 deposit to reimburse FGI for actual expenses incurred in connection with FGI’s review and approval process as well as auditor fees, attorneys’ fees and expenses incurred in documenting the financing agreement.

On September 30, 2009, we established a $1,750,000 credit facility, which includes an accounts receivable factoring line, with Summit, secured by our domestic accounts receivable, inventory, and all of our other assets. This credit facility enables us to sell selected accounts receivable invoices to Summit with full recourse against us. Due to the full recourse provisions in both the FGI and the Summit Financing Agreements, and pursuant to the guidance as set forth in this Topic, these transactions do not qualify as a true sale of assets, and thus are treated as secured borrowings. During the third fiscal quarter and initial nine months of fiscal 2010, we sold $1,354,029 and $3,289,472 respectively, of our accounts receivable invoices to FGI and Summit (“the Lenders”) for approximately $1,167,099 and $2,908,933, respectively. As previously mentioned, pursuant to the provisions of this Topic, we reflected the transactions with the Lenders as secured borrowings, as we have previously done with the sales of accounts receivable to Benefactor Funding Corporation. We have also established an accounts receivable from the Lenders for the retained amounts, less the costs of the transactions, less any anticipated future loss in the value of the retained asset. The retained amounts are equal to 15% of the total accounts receivable invoice sold to the Lenders. The periodic interest expense and administrative fees assessed by the Lenders on the amounts owing, are charged to interest expense, and will be credited against the accounts receivable due from them. As of March 31, 2010, we have an outstanding retained receivable of $226,631 due from the Lenders.

(f)                                    Inventories

Inventories consist of raw materials, work in process and finished goods and are recorded at the lower of average cost or market, using the first-in, first-out method. A provision is recorded to reduce excess and obsolete inventories to their estimated net realizable value, when necessary. No such provision was recorded as of March 31, 2010 or March 31, 2009. Components of inventories as of March 31 and June 30 are as follows:

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(g)                                 Equipment and Software

Equipment and software are recorded at cost. Equipment under capital leases is recorded initially at the present value of the minimum lease payments. There was no equipment acquired under capital leases for the quarters ended March 31, 2010 and there was $16,398 worth of equipment acquired under capital leases for the quarter ended March 31, 2009. For the nine months ended March 31, 2010 there was no equipment acquired under capital leases and for the nine months ended March 31, 2009, there was $43,538              worth of equipment acquired under capital leases. Depreciation and amortization expense, which totaled $111,102 and $111,949 for the quarters ended March 31, 2010 and March 31, 2009, respectively, and $326,302 and $333,989 for the nine months ended March 31, 2010 and March 31, 2009, respectively, is calculated primarily using the straight-line method over the estimated useful lives of the respective assets which range from 3 to 7 years. Capitalized software costs are related to our web site development, our R & D statistical software, which were and are both amortized over three years, and our accounting software, which is being amortized over five years, beginning in March 2008.

(h)                                 Intangible Assets

Intangible assets consist of purchased licenses. Purchased licenses are amortized using the straight-line method over the shorter of 15 years or the remaining life of the license. We have adopted the provisions of the Goodwill and Other Intangible Assets Topic of the FASB ASC. Pursuant to these provisions, goodwill and intangible assets acquired in a purchase business combination and determined to have indefinite lives and licenses acquired with no definite term are not amortized, but instead are tested for impairment at least annually in accordance with the provisions of this statement. Identifiable intangibles with estimated useful lives continue to be amortized over their respective estimated useful lives and reviewed for impairment in accordance with the Accounting for Impairment or Disposal of Long Lived Assets Topic as set forth in the FASB ASC.

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

The License Agreement imposes caps on the total amount of cash, common stock, and warrant payments from us to CCC from the date of execution through to and including the third anniversary payment. Under that cap limitation, the total of all anniversary payments will not exceed $200,000 in cash, with each anniversary cash payment determined by multiplying $50,000 by an anniversary ratio which is the ratio of cumulative revenue at the respective anniversary date divided by the cumulative sales target for the same period of time. Likewise, the total of all anniversary common stock payments will not exceed $300,000 in value of shares of common stock (as valued on the date of issue), with the number of shares for each anniversary stock issuance determined by dividing 75,000 by the closing stock price as of the respective anniversary date and multiplying that result by the anniversary ratio noted above. Finally, the total of all anniversary warrant payments will not exceed 300,000 warrants, with the value of each anniversary warrant issuance determined by multiplying 75,000 (the number of warrants to be issued) by a newly calculated Black Scholes value per warrant as of the fiscal year end. As of March 31, 2010, we had accrued $2,646 with respect to the cumulative amount due to CCC. For the quarter and nine month periods ended March 31, 2010, we issued to CCC 23,164 shares of our common stock and 75,000 warrants with an exercise price of $0.35, pursuant to this license agreement.

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

(i)                                    Advertising Costs

Advertising costs are expensed when incurred, and are included in Selling and Marketing expenses. Advertising costs, which totaled $14,602 and $21,158 for the quarters ended March 31, 2010 and March 31, 2009, respectively, and $37,451 and $87,896 for the nine month periods ended March 31, 2010 and March 31, 2009, respectively.

(j)                                    Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for net operating loss and other credit carry forwards and the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the tax effect of transactions are expected

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to be realized. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the consolidated statements of operations in the period that includes the enactment date.

Deferred tax assets are reduced by a valuation allowance for the portion of such assets for which it is more likely than not that the amount will not be realized. Deferred tax assets and liabilities are classified as current or noncurrent based on the classification of the underlying asset or liability giving rise to the temporary difference or the expected date of utilization of the carry forwards.

(k)                                 Revenue Recognition

Revenue is recognized upon shipment of products. Sales discounts and allowances are recorded at the time product sales are recognized and are offset against sales revenue. When revenue is received by a customer in advance of shipment of products, in exchange for a discount, it is credited to deferred revenue and taken into revenue upon eventual shipment of the products. We also have arrangements in which we manufacture products for other companies. Revenue under these arrangements is recognized when the manufacturing process is complete and risk of ownership has passed.

(l)                                    Research and Development

Research and development costs and any costs associated with internally developed patents, formulas or other proprietary technology are expensed as incurred. Research and development expense totaled $190,155 and $172,513 for the quarters ended March 31, 2010 and March 31, 2009, respectively, and $506,574 and $572,210 for the nine month periods ended March 31, 2010 and March 31, 2009, respectively. Revenue from research and development contracts represents amounts earned pursuant to agreements to perform research and development activities for third parties and is recognized as earned under the respective agreement. Because research and development services are provided evenly over the contract period, revenue is recognized ratably over the contract period. Research and development agreements in effect in 2010 and 2009 provided for fees to us based on time and materials in exchange for performing specified research and development functions. Contract research and development revenues totaled $248,183 and $36,183 for the quarters ended March 31, 2010 and March 31, 2009, respectively, and $426,213 and $169,989 for the nine month periods ended March 31, 2010 and March 31, 2009, respectively. Research and development contracts are generally short term with options to extend, and can be cancelled under specific circumstances.

(m)                              Long-Lived Assets

We review long-lived assets, including intangibles, for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Events relating to recoverability may include significant unfavorable changes in business conditions, recurring losses, or a forecasted inability to achieve break-even operating results over an extended period. We evaluate the recoverability of long-lived assets based upon forecasted undiscounted cash flows. Should an impairment in value be indicated, the carrying value of intangible assets will be adjusted based on estimates of future discounted cash flows resulting from the use and ultimate disposition of the asset.

(n)                                 Deferred Facility Lease Payable

Prior to occupying our headquarters facility in Broomfield, Colorado, the landlord expended a total of $1,052,140 for the tenant improvements. This amount was recorded as a charge to leasehold improvements and a credit to deferred facility lease payable, which is being amortized against rent expense over the 84 month period of the lease.

(o)                                 Stock-Based Compensation

In accordance with the guidance of the Share-Based Payment Topic of the FASB ASC, we account for share-based payments by measuring and recognizing the amount of compensation expense for all share-based payment awards made to employees, officers, directors, and consultants, including employee stock options based on estimated fair values. Pursuant to this guidance, we estimate the fair value of share-based payment awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the required service period in our Statements of Operations. Stock-based compensation is based on awards ultimately expected to vest and is reduced for estimated forfeitures. In further adherence to this guidance, we estimate any future forfeiture at the time of grant and revise these estimates, as necessary, in subsequent periods if actual forfeitures differ from those estimates.

For purposes of determining the estimated fair value of share-based payment awards on the date of grant, and as allowed by the guidance of the Share-Based Payment Topic in the FASB ASC, we use the Black-Scholes option-pricing model (Black Scholes Model). The Black Scholes Model requires the input of highly subjective assumptions. Because our employee stock options may have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can

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materially affect the fair value estimate, in management’s opinion, the existing models may not provide a reliable single measure of the fair value of our employee stock options. Management will continue to assess the assumptions and methodologies used to calculate estimated fair value of share-based compensation. Circumstances may change and additional data may become available over time, which result in changes to these assumptions and methodologies, which could materially impact our fair value determination.

The application of the accounting principles set forth in the guidance of the Share-Based Payment Topic of the FASB ASC may be subject to further interpretation and refinement over time. There are significant differences among option valuation models, and this may result in a lack of comparability with other companies that use different models, methods and assumptions. If factors change and we employ different assumptions in the application of these accounting principles in future periods, or if we decide to use a different valuation model, the compensation expense that we record in the future under these principles may differ significantly from what we have recorded in the current period and could materially affect our loss from operations, net loss and net loss per share.

(p)                                 Earnings (loss) per Share

Basic earnings (loss) per share is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding. Diluted earnings (loss) per share is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding increased for potentially dilutive common shares outstanding during the period. The dilutive effect of stock options and their equivalents is calculated using the treasury stock method. Options and warrants to purchase common stock, totaling 36,168,177 and 37,703,968 shares as of March 31, 2010 and March 31, 2009, respectively, are not included in the calculation of weighted average common shares-diluted below, as their effect would be to lower the net loss per share and thus be anti-dilutive. Redeemable common stock is included in the common shares outstanding for purposes of calculating net income (loss) per share.

*Less than $0.01 per share

(q)                                 Foreign Currency Transactions and Comprehensive Income (Loss)

The accounts of our foreign subsidiary are generally measured using the local currency as the functional currency. For those operations, assets and liabilities are translated into U.S. dollars at period-end exchange rates. Income and expense accounts are translated at average monthly exchange rates. Adjustments resulting from such translation are accumulated in other comprehensive income as a separate component of stockholders’ equity.

We adhere to the guidance set forth in the Reporting Comprehensive Income Topic of the FASB ASC, which establishes standards for reporting and displaying comprehensive income (loss) and its components. Comprehensive income (loss) includes all changes in equity during a period from non-owner sources.

(r)                                   Cost of Sales and Operating Expenses

Cost of sales includes costs associated with manufacturing, including labor, raw materials, freight-in, manufacturing administration, quality assurance and quality control, repairs and maintenance, scrap and other indirect costs.

Selling and marketing expenses consist primarily of shipping and handling costs, wages and benefits for sales and marketing support personnel, travel, sales commissions, business insurance, promotional costs, as well as other indirect cots.

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Research and development expenses consist primarily of the labor-related costs, the cost of clinical studies and travel expenses, laboratory supplies and product-testing expenses related to the research and development of new and existing diagnostic products.

General and administrative expenses consist primarily of wages and benefits associated with management and administrative support departments, business insurance costs, professional fees, outside services, office facility related expense, and other general support costs.

(s)                                   Liquidity

We have incurred operating losses and negative cash flow from operations for most of our history. Losses incurred since our inception, net of dividends on convertible preferred stock, have aggregated $13,220,253, 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.  At March 31, 2010, trade and other receivables were $1,608,467 versus $1,339,409 at June 30, 2009.

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 double digit 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.  Towards these efforts, although we have been able to better control our operating expenses, we have not yet managed to generate continuously increasing sales at a rate sufficient to meet our plan, nor have we been successful in reducing our cost of sales to a percentage closer to that which we normally achieved prior to 2008.  As a result, even though our operating losses have been significantly reduced over the prior 18 months, if our sales continue to decline, are flat, or achieve very slow growth, we would undoubtedly incur operating losses and a decreasing level of liquidity for that period of time. In view of this, and in order to improve our liquidity and operating results, we are also continuing to assess alternative financing scenarios, while at the same time striving to increase our revenues and further reduce, where possible, our operating expenses.  Given the current lack of a resumption of former sales growth rates, there are significant short- term and potentially intermediate-term risks associated with the operating plan. Thus, we will undoubtedly be forced to secure either an equity placement or an additional debt financing, if available, while at the same time, further modify the plan, in order to maintain liquidity and achieve the goals of sustained profitability and positive cash flow from operations.

In order to further supplement our corporate liquidity and completely pay off our former convertible debt, on March 15, 2010 and September 30, 2009, we were able to secure both a $750,000 and a $1,750,000 credit facility from FGI and Summit respectively. Our current intention is to eventually be in a position to replace said financings with traditional commercial bank and/or equity financing, if either or both should be made available to us. Although the recent debt financings in conjunction with our current revised forecasts show that we should have adequate resources to continue operations for longer than 12 months, management believes that a further cash infusion either via an additional debt financing or an equity placement would give us better assurance that this will be the case.

As can clearly be seen from the above, our dependence on operating cash flow means that risks involved in our business can significantly affect our liquidity. Any loss of a significant customer, any new competitive products or pricing pressures affecting sales levels of our core products, or any significant expenses not anticipated nor included in our internal operating budget, could further result in the need to raise additional cash. The Summit and FGI financings are expected to provide working capital which will be necessary to help meet our needs over the next 12 months via the sale of our high quality trade accounts receivable. Although we currently have no arrangement for any additional external financing of debt or equity, we continue to seriously explore all such possibilities, with the near-term intention of executing one or more of them.

(t)                                Recently Issued Accounting Pronouncements

With respect to the guidance set forth in the Disclosures  of Derivative Instruments and Hedging Activities Topic of the FASB ASC, which enhances required disclosures regarding derivatives and hedging activities, including enhanced disclosures regarding how: a) an entity uses derivative instruments; b) derivative instruments and related hedged items are accounted for; and c) derivative instruments and related hedged items affect an entity’s financial position, financial performance and cash flows, we do not expect that the application of the principles set forth under this Topic will be applicable to our financial statements.

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As of July 1, 2008, we adopted the guidance set forth in the Fair Value Measurements Topic of the FASB ASC. This guidance established a framework for measuring fair value in GAAP and clarified the definition of fair value within that framework. The guidance does not require any new fair value measurements in GAAP. The guidance further introduced, or reiterated a number of key concepts which form the foundation of the fair value measurement approach to be utilized for financial reporting purposes. The fair value of our financial instruments reflect the amounts that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The guidance also established a fair value hierarchy that prioritizes the use of inputs used in valuation techniques into the following three levels:

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

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

Level 3—unobservable inputs.

The adoption of these provisions did not have a material effect on our financial condition and results of operations, but introduced new disclosures about how we value certain assets and liabilities. Much of the disclosure requirement is focused on the inputs used to measure fair value, particularly in instances where the measurement uses significant unobservable (Level 3) inputs. Our financial instruments are valued using quoted prices in active markets or based upon other observable inputs. The following table sets forth the fair value of our financial assets that were measured on a recurring basis as of March 31, 2010:

We have adopted the guidance set forth in the Fair Value Option for Financial Assets and Financial Liabilities Topic of the FASB ASC. Pursuant to the guidance of this Topic, we are allowed the irrevocable option to elect fair value for the initial and subsequent measurements for specified financial assets and liabilities on a contract-by-contract basis. We did not elect to adopt the fair value option included in this Topic. The provisions of the Non-controlling Interests in Consolidated Financial Statements Topic of the FASB ASC change how business acquisitions are accounted for and will impact financial statements both on the acquisition date and in subsequent periods. These provisions will change the accounting and reporting for minority interests, which will be recharacterized as non-controlling interests and classified as a component of equity. These provisions are effective for both public and private companies for fiscal years beginning on or after December 15, 2008 (the fiscal year ended June 30, 2010 for our company). The provisions will be applied prospectively. The provisions also require retroactive adoption of the presentation and disclosure guidance for existing minority interests. All other guidance under this Topic will be applied prospectively. Early adoption is prohibited for both standards. Management has evaluated the guidance under this Topic and has determined that there is no impact on our financial statements.

The provisions of the Interim Disclosures about Fair Value of Financial Instruments Topic of the FASB ASC, which is effective for interim periods ending after June 15, 2009, require the disclosures of fair value of financial instruments in interim financial statements as well as in annual financial statements. We have adopted these provisions and believe that they do not have a significant impact on our financial position, cash flows, or disclosures.

The Subsequent Events Topic of the FASB ASC established general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. Recognized subsequent events should be recognized in the financial statements since the condition existed at the date of the balance sheet. Non recognized subsequent events are not recognized in the financial statements since the conditions arose after the balance sheet date but before the financial statements are issued or are available to be issued. The guidance in this Topic, is effective for interim or annual periods ending after June 15, 2009. In connection with the preparation of our consolidated financial statements, we have evaluated subsequent events after the balance sheet date of March 31, 2010, through the filing of this report.

3.                                      SEGMENT INFORMATION

Our diagnostic medical products are sold in North America (the U.S., Canada and Mexico) directly and through independent sales representatives, to hospital laboratories, laboratory chains, independent laboratories, university laboratories and reference laboratories. Internationally, our diagnostic medical products are sold wholesale through distributors, except in the UK, where they are sold direct.  Management has chosen to organize our business around the two geographic segments of business: North American and International operations. The following table sets forth selected financial data for these segments for the three and nine month periods

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ended March 31, 2010 and 2009.

4.                                      REDEEMABLE COMMON STOCK AND REDEEMABLE CONVERTIBLE PREFERRED STOCK

(a)                                 Redeemable Common Stock and Warrants

On July 1, 2002, as part of the Medical & Biological Laboratories Co., Ltd. (MBL) Agreement, MBL purchased shares of our common stock for $500,000. Under the MBL agreement, MBL could require us to repurchase at the same price in the event that a previously existing distribution agreement with RhiGene, Inc. was terminated. For no additional consideration, MBL was also issued warrants to purchase an additional 880,282 shares of Common Stock at a price of $.568 per share, which was equal to an aggregate amount of $500,000. These warrants were originally due to expire on July 3, 2008. The estimated fair value of the warrants upon issuance was calculated at $401,809 using the Black-Scholes option-pricing model with the following assumptions: no expected dividend yield, 143% volatility, risk free interest rate of 4.2% and an expected life of five years. The gross proceeds of $500,000 were allocated $277,221 to redeemable common stock and $222,779 to the related warrants based on the relative fair value of the respective instruments to the fair value of the aggregate transaction.  Issuance costs and the discount attributed to the redeemable common stock upon issuance were accreted over the 33-month period prior to the first date whereupon the put option could have been exercised, which was the expiration date of the distribution agreement between us and RhiGene (March 31, 2009). Furthermore, pursuant to the agreement with MBL, as long as MBL held at least 50% of the common stock purchased under the MBL agreement, MBL must give its written consent with respect to the payment of any dividend, the repurchase of any of our equity securities, the liquidation or dissolution of the Company or the amendment of any provision of our Articles of Incorporation or Bylaws which would adversely affect the rights of MBL under the stock purchase transaction documents. MBL was granted standard anti-dilution rights with respect to stock issuances not registered under the Securities Act. MBL also received standard piggyback registration rights along with certain demand registration rights.

On March 31, 2005, our distribution agreement with RhiGene expired, and we signed a new distribution and OEM Supply Agreement with MBL International, Inc. (“MBLI”), a wholly owned subsidiary of MBL, which granted us non-exclusive rights to distribute MBL’s complete diagnostic line of autoimmune testing products in the U.S. and exclusive distribution rights to the OEM label products worldwide excluding the U.S., Japan, Korea and Taiwan. In addition, on August 1, 2005 we executed an Amendment to the 2002 Common Stock Purchase Agreement and Common Stock Purchase Warrant wherein one-half, or 440,141, of the original redeemable shares were exchanged for a three-year promissory note payable with interest at prime (3.25% as of March 31, 2010) plus two percent, with payments having commenced in September, 2005. The shares exchanged for the promissory note were returned to us quarterly on a pro rata basis as payments were made on the promissory note. The remaining 440,121 shares not covered by the promissory note were originally due to be redeemed by us at $0.568 per share on August 1, 2008 for any shares still owned at that time by MBL but only to the extent that MBL had not realized at least $250,000 in gross proceeds upon the sales of its redeemable shares in the open market for the time period August 1, 2007 through August 1, 2008. Finally, the warrants originally

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issued to MBL to purchase 880,282 shares were initially extended to August 31, 2008 and re-priced from $0.568 per share to $0.40 per share.

On  July 15, 2008, we reached agreement with MBL to amend certain provisions of our February 1, 2005 Exclusive Distribution Agreement, in addition to entering into a Memorandum of Understanding Regarding Aspirin Works Distribution Rights in Japan, and to execute a Second Amendment to Common Stock Purchase Agreement and Warrant. These new agreements and amendments added certain products and transfer prices, called for the discussion of terms whereby MBL would be granted a worldwide OEM agreement for certain of the products in a designated territory, called for the payment by us of royalties on certain proprietary products, which included proprietary technology of MBL, and called for the negotiation of terms of an exclusive distribution agreement for sales of AspirinWorks in Japan. In addition, pursuant to the Second Amendment to Common Stock Purchase Agreement and Warrant, we agreed with MBL that the warrant term would be extended to August 1, 2010 and that one-half, or 220,086, of the remaining 440,171 redeemable shares will be exchanged for a two-year promissory note payable with interest at prime (3.25% as of March 31, 2010) plus two percent with payments commencing September 1, 2009. As a result of the warrant extension, additional unaccreted dividends on the redeemable common stock were created, which are being accreted over the period of the warrant extension, and are deducted in calculating net loss attributable to common stockholders on our statements of operations and comprehensive loss. The shares exchanged for the promissory note will be returned to us quarterly on a pro rata basis as payments are made on the promissory note. As of March 31, 2010, a total of 495,157 shares have been returned to us pursuant to the notes payable. The companies further agreed that beginning September 1, 2008, and continuing through August 1, 2010 (the maturity date of the Second Promissory Note), MBL will attempt to sell on the open market, the remaining 220,101 shares not subject to the Second Promissory Note, at a price of $0.62 or greater. At the close of business on August 1, 2010, MBL will then have the right to sell, and we will have the obligation to purchase, any remaining stock then held by MBL, at a price of $0.568 per share.

(b)                                 Redeemable Convertible Preferred Stock

On February 3, 2009, we entered into two agreements (the “Restructuring Agreements”) to restructure the debt evidenced by convertible term notes that Truk Opportunity Fund, LLC, a Delaware company; Truk International Fund, LP, a Cayman Islands company (collectively, “Truk”); and CAMOFI Master LDC, a Cayman Islands company, formerly named DCOFI Master LDC, (“CAMOFI”) purchased on May 19, 2005 and December 28, 2005. The Restructuring Agreements suspended all amortizing principal amount payments otherwise due under each note, beginning November 1, 2008 and ending on the earlier of (i) the first day of the month next succeeding the closing of any new financing transaction or (ii) May 1, 2009 (the “Repayment Date”), at which time payments would again have become due and payable on the first day of each subsequent month until March 31, 2010 (the “Maturity Date”). Payments would be equal to the amount of principal outstanding divided by the number of months from the Repayment Date until the Maturity Date. On the Maturity Date, the amortizing principal amount for each of the term notes and all other amounts due and owing must be repaid in full, whether by payment of cash, or at Truk’s or CAMOFI’s option, by the conversion into common stock.

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

Simultaneously with the execution of the Restructuring Agreements:

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

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

(3)                                  We issued to CAMOFI 200,000 shares of our Series B Convertible Preferred Stock (“Series B”), with a liquidation preference of $50,000, which is convertible into 800,000 shares of our common stock at the rate of $0.25 per share; and

(4)                                  We issued to Truk 36,680 shares of Series B, with a liquidation preference of $9,170, which is convertible into 146,720 shares of our common stock at the rate of $0.25 per share. The calculated cost of items (2) through (4) above, were charged to deferred finance costs and is being amortized over nine months through December 2009.

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5.                                     STOCKHOLDERS’ EQUITY

(a)                                 Employee Stock Purchase Plan

Effective January 1, 1999, we adopted an Employee Stock Purchase Plan to provide eligible employees an opportunity to purchase shares of our common stock through payroll deductions, up to 10% of eligible compensation. On April 26, 2007, Shareholders approved our Second Amended and Restated Employee Stock Purchase Plan. These plans fully comply with Section 423 of the Internal Revenue Code of 1986. Each quarter, participant account balances are used to purchase shares of stock at the lesser of 85% of the fair value of shares on the first business day (grant date) and last business day (exercise date) of each quarter. No right to purchase shares shall be granted if, immediately after the grant, the employee would own stock aggregating 5% or more of the total combined voting power or value of all classes of stock. A total of 600,000 common shares have been registered with the Securities and Exchange Commission (SEC) for purchase under the two plans. In the quarter and nine months ended March 31, 2010, 1,760           and 36,307 shares, respectively, were issued under the plans. In the quarter and nine months ended March 31, 2009, 27,673 and 52,725 shares, respectively, were issued under the plans.

(b)                                 Incentive Stock Option Plan

Stock Options as of March 31, 2010

Our Amended and Restated 1999 Incentive Stock Plan and the 2007 Incentive Compensation Plan (the “Plan”) provides for two separate components. The Stock Option Grant Program, administered by the Compensation Committee (the “Committee”) appointed by 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 March 31, 2010, and changes during the nine months then ended:

The total intrinsic value as of March 31, 2010 measures the difference between the market price as of March 31, 2010 and the exercise price. No options were exercised during the nine months ended March 31, 2010. Consequently, no cash was received, nor did we realize any tax deductions related to exercise of stock options during the period.

Total estimated unrecognized compensation cost from unvested stock options as of March 31, 2010, was approximately $4,399, which is expected to be recognized over a weighted average period of 36.0 months.

The weighted average per share fair value range of stock options granted during the nine month periods ending March 31, 2010 was $0.099. There were no options granted during the nine months ended March 31, 2009. 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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In addition to the stock options discussed above, we recognized no share-based compensation expense related to Restricted Stock awards in the current quarter or nine month period and recognized $3,333 and $9,999 in related share-based compensation expense for the three and nine month periods ended March 31, 2009.

As of March 31, 2010, there were also 33,799,537 warrants outstanding which have been issued to institutional investors, consultants, and employees, with exercise prices ranging in prices from $.23 to $.50 per share with a weighted average exercise price of $.35 per share. Of these warrants, none were newly or incrementally issued in the current quarter. However, 75,000 warrants were issued in the nine months ended March 31, 2010 pursuant to the License Agreement with CCC, as noted above. Similarly, no warrants were issued in the quarter ended March 31, 2009, with 75,000 warrants newly or incrementally issued in the nine months ended March 31, 2009.

On September 8, 2008, the Board of Directors granted an equity award of 206,000 shares of common stock to our five officers in recognition of our achievements for the prior two years, as no stock options had been granted since August, 2006. The closing price of our stock on September 8, 2008 was $0.20 and the value of the stock awards amounted to $41,200.

Effective September 8, 2008, we adopted a One Year Short-term Incentive Compensation Plan to provide the executive officers an opportunity to earn shares of our common stock as a bonus and in lieu of cash compensation upon the achievement by us of certain stipulated and targeted EBITDA amounts. The shares of common stock to be issued under this plan were based upon the closing stock price of our common stock as of June 30, 2009, which was $0.095. Based upon the reported EBITDA figures for the fiscal year ended June 30, 2009, 737,099 shares of our common stock were earned by the Executive Officers and were issued to the corporate officers at the end of September 2009. Under both issuances, the shares immediately vested upon issuance.

6.                                     DUE TO FACTOR

On March 15, 2010, Corgenix UK entered into a financing agreement with FGI.  Under the Agreement, Corgenix UK agrees to sell all of Corgenix UK’s right, title and interest in and to specified accounts receivable and all merchandise represented by those accounts.  In exchange, FGI will advance funds to the Company. The Company will use the funds for working capital purposes and to continue to fund the operations of Corgenix UK.  The Company, and Corgenix, Inc., a wholly owned subsidiary of the Company, have guaranteed Corgenix UK’s obligations to FGI.

The purchase price for each sold account is 85% of the face amount of the account, less certain fees set forth in the Agreement.  An administrative fee of 1.15% of the average monthly balance of the purchased accounts (the “Administrative Fee”) will be payable monthly.  The Company will pay FGI a one-time facility fee of $10,000 upon funding, and has already paid an additional $10,000 deposit to reimburse FGI for actual expenses incurred in connection with FGI’s review and approval process as well as auditor fees, attorneys’ fees and expenses incurred in documenting the financing agreement.

Corgenix UK must maintain an average monthly net balance of funds advanced of no less than $200,000 during the term of the agreement.  If Corgenix UK does not sell at least $200,000 of account debt to FGI each month, then interest and fees will be applied to the difference between $200,000 and the amount of debt actually sold.  Interest will be charged on each advance at the greater of 8.5% per annum or 1.5% above the U.S. Prime Rate.  The maximum amount available for advance to the Company is $750,000. On March 31, 2010, the initial advance to us from FGI on eligible international accounts receivable amounted to $114,459 which represented  approximately 85% of international accounts receivable sold to them totaling $134,658.

The Agreement term is 36 months; however Corgenix UK may terminate the Agreement at any time after two years by giving FGI not less than ninety days prior written notice and paying a termination fee of $25,000.  FGI may terminate the Agreement at any time by giving Corgenix UK not less than thirty days prior written notice or without notice if any event of default or recourse event occurs.

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On September 30, 2009, we, along with our wholly owned subsidiary, Corgenix, Inc., entered into a Financing Agreement, an Addendum to Financing Agreement, a Loan and Security Agreement and a Promissory Note (collectively, the “Summit Agreements”) with Summit.  We are jointly and severally liable for all obligations pursuant to the Summit Agreements. The Agreements with Summit provide us and our subsidiary with a maximum credit line of $1,750,000 pursuant to an account factoring relationship, coupled with a secured line of credit.

Under the Financing Agreement, we agree to sell all of our right, title and interest in and to accounts identified for purchase by Summit from time to time. The purchase price for each sold account equals the face amount of each account multiplied by the applicable advance rate, minus all interest and fees and charges as described in the Financing Agreement. In addition, interest will accrue on advances made by way of purchased accounts at the rate of prime plus 1.5% per annum until Summit receives payment in full on each account. If Summit does not receive full payment on a purchased account by the due date specified in the Financing Agreement, then we or our subsidiary (as applicable) must repurchase that account, and pay Summit the default interest rate until it is repaid.

During the initial funding period (which is the earlier of 120 days after the date of the Agreements, or the date of the second term loan advance), the advance rate on eligible accounts receivable will be 90%, and 85% thereafter, unless Summit elects in its discretion to apply a different percentage. On September 30, 2009, the initial advance to us from Summit on eligible accounts receivable amounted to $632,553, which represented 90% of eligible accounts receivable of $702,908.

As stated in Note 2 (e) above, the accounts receivable sold to FGI and Summit (‘the Lenders”) are treated as a secured borrowing and  in the same manner as set forth above for Benefactor Funding Corporation. During the third quarter and initial nine months of fiscal 2010, we sold $1,354,029 and $3,289,472, respectively, of our accounts receivable invoices to the Lenders for approximately $1,167,098 and $2,908,933. Fees paid to the Lenders for interest and other services for the quarter and nine months ended March 31, 2010 totaled $57,566 and $134,132, respectively.

Pursuant to the Addendum to Financing Agreement, Summit may, in its sole discretion and without any duty to do so, elect from time to time to make advances based upon Acceptable Inventory, which is defined in the addendum to mean inventory approved for intended use by the Food and Drug Administration, among other criteria.

Advances based upon Acceptable Inventory may be made upon request so long as the aggregate amount of all advances based upon Acceptable Inventory outstanding and unpaid does not exceed the lesser of (a) Fifty Percent (50%) of the lower of book value, as determined in accordance with generally accepted accounting principles, of the Acceptable Inventory, (b) Four Hundred Fifty Thousand Dollars ($450,000), (c) Fifty Percent (50%) of Client’s outstanding Acceptable Accounts, and (d) together with the aggregate amount of all other outstanding Advances, the Maximum Credit Line. On September 30, 2009, the initial advance to us from Summit on Acceptable Inventory amounted to $351,454.

Summit may decline to make advances based upon Acceptable Inventory for any reason or for no reason, without notice, regardless of any course of conduct or past advances based upon Acceptable Inventory by Summit.

We used a portion of the initial advance to retire the debt evidenced by the Factoring and Security Agreement to Benefactor Funding Corp, a Colorado corporation. The payoff to Benefactor amounted $580,786.

7.                                     NOTES PAYABLE

Notes payable consist of the following at March 31, 2010 and June 30, 2009:

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The convertible notes payable restrict the payment of dividends on our common stock.

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.

(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 Act of 1934, as amended, including statements regarding our expectations, beliefs, intentions or strategies regarding the future.  All statements other than historical fact contained in this 10-Q, including, without limitation, statements regarding future capital guidance, acquisition strategies, strategic partnership expectations, technological developments, the development, the availability of necessary components, research and development programs and distribution plans, are forward-looking statements.  All forward-looking statements included in this 10-Q are based on information available to us on the date hereof, and we assume no obligation to update such forward-looking statements.  Although we believe that the assumptions and expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to have been correct or that we will take any actions that may presently be planned.

(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 52 products covering autoimmune disorders, vascular diseases, infectious diseases and liver disease. Our products are sold in the United States, the UK and other countries through our marketing and sales organization that includes direct sales representatives, contract sales representatives, internationally through an extensive distributor network, and to several significant OEM partners.

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

Except for the fiscal years ending June 30, 1997 and 2009, we have experienced revenue growth since our inception, primarily from sales of products and contract revenues from strategic partners. Contract revenues consist of service fees from research and development agreements with strategic partners.

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

Although, as previously stated, we have experienced growth in revenues every year since 1990, except for 2009 and 1997, 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,

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(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.

(c)                                  FASB Codification

The FASB recognized the complexity of its standard-setting process and embarked on a revised process in 2004 that culminated in the release on July 1, 2009, of the FASB Accounting Standards Codification, sometimes referred to as the Codification or ASC. The Codification does not change how we account for our transactions or the nature of related disclosures made in our financial statements. However, when referring to guidance issued by the FASB, we refer to topics in the ASC rather than the numbers of specific Standards, Statements, Interpretations, Positions, etc. Consequently, we have updated references to GAAP in this Quarterly Report on Form 10-Q, to reflect the guidance in the Codification.

(d)                                  Results of Operations

Three months ended March 31, 2010 compared to three months ended March 31, 2009

Net sales. Net sales for the quarter ended March 31, 2010 were $2,196,010 an 8.1% increase versus $2,032,024 in the same quarter of the prior fiscal year. Total North American sales increased $139,067 or 9.7% to $1,579,818 versus $1,440,751 in the prior year’s third quarter, while total sales to international distributors increased $24,919 or 4.2% to $616,192 versus $591,273 in the prior year’s third quarter. With respect to our major revenue categories and product lines, total worldwide Corgenix labeled product sales increased $49,505 or 3.3% to $1,559,988 versus $1,510,483 in the prior year’s third quarter. North American Corgenix labeled product sales decreased $43,906 or 4.0% to $1,065,273 versus $1,109,178 in the prior year’s third quarter, whereas international Corgenix labeled product sales increased $93,411 or 23.3% to $494,716 versus $401,305 in the prior year’s third quarter. Worldwide category results were as follows: Phospholipids kit sales (including OEM) decreased $8,913 or less than 1% to $957,484 versus $966,397 in the prior year’s third quarter. Coagulation kit sales decreased $16,620 or 4.3% to $371,778 versus $388,398 in the prior year’s third quarter. HA kit sales increased $37,292 or 15.9% to $271,689 versus $234,397 in the prior year’s third quarter, while autoimmune kit sales decreased $3,171 or 5.8% to $51,230 versus $54,401 in the prior year’s third quarter. Additionally, worldwide OEM revenues decreased $19,583 or 11.1% to $156,364 versus $175,947 in the prior year’s third quarter, and contract manufacturing revenue increased $2,027 or 2.2% to $95,577 versus $93,550 in the prior year’s third quarter. R & D contract revenue increased $211,839 or 582.9% to $248,183 versus $36,344 in the prior year’s third quarter. Finally, Aspirin Works sales increased $8,403 or 23.0% to $44,951 versus $36,548 in the prior year’s third quarter.

Cost of sales.  Cost of sales, as a percentage of sales, increased to 44.2% for the quarter ended March 31, 2010 from 43.7% in the prior year’s comparable quarter. The increase was primarily attributable to a differentiation in the product sales mix for the quarter.

Selling and marketing expenses.  For the quarter ended March 31, 2010, selling and marketing expenses decreased $92,882 or 19.8% to $375,369 from $468,251 for the quarter ended March 31, 2009. The $92,882 decrease versus the prior year resulted primarily from decreases of $6,556 in advertising expense, $44,348 in labor-related expenses, $30,700 in consulting expenses, and $14,293 in travel related expenses, partially offset by a net increase of $3,015 in other selling and marketing expenses.

Research and developmentExpenses. Research and development expenses increased $17,642 or 10.2% to $190,155 for the quarter ended March 31, 2010, from $172,513 for the quarter ended March 31, 2009. The $17,642 increase versus the prior year resulted primarily from increases of $13,275 in convention related expenses, $4,770 in consulting expenses, and $11,632 in travel an entertainment expenses, partially offset by a net decrease of $12,035 in other research and development expenses.

General and administrative expenses. For the quarter ended March 31, 2010, general and administrative expenses decreased 8.8% or $49,780 to $514,183 from $563,963 for the quarter ended March 31, 2009. The $49,780 decrease versus the prior year resulted primarily from decreases of $4,212 in Corgenix-UK general and administrative expenses, $72,973 in labor-related expenses, $18,846 in outside services expenses, and $10,306 in patent renewal costs, partially offset by a net increase of $52,345 in other general and administrative expenses.

Interest expense. Interest expense decreased $409,101, or 86.3% to $65,146 for the quarter ended March 31, 2010, from $474,247 for the quarter ended March 31, 2009. The $409,101 reduction in interest expense was due primarily to the accelerated write off in March 31, 2009 of 92.3% of the unaccreted discount and unamortized deferred financing costs to interest expense as a result of the payoff of the convertible notes as part of the Benefactor financing.

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Nine months ended March 31, 2010 compared to nine months ended March 31, 2009

Net sales. Net sales for the nine month period ended March 31, 2010 were $6,200,429, a 2.8% increase versus $6,028,946 for the comparable nine month period of the prior fiscal year. Total North American sales increased $194,007 or 4.5% to $4,494,277 versus $4,300,270 for the prior year’s comparable nine month period, while total sales to international distributors decreased $22,524 or 1.3% to $1,706,152 versus $1,728,676 for the prior year’s comparable nine month period. With respect to our major revenue categories and product lines, total worldwide Corgenix labeled product sales decreased $171,783 or 3.8% to $4,333,988 versus $4,505,771 for the prior year’s comparable nine month period. North American Corgenix labeled product sales decreased $156,168 or 4.9% to $3,027,618 versus $3,183,786 for the prior year’s comparable nine month period, whereas international Corgenix labeled product sales decreased $15,615 or 1.2% to $1,306,370 versus $1,321,985 for the prior year’s comparable nine month period. Worldwide category results were as follows: Phospholipids kit sales (including OEM) decreased $72,107 or 2.6% to $2,733,909 versus $2,806,016 for the prior year’s comparable nine month period. Coagulation kit sales decreased $35,442 or 2.9% to $1,175,416 versus $1,210,858 for the prior year’s comparable nine month period. HA kit sales decreased $87,974 or 11.3% to $689,414 versus $777,388 for the prior year’s comparable nine month period, while autoimmune kit sales increased $90,966 or 35.7% to $345,916 versus $254,950 for the prior year’s comparable nine month period. Additionally, worldwide OEM revenues increased $32,730 or 5.5% to $624,327 versus $591,597 for the prior year’s comparable nine month period, and contract manufacturing revenue increased $128,914 or 59.4% to $345,916 versus $217,002 for the prior year’s comparable nine month period. R & D contract revenue increased $256,224 or 150.7% to $426,213 versus $169,989 for the prior year’s comparable nine month period. Finally, Aspirin Works sales increased $32,676 or 30.7% to $138,992 versus $106,316 for the prior year’s comparable nine month period.

Cost of sales.  Cost of sales, as a percentage of sales, was essentially the same for the nine month period, at 44.9% for the nine month period ended March 31, 2010 from 43.5% for the prior year’s comparable nine month period. The increase was primarily attributable to a differentiation in the product sales mix for the period.

Selling and marketing expenses.  For the nine month period ended March 31, 2010, selling and marketing expenses decreased $199,974 or 14.2% to $1,204,581 from $1,404,555 for the comparable nine month period ended March 31, 2009. The $199,974 decrease versus the prior year resulted primarily from decreases of $50,445 in advertising expense, $70,560 in labor-related expenses, $62,017 in consulting expenses, and $46,468 in trade show and travel and entertainment expenses, partially offset by a net increase of $29,516 in other selling and marketing expenses.

Research and developmentExpenses. Research and development expenses decreased $65,636 or 11.5% to $506,574 for the nine month period ended March 31, 2010, from $572,210 for the comparable nine month period ended March 31, 2009. The $65,636 decrease versus the prior year resulted primarily from decreases of $44,932 in clinical studies expense and $64,727 in labor-related expenses, partially offset by a net increase of $44,023 in other research and development expenses.

General and administrative expenses. For the nine month period ended March 31, 2010, general and administrative expenses decreased $176,093 or 10.7% to $1,462,914 from $1,639,007 for the comparable nine month period ended March 31, 2009. The $176,093 decrease versus the prior year resulted primarily from decreases of $118,580 in labor-related expenses, $81,537 in outside services expenses, and $20,097 in patent renewal fees, partially offset by a net increase of $44,121 in other general and administrative expenses.

Interest expense. Interest expense decreased $712,692, or 75.6% to $230,252 for the nine month period ended March 31, 2010, from $942,944 for the comparable nine month period ended March 31, 2009. This substantial reduction in interest expense was due primarily to the accelerated write off in March 31, 2009 of 92.3% of the unaccreted discount and unamortized deferred financing costs to interest expense as a result of the payoff of the convertible notes as part of the Benefactor financing.

(e)                                  EBITDA

Our earnings before interest, taxes, depreciation, amortization and non cash expense associated with stock-based compensation (“Adjusted EBITDA”) decreased $71 or less than 1% to $266,308 for the three months ended March 31, 2010 compared with $266,379 for the corresponding three month period in fiscal 2009, but increased $128,836 or 28.9% to $574,167 for the nine months ended March 31, 2010, compared with $445,331 for the corresponding nine month period in fiscal 2009. Although adjusted EBITDA is not a GAAP measure of performance or liquidity, we believe that it may be useful to an investor in evaluating our ability to meet future debt service, capital expenditures and working capital guidance. 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 our 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.

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A reconciliation of Adjusted EBITDA to net earnings (loss) can be made by adding depreciation and amortization expense, corporate stock-based compensation expense, interest expense, and income tax expense to net income (loss) as in the following table: